WAR is a sure generator of social change and not infrequently a prelude to revolution. How has Japan stood the strain of eighteen months of a conflict which, as its leaders repeatedly remind the people, is by no means ended and may assume much larger proportions if the Soviet Union should come to China's aid?

I think the first impression of any visitor to Japan is -- for a country at war -- one of calm and normality. The outward aspect of the Tokyo district where I live has not changed. At the New Year holiday season the customary decorations of small pine trees and Japanese oranges appeared at the gates of houses, while children, apprentices and serving maids played battledore and shuttlecock in the streets. The small shops, so amazingly numerous in Tokyo, carry on as usual; it is much harder to obtain imported goods, but the stocks of native vegetables and fruit and cheap manufactured goods seem to be as abundant as ever; there are no queues and no ration cards for daily necessities.

Similarly, a recent visit to a village some thirty miles from Tokyo at first sight revealed nothing out of the ordinary. The farmers were carrying on seasonal work in their fields and farmyards. It was only when one got beneath the surface by going into houses and asking questions that one realized how the war had affected this particular community. Out of a district (including several villages) with a total population of 4,500 persons, 150 had been mobilized and eight had been killed. And the villages, like the towns, were suffering inconveniences, though no downright hardships. There was a lack of salt, for instance, for pickling radishes. And there were complaints about low prices offered for the compulsory requisitions of hay and sweet potatoes for the Army. Inconveniences in the cities are a lack of materials for house repairs, deterioration in some manufactured goods because of the enforced use of staple fibre and other homemade substitutes, terrific overcrowding of busses and almost complete disuse of private automobiles because of gasoline restrictions.

Taken by and large, however, the average Japanese so far has suffered less than the average Russian suffered during the first Five Year Plan. This I can say with reasonable assurance as an eyewitness in both countries. And I doubt whether strain and tension are greater in Japan today than in Germany and Italy.

At the same time, the war has exerted a profound and significant influence on Japanese politics, economics and ways of thinking. On the political side its most obvious effects have been the cementing of the Army grip on state affairs; the eclipse of the remnants of that degree of liberalism which characterized Japanese politics during the twenties; and a further diminution in the already shattered prestige of the political parties.

The instrument of Army control over governmental policy is the National Mobilization Act, which was passed last spring without a dissenting vote although not without a good deal of futile criticism by liberal members of the Diet. It gives the Government wide and sweeping powers to expropriate property, to forbid strikes and lockouts, to control every detail of production and foreign trade, to issue ordinances on almost any subject without reference to the Diet. Its last nineteen articles bristle with penalties of fine and imprisonment for individuals who violate any provision of the law or betray mobilization secrets. The tendency has been to invoke its articles piecemeal; but the whole Act will most probably soon be in effect.

The resignation last autumn of the moderate General Kazushige Ugaki, Minister of Foreign Affairs after the sweeping reorganization of the Konoye Cabinet in May, is another indication of the decisive influence of the fighting services. Ugaki had been denounced in military, naval and extreme nationalist circles as "pro-British" and "weak-kneed" because of the conversations which he had carried on with the British Ambassador, even though these conversations led to no satisfaction of such British grievances as the closing of the Yangtze to non-Japanese shipping, the nonpayment of interest to the British creditors of Chinese railways now being operated under the direction of the Japanese Army, and the continued Japanese military occupation of part of the International Settlement at Shanghai.

The establishment, under the presidency of General Heisuke Yanagawa, of the Asia Development Board, as a coordinating agency to supervise all Japanese activities, except diplomatic, in China, is another step toward military domination of Japan's new continental empire. There has been a good deal of complaint in the past that Japanese military leaders, consular officials and businessmen sometimes act at cross-purposes.

The eclipse of liberalism in Japan is in part a matter of prudential necessity. Since the beginning of the war there have been hundreds of arrests of suspected radicals and pacifists. Probably the best-known figure among those in prison for more than a year, awaiting trial, is Kanju Kato, Left-wing political and trade-union leader. Anyone who openly criticizes the war must expect a similar fate. The silence of such men as Yukio Ozaki, one of the oldest members of the Diet and one of the most consistent liberals in Japan, and Toyohiko Kagawa, the internationally famous evangelist and organizer of coöperatives, does not necessarily imply agreement with the present course of affairs.

