Download Prices, Standards of Living and Material Incentives in Japan, 1937

Prices, Standards of Living and Material Incentives in Japan, 1937-1941
Janet Hunter
London School of Economics
Preliminary Draft, Not for Citation
29th February 2008
Introduction
It is widely recognised that by 1945 the extent of material deprivation and malnutrition in
Japan was considerable, and that economic collapse was a key factor in Japan’s defeat. The position
of the economy in the years of the China conflict prior to Pearl Harbor, 1937-1941, has received
much less attention. Economic historians of 20th century Japan have long focused their attention on
the interwar depression and Japan’s recovery under Takahashi after December 1931. Over recent
years they have also increasingly analysed the nature of Japan’s war economy during the period
1937-1945, and its longer term implications for Japan’s postwar economy.1 It makes sense, of
course, to treat the war years of 1937-1945 as a whole, but at the same time the treatment has often
been imbalanced. The acute, and very obvious, problems of inadequate labour mobilization, skill
and raw material shortages, and production decline, of 1943-45 have often led to the earlier years of
conflict against China receiving only passing mention. Most of the papers in Pauer’s excellent
volume, for example, focus primarily on the Pacific War years. Statistics often compare 1944/45
figures with those in the 1930 and 1940 censuses, by implication measuring 1940 against the 1930
baseline, rather than the post-depression start of the China War in 1937.2 Yet in many respects the
period 1937-41, during which the state struggled to establish an efficient planning mechanism that
would ensure the economy met the needs of the war effort, set the parameters for the operation of
the war economy through to 1945. Moreover, as the transitional period between the recovery years
that ended with Takahashi’s assassination in 1936 and the total war economy of 1942-45, these
initial years of the China War merit attention in their own right.
This paper will analyse the functioning of the Japanese economy during these years. It will
in particular look at the issue of material incentives, arguing that the decision to expand the conflict
in the autumn-winter of 1941 was taken in a context in which Japan’s economic vulnerability in this
area was already apparent to observers both inside and outside the country. It is not disputed that
from very early on the country’s economic capacity for a sustained conflict was called into question
by the appearance of inadequacies in labour, resource capacity and production. More seriously,
1
For example, T.Okazaki, ‘Senji Keikaku Keizai to Kakaku Tōsei’, in Kindai Nihon Kenkyūkai (ed.), Nenpō Kindai
Nihon Kenkyū IX (Tokyo: Yamakawa Shuppansha, 1987); T. Okazaki & M.Okuno (eds.), Gendai Nihon Keizai
Shisutemu no Genryū (Tokyo: Nihon Keizai Shinbunsha, 1993) (English version published as T.Okazai & M.OkunoFujiwara (eds.), The Japanese Economic System and its Historical Origins (Oxford: Oxford University Press, 1999));
Y.Noguchi, ‘The 1940 System: Japan under the Wartime Economy’, American Economic Review 88, 1998; A.Hara,
‘Japan: Guns Before Rice’, in M.Harrison (ed.), The Economics of World War II (Cambridge: Cambridge University
Press, 1998); E.Pauer (ed.), Japan’s War Economy (London & New York: Routledge, 1999); T.Nakamura, ‘The Age of
Turbulence: 1937-1954’, in T.Nakamura & K.Odaka (eds.), Economic History of Japan 1914-1955: a Dual Structure
(Oxford: Oxford University Press, 2003); A.Hara & S.Yamazaki (eds.), Senji Nihon no Keizai Saihensei (Tokyo: Nihon
Keizai Hyōronsha, 2006).
2 This is true, for example, of many of the figures in J.B.Cohen’s Japan’s Economy in War and Reconstruction
(Minneapolis: University of Minnesota Press, 1949), which remains the best account of Japan’s wartime economy in
English.
1
economic potential was crucially dependent on workers’ living standards and material incentives.
The paper will argue that notwithstanding public pronouncements that recognised this relationship,
the state failed effectively to address issues of declining real incomes for many citizens, shortages
of goods and distorted incentive structures, all of which were well before December 1941 reducing
the productivity of labour, affecting work effort, attendance and efficiency. It will be shown also
that the progressive weakening of the material incentive structure was apparent to both Western and
Japanese observers, who believed that it must eventually undermine Japan’s war effort, although
there was no agreement on how long this might take.
A key feature of wartime economies is a tendency towards inflation. In Japan after 1937 the
inflationary threat was to be addressed by curbing the operation of non-essential industries and
limiting private consumption. It was recognized, however, that private consumption could only be
limited so far, particularly in a relatively poor economy such as Japan, in which average income
levels were relatively low. Moreover a minimum standard of living had to be maintained if the
populace was to continue to back government policy. Early on this dilemma led to increasing
control over the economy through enunciation by the Konoe cabinet of its ‘Three Economic
Principles’ of regulation and expansion of production, regulation of balance of payments and of
material demand and supply.3 The first part of the paper outlines the development of regulation
during this four year period, showing that it was largely ad hoc and lacking in systematic attention
to material incentives.
Two sets of incentives were important in maximising the contribution of labour to an
efficient wartime economy, the material and the non-material (‘spiritual’). The spiritual
mobilization campaign that was used to hone workers commitment to the national cause has been
the subject of much analysis.4 Just as significant, however, were the material incentive structures in
an economy in which market operation remained the norm even as state regulation increased.
Wartime regulation by its very nature changed and distorted incentive structures, repeatedly
generating new problems that demanded further intervention. Workers’ ability to contribute
depended critically on the ways in which they could be remunerated and incentivised. This in turn
impacted on work effort, attendance and efficiency. In trying to balance material demand and
supply through physical controls over the economy, successive Japanese governments were faced
with major dilemmas in this respect. Labour productivity depends crucially on providing
3
T.Nakamura, ‘The Age of Turbulence: 1937-1954’, in T.Nakamura & K.Odaka (eds.), Economic History of Japan
1914-1955: a Dual Structure (Oxford: Oxford University Press, 2003), p.55.
4 Eg. R.H.Mitchell, Thought Control in Prewar Japan (Ithaca NY; Cornell University Press, 1976); J.Dower,
‘Sensational Rumors, Seditious Graffiti and the Nightmares of the Thought Police’, in J.Dower, Essays in War and
Peace (New York: The New Press, 1993); S.Garon, Molding Japanese Minds (Princeton NJ: Princeton University
Press, 1997); B.Kushner, The Thought War: Japanese Imperial Propaganda (Honolulu HI: University of Hawaii Press,
2006).
2
appropriate material and other incentive structures that will allow workers to equate increasing
efforts with increasing rewards. Neoclassical economists have focused on the importance of wage
and income levels in this equation, and the second part of the paper will outline what was known
about the trends in real wages and real income of Japanese workers during this period.
However, labour productivity also depends crucially on workers’ capacity to make use of
the income that they receive. As one textbook noted for the Soviet Union, one important measure of
economic performance is the extent to which an economy meets the material need of its population
with a given productive capacity, and in this respect the Soviet planning system often fell short in
terms of the lack of consumer goods for purchase with the wages that were earned.5 Income ceases
to be a motivating factor if you cannot buy anything with it. Moreover, if earning a decent income
requires long extended hours of work and jeopardizes health, then workers will try and calculate
how far such effort may, or may not, be worthwhile. We therefore need to consider in the Japanese
case not just what was happening to workers’ real incomes, but their ability to consume material
goods, enjoy leisure time and experience reasonable health. These broader indicators of living
standards will be considered in the final parts of the paper, and it will be shown that
notwithstanding trends in real incomes and official entitlements supplies of many commodities were
deficient from a relatively early stage in the conflict.
