Economic Relations

1868 Meiji Restoration (Meiji era lasts from 1868-1912) Rise of modern industrialization in Japan --- emphasis on textile industry, with female workers. Zaibatsu, or mega-corporations, are formed: Mitsui, Mitsubishi, Sumitomo. Mitsui and Sumitomo were wealthy merchant houses in the Edo period, whereas Mitsubishi was initially a shipping company that expanded under government protection. (p. 12,17-18 history of the modern Japanese economy, Osamu Nariai)

1877 Satsuma Rebellion

1881 Land Tax reform: 1) taxes based on land's profit-earning price instead of on the basis of its yield. 2) new land tax rate fixed at 3% of land's price instead of tax adjustments according to crop conditions 3) new taxes imposed on cultivated fields were paid in cash 4) new land taxes were collected from land owners, not land users as was the case under the old system. (8-9, Nariai) The result was that peasantry system broke down, as those who paid taxes were considered land owners. Those peasants who did not pay taxes grew dependent on farmers, and commercial products became their livelihood instead (instead of raw goods.) (9-10 Nariai)

1876-1881 High inflation of money: By 1877 government debts totaled more than 220 million yen. Government issues bad money ("inconvertible notes") to assuage high inflation, results in depression by 1881. (13, Nariai) 1894-1895 Sino-Japanese War (14, Nariai)

1897 Yawata state-run iron and steel works under the Ministry of Agriculture and Commerce. (15, Nariai) 1900 Boxer Rebellion in China, trade with Japan is cut off. (15, Nariai)

1904 Japan enters into war against the Russians. War expenditures amount to about 1.8 billion yen. (17, Nariai) Floating bonds issued exceeding 1.4 billion yen. The Japanese government could not refund most of these bonds, and had to borrow from foreign loans. (17, Nariai)

1912 Yuaikai: Trade union formed as a type of friendship association between labor and management. (27, Nariai)

1914 World War I breaks out. (21, Nariai) Japan is 1.1 billion yen in debt to foreign loans. Government issues an embargo on the export of gold. (24, Nariai)

1915 Economic slump in Japan is amended with the demand from Allied Powers for war supplies as well as a new demand from Asian markets for textiles since the Europeans were no longer able to trade with them in the face of the war. Exports triple from 600 million to 2 billion yen in four years. (21, Nariai)

1915-1918 Chemical and steel industries boom because of domestic shortage due to exports to Allied Powers. Difference between family incomes and commodity prices rise. (22, Nariai) 1918. Nationwide rice riots: A result of low income versus high rice prices. (22, Nariai)

1920. Japan is out of debt to foreign loans and is +2.7 billion yen. (22, Nariai) March 15: Stock market crash, stock prices go down by over 50%. Prices of raw goods, e.g., rice, silk, cotton, drop by 50-70% (23, Nariai) 1922 The Japan Communist Party is illegally organized. (27, Nariai) Japan Farmer's Union is formed.

1923 Great Kanto Earthquake (Kanto Prefecture, includes Tokyo-Yokohama district.) Government issues 30-day moratorium on payment of debt, and ordinance banning profiteering activities. Central bank and others extend relief funds of around 500 million yen, to be paid back in two years with a compensation of up to 100 million yen. Total cost of earthquake to government: 400 million yen. (23-24, Nariai)

1925 Left-wing Japan Labor Union Council formed by the Japan Communist Party. Its disputes with the zaibatsu operations forces the government to consider legislation of a health insurance law and other social welfare measures. Universal Suffrage Law is passed. Public Order Maintenance Law is passed. (27, Nariai)

1926 Almost all industries form cartels to cope with recessions, and agree to fix prices, marketing, and production. 1927, April 18 Taiwan Bank, Omi Bank, Jugo Bank suspend business. At this point, more than 200 million yen was still owed them by the government for the earthquake relief funds. (24, Nariai) Yuaikai trade union membership has increased from 100,000 in 1921 to 300,000 in 1927. (27, Nariai) 1928-1929 Government attempts to suppress Japan Communist Party under statute of the Public Order Maintenance Law. (27, Nariai)

