Historical sources on the Japanese economic miracle after WWII

"Initially, the Occupation [of Japan by America] was confronted with an industrial establishment virtually at a standstill. The effect of the Allied blockade of Japan by sea [during World War Two] and by air had throttled all supply lines from Asia and the island portions of her former Empire, while bombing raids had destroyed perhaps 30% of her overall plant capacity and had greatly disorganized all industrial effort through the burning of cities and disruption to essential services. With surrender and entrance of the occupying armies, industrial chaos became even more pronounced." 

"Very substantial recovery has taken place since then. The index of industrial production has risen from a low point in the fall of 1945 to present levels of approximately 45 calculated upon a base period of the average for the years 1930–34. This base period is used since it represents the Far Eastern Commission's appraisal as to what constitutes normal peacetime requirements." 

Contextual information:

This report was prepared by SCAP (Supreme Commander for the Allied Powers) officials and enclosed in a telegram from W. J. Sebald, Acting Political Adviser in Japan, to the U.S. Secretary of State on 29 September 1947. The document summarised Japan's industrial recovery progress nearly two years after the end of the war, noting that by late 1947 production had only recovered to approximately 45 per cent of its 1930–34 base, which confirms that 1946 levels were substantially lower. 

Bibliographical reference:

Sebald, W. J. (1947). Report by the chairman on Japanese industrial production (Enclosure to Document 265). In Foreign relations of the United States, 1947, The Far East (Vol. VI, pp. 295–300). U.S. Government Printing Office. https://history.state.gov/historicaldocuments/frus1947v06/d265 

Copyright: Public domain — U.S. government work (17 U.S.C. § 105). 

"The Japanese standard of living, always low, is now even lower. Prices are quite unstable. Agricultural production, always inadequate to feed the people, is now about normal. Industrial production is only 45% of the 1930–34 average, or 24% of the wartime peak. To secure the 1930–34 average standard of living for the present population would require industrial production at about 125% of 1930–34." 

Contextual information:

This briefing document was prepared by the U.S. State Department in early 1948 to summarise Japan's economic situation during the occupation. It provided American policymakers with a snapshot of the scale of Japan's post-war economic collapse and the distance that remained before recovery could be considered complete. 

Bibliographical reference:

U.S. Department of State. (1948). State Department briefing document on Japan's economic situation (Document 644). In Foreign relations of the United States, 1948, The Far East and Australasia (Vol. VI). U.S. Government Printing Office. https://history.state.gov/historicaldocuments/frus1948v06/d644 

Copyright: Public domain — U.S. government work (17 U.S.C. § 105).

"However, growing concern over Communist power in East Asia, particularly the success of the Chinese Communist Party in its struggle against Chiang Kai-shek's Nationalist forces, led the United States to halt reforms in 1947 and 1948 in order to focus on the economic recovery and political rehabilitation of Japan. In this 'Reverse Course,' Supreme Commander of the Allied Powers, General Douglas MacArthur, focused on strengthening, not punishing, what would become a key cold war ally." 

Contextual information:

This passage comes from a separate article by the U.S. State Department's Office of the Historian, which focuses specifically on the Korean War's connection to Japan's economic recovery. It places the "reverse course" within the broader context of American Cold War strategy in East Asia during the late 1940s. 

Bibliographical reference:

U.S. Department of State, Office of the Historian. (n.d.). Korean War and Japan's recovery. Milestones in the history of U.S. foreign relations. https://history.state.gov/milestones/1945-1952/korean-war 

Copyright: Public domain — U.S. government work (17 U.S.C. § 105).

"Economic recovery should be made the prime objective of United States policy in Japan for the coming period. It should be sought through a combination of a long-term U.S. aid program envisaging shipments and/or credits on a declining scale over a number of years, and by a vigorous and concerted effort by all interested agencies and departments of the United States Government to cut away existing obstacles to the revival of Japanese foreign trade and to facilitate the restoration and development of Japan's exports." 

"While SCAP should not stand in the way of reform measures initiated by the Japanese if it finds them consistent with the overall objectives of the occupation, it should be authorized not to press upon the Japanese Government any further reform legislation." 