Qualitative and quantitative information on the Japanese economy was far more widely
available during these years than was the case after Pearl Harbor. It was also more credible to
contemporaries. Not only did the state publish a considerable amount of statistical data, there was
also scope for semi-independent economists and journalists to produce additional information that
would complement, or even call into question the accuracy of the government’s own figures. The
Tōyō Keizai Shinpō under the editorial control of Ishibashi Tanzan, and its yearbook, the Tōyō
Keizai Nenkan, was one such medium. An English-language version, The Oriental Economist, had
been published from 1934, and was a source widely used by US commentators publishing in
journals such as Far Eastern Survey and Amerasia.6 These journals are a key source for this paper,
as they indicate what was known about the situation of the Japanese economy among an informed
public, inside and outside Japan.
5
P.Gregory & R.C.Stuart, Soviet and Post-Soviet Economic Structure and Performance (5th edition, New York: Harper
Collins, 1994), p.253ff.
6 Sharon Nolte’s book, Liberalism in Modern Japan: Ishibashi Tanzan and his Teachers, 1905-1960 (Berkeley CA:
University of California Press, 1987) offers a detailed analysis of Ishibashi and his views. She observes that The
Oriental Economist was more compliant with the official line after the start of the Pacific War, and had always been
more ‘propagandistic’ than its Japanese parent publication. This may well have been due to greater constraints on a
publication for overseas consumption, but The Oriental Economist is nevertheless conspicuous for its criticism of a
number of aspects of government policy during these years, as well as its upholding of the benefits of free international
trade and the detrimental effects of a regional yen bloc and military mobilization on Japan’s economic progress.
3
Emergence of Planning
The broad thrust of economic policy after the assassination of Takahashi Korekiyo in
1936 was expansion and prioritization of war-related production, and a shift of resources away from
peacetime industries. From late 1937 production in a range of peacetime industries was
progressively cut. Some producers were able to switch their capacity to war-related production, and
while some workers in less essential industries were deprived of employment, many could be
absorbed by those areas of production that were growing. Between 1938 and 1942 the number of
workers in manufacturing increased by nearly 25 %, to over 9 million.7 While concerns were
expressed about there being insufficient skilled workers to sustain production increases in key
industries, plans were articulated to provide for future human capital needs.8 We know that
production grew substantially, with an estimated 30% increase in Gross Domestic Product between
1937 and 1941.9 Capital goods production grew disproportionately, while consumer goods
production showed a relative decline.
Beneath this apparent success story, however, lay a number of problematic issues.
Starting with Finance Minister Baba in 1936-7 Japanese planners faced a fundamental
macroeconomic policy dilemma. Growing expenditure on the military increased budget deficits and
the threat of inflation. The additional expenditure had to be supported by either increased taxation
or increased borrowing.10 Governments sought to address the inflationary threat by curbing the
operation of non-essential industries and limiting private consumption. This strategy, however,
brought a further dilemma. Military expansion was substantially dependent on imports of raw
materials and finished goods. Securing essential foreign inputs meant instituting controls on foreign
exchange, with the aim of directing scarce foreign currency to key industries. However, the supply
of foreign exchange could only be secured by continuing to export the products of non-military (and
therefore less essential) industries. A decline in exports meant that foreign payments would have to
be made out of Japan’s finite supply of gold reserves. In the face of this dilemma in 1937
emergency foreign trade controls were rapidly introduced, which explicitly restricted imports of
consumer items, including some foods and drinks, vehicles, musical instruments and photographic
equipment.11
In April 1938 the National General Mobilization Bill went through the Lower House of the
Diet, giving government extensive control over a range of economic activities, including the labour
force. This legislation is appropriately regarded as the enabling act for wartime mobilisation of the
7
S.Nagaoka, Kindai Nihon no Keizai (Tokyo: Minerva Shobō, 1992), p.232, table II-15-2.
M.S.F., ‘Japan to Coordinate Labor Supply and Demand’, Far Eastern Survey 7, 19, 28 Sept. 1938, pp.225-6.
9 Hara, ‘Japan: Guns before Rice’, p.226.
10 Ishibashi Tanzan argued strongly for the raising of money through taxation rather than increased borrowing in his
publications (Nolte, Liberalism in Modern Japan, p.266).
11 Oriental Economist IV, 10, October 1937, pp.579-80.
8
4
economy, and has received much attention, including from contemporaries. As far as workers were
concerned, it laid down that the government could ‘draft subjects of the Empire for employment in
general mobilization enterprises or cause them to cooperate in the conducting of such concerns by
the nation or local public bodies; give necessary orders concerning use, employment dismissal,
wages and other labor terms of employees…and for the prevention, settlement, restriction, or
prohibition of actions in labor disputes’. It could also ‘demand reports on and examine the
vocational abilities of the subjects of the Empire; issue requisite orders regarding the training of
technicians necessary for national general mobilization to their employers, and the institutions or
places of work where they may be trained; cause owners of general mobilization enterprises to
establish programs pertaining to mobilization or conduct drills based thereon.’12 The first moves to
invoke the legislation came shortly afterwards.
While controls over labour mobilisation became increasingly important in this period, it is
regulation relating to the pricing and availability of goods that related most specifically to the issue
of standards of living and material incentives. Price controls were some of the first to appear.
Immediately after the outbreak of war in August 1937 the Japanese government invoked the 1917
Anti-Profiteering Law, and in October expanded its remit to include a diverse range of commodities.
Powers were extended to weekly reporting of the prices of key items, and before the end of the year
maximum prices had been fixed for some key commodities.13 Increasingly, though, the authorities
found that it was impossible to control the price of one commodity without controlling those of
others and intervening in supply-demand relationships. It was reported that the prices of many
goods rose as people rushed to purchase and stockpile them. Voluntary restraints failed to address
the problem, which, as, the Oriental Economist observed, ‘was inevitable in view of the fact that
any effective price control policy must envisage the adjustment of supply and demand relations as
well as the actual control of prices’.14 Recognising this problem, steps were taken early in 1938 to
control distribution through national and local prices commissions and bodies such as the Interim
Commodities Adjustment Bureau (Rinji Busshi Chōsei Kyoku). It was applied initially to cotton
yarn, but ‘the fixed price was a product of voluntary cooperation and was ignored in actual
practice.’15 This led in the spring of 1938 to the introduction of maximum fixed prices for cotton
yarn and an overall policy on price controls with the formation of the Central Price Commission
(Chūō Bukka Iinkai). A similar system to that for cotton was imposed on oil and gasoline from the
12
Kathleen Barnes, ‘Japanese Government Given Blank Cheque’, Far Eastern Survey 7, 7, April 6, 1938, p.80.
Oriental Economist v, 6, June 1938, p.358; B.F.Johnston, Japanese Food Management in World War II (Stanford
CA: Stanford University Press, 1953), p.170.
14 Oriental Economist V, 6, June 1938, p.359.
15 Oriental Economist V, 6, June 1938, p.360. The OE referred to this body as the Council on Adjustment of Supply and
Demand. I have used the translation in Hara, ‘Wartime Controls’, p.255. A contemporary evaluation of this is E.Shiina,
Senji Keizai to Busshi Chōsei (Tokyo: Tōa Seikeisha, 1941).
13
5
start of May, and then extended to other important commodities. By the end of 1938 77 kinds of
merchandise were designated by the Commission.16
Prices continued to rise, generating proposals to fix the prices of some goods, but The
Oriental Economist pointed out that in an economy in which fixed and non-fixed prices coexisted,
the non-fixed prices would continue to move up, if anything at an even higher rate. While it was the
government’s intention to cope with this problem by limiting profiteering through levies and
surcharges, and by refusing raw materials for goods whose prices were not fixed, restricting inputs
would be likely to raise prices further, while restricting profiteering would ‘merely prevent the
dealers from retaining the fabulous profits involved’, not stop the prices themselves from rising.17
Price controls were strengthened after the outbreak of war in Europe, when the government, unable
to stem ongoing price rises, passed a decree freezing official prices at their September 18th level.
