A cheaper yen, easier borrowing and government spending helped recovery. Increasing controls also directed factories, workers and materials towards war.
Recovery did not come from conquest alone. In 1930, Japan had returned to the gold standard, a system linking money's value to a fixed amount of gold. Restoring the yen's old value made Japanese goods relatively expensive for overseas buyers, adding to the pressure on Japanese exports. When Finance Minister Takahashi Korekiyo returned to office in December 1931, he took Japan off the gold standard and the yen fell in value against foreign currencies. This fall is called depreciation.
A cheaper yen meant overseas buyers could pay less in their own currency for Japanese goods, helping exporters win orders. Easier and cheaper borrowing helped spending and investment. Government spending also created demand and jobs: public works paid workers and bought materials. This package is often called stimulus because it encourages economic activity. Spending included military operations as well as public works and rural relief; civilian-led policy did not mean military spending was absent.
At the same time, the state increased its influence over industry. The 1931 Important Industries Control Law encouraged firms to coordinate production and prices. As war in China expanded, military orders and controls grew. The National Mobilisation Law of 1938 gave the government broad powers to direct workers and materials for war. Mobilisation means organising people and resources to meet a national demand, here war.
More orders for steel, machinery and weapons could create jobs, but also drew resources away from other uses. A factory could remain privately owned while the government restricted what it could produce or obtain. To judge the results, ask both whether people had more work and what choices or freedoms they lost. Rising production alone cannot answer both questions.
Worked example: A factory hires more workers: what can we conclude?
Imagine a factory hiring workers to make equipment ordered by the military.
- The new orders create jobs at that factory: this is a practical economic benefit.
- The factory is also using workers and materials for military production rather than other goods.
- We still need evidence about pay and working conditions to judge the benefit to workers. More jobs do not by themselves show greater freedom at work.
Watch out for this
Takahashi's recovery policy shows that military conquest rescued Japan's economy.
Takahashi was a civilian finance minister. Changes to the currency, borrowing and government spending helped recovery; some spending served the military, but conquest alone does not explain the recovery.
Check your understanding
Which account best explains recovery and growing government control in the 1930s?
- Military factory orders created jobs, which shows that workers also gained more control over their working conditions.
- Currency and spending policies helped recovery, while growing controls directed more resources towards war.
- The government could direct industrial production only after taking ownership of the factories.