1929 Minsei Party, headed by Osachi Hamaguchi, lifts embargo on the export of gold. The yen temporarily rose against the dollar from 2.41 yen to 2.0 yen. (25, Nariai)

1930-1931 Worldwide economic recession triggered by American Depression. Crisis hits the Japanese economy --- prices go down, bankruptcies ensue, unemployment rises. Cartels become more popular, especially with the issuance of the Important Industry Control Law, which encouraged cartels. Zaibatsu absorb smaller operations in the recession. (25-26, Nariai)

1931 Manchurian Incident (26, Nariai)

1932 Electric Power League is formed under control of zaibatsu. (26, Nariai) December: Korekiyo Takahashi of the Inukai Cabinet reimposes the gold embargo. Yen's rate initially continued to decline, but as a result of market forces, changes from from 100 yen to roughly $49 in the 1920s to 100 yen to $25, and finally stabilizes at about 100 yen to $28. Exports begin to expand rapidly as a result of the lower exchange rate. (28-29, Nariai)

1935 Osaka-Kobe industrial district, Tokyo-Yokohama, Kitakyushu, and Nagoya industrial districts are strengthened. Modern Japan's four major industrial districts are thus established. (27, Nariai) Japan's national income totals 14.5 billion yen. (31, Nariai)

1936 through World War II Government establishes more control over the economy, zaibatsu are once again strengthened by increased industrial need and new laws, but are curtailed by government regulation. (29-30, Nariai) 1936 Military spending increases under Finance Minister Eiichi Baba of the Hirota Cabinet to 1.4 billion yen. Deficit between imports and exports rises rapidly. (29, Nariai) 1937 Konoe Cabinet is in power. Imperial Diet approves 500 million yen military budget, followed by a 2 billion yen military spending budget approved in the next Diet session (72nd) until the end of the war. Also enacted during the 72nd session was the Temporary Funds Adjustment Law and the Temporary Measures Law for Export and Import Goods. (29, Nariai) Ordinance on Important Industrial Organizations: A "control council" was organized in each industry and empowered to impose quotas on raw material and to control production on behalf of the government. Each council was headed by the president of the largest company in each industry.

1937-early 1940s Eidan, government-owned organizations, are organized to cooperate with the control councils for various purposes. (30, Nariai)

1941 Industrial Equipment Eidan is set up for the task of purchasing or scrapping idle facilities. Goods Control Ordinance replaces the Temporary Measures Law for Export and Import Goods. (30, Nariai)

1942 Various organizations are set up. In the period of 1941-1942, the government issues around 100 ordinances to impose controls on goods and materials. January: Consolidation of Finance Enterprises Ordinances. February: Wartime Finance Bank. March: Southern Development Bank. April: Finance Control Ordinance. May: Finance Control Council. July: Bank of Japan is made the central bank for the Greater South East Asia Co-Prosperity Sphere, and given the task of administering industrial financing. (30, Nariai)

1943 The Important Goods Management Eidan is set up to oversee the storage and utilization of important goods.

End of World War II to 1947: Japan's economy crashes as a result of defeat by Allies. 49.6 billion yen loss due to wartime damages. Total reaches 1.38 trillion yen by the end of 1947 (equal to 20% of Japan's pre-war domestic assets.) Japan's national income drops to 6.5 million yen. (31, Nariai)

1946 Economic Stabilization Board is established. Almost all sectors of the national economy --- commodities, prices, transport, banking, etc. --- to be put under systematic control of the board. October: Law for the Establishment of the Reconstruction Finance Bank. The bank furnished enormous volumes of funds to industries vital to economic recovery, such as the coal, steel, and chemical fertilizer industries. (33, Nariai)