The few exceptions to these controls included perishable goods, such as fish, vegetables and fruit,
and items for export. Legislation at the end of the year specifically prohibited selling at ‘excessive
profit’, hoarding and refusing to sell.18 By 1940 popular confidence in the government’s ability to
keep down prices was reported to be in decline. The government found itself obliged for political
reasons to raise the maximum rice price payable to farmers, but this move seemed to refute the
official commitment to lowering prices, as did a rise in retail prices by the tobacco monopoly. The
government was forced to acknowledge that it was almost impossible to determine accurately what
the ‘appropriate’ price for any commodity was, and ‘it has become growingly apparent, that without
checking or depressing price levels in general, the value of any isolated commodity could not be
restrained from a rise or, much less, depressed’. The low pricing policy in general was seen as
threatening the desire for increased production and productivity.19 By the late summer of 1940 the
Price Commission, now chaired by the Prime Minister, recommended that the prices of perishable
foodstuffs, which had experienced conspicuous rises over previous months, also be controlled,
resulting in the setting of price ceilings by local authorities. Again this was associated with
distribution control, but in the case of fish, for example, the authorities found it hard to stop dealers
from selling their limited stocks above the official price. By the autumn official prices well below
the prevailing free market price had been established for 24 vegetables and 16 varieties of fruit,
again accompanied by tighter distributional control.20 Price controls could not, however, address
the fundamental supply deficiency that will be discussed below. Moreover, if combined with
16
Oriental Economist V, 6, June 1938, p.360; VI, 5, May 1938, p.305.
Oriental Economist VI, 6, June 1939, p.375.
18 Hara, ‘Japan: Guns before Rice’, p.237; Hara, ‘Wartime Controls’, pp.258-9; Johnston, Japanese Food Management,
pp.170-1.
19 Oriental Economist VII, 3, March 1940, p.137.
20 Johnston, Japanese Food Management, p.171. See also K.Baba, ‘Shokuryō Jukyū no Dōkō’, in Tōkei Kenkyūkai,
Shokuryō Kanryō Shi vol.2 (Tokyo: Shokuryōchō, 1969).
17
6
inefficient or easily circumvented distributional policies, or inappropriate incentives, then they were
unlikely even to meet the short term needs of the economy.
Further tools which had a role in constraining consumption and limiting the budget deficit
were taxation and savings programmes. Individual savings rose from around 10% of GNP in 1937
to over 20% in 1941. In the early 1940s around 70% of these savings were in the form of deposits in
financial institutions.21 Large scale tax reform to support increases in military expenditure had been
proposed as early as 1936-7,22 and while much of the increased expenditure was supported by
government borrowing rather than tax increases, taxation remained an important tool both of
government revenue and for regulating distribution and consumption. Immediately after the
outbreak of war with China the government imposed emergency tax increases on income and
profits.23 Early in 1940 a significant reform of the tax system was attempted, which sought to
expand dependence on income tax, introduce a corporation tax, revise and simplify the temporary
profits tax, and introduce a new structure for local taxes. There were significant increases in
inheritance tax and all indirect taxes. The ability of the Japanese population, whose average income
remained relatively low by international standards, to bear higher taxation was a topic of debate.
Estimates in 1939 suggested that the incidence of tax was equivalent to 17% national income, which
indicated that there was some scope for increase.24 The 1940-41 fiscal year budget anticipated tax
receipts over 25% above those of 1939-40. Particularly significant components of total revenue
were the brewery tax (¥263m.), the sugar excise (¥156m.) and tax on textile consumption (¥71m.).
The amusement and restaurant meal tax was expected to bring in over ¥112m., an increase of more
than 200% over the previous year.25 By 1941 additional taxes were payable on furniture, pets,
bonsai and antiques. Taxation also hit staples. The duty on tea, which stood at 10% at the start of
the conflict, was raised to 20% in May 1941, and the tax on cheap tobacco was also
increased.26 While the spread of income tax mostly affected only the better off (income over ¥50
per annum), other tax changes impacted directly on prices and hence on consumers.
Prices, Wages and Incomes
This was the policy context within which, following the outbreak of the war in China, both
prices and wages began to rise. Average wages rose in conjunction with an increase in labour
21
T.Okazaki, ‘Wartime Financial Reforms and the Transformation of the Japanese Financial System’, in Pauer (ed.),
Japan’s War Economy, p.145.
22 A.Hara, ‘Wartime Controls’, p.249
23 Oriental Economist IV, 8, August 1937, p.443.
24 Oriental Economist VI, 6, June 1939, pp.362-3.
25 ‘The Tax Reform’, Oriental Economist VII, 3, March 1940, pp.155-8.
26 Marc T.Greene, ‘How Much Longer, Japan?’, Amerasia IV, 12, February 1941, pp.570-1(?).
7
mobility, indicating significant variation in wages and working conditions across different sectors
of production. The fact that workers with the highest wages were the least mobile27 seems to
underline the importance of material incentives in influencing worker behaviour at this time. Both
planners and firm managers recognized that some firms needed to offer higher wages to attract
workers, but also ecognized that this would fuel inflation further. From 1938 the government set in
train a strategy whereby limits on wage rises and worker mobility operated together. At the same
time, constraints upon workers’ freedom and wages meant that alternative incentive structures
needed to be devised to sustain workers’ commitment and productivity.
The introduction of price controls made it very difficult for Japanese economists to
construct meaningful price indices, particularly given that policy indicated standard prices, but
failed to impose them as official prices. There were significant disparities between different indices
produced during and immediately after the war.28 It is clear, however, that wholesale prices rose at
a lower rate than the prices paid by consumers, and this has been confirmed by subsequent
calculations. Moreover, the indices compiled by the Tōyō Keizai Shinpōsha are close to the figures
produced by more recent estimates. The Tōyō Keizai Nenkan calculated that the Tokyo wholesale
price index had risen by around 30% between 1937 and the start of 1942 (See Table 1). Other big
cities experienced similar rises. Retail prices accelerated much faster. One estimate suggested that
by March 1939 average retail prices were already a third higher than they had been in June
1937.29 Analysis of the prices of commodities exempt from official pricing showed that prices were
continuing to rise, and The Oriental Economist in mid-1940 estimated that the retail price index had
risen by nearly 60% since July 1937, and living costs had risen by over 10% over the five months
from September 1939 alone. Referring to its earlier predictions, it noted ‘the main cause of the
recent upward curves of the living cost and retail price indices may be found in the sudden rise of
these articles excepted from the price-pegging system’. More detailed breakdowns showed that the
price for many commodities more than doubled between 1937 and 1941 (See Table 2) The official
Tokyo wholesale price of fish, for example, rose 130% between 1936 and 1942.30
Initial price rises after the incident started were most marked in textiles and clothing, but
the momentum behind the rises then shifted to cereals, other foodstuffs and drinks, which were
experiencing the most price inflation from late 1939.31 (See also Tables 3 and 4)). Perishable
commodities had experienced a particularly conspicuous rise over the previous year, with fish
prices rising 61% between July 1939 and July 1940, and green vegetables by 48%. Miscellaneous
27
H.Hazama, Chōki Antei Koyō (Tokyo: Bunshindō, 1998), pp.76-79.
Cohen gives a comparison of 7 contemporary official and unofficial indices (Japan’s Economy in War and
Reconstruction, p.356).
29 Oriental Economist VI, 5, May 1939, p.305.
30 Tōyō Keizai Nenkan vol.28, 1944, p.135.
31 Oriental Economist VII, 6, June 1940, pp.351-2.
28
8
household products such as paper, soap, buckets, matches and alcohol had likewise experienced a
rise of nearly 30%.32 The shift in the pattern of price rises was important, as Japanese at this time,
like their counterparts in other lower income countries, on average spent a higher proportion of their
incomes on basic necessities, particularly food. Examinations of expenditure suggested that food
and drink accounted for around 45% of spending, housing for around 17.5%, clothing 14% and
lighting and heating 5%.33 Price inflation in the items on which workers spent most, therefore, was
likely to be particularly damaging.
