Postwar Japan


The conflict between the United States and Japan during World War II utterly devastated Japan. Following this conflict, Japan demilitarized its government and society under US occupation and staged a remarkable economic revival. By the 1970s, Japan emerged as one the largest economies in the world.


Learning Objectives

  • Examine the transformation of Japanese government into a pro-western constitutional political system.

  • Analyze the causes for Japan’s economic recovery after World War II.


Key Terms / Key Concepts 

Article 9 of the Japanese Constitution: a clause in the Constitution of Japan outlawing war to settle international disputes involving the state

Japan Self-Defense Forces: the unified military forces of Japan established in 1954 and controlled by the Ministry of Defense

keiretsu: a set of companies with interlocking business relationships and shareholdings; an informal business group that maintained dominance over the Japanese economy for the second half of the 20th century

San Francisco Peace Treaty: a treaty predominantly between Japan and the Allied Powers officially signed by 48 nations on September 8, 1951 that ended the Allied post-war occupation of Japan and returned sovereignty to Japan

V-J Day: a term used to refer to the day on which Japan surrendered in World War II, in effect ending the war 

Yoshida Doctrine: a strategy named after Japan’s first Prime Minister after World War II—Shigeru Yoshida—that declared the reconstruction of Japan’s domestic economy with security guaranteed by an alliance with the United States

zaibatsu: a Japanese term for industrial and financial business conglomerates whose influence and size allowed control over significant parts of the Japanese economy from the Meiji period until the end of World War II


The 1947 Japanese Constitution


The loss of World War II placed Japan in the precarious position of a country occupied by the Allied, primarily American forces, which shaped its post-war reforms. These reforms included the Constitution of 1947, with Article 9 outlawing war as a means to settle international disputes involving the state.

Japan surrendered to the Allies on August 14, 1945, when the Japanese government notified the Allies that it had accepted the Potsdam Declaration—a statement that called for the surrender of all Japanese armed forces during World War II. This date, known as Victory over Japan or V-J Day, marked the end of World War II and the beginning of a long road to recovery for Japan.

U.S. President Harry Truman appointed General Douglas MacArthur as Supreme Commander for the Allied Powers (SCAP) to supervise the occupation of Japan. During the war, the Allied Powers planned to divide Japan among themselves for the purposes of occupation, as was done with Germany. Under the final plan, however, SCAP was given direct control over the main islands of Japan (Honshu, Hokkaido, Shikoku, and Kyushu) and the immediately surrounding islands, while outlying possessions were divided between the Allied powers.

On September 6, Truman approved a document titled “US Initial Post-Surrender Policy for Japan,” which set two main objectives for the occupation: eliminating Japan’s war potential and turning it into a western-style nation with pro-American orientation. The Japanese emperor was permitted to remain on the throne, but was ordered to renounce his claims to divinity, which had been a pillar of the State Shinto system. Allied (primarily American) forces were set up to supervise the country. MacArthur was technically supposed to defer to an advisory council set up by the Allied powers but in practice he hardly did so.


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Emperor Hirohito and General MacArthur, at their first meeting, at the U.S. Embassy, Tokyo, September 27, U.S. Army photographer Lt. Gaetano Faillace. The photograph above is one of the most famous in Japanese history. Some were shocked that MacArthur wore his standard duty uniform with no tie instead of his dress uniform when meeting the emperor.


Article 9 of the Japanese Constitution 


The wording of the Potsdam Declaration (“The Japanese Government shall remove all obstacles…”) and the initial post-surrender measures taken by MacArthur suggest that neither he nor his superiors in Washington intended to impose a new political system on Japan unilaterally. Instead, they hoped to encourage Japan’s new leaders to initiate reforms on their own. Already in 1945, however, MacArthur’s staff and Japanese officials were at odds over the most fundamental issue, the writing of a new constitution. Emperor Hirohito, Prime Minister Kijūrō Shidehara, and most of the cabinet members were extremely reluctant to take the drastic step of replacing the 1889 Meiji Constitution, which outlined a form of mixed constitutional and absolute monarchy, with a more liberal document.