But, as always happens in wartime, there has been a swing toward 100-percent nationalism on the part of some of Japan's former Leftists and internationalists. Stories of repentant Communists and their deeds of valor at the front are perhaps a little overdone for propaganda purposes in the Japanese press. But the swing from violent social discontent to violent nationalism, from faith in the mystical destiny of the proletariat to faith in the divine mission of Japan is psychologically not very difficult.

I recently discussed the war with a Japanese friend whose viewpoint before its beginning would have placed him among the liberals, if not the radicals. And what he said, I think, was of more than personal significance; it reflected the outlook of a fairly large number of Japanese intellectuals: "Whatever we may think of the war in China from a theoretical moral standpoint, we are in it; there is no way of turning back. And we must recognize two things. The war has demonstrated Japan's right to be considered a Great Power and has given our heavy industry a scope and pace of development which will be important in future years. Moreover, some of the objections which we liberals formerly raised against a strong policy in China -- the danger, for instance, of vigorous opposition from the Western Powers -- tend to lose their force in the light of actual events."

There is no labor or Socialist opposition group in the Japanese Diet today. The one party which might have seemed cast for this rôle, the Shakai Taishuto, or Social Mass Party, which had been gaining in electoral strength on a program of moderate Socialism and anti-militarism before the war, has experienced a drastic change of orientation. There had always been a minority in the party, headed by the secretary, Mr. Hisashi Aso, which had favored coöperation with the Army, on the ground that the young officers were sincere revolutionaries, opposed to capitalism, and that the Army was the only instrument through which social change could be brought about. This minority has now become the majority. Its opponents are silenced, if not convinced. And the Social Mass Party has gone well ahead of the two large traditional parties, the Seiyukai and the Minseito, in playing up to the Pan-Asian spirit of the Army. It has superimposed on its original demands for social reform the familiar nationalist phrases about freeing the Eastern peoples from the yoke of Western capitalism, promoting Japan's advance on the continent, etc. The Social Mass Party and the Tohokai, a smaller group in the Diet headed by Mr. Seigo Nakano, an avowed admirer of Hitler and Mussolini, are prepared to support the Army even more whole-heartedly than the Seiyukai and the Minseito, which are more closely connected with business interests that feel the pinch of the increasingly restrictive legislation in such fields as capital investment, disposition of profits, foreign trade and foreign exchange.

The Diet today chiefly functions as a forum for the ventilation of popular grievances. Concerted opposition to the Government in this period of wartime emergency is unthinkable. But a deputy from some fishing district will stand up and wax eloquent about the difficulties of his constituents in obtaining proper material for making and mending their fishing nets. A representative of Osaka will dwell on the distress of the cottage industries, cut off from a normal supply of imported raw materials. Or a deputy from a farming community will speak of rising prices of city commodities and shortage of horses.

Of course even this trickle of criticism would be stopped if an authoritarian one-party system were set up. There have been occasional trial balloons and rumors of such a change; but nothing positive has developed. Indeed one of the reasons for the fall of the Konoye Cabinet was the zeal of its Home Minister, Admiral Nobumasa Suetsugu, for "reconstruction" of the Government along one-party lines. It is baffling to the outside world but characteristically Japanese that two other factors making for Konoye's resignation were his chafing under Army dictation and the increasingly difficult position of his Finance Minister, the eminent financier and former managing director of the House of Mitsui, under the fire of criticism from military extremists. Japanese political changes almost never assume the form of purges, of clearcut swings of the pendulum. They are almost always blurred compromises about which it is uncommonly difficult to write headlines that are at once incisive and accurate.

There are checks and balances in the present Japanese political system which would not be compatible with a Fascist régime. There are still some moderates in high places, such as the Lord Keeper of the Privy Seal, Kurahei Yuasa, and the Minister of the Imperial Household, Tsuneo Matsudaira, a diplomat of long experience both in London and in Washington. The counsel of the venerable Genro, Prince Kimmochi Saionji, is sought from time to time, and he is also an influence against extremism. To be sure, there is little of a positive nature that these moderates can achieve under present conditions. But they can occasionally block some especially reckless measure or unwise appointment.

While Japan has been touched by the world-wide sweep of Fascist ideology and has an understanding, if not an alliance, with the two leading European Fascist countries, an outright adoption of the European Fascist pattern of government does not seem probable. Two essential ingredients, a leader and a party, are lacking. The Army fulfills some of the functions of a Fascist party. Its recruits receive heavy doses of "political education;" and the Army and Navy Press Sections issue pamphlets recommending a system of military state socialism, or at least highly regulated capitalism, as the cure for Japan's economic ailments. But by its nature an army is not the equivalent of a mass civilian party. And Japan's military leaders, with few exceptions, prefer their present status of power without responsibility to the risks of formally taking over the entire state machine.