As noted above, wage rates, particularly in key industries, also rose in the months after
1937. Official cabinet statistics suggested that the average daily cash wages of male factory workers
rose by 20-25% between 1937 and 1941.34 This figure conceals considerable disparities between
workers, since many of the additional male workers joining the key industries were young and
unskilled. Male wage rates were also much higher than those of females. These figures suggest that
wage rates were not rising in line with price increases. However, overall earnings were rising rather
faster, largely due to longer hours of work. Even as wage rate increases slowed from 1939, the
earnings trend for male workers in factories continued to rise. While wage rates for all factory
workers increased by about 20% between 1937 and 1940, actual earnings increased by around 50%.
The Oriental Economist was cautious in commenting on any possible decline in real living
standards. It was noted that early on rises in living costs were marginally ahead of growth in income,
but by November 1938 the two series were moving in parallel.35 In spring 1941, after nearly three
years of war, it voiced strong criticism of attempts to create the impression abroad that living
conditions in Japan had become very difficult, arguing that living standards remained relatively
unaffected, and with growing incomes workers and farmers were enjoying prosperity and
contentment:
‘Despite a sharp upward movement in wholesale commodity prices, which are highly
susceptible to variations in imported raw materials, national living conditions have thus far been
immune to any harmful effect associated with rising commodity values. There has been an
appreciation in living costs, but that is being offset by the full employment of labor and by rising
wage rates.’ 36
The journal did, however, feel able to voice recurrent concerns about the inflation that was likely to
result from shortages of consumer goods at a time of rising incomes.37
32
Oriental Economist VII, 10, October 1940, pp.600-1.
Oriental Economist VII, 6, June 1940, p.353.
34 Cohen, Japan’s Economy in War and Reconstruction, p.336.
35 Oriental Economist VI, 4, April 1939, pp.236-8.
36 Oriental Economist V, 3, March 1938, p.140.
37 Oriental Economist V, 6, June 1938, p.344; Oriental Economist VI, 4, April 1939, p.226.
33
9
Again these figures do not, of course, tell us anything about income distribution. Women’s
earnings remained well behind those of men. By December 1940 women factory workers’ actual
earnings had recovered to the 1926 level, but those of male factory workers were 35% above it.38 In
the summer of 1942, eight months after Pearl Harbor, the daily wages of women factory workers
were at the most barely 50% of those of male workers, and in most sectors the figure was closer to
35-40%. (See Table 5) Even if male workers’ increased earnings could cope with the rising cost of
living, those of female workers could hardly be expected to do so. It is clear also that some regions
and groups did much better than others. Many contemporaries were concerned about urban-rural
disparities. As early as late 1938 a decline in farmers’ real incomes was observed, and rising prices
for inputs seemed likely to outweigh the advantages of rising prices for agricultural products. As
such, the outlook for the agricultural sector was not particularly rosy:
‘Even if the equilibrium between general commodity prices and the prices of agricultural
products is maintained, the purchasing power of the agricultural community will still be greatly
weakened by the higher production cost resulting from the recent rise in the prices of general
commodities. In either case, the restraint of the prices of agricultural products will increase the
possibility of an accelerated downward trend of the purchasing power of the agricultural
community, which has already entered a period of stagnation.’39
It must be emphasized, however, that it was not just the distribution of income that determined
people’s ability to consume. Even where real incomes were maintained or increased, those incomes
did not necessarily enable the acquisition of what was needed. The real problem for material
incentive structures was an inability on the part of the state to ensure sufficient supplies to those
who could afford them in the market, and to those who had legal entitlement to them under the
system of allocation at official prices. This can be demonstrated by analyzing the constraints on
consumption that emerged over the period 1937-41.
Consumption
Assessing actual consumption during this period is problematic. Data on consumption offered by
the major statistical series are largely in current prices, and the value of consumption of most items
went up, at least until 1940. However, per capita consumption expenditure in constant prices
declined from 1938.40 Havens suggests that inflation resulted in an overall 17% decline in real per
capita consumption over the period 1937-40.41 More recent scholarly work notes that a declining
availability of consumer goods was apparent from 1939, although at an aggregate level the
38
From figures in Oriental Economist VIII, 4, April 1941, p.217.
Oriental Economist V, 12, December 1938, pp.802-5 (quotation from p.5).
40 S.Miyohara (ed.), Kojin Shōhi Shishutsu, vol. 6 of Chōki Nihon Keizai Tōkei (Long Term Economic
Statistics of Japan) (Tokyo: Tōyō Keizai Shinpōsha, 1967), p.141, Table 4.
41 T.R.H.Havens, Valley of Darkness: the Japanese People and World War II (New York: Norton, 1978), p.35.
39
10
availability of food staples and some basic energy sources such as firewood and charcoal appears to
have been broadly sustained until 1941.42 There is now a consensus that consumer goods were
already in rapidly declining supply within months of the outbreak of the China war.
Contemporary indices of consumer goods supplies suggest that they declined from a peak
in 1937, although the stockpiling that took place immediately after the start of the conflict helped to
conceal some of this decline. Controls on imports of consumer goods, and on inputs for consumer
goods production, threatened to limit availability of some commodities in the domestic market even
before the outbreak of war, but well into the conflict Japanese commentators remained optimistic
that previously accumulated stocks would support consumption levels:
‘The general public to date has hardly felt even a perceptible pinch in the supply of
consumers’ goods….All department stores and other retail establishments display and offer for
sale cotton goods and woolen products in full assortments and in abundant quantities. The same
is also the case with hardware and other metallic products. Even gasoline, which is subject to a
rationing system of the strictest sort, is available in a sufficient supply so that not only public
buses and sightseeing cars, but motor vehicles of all imaginable sorts remain in operation.’43
A later article in mid-1940 loyally confirmed that such problems as had arisen in the supply of
consumer goods were simply due to ‘faulty handling of matters by Government officials, by no
means indicating any fundamental weakness in the nation’s economic structure’. Although the
supply of some goods might be diminishing, as long as both consumers and merchants avoided
stockpiling in anticipation of higher prices average individual consumption could be sustained at
broadly the same level.44 Such optimism about stocks was not, however, always substantiated by
information provided elsewhere in the same journal and in other contemporary evidence. For
example, while the amount of goods held in public warehouses was reported as having increased in
early 1941, there was a decline in stocks of many consumer goods, including grain, beans, peas,
sugar, liquor, tobacco, marine products and toilet articles.45 Indeed, a succession of comments on
shortages of one consumer good after another belied the optimism that was simultaneously attached
to official pronouncements about their widespread availability.
The view that Japan was ‘completely immune to a scarcity of food’46 was widely shared, and
indices of agricultural production suggest that for most products production levels were sustained
until at least 1941, and it was not until 1942-3 that supplies of some goods began to drop
42
Nakamura, ‘Age of Turbulence, 1937-1954’, p.71.
Oriental Economist VI, 3, March 1939, p.154.
