The Great Depression and Japan’s Political-Economic History
The great depression of 1929 brought mixed fortunes to Japan’s political and economic history. By late 1920s, the country’s economy had become integrated to the global economic system where it heavily relied on earnings from its industrial exports. As a result, when the New York Stock Exchange collapsed in 1929, it led to a decline in the demand for Japanese products that eventually caused domestic mayhem. The resulting public discontent against the failure of the sitting Minseto government to contain the appalling economic situation gave birth to groups that called for political change.
Protests organized by small-scale farmers, university students, waitresses, and industrial workers provoked a string of assassinations that led to regular regime changes. However, the capture of Manchuria by the military brought immediate relief to the country that was about to sink into anarchy. Though unsanctioned by the government, the brave act of the Guandong army to capture Manchuria initiated a decade-long expansionary exercise that made Japan an industrial powerhouse. Furthermore, it enabled it to secure a regional market that stretched to China, Taiwan, and Korea.
In spite of the adverse effects of the slip in the world financial situation, the real cause of social unrest in the country was the failure of the administration of Prime Minister Hamaguchi to enact proper fiscal strategies that could have cushioned ordinary people from the direct effects of the depression. In fact, its two leading monetary policies were responsible for initiating cyclic events that eventually led to a political shift in the country. The first one propagated for a reduction in prices and an increase in exports through reducing money supply and cutting government expenditure. Although for a short period, this move lowered the cost of living.
The second one wanted to stabilize international trade and investments by introducing a fixed exchange rate for the yen. Unluckily, the government never anticipated that this policy will be used by selfish entrepreneurs. When the rich and cunning bank owners sensed that the country needed to revise the yen downwards, they exchanged huge amounts of the yen for dollars. Interestingly, the wealthy bankers redoubled their fortune because the value of the yen fell by half against the dollar soon after the government abandoned the fixed rate. Consequently, locals felt that their government had intentionally manipulated the economy to benefit the rich capitalists, thereby leading to massive protests.
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