A cheaper yen, cheap loans and government spending helped Japan recover, while growing state controls steered industry towards war.
Japan's recovery did not come from conquest alone. In 1930, Japan returned to the gold standard, a system that ties a currency's value to a fixed amount of gold. Setting the yen at its old value made Japanese goods expensive for foreign buyers, hurting exports even more. In December 1931, Finance Minister Takahashi Korekiyo returned to office and took Japan off the gold standard. The yen then fell in value against other currencies. This is called depreciation.
A cheaper yen meant foreign buyers paid less, in their own money, for Japanese goods. So exporters won more orders. Cheaper borrowing helped spending and investment. Government spending also created demand and jobs, because public works paid workers and bought materials. This package is called stimulus, because it stimulates economic activity. Spending went on the military as well as on public works and help for farmers.
At the same time, the state gained more control over industry. The 1931 Important Industries Control Law encouraged firms to coordinate production and prices. As the war in China grew, military orders and controls grew too. The National Mobilisation Law of 1938 gave the government wide powers to direct workers and materials for war. Mobilisation means organising people and resources for a national aim, here war.
More orders for steel, machinery and weapons created jobs, but also pulled resources away from other uses. A factory could stay privately owned while the government limited what it could make or buy. So ask two questions: did people have more work, and what choices or freedoms did they lose? Rising production alone cannot answer both.
- December 1931
- Takahashi takes Japan off the gold standard; the yen falls.
- Stimulus
- Cheap loans and government spending to boost the economy.
- 1938
- National Mobilisation Law directs workers and materials to war.
Worked example: A factory hires more workers
A factory hires workers to make equipment for the military.
- Benefit: new jobs at the factory.
- Cost: workers and materials go to war goods, not other things.
- We still need evidence on pay and freedom before judging it good for workers.
Watch out for this
Takahashi's recovery shows that conquest rescued Japan's economy.
Recovery came mainly from a cheaper yen, cheap loans and government spending, not from conquest alone.
Check your understanding
How did a cheaper yen help Japan recover?
- It made imports cheaper, so Japan stopped exporting.
- It made Japanese goods cheaper abroad, so exporters won more orders.
- It forced Japan back onto the gold standard.