Contextual information:

This document was authored by George F. Kennan, the director of the U.S. State Department's Policy Planning Staff, on 25 March 1948. Known as PPS/28, it was a formal policy recommendation that called for a fundamental shift in American occupation priorities from reform and demilitarisation towards economic recovery. This document is considered one of the key intellectual foundations of the "reverse course" in occupation policy. 

Bibliographical reference:

Kennan, G. F. (1948, March 25). PPS/28: Recommendations with respect to U.S. policy toward Japan (Document 549). In Foreign relations of the United States, 1948, The Far East and Australasia (Vol. VI, pp. 691–719). U.S. Government Printing Office. https://history.state.gov/historicaldocuments/frus1948v06/d549 

Copyright: Public domain — U.S. government work (17 U.S.C. § 105).

"Article 9. Aspiring sincerely to an international peace based on justice and order, the Japanese people forever renounce war as a sovereign right of the nation and the threat or use of force as means of settling international disputes. 

(2) In order to accomplish the aim of the preceding paragraph, land, sea, and air forces, as well as other war potential, will never be maintained. The right of belligerency of the state will not be recognized." 

Contextual information:

This is the official English translation of the Constitution of Japan, which was promulgated on 3 November 1946 and came into effect on 3 May 1947. The constitution was drafted under the supervision of SCAP during the American occupation, and this English text is hosted by the National Diet Library of Japan as part of its digital archive on the birth of the constitution. 

Bibliographical reference:

The Constitution of Japan. (1947, May 3). Chapter II, Article 9. National Diet Library of Japan, Birth of the Constitution of Japan digital collection. https://www.ndl.go.jp/constitution/e/etc/c01.html 

Copyright: The Constitution of Japan is an official legal document and is in the public domain. The English translation was produced by the Government Printing Bureau of Japan.

"3. Up to the present time the local expenses of U.S. forces in Japan have been borne by the Japanese government out of funds appropriated in the Japanese budget under the title Termination of War expenses. Expenditures under this account in the Japanese fiscal year 1949–50 amounted to ¥94.2 billion. The appropriation for the current Japanese fiscal year amounts to ¥109.5 billion and the proposed appropriation for the Japanese fiscal year 1951–52 is ¥102.5 billion. At 360 yen to the dollar, dollar equivalents are $261.94 million, $304.16 million and $280.47 million." 

Contextual information:

This memorandum was written by the Deputy Director of the Office of Northeast Asian Affairs to the Deputy Assistant Secretary of State for Far Eastern Affairs on 29 December 1950. It discussed a proposed financial arrangement for covering the local expenses of U.S. forces stationed in Japan, and in doing so documented the fixed exchange rate that had been established under the Dodge Plan the previous year. 

Bibliographical reference:

Johnson, U. A. (1950, December 29). Memorandum: Partial "pay-as-you-go" arrangement for Japan (Document 799). In Foreign relations of the United States, 1950, East Asia and the Pacific (Vol. VI). U.S. Government Printing Office. https://history.state.gov/historicaldocuments/frus1950v06/d799 

Copyright: Public domain — U.S. government work (17 U.S.C. § 105).

"The outbreak of the Korean War in 1950 provided SCAP with just the opportunity it needed to address this problem, prompting some occupation officials to suggest that, 'Korea came along and saved us.' After the UN entered the Korean War, Japan became the principal supply depot for UN forces." 

Contextual information:

This passage comes from the U.S. State Department's Office of the Historian summary of the American occupation and reconstruction of Japan. It describes how the Korean War transformed Japan's economic prospects by turning the country into the primary logistics base for United Nations military operations on the Korean Peninsula. 

Bibliographical reference:

U.S. Department of State, Office of the Historian. (n.d.). Occupation and reconstruction of Japan, 1945–52. Milestones in the history of U.S. foreign relations. https://history.state.gov/milestones/1945-1952/japan-reconstruction 

Copyright: Public domain — U.S. government work (17 U.S.C. § 105).

"With extreme shortages of supplies in Japan's domestic economy, exports did not begin to recover until the Korean Conflict when special procurement by United Nations forces induced boom conditions in Japan's industries... 