44 Oriental Economist VII, 6, June 1940, pp.344, 346.
45 Oriental Economist VIII, 3, March 1941, pp.137-8.
46 Oriental Economist VI, 3, March 1939, p154.
43
11
calamitously.47 There was a serious shortfall of rice production in 1940, largely due to drought, but
output rose again the following year. However overall supplies were increasingly hit by problems in
the operation of the domestic market, declining carryover from year to year, and diminishing
imports. A drought that hit Northeast Asia in the summer of 1939 sharply reduced Japan’s rice
imports from Korea. Staple imports from the colonies fell to less than 70% of the 1935-8 level in
1939-40, although they rose again the following year. The consequent dislocation of the normal
distribution pattern led to supply problems in major cities of the Kantō region, and some shortages
in producing areas.48 Measures to curtail rice consumption by 10%, to substitute for rice with other
grains, and to control distribution were proposed. Recognising that Japan’s famed empire selfsufficiency in rice was jeopardised by import shortages, the government moved to try and maintain
domestic rice supplies. A freeze was placed on the rents that tenant farmers paid for their land in an
attempt to compensate for price ceilings on agricultural products.49 To boost the output of
foodgrains restrictions were placed on what could be grown on newly cultivated land, and existing
land was converted to staple food production.50 The output of many agricultural products actually
increased in 1939, but supplies of non-foodgrain crops such as fruits, and even staples such as
potatoes, buckwheat and millet, declined. By 1941 supplies of many non-foodgrain crops had
become very restricted. Core foodgrain production soon experienced a similar trend, largely due to
growing constraints on agricultural inputs. Declining availability of chemical fertilisers, which had
been particularly important for output growth in prewar Japanese agriculture,51 was the main input
constraint before Pearl Harbor. Imports of phosphate rock were impeded by lack of shipping
capacity, and imports of potassium chloride, mostly obtained from Europe, declined substantially
after the outbreak of the European war in 1939.52 By the summer of 1940 the problem was severe:
‘Though it is a fact that the revenue of farming households has increased, farmers are
unable to obtain their farming materials even if they have money. Fertilisers are generally
supplied only to an extent of 70% of the required quantity. Furthermore, it often happens that
although the farmer is in possession of sulphate of ammonia, he does not have any potassium,
superphosphate or bean and oil cakes. Then the distribution of such fertilisers is not always
47
M.Miyazaki & O.Itō, ‘Transformation of Industries in the War Years’, in Nakamura & Odaka (eds.), Economic
History of Japan 1914-1955, p.328.
48 Hara, ‘Japan: Guns before Butter’, p.238; Johnston, Japanese Food Management, pp.151, 187-8.
49 Hara, ‘Wartime Controls’, p.259.
50 Among the crops banned on new land were tea, peppermint, tobacco, fruit and flowers. Some prefectures banned
completely the production of some crops, including flowers and melons, on account of their low calorie yield (Johnston,
Japanese Food Management, p.118).
51 Fertiliser was estimated at c.15-17% production cost of rice in 1937, and on average over one quarter of total farm
costs and over one third farmers’ total cash expenditure (Johnston, Japanese Food Management, pp.14-15.
52 Oriental Economist VII, 5, May 1940, p.295; Miriam S.Farley, ‘Japan’s Fertilizer Problem Still Unsolved’, Far
Eastern Survey 8, 6, 15 March, 1939, pp.73-4.
12
made in time for the proper season. Thus not only is it impossible to secure rational fertilisers,
but also the fertilising seasons are often missed.’53
By 1941 consumption of potassium-based fertiliser had fallen to less than a quarter of its 1937 level,
and was not compensated for by any increase in consumption of nitrogenous or phosphate
fertilisers.54
Higher prices and increased production of some crops did not necessarily mean that
producers of agricultural commodities were better off. The incentive structure facing farmers in the
form of higher prices and higher farm incomes discouraged them from marketing their products.
Johnston noted later that increasing rice consumption by the farm population reduced supplies to
urban consumers, and ‘since the rural population comprised nearly half the total population of Japan,
even a small increase in the level of rice consumption of farm families involved an important
reduction in the supply available for the non-farm population whenever imports from foreign
sources failed.’55 The Oriental Economist highlighted this problem in the summer of 1940:
‘Though the production of rice and wheat increased, their supply to the markets
declined. The insufficient shipment of rice is not only due to speculative holding by merchants
and rich farmers and storing by producers in fear of a food shortage, but also to the use of
wheat and barley as well as broken rice as animal and fowl fodder, due to the advanced cost of
miscellaneous cereals, and to the increased consumption of rice as food. It is also related to the
decreased production of such miscellaneous cereals and to the reduced import of bran and other
fowl feeds.56
The journal suggested that coercive measures to force producers to market their rice were, if
anything, likely to exacerbate the problem.57 Moreover, because the system was such that farmers
were obliged to estimate their expected rice crop, and to offer to the government a clearly stated
total amount following deductions for necessary food and seed, the overwhelming inclination was
to underestimate to avoid a situation in which they themselves would suffer a shortfall.58
Where farmers lacked the incentive to market, consumers were bound to be affected, and it
was this situation that pushed the government towards tighter distributional controls. In January
1941 residents of the six largest cities were officially permitted an allocation of 330g. of rice per
day.59 National rice rations for civilian adult Japanese were eventually fixed at 300-400g. per day
53
Oriental Economist VII, 7, July 1940, pp.415-6.
Nagaoka, Kindai Nihon no Kaizai, p.139.
55 Johnston, Japanese Food Management, p.169.
56 Oriental Economist VII, 7, July 1940, pp.415-6. LTES vol.6 shows that the volume of farmers’ consumption went up
1938-40. In 1938 they took 34.23% of total agricultural output, but in 1940 they took 39.49% of a much smaller harvest
(p.151 Table 10).
57 Oriental Economist VII, 8, August 1940, p.464.
58 Oriental Economist VIII, I, January 1941, pp.15-16.
59 Hara, ‘Wartime Controls’, p.262.
54
13
depending on sex, age and work.60 Military rations were higher. Even these allocations suffered
from deteriorating quality before the start of the Pacific War, as the government had campaigned to
reduce rice consumption through the mixing of rice with other grains, such as barley. The use of
low quality and broken rice, and of other substitutes, spread. The adulteration was detrimental to the
taste of cooked rice, a situation worsened by a shortage of charcoal for cooking it appropriately. 61
Rice shortages also hit other areas of consumption. As a greater share of rice was consumed, less
was allocated to seeds and other manufacturing uses. The domestic supply of sake went down by
over 40% 1937-40. 62
The attempts of the government to ensure at least a basic rice availability did not extend to
many other foodstuffs. Imports of soy beans, a key source of protein, declined dramatically from
1940, in conjunction with falls in domestic supplies. Production of fats and oils also dropped
dramatically 1939-40. A permit system that had been used for mochi rice at New Year began to be
extended to other basic commodities from the spring of 1940, including miso, soy sauce and oil.
The system was initially piecemeal and local, however.63 Net supplies of sugar were down by over
20% 1939-40.64 A distribution card system for sugar was initiated in June 1940 in the six major
cities, and wider rationing for sugar was initiated in November 1940, but supplies were drastically
reduced compared with pre-1937 consumption levels.65 Fish consumption was also hit, and there
was a dramatic decline in shipments to large urban areas during 1941. Between 1937 and 1940
domestic supplies of fresh and frozen fish were down by nearly 20%.66 Fish and shellfish
distribution control was strengthened, with allocation done by rotation between and within wards.
Early on, there was a distribution of fish every few days, but the frequency diminished.67 It was
reported that by early 1941 butter, eggs and coffee were unavailable outside the Imperial Hotel, 68
and while butter and coffee would rarely have figured in the diet of the average Japanese, an
absence of eggs would have been more serious. Sake was rationed from May 1941.69
Neighbourhood associations were closely involved in attempts to try and cope with shortages of
other goods. Some developed plans for raising chickens in urban areas, and distributed instructions
for keeping rabbits and pigs for food. They were more successful in the gardening campaigns
started in major cities in 1940, and also promoted cultivation by members of previously
60
A.Scherer, ‘Drawbacks to Controls on Food Distribution: Food Shortages, the Black Market and Economic Crime’,
in Pauer (ed.), Japan’s War Economy (London: Routledge, 1999), p.109.