In late 1945, the Japanese Prime Minister, Shidehara appointed Jōji Matsumoto, state minister without portfolio, head of a committee of constitutional scholars to suggest revisions to the1889 Meiji Constitution. This Matsumoto Commission’s recommendations were quite conservative. MacArthur rejected them outright and ordered his staff to draft a completely new document. Much of this work was done by two senior army officers with law degrees, Milo Rowell and Courtney Whitney, although others chosen by MacArthur had substantial influence. Although the document’s authors were non-Japanese, they took into account the Meiji Constitution, the demands of Japanese lawyers, the opinions of pacifist political leaders, and especially the draft presented by the Constitution Research Association, private group of Japanese lawyers led by Takano Iwasaburo and Suzuki Yasuzo. MacArthur gave the authors less than a week to complete the draft, which was presented to surprised Japanese officials in February 1946.

The MacArthur draft, which proposed a unicameral legislature, was changed at the insistence of the Japanese to allow a bicameral one, with both houses being elected. In most other important respects, the government adopted the February draft, with its most distinctive features: the symbolic role of the Emperor, the prominence of guarantees of civil and human rights, and the renunciation of war. That last clause became one of the most symbolic components of Japan’s new constitution. Known as Article 9, it outlaws war as a means to settle international disputes involving the state.

The source of the pacifist clause is disputed. According to the Allied Supreme Commander Douglas MacArthur, the provision was suggested by Prime Minister Shidehara, who “wanted it to prohibit any military establishment for Japan—any military establishment whatsoever.” Shidehara’s perspective was that retention of arms would be “meaningless” for the Japanese in the post-war era, because any substandard post-war military would no longer gain the respect of the people and would actually cause people to obsess with the subject of rearming Japan. Shidehara admitted to his authorship in his 1951 published memoirs, where he described how the idea came to him on a train ride to Tokyo. MacArthur himself confirmed Shidehara’s authorship on several occasions. However, according to some interpretations, the inclusion of Article 9 was mainly brought about by the members of the Government Section of Supreme Commander for the Allied Powers, especially Charles Kades—one of Douglas MacArthur’s closest associates. The article was endorsed by the Diet of Japan in November 1946. Kades rejected the proposed language that prohibited Japan’s use of force “for its own security,” believing that self-preservation was the right of every nation.


written document
The Preamble to the 1947 Constitution of the State of Japan


It was decided that in adopting the new document, the Meiji Constitution would not be violated, but instead remain the law of the land in name. Thus, the new Japanese constitution was adopted as an “amendment” to the existing Meiji Constitution in accordance with the provisions of Article 73 of that document. Under Article 73, the new “revised” constitution was formally submitted to the Imperial Diet by the Emperor.


Japan's Post-WWII Growth


Although Article 9 intended to prevent the country from ever becoming an aggressive military power again, the United States was soon pressuring Japan to rebuild its army as a bulwark against communism in Asia, after the Chinese Civil War and the Korean War. During the Korean War, U.S. forces largely withdrew from Japan to deploy to Korea, leaving the country almost totally defenseless. As a result, a new National Police Reserve armed with military-grade weaponry was created. In 1954, the Japan Self-Defense Forces (JSDF) were founded as a full-scale military in all but name. To avoid breaking the constitutional prohibition on military force, they were officially founded as an extension to the police force. Traditionally, Japan’s military spending has been restricted to about 1% of its gross national product, although this is by popular practice, not law, and this figure has fluctuated. The JSDF slowly grew to considerable strength, and Japan now has the eighth largest military budget in the world.

All the major sectors of the Japanese society, government, and economy were liberalized in the first few years, and the reforms won strong support from the liberal community in Japan.  Shigeru Yoshida served as prime minister in 1946 – 47 and 1948 – 54; he played a key role in guiding Japan through the occupation. His policies, known as the Yoshida Doctrine, proposed that Japan should forge a tight relationship with the United States and focus on developing the economy rather than pursuing a proactive foreign policy.