"MITI serves as an architect of industrial policy, an arbiter for industrial problems and disputes, and a regulator. MITI's major objective is to strengthen Japan's industrial base and to insure that Japan's foreign trade operates smoothly and efficiently. MITI maintains very close relations with domestic producers and key factions within the Liberal Democratic Party. It does not manage Japanese trade and industry along the lines of a centrally planned economy. It does, however, provide administrative guidance and other direction — either formal or informal — to industries on modernization, technology, plans for investments in new plant and equipment, and on competing both with each other and with foreign firms." 

"MITI holds primary responsibility for formulating and implementing international trade policy, although it does so by seeking a consensus among interested parties." 

"MITI is responsible not only for exports and imports, but also for all domestic industries and businesses not specifically covered by other ministries, investments in plant and equipment, pollution control, energy and power, some aspects of foreign economic assistance, and consumer complaints. Such broad responsibility allows MITI to integrate conflicting policies, such as pollution control and export competitiveness, to prevent excessive damage to industries." 

Contextual information:

This Congressional Research Service report was written by Dick K. Nanto for the U.S. Library of Congress in 1982. It provided a comprehensive overview of Japan's post-war trade patterns and industrial policies for the use of members of Congress, and it documented how Korean War procurement orders created the demand that kickstarted Japan's industrial recovery. 

Bibliographical reference:

Nanto, D. K. (1982, March 15). Japan's international trade patterns, institutions, and policies (CRS Report 82-67E, p. 9, 12-4). Congressional Research Service, Library of Congress. https://www.everycrsreport.com/files/19820315_82-67E_632f4010cf32c2ecd2354f9643542937de59cc12.pdf 

Copyright: Public domain — U.S. government work (17 U.S.C. § 105).

"The policies Tokyo uses to advance Japanese economic interests are more diverse and better integrated than those of most other advanced countries. In addition to broad fiscal and monetary instruments, the Japanese Government selects and nurtures strategic growth industries and assists in maintaining or phasing out industries lacking international competitiveness. The principal bureaucratic responsibility for selecting and implementing industrial policies rests with the Ministry of International Trade and Industry [MITI]." 

Contextual information:

This declassified CIA intelligence assessment was produced by the Directorate of Intelligence in September 1982 and approved for public release in March 2007. It analysed the aims and instruments of Japanese industrial policy, with a focus on MITI's central coordinating role in identifying and supporting industries that were considered strategically important for national economic growth. 

Bibliographical reference:

Central Intelligence Agency, Directorate of Intelligence. (1982, September). Japan: Aims and instruments of industrial policy (EA 82-10103). Declassified and approved for release March 8, 2007. CIA FOIA Electronic Reading Room. https://www.cia.gov/readingroom/document/cia-rdp84s00554r000100150001-1 

Copyright: Public domain — U.S. government work (CIA), declassified (17 U.S.C. § 105).

"The keiretsu are a key feature of Japan's economy, directly or indirectly affecting economic transactions in both upstream and downstream channels, within and across industries. According to the Japan Fair Trade Commission (JFTC), almost 20 percent of Japan's capital was held by the six major corporate groupings (Mitsui, Mitsubishi, Sumitomo, Fuyo, Sanwa and Dai-Ichi Kangyo or DKB) and their subsidiaries in JFY 1992. By another estimate, approximately 50 percent of Japan's capital is controlled by all of the keiretsu. The keiretsu are composed of firms from a wide range of commercial and industrial fields, including trading companies, banks, suppliers, distributors and retailers. The groupings often have overlapping relationships with members of their own group, other groups and nominally independent firms." 

"Although some variations have been suggested by observers, in general, keiretsu can be categorized into three types. The first type is known as the intermarket, horizontal, or financial keiretsu which are descended from the prewar zaibatsu and are typically organized around a major bank, trading company, insurance company, and large manufacturing company. The second type, variously known as intramarket, industrial, production or vertical keiretsu (firms representing successive stages of production or closely connected industries) are usually organized around a large independent company and its subsidiaries and affiliates." 

Contextual information:

This working paper was published by the U.S. International Trade Commission (USITC) in 1997, written by Diane L. Manifold. It examined Japanese corporate activities in Asia and their implications for U.S.–Japan trade relations, including a detailed section describing the structure and economic significance of the keiretsu system in Japan's post-war economy. 