61 Pauer, ‘New Order for Japanese Society’, p.92; Oriental Economist VIII, I, Jan.1941, p.6.
62 Shinohara (ed.), Kojin Shōhi Shishutsu, p.160, Table19; p.193, Table 45; p.209, Table 58..
63 Pauer, ‘New Order for Japanese Society’, p.91
64 Shinohara (ed.), Kojin Shōhi Shishutsu, p.195, Table 46.
65 Oriental Economist VII, 6, June 1940, p.335; Hara, ‘Wartime Controls’, p.261.
66 Shinohara (ed.), Kojin Shōhi Shishutsu, p.184, Table 35.
67 Johnston, Japanese Food Management, pp.209-10.
68 William S.Husk, ‘The Japanese Don’t Like It Either’, Amerasia V, 3, May 1941, p.116.
69 Hara, ‘Wartime Controls’, p.262.
14
uncultivated areas outside cities,70 a move that again suggests that consumer livelihoods were an
ongoing concern for the authorities. While urban residents were more likely to suffer from
declining supplies, however, they did have the advantage of higher incomes than their rural
counterparts. The mass exodus of city dwellers to the countryside to purchase food is a phenomenon
normally associated with the final years of the war, but an official report in the summer of 1941
complained that urban residents visiting the countryside for the Obon festival in August were
buying up everything they could find, not just grain or vegetables, but canned and dried food as
well.71
Shortages of clothing were particularly severe. Textile production for domestic use
declined as capacity was increasingly restricted to the need to earn foreign exchange. By August
1941 only 50% of Japan’s cotton spinning enterprises were still in operation, and thread output had
fallen to around half of the 1937 level. By 1940 imports of the American and Indian raw cotton on
which the industry depended were barely a third of the 1936 level.72 Japan depended on imports for
80% of raw hide needs, and a shortage was reported as early as autumn 1937.73 By early 1940
leather for shoe repairs could be obtained only with a permit.74 The demand for the services of
cobblers and shoe repairers grew as people sought to prolong the life of their existing footwear.75
As rubber supplies were curtailed or diverted to ‘essential’ use farmers had problems obtaining the
rubber boots and rubber soled footwear on which they depended.76 Silk, a key foreign exchange
earner, became a rarity even for those who could afford it. Imported raw cotton and wool were
increasingly mixed with other fibres for domestic use. From December 1937 woollen and worsted
yarns for domestic consumption had to contain 10-40% ‘staple fibre’ (made from bark or wood),
while woollen and worsted fabrics had to contain at least 20% staple fibre. Two months later knitted
woollen goods, serges and shawls also had to include 20-30% staple fibre.77 Wool was effectively
unavailable by early 1941.78 By early 1938 cotton yarns for domestic use also had to contain at
least 30% staple fibre, a requirement that in itself exceeded the productive capacity of the staple
fibre industry. The pressure to increase staple fibre production brought its own problems, increasing
demand for wood pulp, which was already in short supply, and pushing producers into thinking
about wood pulp substitutes. Shortages of the carbon bisulphide and caustic soda used in its
E.Pauer, ‘A New Order for Japanese Society’, p.96.
Scherer, ‘Drawbacks to Controls on Food Distribution’, p.111.
72 M.Miyazaki & O.Ito, ‘Transformation of Industries in the War Years’, in T.Nakamura & K.Odaka (eds.), Economic
History of Japan 1914-1955: a Dual Structure (Oxford: Oxford University Press, 2003), p.294; Nagaoka, Kindai Nihon
no Keizai, pp.24, 28.
73 Oriental Economist IV, 10, October 1937, p.580.
74 D.J.Orchard, ‘The Outlook in Japan’, Amerasia III, 8, Oct.1939, p.466.
75 Havens, Valley of Darkness, p.49.
76 Oriental Economist VII, 7, July 1940, p.416.
77 Oriental Economist IV, 12, December 1937, pp.701-2; V, 2, Feb.1938, p.105.
78 William S.Husk, ‘The Japanese Don’t Like It Either’, Amerasia V, 3, May 1941, p.116.
70
71
15
manufacture were a further problem.79 Staple fibre was stiff and harsh on the skin, could be worn
only for a few months, and sometimes gave way altogether if exposed to heavy rain. 80 One
commentator suggested that it was also particularly susceptible to being eaten by locusts.81
Residential and other construction was also before too long a victim of the pressure to
focus on war needs, which brought with it restrictions on basic inputs such as iron, steel and lumber.
By early 1938 commentators were noting particular declines in the construction of individual
dwellings, department stores, office buildings, schools and combined shops/dwellings. Ferroconcrete and steel-based construction was particularly badly hit, though iron-frame, wood, brick
and stone construction fared better.82 The price of lumber, essential for private dwelling
construction, rose considerably, a situation to which the response was to institute what was
effectively a government monopoly.83 Cement supply was inadequate to meet demand, and offered
a typical example of how a shortage of one commodity had a knock on effect on others. Its
manufacture was impeded by shortages of coal (although overall output of coal had increased), and
its distribution by shortages of transport facilities, labour and paper bags.84
Energy shortages affected both manufacturers and individuals, who found it increasingly
difficult to heat and light their homes, and to travel around within cities, let alone between them.
Virtually all oil was imported, and designated for war needs. In April 1939 the government
instituted a series of measures aimed at ensuring supplies of coal, which were being endangered by
problems in transport and shortages of materials and labour. These included providing for increased
housing for miners, and encouraging Korean immigration.85 Overall coal production peaked in 1940,
but an increasing proportion was diverted to war industries. As early as the autumn and winter of
1939-40, power shortages erupted when a lack of coal constrained steam powered generation of
electricity, compounded by a decline in hydroelectricity consequent on the drought. The search for
substitutes was vigorously pursued, but was never very successful.86 Again, it brought its own
problems. The search for oil substitutes, for example, increased the demand for coal. A 1938
programme to conserve petrol by mixing it with other forms of alcohol increased industrial demand
for potatoes,87 whose production was not a priority for the agricultural sector.
79
Oriental Economist IV, 12, Dec.1937, p.702; V, 2, February 1938, pp.103-4; V, 4, April 1938, pp.226-8; VII, 9,
Sept.1940, p.550. The wood pulp shortage was exacerbated by encouraging people to use rayon as a further substitute
for natural fibres. The substitutes considered included sugar cane residue (bagasse) and rice husk pulp.
80 William S.Husk, ‘The Japanese Don’t Like It Either’, Amerasia V, 3, May 1941, p.116.
81 Marc T.Greene, ‘How Much Longer, Japan?’, Amerasia IV, 12, February 1941, p.573.
82 Oriental Economist V, 3, March 1938, pp.151-3.
83 Oriental Economist VII, 6, June 1940, p.362.
84 Oriental Economist VII, 8, August 1940, p.488; VIII, 2, Feb.1941, p.93.
85 Oriental Economist VII, 4, April 1940, pp.216-7.
86 M.S.F., ‘Japan Pushes Search for Substitutes’, Far Eastern Survey 7, 22, 9 Nov., 1938; Miriam S.Farley, ‘Coal Sales
Licensed in Japan’, Far Eastern Survey 8, 2, 19 Jan., 1939.
87 Johnston, Japanese Food Management, p.83.
16
The direct impact on citizens of these growing constraints was initially limited, but by the
end of 1939 air conditioning and elevators in public places were being halted, and people were
being urged to limit home consumption.88 Oil-based energy was the main initial target of the
government’s efforts. Petrol for vehicles was restricted from 1938, and buses received subsidies to
install charcoal generators. By the autumn of 1940 such conversion was compulsory. 89 Many taxis
followed suit. A petrol distribution policy proposed in the autumn of 1939 was a source of fierce
internal conflict, and provoked an angry response from agricultural interests which took the view
that it would prioritise the needs of commerce and manufacturing over those of farming and fishing.
The government was forced to compromise,90 but farming remained the loser in the distribution of
oil-based fuels. Between 1939 and 1942 the availability of kerosene for use in farm machinery
declined by around 60%.91 The chance of obtaining the petrol to operate the few civilian motor
vehicles declined rapidly. At the same time, demand for charcoal increased, and charcoal for
domestic use was rationed from May 1941.92 Shortages increased, and the government again found
itself pushed in the direction of imposing a state monopoly. Charcoal and wood shortages affected
heating in private homes, and by early 1941 the public bath houses used by most ordinary Japanese
were closed on some days due to lack of fuel.93 Fuel shortages and other equipment shortages also
meant overcrowded buses and public transport systems.94 In areas such as Tokyo the implications of
this for both living standards and efficiency were considerable.
