U.S. economist Joseph Dodge (1890-1964) arrived in occupied Japan in 1949 because the monetary adviser to the Supreme Commander for the Allied Powers.
Tasked with implementing postwar financial stabilization packages, which got here to be generally known as the Dodge Line, he said throughout a information convention on March 7 of 75 years in the past that Japan’s economic system had been standing on stilts.
Noting that the pair of stilts consisted of U.S. help and Japanese authorities subsidies, Dodge referred to as for a super-balanced funds coverage.
In the fast postwar period, Japan was supported by huge quantities of U.S. help that far exceeded its personal annual funds.
And Japanese authorities subsidies had been used to pay the distinction generated by export import controls.
Dodge insisted that the one method to curb Japan’s hyperinflation was to lop off these “stilts.”
This severely alarmed the then-Democratic Liberal Party (Minshu Jiyu-to) Cabinet of Prime Minister Shigeru Yoshida (1878-1967), who had simply gained the final election of January 1949 by a landslide after pledging huge tax cuts.
Implementing an austerity coverage would represent an outright breach of the occasion’s election pledge.
His finance minister, Hayato Ikeda (1899-1965), was in a bind.
He held repeated negotiations with Dodge, hoping, not less than, to hold out partial tax cuts.
But the funds outlook couldn’t have been extra totally different from what the occasion had pledged, and intraparty dissatisfaction erupted.
At one level, Ikeda was stated to have been ready to step down.
Ultimately, Yoshida mainly “shut everyone up and got the budget approved,” recalled former Prime Minister Kiichi Miyazawa (1919-2007) in his memoir.
Miyazawa was Ikeda’s coverage aide on the time.
The drastic budget-balancing “remedy” served to carry the nation’s hyperinflation beneath management, nevertheless it additionally precipitated extreme unwanted effects.
A large number of small and midsize enterprises went belly-up, and lots of staff had been let go across the nation in what got here to be referred to as the “Dodge recession.”
In July 1950, the inventory common plummeted to 85.25, the bottom stage ever.
And on March 4 this yr, the Nikkei inventory common topped 40,000 for the primary time.
The nation’s “stilts” economic system is a factor of a long-past period, however I really feel uneasy.
Perhaps that’s as a result of I don’t see any politician at this time agonizing over the load of their election pledge or asserting management to forge occasion unity.
–The Asahi Shimbun, March 5
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Vox Populi, Vox Dei is a well-liked every day column that takes up a variety of subjects, together with tradition, arts and social traits and developments. Written by veteran Asahi Shimbun writers, the column offers helpful views on and insights into up to date Japan and its tradition.