Bibliographical reference:

Manifold, D. L. (1997, February). Japanese corporate activities in Asia: Implications for U.S.–Japan relations (USITC Working Paper No. 96-04-A, pp. 6–7). U.S. International Trade Commission. https://www.usitc.gov/publications/332/ec9604a.PDF 

Copyright: Public domain — U.S. government work, U.S. International Trade Commission (17 U.S.C. § 105).

"Prior to conference, Ikeda's position was sagging as combination of serious disequilibrium in Japanese payments, apparent upsurge trade protectionism in U.S., and formation regional economic groupings excluding Japan. These developments threatened to undermine twin pillars of Ikeda's policy: partnership with U.S. and program to double national income within decade." 

"Hakone may in fact have succeeded in producing indispensable factor for Ikeda's survival beyond next spring, providing means to reinforce U.S.-Japan partnership while disengaging Ikeda from albatross of overly specific national income statistics and from personal identification with slogan of '9.2 percent annual growth over next three years.'" 

Contextual information:

This telegram was sent by U.S. Ambassador Edwin O. Reischauer from the American Embassy in Tokyo to the Department of State on 13 November 1961. It reported on the political situation surrounding Prime Minister Ikeda's Income Doubling Plan and its connection to U.S.–Japan economic relations during the early 1960s. The telegram confirms the plan's existence and the "double national income within decade" objective, though it references the short-term 9.2 per cent growth target rather than the longer-term 7.8 per cent figure. 

Bibliographical reference:

Reischauer, E. O. (1961, November 13). Telegram 1466 from Embassy Tokyo to Department of State (Document 232). In Foreign relations of the United States, 1961–1963, Volume IX: Foreign economic policy. U.S. Government Printing Office. https://history.state.gov/historicaldocuments/frus1961-63v09/d232 

Copyright: Public domain — U.S. government work (17 U.S.C. § 105).

"On 17 October the Organization of Arab Petroleum Exporting Countries (OAPEC) decided to cut oil production. —Production will be reduced by not less than 5% a month until an Israeli withdrawal from occupied territories is completed and the 'legal rights' of the Palestinians are restored; —The Arab countries also promised to maintain oil deliveries to 'friendly' countries that give Arabs 'effective material help'; and —Threatened a total embargo of countries that used their armed forces to aid Israel." 

Contextual information:

This declassified CIA intelligence memorandum was produced on 19 October 1973, just two days after the OAPEC decision to cut oil production. It provided American policymakers with real-time intelligence about the Arab oil weapon being deployed during the October War, making it a primary source that recorded events as they unfolded. 

Bibliographical reference:

Central Intelligence Agency. (1973, October 19). CIA intelligence memorandum (Document 223). In Foreign relations of the United States, 1969–1976, Volume XXXVI: Energy crisis, 1969–1974. U.S. Government Printing Office. https://history.state.gov/historicaldocuments/frus1969-76v36/d223 

Copyright: Public domain — U.S. government work (CIA), declassified (17 U.S.C. § 105).

"Japan is the second largest and the most dynamic industrial power in the free world, and the only non-Communist power in Asia. Japan's economic capacity is growing rapidly; if present trends hold, Japan's GNP could surpass that of the USSR in the 1980's." 

Contextual information:

This summary paper was prepared by the Interdepartmental Group for East Asia in August 1971 as a response to National Security Study Memorandum 122. It assessed Japan's strategic and economic importance for U.S. foreign policy, confirming Japan's position as the second-largest economy in the non-Communist world by the early 1970s. The document does not explicitly name West Germany or the year 1968, but it confirms Japan's ranking. 

Bibliographical reference:

Interdepartmental Group for East Asia. (1971, August 2). Summary paper prepared in response to NSSM 122 (Document 84). In Foreign relations of the United States, 1969–1976, Volume XIX, Part 2: Japan, 1969–1972. U.S. Government Printing Office. https://history.state.gov/historicaldocuments/frus1969-76v19p2/d84 

Copyright: Public domain — U.S. government work (17 U.S.C. § 105).