Another commodity regarded as an essential material incentive was tobacco. From the start
of the China war maintaining supplies of tobacco to the army became a priority concern, putting
civilian consumption under pressure. Tobacco had been a government monopoly since the Meiji
period, but its sale and distribution had been substantially according to market principles. Tobacco
prices were allowed to rise, and tobacco consumption by value went up considerably in the early
years of the conflict. However, the government was accused of acting in contravention of its own
price controls by allowing the tobacco monopoly to raise prices in September 1939, just when the
prices for most other goods had been frozen.95 It was suggested that by the end of 1940 the two
‘solaces’ of tea and tobacco were beyond the reach of many Japanese. 96 Personal care also became
88
D. J.Orchard, ‘The Outlook in Japan’, Amerasia III, 8, October 1939, p.469.
Oriental Economist VIII, 3, March 1941, p.139.
90 Lawrence K.Rosinger, ‘Petroleum Control in Japan Reflects Internal Conflict’, Amerasia IV, 1, March 1940, pp.4346.
91 Johnston, Japanese Food Management, p.114.
92 Hara, ‘Wartime Controls’, p.262.
93 Marc T.Greene, ‘How Much Longer, Japan?’, Amerasia IV, 12, February 1941, p.571
94 Dorothy J.Orchard, ‘The Outlook in Japan’, Amerasia III, 8, October 1939, p.466.
95 Havens, Valley of Darkness, p.49.
96 Marc T.Greene, ‘How Much Longer, Japan?’, Amerasia IV, 12, February 1941, pp.570-1.
89
17
more restricted. Cosmetics and perms were banned in 1939 on the grounds of being unnecessary
luxuries,97 and in that context became objects of material shortage as well as social opprobrium.
A range of other domestic items were affected by declining supplies resulting from the
pressure to use substitutes for expensive imports and switch needed materials to war use. Matches,
critical for most households, became subject to a distribution card system in June 1940.98 People
were also increasingly pressured to give up their possessions for recycling for war purposes. Metal
goods began to be surrendered relatively early on. Scrap metal was collected and the use of
substitutes for domestic machinery, pots and pans were encouraged.99 In May 1940 it was decreed
that department stores could no longer sell ‘non-essential’ goods, and all such goods had to be
disposed of by the first week of October. The consequence was a bonanza of price cuts and
purchases.100 It was possible to put a positive slant on this situation. One estimate suggested that
‘compared with pre-Incident days, current department store sales are fully 30% greater with high
grade, expensive articles commanding especially ready market’.101 However, many retail workers
were laid off or transferred to more ‘essential’ occupations. Although the big department store
chains enjoyed expanded sales in 1939-40, they were increasingly hit by the rising cost and general
shortage of items for sale, and by anti-luxury campaigns that led to more and more items being
prohibited. From spring 1940 they were unable to engage in promotional activities and the
prospects for the future were uncertain. ‘In some places, sales counters have become thinly covered
with articles though the popular purchasing capacity remains as immense as ever. The department
store executives are racking their brains over how to cope with the situation.’102
The more extensive official controls became, and the greater the shortages of particular
commodities, the greater the incentives for individuals and organisations to try and circumvent the
controls and the greater the divergence between official and ‘real’ prices. (Table 6) Moreover,as
Nakamura has noted, well before Pearl Harbor purchase or rationing vouchers did not necessarily
produce the promised commodities and unplanned shortages and surpluses of specific goods
appeared. Under the circumstances a new phalanx of ‘brokers’ emerged to manipulate market
transactions, while black market and illegal channelling of commodities mushroomed.103 The
inevitable failure of the regulated market to supply consumers with what they expected and needed
was the emergence of a black market which extended to imported commodities and could be
exploited by those who had the funds and talent to do so. It was reported in autumn 1939 that
97
Havens, Valley of Darkness, p.18.
Oriental Economist VII, 6, June 1940, p.335.
99 Hara, ‘Wartime Controls’, p.256
100 Havens, Valley of Darkness, p.50.
101 Oriental Economist VII, 6, June 1940, p.344.
102 Oriental Economist VII, 12, December 1940, pp.706-7.
103 Nakamura, ‘The Age of Turbulence, 1937-1954’, p.66.
98
18
‘ordinary Japanese have become small importers exercising their right to 100 yen of foreign
exchange a month. With this exchange they buy such things as drills and bits and sell them to a
middleman at 200 to 300 per cent profit. The middleman in turn sells to manufacturing
establishments at double the price he has paid.’104 Even the most worthy organisations became
involved in improper transactions. Pauer reports the illegal exchange of purchase permits within
block and neighbourhood associations.105 The black market and official prices for rice had diverged
considerably by 1941, and the economic policing mechanisms put in place in August 1938
expanded rapidly. By 1941 there were nearly three quarters of a million police dealing with
economic crimes. The number of persons arrested for economic crimes grew from 28,367 in 1939
to 129,110 in 1941,106 but the number of violations were far greater. In Tokyo the Economic
Control Section of the police claimed to have exposed over 239,000 violations between August
1938 and December 1939, 148,000 of them in the last five months of 1939 alone.107 In March 1940
the Diet was so concerned about ‘the rampancy of outlaw transactions in many commodities.…
attributable to a faulty price policy and distribution of supplies’ that an official note calling on the
Government to stamp out such practices was incorporated in the resolution approving the 1940-41
budget.108 Illegal trafficking in fuels and other commodities was widespread. In February 1940 the
police rounded up over 2,000 Tokyo sake merchants in connection with market collusion and
profiteering. It was recognised however, that the number of cases that resulted in a court appearance,
let alone a successful conviction, were lamentably small,109 and as long as prices continued to
increase and supplies to diminish, the so-called ‘outlaw transactions’ were unlikely to be brought
under control. Evidence suggests that they increased as the war progressed. It is therefore difficult
to know how far citizens’ circumvention of the spreading rationing system and price controls meant
that their consumption levels were higher than would otherwise have been the case.
Time, Leisure and Health
In general average working hours were rising over this period, as attempts to increase
production in the face of a shortage of labour, especially skilled labour, led to factories pushing for
more overtime. There was a cost to such strategies. Exhaustion, illness and accidents among
workers increased, especially among the younger workers who were unfamiliar with machinery and
104
D. J.Orchard, ‘The Outlook in Japan’, Amerasia III, 8, October 1939, p.467.
Pauer, ‘New Order for Japanese Society’, p.92.
106 Scherer, ‘Drawbacks to Controls on Food Distribution’, pp.114-116. Scherer’s article focuses mainly on the period
after 1941, and there is no breakdown by kind of economic crime for these early years
107 L.H.Odell, ‘Japan Fights Widespread Violation of Control Regulations’, Far Eastern Survey 9, 10, 8 May, 1940,
pp.121-2.
108 Quoted in Oriental Economist VII, 3, March 1940, p.136.
109 L.H.Odell, ‘Japan Fights Widespread Violation of Control Regulations’, Far Eastern Survey 9, 10, 8 May, 1940,
p.122.
105
19
lacked skills. More significantly, if we are thinking of the impact of material incentives, is the fact
that absenteeism rates increased markedly over the period 1937-40, becoming very high in some
key war-related industries.110
With longer working hours, of course, there was less free time for leisure activities. This
was diminished further by less efficient public transport and increasing time spent queuing for
rationed or non-rationed goods, something that consumer cooperatives sought to address through
collective action.111 The range of leisure activities available to those who could afford them also
diminished, notwithstanding buoyant demand. One article in June 1940 remarked that ‘movies, play
houses and other theatrical offerings have been doing a booming trade, in a great many cases with
tickets sold out for days or even weeks in advance’.112 Dance halls were given a two year warning
and forced to close in autumn 1940. One manager reported: ‘They were packed. We were given
permission to remain open until 2 a.m. Even on Christmas nights we’d only been allowed to stay
open to midnight. The last melody was “Auld Lang Syne”. All the girls were weeping.