1947 The net increment of loans by the Reconstruction Finance Bank amounts to 44.2 billion yen.

1948 The net increment of loans by the Reconstruction Finance Bank amounts to 66.9 billion yen.

1949 Dodge Line policy: Promoted a self-sustaining economy. Joseph Dodge, economic advisor to the General HQ of the Allied occupation forces, mapped out plan. Established a single exchange rate for the yen, attempted to stabilize currency as well as close gap between domestic and overseas prices in general. Also curtailed government spending - "tight-money policy." By this time, the exchange rate had risen to 360 yen to the U.S. dollar. (31, Nariai)

1950-1953 Korean War ensues. During the war, "special procurements" contracts by the American government --- demand for goods and services --- generated $315 million for Japan. During this time period, Japan attempts to reduce dependency on imports by increasing modernization of processing in the four major industries (steel, coal, etc.), importing new technologies, and improving on old ones (synthetic fibres and petrochemicals.) (37, Nariai) 1951 Japan's foreign exchange reserves quadruple from $260 million in 1949 to 1.06 billion in 1951. (36, Nariai) 1953 Japanese exports are now 50% greater than before the Korean war. Domestic prices rise in response to rise in export and import prices. (35, Nariai)

1956 Jinmu Boom: "Tight-money policy" is ended, economy enjoys brief prosperity. (38, Nariai) 1957 Jinmu Boom ends in economic slump as a result of massive imports of raw materials by Japanese industries in response to the Suez War. "Tight-money policy" is again enacted: increased regulation of industrial spending and import/export. (39, Nariai)

1957-1958 nabezoko ("bottom of the pan") Japan fails to rally from recession, but economy does not worsen. (39, Nariai)

1958, late: "Tight-money policy" is discontinued. (39, Nariai) 1959 Jinmu Boom: Economy is revitalized as a result of successful equipment investment. Technological progress in heavy industries is the primary reason for success of investment. (39, Nariai)

1959-1961 Japan experiences rapid economic growth and subsequently experiences a labor shortage. (41, Nariai)

1963-1965 Due to a drop in exports, Japan experiences another recession. The government decides to issue long-term public bonds. Foreign exchange reserves remain stable at about $2 billion. (42, Nariai)

1965-1970 The economy picks up. Average growth rate of the economy remains stable at 11.8% for these five years. Japan has the second highest GNP (gross national product), behind the United States, in the world. (43, Nariai)

1971 Japan's foreign exchange reserves reach $15.2 billion. Modernization of industrial equipment over the past ten years resulted in better prices and more efficient production of goods. (44, Nariai). Bretton Woods system of fixed exchange rates for currency worldwide collapses as a result of the devaluation of the American dollar. U.S. President Nixon enacts an emergency policy that applied a 10% surcharge to imports to the United States and also suspended the conversion of the American dollar into gold. (45, Nariai)

1973 Smithsonian floating exchange rates for worldwide currency is implemented. The Japanese yen is revalued against the American dollar at a lower rate, causing an increase in imports into Japan due to cheaper import prices. (46, Nariai) 1973 Oil Crisis: War breaks out in the Middle East, the export of crude oil is suspended, and oil prices increase worldwide. Japan is one of the many nations that undergo severe recession due to the oil crisis and collapse of the fixed exchange rate system. (48, Nariai)

1974 Oil prices have quadrupled since 1972. As a result, production costs increase due to the energy shortage, and commodity prices skyrocket to reflect the disparity between supply and demand. The government enacts a system that regulates price increases of manufactured goods. (49-50, Nariai) 1975 Japan reaches the lowest point of its recession. Japan attempts fight inflation by lowering wage increases from 13.1% to 5.9% in a three-year period. The fiscal deficit is reduced from $3.9 billion in 1973 to almost even by 1975. (50, Nariai)

1977-1978 The Japanese yen increases in value in response to post-recession prosperity. (51, Nariai) 1978 Investment in privately-owned businesses increases rapidly. (53, Nariai) 1979 A second oil crisis breaks out, and plunges Japan from a positive $13.9 billion to a $7 billion deficit by 1980. (55, Nariai)