It is perhaps too widely believed abroad that the Army's hold on Japan is purely a matter of machine guns. This is only part of the picture, just as the repressive aspects of European dictatorships do not fully account for their maintenance of power. The seizure of Manchuria in 1931 (and the present war is only the inevitable sequel to this seizure) was Japan's equivalent of a Bolshevik or Fascist revolution. It is no accidental coincidence that this forward thrust on the continent, with the unilateral renunciation of the self-denying provisions of the Nine Power Treaty, occurred at a time when Japan's economy was at an extremely low ebb, when unemployment among manual and white-collar workers was widespread, when the farmers were crushed beneath the double load of falling prices and mounting debts. The Army showed a way out of depression. To the discouraged graduate engineer unable to find employment in Japan it offered the prospect of supervising railway construction in Manchukuo. To the young farmer, chafing in his village with too many people for the available land, it held out the possibility of settlement in the fertile valleys of Northern Manchuria. To the industrialist, big or small, worried by loss of orders, it suggested the vista of rich new markets open primarily for Japanese goods. To the people as a whole, distracted with disturbing new ideas and habits, it proposed a combination of old-fashioned nationalist faith with new-fashioned economics.

In the foregoing paragraph there is an element of deliberate over-simplification. No military leader in 1931, in all probability, thought out all these implications of the overthrow of the Chinese Manchurian leader, Chang Hsueh-liang, just as it is highly improbable that Adolf Hitler, in the moment of his first success in 1933, foresaw Berchtesgaden and Godesberg and Munich. And acceptance of the Army's program has been instinctive rather than conscious. But the point that the Japanese Army is not a static but a dynamic force with a program of social and economic change that may be called revolutionary should be recognized.

Moreover, the Army is by no means devoid of a sense for playing politics. Whenever business and financial circles protest against some new restriction on their freedom of initiative, an Army spokesman is quick to denounce them as heartless and grasping and to present the Army in the rôle of the defender of war widows and orphans and of the poorer classes generally. That there might have been no widows and orphans if the Army had pursued a different policy is a "dangerous thought" which may occur privately to some Japanese, but which has made little visible headway. Such class division as exists in Japan tends to take the form of country-against-town, and many peasants look on the younger officers, with their proverbial social radicalism, as their champions against city bankers and capitalists.

The war has affected various classes in various ways. Skilled laborers in munitions factories are earning in some cases as much as two or three hundred yen a month, a high rate for a country where the average daily wage of a male worker is about 2.30 yen, of a woman about 80 sen. An era of full employment has also opened up for graduates of universities and technical schools. On the other hand, there is a good deal of distress in small home industries. It has been estimated that some 1,300,000 persons are likely to be unemployed as a result of the curtailment of peacetime industries.[i] Some of these new unemployed will be absorbed into the munitions industries; the elastic family system will take care of others; roadbuilding and flood prevention public works will also be instituted, with relief as an incidental object.

The Japanese countryside is normally so overcrowded that the withdrawal of the farmers' share of the million and a half or two million men who have been called for military service (all estimates on military figures in Japan are conjectural, in view of the strict secrecy which is maintained) has not yet caused any serious decline in production. The rice crop of the present year, according to official estimates, was 2.3 percent below last year's, but 3.2 percent above the average for the last five years. There is still no indication of any food shortage. The farmers, however, are suffering because the prices of the articles they consume are rising faster than those of their own products.[ii]

The war, in which Japan has received -- and probably will receive -- no financial help from abroad, poses for her two major economic problems: how to ward off serious inflation, and how to keep a balance in international payments.

Japan has been paying for the war almost entirely out of the proceeds of internal borrowing. Budgetary stability has been unattainable since the occupation of Manchuria. Since the beginning of the war in China deficits which had been running to hundreds of millions have been reckoned in billions of yen. The national debt on the eve of the Mukden "incident" was about six billion yen. By September 1936, it had reached ten billion. The figure of sixteen billions was passed in December 1938, and a debt of over twenty billions may be anticipated, on the basis of prospective appropriations, before the end of the fiscal year ending April 1940.