Understandably. From the morrow they no longer had jobs.’113 Sports activities lost out to more
‘essential’ pursuits. Joseph C.Grew, the US ambassador in Japan, reported in July 1941 that ‘Osaka
reported that the annual tennis tournament and other athletic contest scheduled for this week have
all been cancelled as they would require space for many students travelling in the trains which are
needed for other reasons’.114 While many students were initially protected from conscription into
the armed forces, the motivation that they had for their studies appears to have been limited. One
commentator who had spoken to faculty and students at Kyoto University described how little work
got done, as most of the students lacked much commitment, coming to class or not as they chose,
laughed at the authorities and frequently got drunk. The students themselves argued that they might
as well enjoy themselves before going off to be killed in China or sent to a dead end job.115
In many respects the health levels of Japanese citizens remained relatively unchanged during
the 1937-41 period, at least by comparison with the dramatic declines that occurred later on.
Japanese governments had shown a commitment to public health measures since the Meiji period,
and had been relatively successful in curbing diseases such as cholera and smallpox, although low
income levels had limited sustained increases in life expectancy during the early decades of the 20th
century.116 However, levels of health and life expectancy had been improving during the interwar
110
H.Hazama, Chōki Antei Koyō (Tokyo: Bunshindō, 1998), p.81.
Pauer, ‘New Order for Japanese Society’, p.96.
112 Oriental Economist VII, 6, June 1940, p.344.
113 Hara Kiyoshi, in Haruko Taya Cook & Theodore F.Cook, Japan at War: an Oral History (New York: The New
Press, 1992), p.63.
114 Ten Years in Japan (London: Hammond, Hammond & Co.Ltd., 1944), p.349.
115 William S.Husk, ‘The Japanese Don’t Like It Either’, Amerasia V, 3, May 1941, p.117.
116 S.R.Johansson & C.Mosk, ‘Exposure, Resistance and Life Expectancy: Disease and Death during the Economic
Development of Japan, 1900-1960’, Population Studies 41, 2, July 1987.
111
20
years, and in some respects health provision actually improved after the start of the China war. The
Welfare Ministry was established in 1938, some workers benefited from national health insurance,
and there was a growth in the number of public health centres and health professionals. 117 The birth
rate declined significantly in 1938-9, but then recovered in 1940-41.118 Nevertheless, there were
signs that these gains were unlikely to be sustained, and as nutrition began to decline so did health.
Calorie intake, particularly from animal protein, fell markedly from the late 1930s. Survey data on
17 year olds of both sexes show a marked decline in average height and weight between 1935 and
1945, particularly for mails, but it is hard to determine at what point this decline began. 119
However, one 1938-41 survey of elementary school pupils showed a sharp drop in average weight
gain in 1941.120 Mortality data also suggests that 1941 was a turning point in terms of health. From
then on rates of mortality from the leading causes of civilian death, which had declined substantially
during the 1930s, again started to rise.121 These included tuberculosis, pneumonia and strokes. A
clear contributory cause was the declining availability of drugs.
Conclusion
It has been long established that output per worker in Japan fell steadily throughout the
years of conflict. Much of this has been attributed to deficiencies in labour mobilization, and to
shortages of skilled workers, inputs and functioning machines.122 It has been suggested here,
however, that labour productivity may also have been undermined even before Pearl Harbor by
failures in the material incentive structure. The failures in material living standards at this time
should not be exaggerated. Experts in the US emphasized early on in the war that there had been a
broad improvement in living standards since the First World War, and assumptions by some writers
that social unrest in Japan was nearing the point of explosion were grossly exaggerated.123 It was
also to be expected that Japanese journals would put a positive gloss on the situation. In mid-1940
The Oriental Economist wrote positively of consumers who could be expected to ‘realize the folly
of buying unnecessarily large quantities’ and merchants who would ‘cease selling in anticipation of
higher prices’, and rejected predictions of disaster based on claims of shortages and rampant black
markets with the resounding statement: ‘Do these surface indicators fully and correctly reflect
117
Havens, Valley of Darkness, p.46; M.S.F., ‘Health Ministry Established in Japan’, Far Eastern Survey 7, 5, Mar.2,
1938.
118 I.B.Taeuber, The Population of Japan (Princeton NJ; Princeton University Press, 1958), p.232; Oriental
Economist IV, 8, August 1937, p.456.
119 H.Kitō, ‘Seikatsu Suijun’, in S.Nishikawa, K.Odaka and O.Saitō (eds.), Nihon Keizai no Nihyakunen (Tokyo: Nihon
Hyōronsha, 1996), pp..437, 439.
120 Scherer, ‘Drawbacks to Controls on Food Distribution’, p.109
121 Tauber, Population of Japan, p.290.
122 Cohen, Japan’s Economy in War and Reconstruction, p.275.
123 Article by Staff of the American Council, Far Eastern Survey 6, 21, Oct.20, 1937, p.246; Elizabeth Boody
Schumpeter, ‘Japanese Economic Policy and the Standard of Living’, Far Eastern Survey 7, 2, Jan.19, 1938, p.13ff.
21
Japan’s economic position? In other words, is Japan so hopelessly impoverished as one would be
inclined to believe on the basis of these reports of apparent distress? Our answer is, positively,
No’.124 At the same time, however, this and other journals continued to document and disseminate
extensive empirical data on prices, goods availability and consumption that led to a very different
conclusion. That this was recognized by the state is apparent from the emphasis in the 1940 labour
mobilization plan that ‘In view of the drop in the will to produce and the physical deterioration of
the labourers, special emphasis will be placed upon efforts to preserve labour efficiency…’.125
124
125
Oriental Economist VII, 6, June 1940, p.335
Quoted in Cohen, Japan’s Economy in War and Reconstruction, p.310.
22
Table 1. Tokyo Wholesale Price Index, 1936-1942 (January 1913 = 100)
168.3
206.0
227.5
243.3
266.6
280.8
298.0
1936
1937
1938
1939
1940
1941
1942
Source: Tōyō Keizai Nenkan 1944, p.125
Table 2. Tokyo Retail Price Index 1942 (1937=100)
Food/Drink
183.9
Housing
213.1
Light/Heat
164.3
Clothing
273.6
Source: Tokyo Metropolitan Authorities reported in Tōyō Keizai Nenkan 1944, p.136
Table 3. Workers’ Living Expenses 1939-1942 (July 1937=100)
1939
1940
1941
1942
Food/Drink
123.2
152.3
152.5
156.3
Housing
107.3
115.3
119.4
124.4
Light/Heat
122.6
139.9
142.3
147.5
Clothing
150.6
185.5
202.5
216.5
Overall
121.2
143.4
147.3
153.7
Source: Index compiled by Tōyō Keizai Shinpōsha, published in Tōyō Keizai Nenkan 1944, p.137
Table 4. Tokyo Wholesale Price Index for Specified Commodities (1931=100)
1937
1938
1939
1940
1941
Cereals
181.7
188.9
238.7
267.5
270.0
Other Foods
119.5
128.1
144.8
167.9
175.6
Source: Tōyō Keizai Nenkan vol.28, 1944, pp.126-33
23
Metals
279.6
307.9
261.7
273.5
281.8
Table 5. Factory Workers’ Average Daily Wages August 1942 (¥)
Men
3.84
3.23
3.12
3.30
2.42
2.97
2.84
3.30
3.24
Metals
Machine Tools
Chemicals
Utilities
Spinning/weaving
Lumber/woodworking
Foodstuffs
Printing/publishing
All industries
Women
1.49
1.59
1.42
1.25
1.11
1.30
1.29
1.57
1.32
Source: Cabinet Statistics Office
Table 6. Index of Real and Official Prices, Japan, 1936-1941 (1936=100)
Wholesale Prices
Retail Prices
Real
Official
Real
Official
1936
100
100
100
100
1937
119
121
109
110
1938
126
127
120
125
1939
145
141
135
141
1940
171
158
175
163
1941
184
167
204
165
Source: J.B.Cohen, Japan’s Economy in War and Reconstruction, p.97.
24