Although the Japanese economy was extremely weakened in the immediate postwar years, an austerity program implemented in 1949 by finance expert Joseph Dodge ended inflation. Under this austerity program, tax increases and government budget cuts decreased government debt.  In 1949, the Yoshida cabinet created the Ministry of International Trade and Industry (MITI) with the mission of promoting economic growth through close cooperation between the government and big business. MITI sought successfully to promote manufacturing and heavy industry and to encourage exports. The factors behind Japan’s postwar economic growth included technology and quality control techniques imported from the West, close economic and defense cooperation with the United States, non-tariff barriers to imports, and long work hours. Japanese corporations successfully retained a loyal and experienced workforce through the system of lifetime employment, which assured their employees a safe job. The Korean War (1950 – 53) proved a major boon to Japanese business. And, by 1955, the Japanese economy had grown beyond prewar levels and became the second largest in the world by 1968.

Japan became a member of the United Nations in 1956 and further cemented its international standing in 1964 when it hosted the Olympic Games in Tokyo. Japan was a close ally of the United States during the Cold War, although this alliance did not have unanimous support from the Japanese people. Japan also successfully normalized relations with the Soviet Union in 1956, despite an ongoing dispute over the ownership of the Kuril Islands, and with South Korea in 1965, despite an ongoing dispute over the ownership of the islands of Liancourt Rocks. In accordance with U.S. policy, Japan recognized the Republic of China on Taiwan as the legitimate government of China after World War II; it then switched its recognition to the People’s Republic of China in 1972.


Japanese Economic Policies after World War II


Japan’s impressive economic growth after World War II depended on a number of factors, including the nation’s prewar experience, the advantageous conditions of the post-war occupation by the Allied forces, the high level and quality of investment that persisted through the 1980s, a well-educated and disciplined labor force, economies of scale, and global politics.

Japan experienced dramatic political and social transformation under the Allied occupation in 1945 – 1952. US General Douglas MacArthur, the Supreme Commander of Allied Powers, served as Japan’s de facto leader and played a central role in implementing reforms, many inspired by the New Deal of the 1930s. The occupation sought to decentralize power in Japan by breaking up the zaibatsu—industrial and financial business conglomerates in the Empire, whose influence and size allowed control over significant parts of the Japanese economy. The occupation also transferred ownership of agricultural land from landlords to tenant farmers and promoted labor unionism. Other major goals were demilitarization and democratization of Japan’s government and society. The cabinet became responsible not to the Emperor but to the elected National Diet. The Emperor was permitted to remain on the throne but ordered to renounce his claims to divinity. Japan’s new constitution guaranteed civil liberties, labor rights, and women’s suffrage. The San Francisco Peace Treaty of 1951 officially normalized relations between Japan and the United States. The occupation ended in 1952, although the U.S. continued to administer a number of the Ryukyu Islands, with Okinawa the last to be returned in 1972.


Group of men
Seizure of the zaibatsu families assets, 1946, source: Showa History, Vol.13: Ruins and Lack published by Mainichi Newspapers Company.


The zaibatsu had been the heart of economic and industrial activity within the Empire of Japan and held great influence over Japanese national and foreign policies. Under the Allied occupation after the surrender of Japan, a partially successful attempt was made to dissolve the zaibatsu. Many of the economic advisors accompanying the SCAP administration had experience with the New Deal program and were highly suspicious of monopolies and restrictive business practices, which they felt to be both inefficient and a form of corporatocracy (control of society by business corporations) and thus inherently anti-democratic.

In the aftermath of the war, about 40% of the nation’s industrial plants and infrastructure were destroyed and production reverted to levels of about 15 years earlier. U.S. assistance after World War II totaled about $1.9 billion during the occupation, or about 15% of the nation’s imports and 4% of gross national product (GNP) in that period. About 59% of this aid was in the form of food, 15% in industrial materials, and 12% in transportation equipment. A variety of U.S.-sponsored measures during the occupation, such as land reform, contributed to the economy’s later performance by increasing competition. Finally, the economy benefited from foreign trade because it was able to expand exports rapidly enough to pay for imports of equipment and technology without falling into debt. New factories were equipped with the best modern machines, giving Japan an initial competitive advantage over the victor states, who then had older factories.

The early post-war years were devoted to rebuilding the lost industrial capacity, with major investments made in electric power, coal, steel, and chemicals. By the mid-1950s, production matched prewar levels. Released from the demands of military-dominated government, the economy not only recovered its lost momentum but also surpassed the growth rates of earlier periods. Between 1953 and 1965, GDP expanded by more than 9% per year, manufacturing and mining by 13%, construction by 11%, and infrastructure by 12%. In 1965 these sectors employed more than 41% of the labor force, whereas only 26% remained in agriculture. Millions of former soldiers joined a well-disciplined and highly educated work force to rebuild Japan.

Japan’s highly acclaimed post-war education system contributed strongly to the modernizing process. The world’s highest literacy rate and high education standards were major reasons for Japan’s success in achieving a technologically advanced economy.

The mid-1960s ushered in a new type of industrial development as the economy opened itself to international competition in some industries and developed heavy and chemical manufacturers. Whereas textiles and light manufacturing maintained their profitability internationally, products such as automobiles, electronics, ships, and machine tools assumed new importance. The value added to manufacturing and mining grew at the rate of 17% per year between 1965 and 1970. Growth rates moderated to about 8% and evened out between the industrial and service sectors between 1970 and 1973 as retail trade, finance, real estate, information technology, and other service industries streamlined their operations.


Oil Crisis


Japan faced a severe economic challenge in the mid-1970s. The 1973 oil crisis shocked economies that had become dependent on imported petroleum. During this time, Japan experienced its first post-war decline in industrial production, along with severe price inflation. The recovery that followed the first oil crisis revived the optimism of most business leaders, but the maintenance of industrial growth in the face of high energy costs required shifts in the industrial structure.

Although the investment costs were high, many energy-intensive industries successfully reduced their dependence on oil during the late 1970s and 1980s and enhanced their productivity, as changing price conditions favored conservation and alternative sources of industrial energy. Advances in microcircuitry and semiconductors in the late 1970s and 1980s led to new growth industries in consumer electronics and computers and to higher productivity in established industries. These adjustments increased the energy efficiency of manufacturing and expanded knowledge-intensive industries. Additionally, the service industries expanded in an increasingly postindustrial economy.


Factors of Growth 


Complex economic and institutional factors affected Japan’s post-war growth. First, the nation’s prewar experience provided several important legacies. The Tokugawa period (1600 – 1867) bequeathed a vital commercial sector in burgeoning urban centers, a relatively well-educated elite, a sophisticated government bureaucracy, productive agriculture, highly developed financial and marketing systems, and a national infrastructure of roads. And the buildup of industry during the Meiji period to the point where Japan could vie for world power was an important prelude to post-war growth from 1955 to 1973 and provided a pool of experienced labor.

More important to successes were the level and quality of investment that persisted through the 1980s. Investment in capital equipment, which averaged more than 11% of GNP during the prewar period, rose to about 20% of GNP during the 1950s and to more than 30% in the late 1960s and 1970s. During the economic boom of the late 1980s, the rate still hovered around 20%. Japanese businesses imported the latest technologies to develop the industrial base. As a latecomer to modernization, Japan was able to avoid some of the trial and error needed by other nations to develop industrial processes. In the 1970s and 1980s, Japan improved its industrial base through licensing from the US, patent purchases, and imitation and improvement of foreign inventions. In the 1980s, industry stepped up its research and development, and many firms became famous for their innovations and creativity.

Japan’s labor force contributed significantly to economic growth. Before and immediately after World War II, the transfer of numerous agricultural workers to modern industry resulted in rising productivity and only moderate wage increases. As population growth slowed and the nation became increasingly industrialized in the mid-1960s, wages rose significantly although labor union cooperation generally kept salary increases within the range of gains in productivity.

The nation also benefited from economies of scale. Although medium-sized and small enterprises generated much of the nation’s employment, large facilities were the most productive. Many industrial enterprises consolidated to form larger, more efficient units. While the zaibatsu were dissolved after the war, the keiretsu—large, modern industrial enterprise groupings—emerged. The coordination of activities within these groups and the integration of smaller subcontractors into the groups enhanced industrial efficiency.

Finally, circumstances beyond Japan’s direct control contributed to its success. International conflicts tended to stimulate the Japanese economy until the devastation at the end of World War II. The Russo-Japanese War (1904 – 5), World War I (1914 – 18), the Korean War (1950 – 53), and the Second Indochina War (1954 – 75) brought economic booms to Japan, as militaries needed supplies and created a demand for Japanese goods.


The American-Japanese Relationship during the Cold War


Japan has remained one of the strongest and most reliable allies of the United States since the post-World War II occupation of the country by the Allied forces, despite ongoing tensions over the U.S. military presence on Japanese territories and economic competition between the two countries. In legal terms, the official end of Allied occupation with the San Francisco Peace Treaty in 1952, finally placed Japan’s relations with the United States on equal footing, but this equality was initially largely nominal.

 As the disastrous results of World War II subsided and trade with the United States expanded, Japan’s self-confidence grew, which gave rise to a desire for greater independence from United States influence. During the 1950s and 1960s, this feeling was evident in the Japanese attitude toward United States military bases on the four main islands of Japan and in Okinawa Prefecture, which occupied the southern two-thirds of the Ryukyu Islands.

The government had to balance left-wing pressure advocating dissociation from the United States with the claimed need for military protection. Recognizing the popular desire for the return of the Ryukyu Islands and the Bonin Islands (also known as the Ogasawara Islands), in 1953 the United States relinquished its control of the Amami group of islands at the northern end of the Ryukyu Islands. However, it made no commitment to return Okinawa, which was then under United States military administration for an indefinite period as provided in Article 3 of the peace treaty. Popular agitation culminated in a unanimous resolution adopted by Japan’s legislature in 1956, calling for a return of Okinawa to Japan.


Military Alliance and New Challenges


Bilateral talks on revising the 1952 security pact began in 1959, and the new Treaty of Mutual Cooperation and Security was signed in Washington in 1960, despite the protests in Japan of left-wing political parties and mass demonstrations. Under the new treaty, both the US and Japan assumed an obligation to assist each other in case of armed attack on territories under Japanese administration. It was understood, however, that Japan could not come to the defense of the United States because it was constitutionally forbidden to send armed forces overseas under Article 9 of its Constitution. The scope of the new treaty did not extend to the Ryukyu Islands, but appended minutes to the treaty made clear that in case of an armed attack on the islands both governments would consult and take appropriate action. Unlike the 1952 security pact, the new treaty provided for a ten-year term, after which it could be revoked upon one year’s notice by either party. The treaty included general provisions on the further development of international cooperation and improved future economic cooperation.

Both countries worked closely to fulfill the promise of the United States, under Article 3 of the peace treaty, to return all Japanese territories acquired in war. In 1968, the United States returned the Bonin Islands (including Iwo Jima) to Japanese administration control. In 1971, after eighteen months of negotiations, the two countries signed an agreement for the return of Okinawa to Japan in 1972.

A series of new issues arose in 1971. First, Nixon’s dramatic announcement of his forthcoming visit to the People’s Republic of China surprised the Japanese. Many were distressed by the failure of the United States to consult in advance with Japan before making such a fundamental change in foreign policy. Second, the government was again surprised to learn that without prior consultation, the United States had imposed a 10 percent surcharge on imports, a decision certain to hinder Japan’s exports to the United States. Relations between Tokyo and Washington were further strained by the monetary crisis involving the revaluation of the Japanese yen. These events marked the beginning of a new stage in relations, a period of adjustment to a changing world situation that was not without episodes of strain in both political and economic spheres, although the basic relationship remained close.

The political issues between the two countries were essentially security-related and derived from efforts by the United States to induce Japan to contribute more to its own defense and regional security. The economic issues tended to stem from the ever-widening United States trade and payments deficits with Japan, which began in 1965 when Japan reversed its imbalance in trade with the United States and for the first time achieved an export surplus.


New Global Factors


The United States withdrawal from Indochina in 1975 and the end of the Vietnam War meant that the question of Japan’s role in the security of East Asia and its contributions to its own defense became central in the dialogue between the two countries. The Japanese government, constrained by constitutional limitations and strongly pacifist public opinion, responded slowly to U.S. pressures for a more rapid buildup of the JSDF. It steadily increased its budgetary outlays for those forces, however, and indicated its willingness to shoulder more of the cost of maintaining the United States military bases in Japan. In 1976, the United States and Japan formally established a subcommittee for defense cooperation, and military planners of the two countries conducted studies relating to joint military action in the event of an armed attack on Japan.

Under American pressure Japan worked toward a comprehensive security strategy with closer cooperation with the United States for a more reciprocal and autonomous basis. This policy was put to the test in 1979, when radical Iranians seized the United States embassy in Tehran, taking 60 hostages. Japan reacted by condemning the action as a violation of international law. At the same time, Japanese trading firms and oil companies reportedly purchased Iranian oil that became available when the United States banned oil imported from Iran. This action brought sharp criticism from the U.S. of Japanese government “insensitivity” for allowing the oil purchases and led to a Japanese apology and agreement to participate in sanctions against Iran in concert with other allies.

Following the Iran hostages incident, the Japanese government took greater care to support U.S. international policies designed to preserve stability and promote prosperity. Japan was prompt and effective in announcing and implementing sanctions against the Soviet Union following the Soviet invasion of Afghanistan in 1979. In 1981, in response to United States requests, it accepted greater responsibility for defense of seas around Japan, pledged greater support for United States forces in Japan, and persisted with a steady buildup of the JSDF.


Close TIes and New Challenges


A relatively new stage of Japan-United States cooperation in world affairs emerged in the 1980s with the election of Prime Minister Yasuhiro Nakasone, who enjoyed a particularly close relationship with US President, Ronald Reagan. Nakasone reassured U.S. leaders of Japan’s determination against the Soviet threat, closely coordinated policies with the United States toward such Asian trouble spots as the Korean Peninsula and Southeast Asia, and worked cooperatively with the United States in developing China policy. The Japanese government welcomed the increase of United States forces in Japan and the western Pacific, continued the steady buildup of the JSDF, and positioned Japan firmly on the side of the United States against the threat of Soviet expansion. Japan continued to cooperate closely with United States policy in these areas following Nakasone’s term of office, although the political leadership scandals in Japan in the late 1980s made it difficult for newly elected President George H. W. Bush to establish the close personal ties that marked the Reagan years. Despite complaints from some Japanese businesses and diplomats, the Japanese government remained in basic agreement with U.S. policy toward China and Indochina. The government held back from large-scale aid efforts until conditions in China and Indochina were seen as more compatible with Japanese and U.S. interests.


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Ronald Reagan greeting Japanese leaders, including Prime Minister Yasuhiro Nakasone, Foreign Minister Abe, and Finance Minister Takashita, in London in 1984. Officials of the Ronald Reagan administration worked closely with their Japanese counterparts to develop a personal relationship between the two leaders based on their common security and international outlook. Nakasone backed Reagan to deploy Pershing missiles in Europe at the 1983 9th G7 summit. In 1983, a U.S.-Japan working group produced the Reagan-Nakasone Joint Statement on Japan-United States Energy Cooperation.


The main area of noncooperation with the United States in the 1980s was Japanese resistance to repeated U.S. efforts to get Japan to open its market to foreign goods, as well as change other economic practices seen as adverse to U.S. economic interests. Furthermore, changing circumstances at home and abroad created a crisis in Japan-United States relations in the late 1980s. Japan’s growing investment in the United States—the second largest investor after Britain—led to complaints from some American constituencies. Moreover, Japanese industry seemed well-positioned to use its economic power to invest in high-technology products, in which United States manufacturers were still leaders. The United States’ ability to compete under these circumstances was seen by many Japanese and Americans as hampered by heavy personal, government, and business debt and a low savings rate. The breakup of the Soviet bloc in Eastern Europe with the end of the Cold War forced the Japanese and United States governments to reassess their longstanding alliance against the Soviet threat. Some Japanese and United States officials and commentators continued to emphasize the common dangers to Japan-United States interests posed by the continued strong Russian military presence in Asia.


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