The total emission of "China Incident Bonds" up to the beginning of 1939 amounted to 5,630,500,000 yen. If we add the sum of 400,000,000 yen which was raised by taxation to cover war expenses, we find that the cost of the war up to the end of 1938 is roughly six billion yen, nearly $1,650,000,000 at current rates of exchange. Japan has been operating on the basis of a double budget -- an ordinary budget to cover regular administrative expenses and a special war appropriation. Last year the regular budget was fixed at 3,514,000,000 yen, of which 1,008,000,000 had to be raised by means of loans. The war appropriation was 4,850,000,000 yen, of which all but 400,000,000 was covered by bond issues. The budget for 1939-1940 has been set at 3,694,000,000 yen, of which 809,000,000 will be raised by new bond issues, while the war estimates, not yet announced, will probably be in the neighborhood of five billion yen.

Despite these massive deficits, which would make a Victorian Chancellor of the Exchequer throw up his hands in despair, there are not so many signs of inflation in Japanese financial life as one might expect. Official statistics, which may lag somewhat behind the realities of the situation, show an increase of a little less than ten percent in the cost of living since the beginning of the war, together with an increase of about 17 percent in the retail price level. The amount of currency in circulation rose by almost 14 percent during 1938. Such an increase is a warning signal, although Japanese financial authorities maintain that it is not abnormal in view of the great increase of industrial and transportation activity which has resulted from the war.

The Finance Ministry professes confidence that Japan can carry its increased load of debt with no more serious consequence than a moderate rise in the general price level. It contends that the new funds raised by state borrowing have revolved and will continue to revolve within a very narrow circle. The money which the Government raises by selling bonds to the banks is largely paid to firms manufacturing war supplies or furnishing shipping, transportation and other war services. These firms, in turn, it is argued, put their surplus funds back in the banks, which are thus enabled to purchase more bonds.

It is perhaps questionable whether the process goes quite as smoothly and painlessly as this explanation would suggest. A recent issue of Asahi noted that the Bank of Japan, the primary agency for selling bonds, was left with 1,615,000,000 yen worth of new loan issues on its hands, a record figure, despite the fact that "the investing power of the banks in Government bonds has been mobilized almost to the limit."

It is feared that awkward goods shortages may appear because of the discrepancy between the higher wartime wages and the slowing down in the output of many consumption goods industries which are short of raw materials. Anti-profiteering and price control ordinances have been put into force, adding more to the bureaucratic scaffolding which surrounds the Japanese industrial structure. There is also an intensive campaign to promote popular investment in state bonds, with a view to taking out of circulation as much surplus money as possible.

The chances are that Japan will not experience shipwreck because of its lavish issue of war loans. The experiences of the Soviet Union, of Germany and of Italy show that a system of rigorous state control over economic life makes practicable more flouting of the laws of normal finance than orthodox economists have regarded as possible. If the weight of the debt becomes too crushing, a government armed with wartime dictatorial powers could reduce it by drastic devaluation of the currency.

More serious, I think, is the problem of meeting those foreign payments necessary for the prosecution of the war. In normal times Japan has a delicately poised balance of international payments. An unfavorable visible trade balance is compensated by such invisible items as receipts from shipping and tourist travel. As a result of the war, both visible and invisible exports are inevitably shrinking. Imports have been cut to the bone and 1938 trade figures up to December 20 show a favorable trade balance of 50,000,000 yen. Imports are down in comparison with 1937 by 29.6 percent and exports are down by 13.8 percent. But the impression of a favorable trade balance, with consequent relief for the foreign exchange situation, is deceptive. For statistics up to November 30 show that Japan's exports to "yen bloc countries," such as Manchukuo and North China had increased by 46.8 percent, by comparison with the first eleven months of 1937, while exports to other parts of the world had declined by 34 percent. The yen bloc countries give Japan no currency which is acceptable in international exchange (except for a small surplus in Manchukuo's foreign trade with other countries besides Japan). And the unfavorable balance of trade, omitting the yen bloc countries, was 495,000,000 yen up to the end of November.

There are several reasons for this decline in exports, the first which Japan has experienced for many years. Some factories are being diverted from production for export to production for war. Industrial costs are rising because of the scarcity and high prices of many raw materials; this endangers the cheapness which is the main selling point for Japanese goods in foreign markets. Boycott movements add their share to Japan's foreign trade difficulties. Invisible exports are also declining because tourists are avoiding Japan and many ships which would normally be earning foreign exchange on commercial routes are being used as transports.

Japan has been compelled to throw a considerable part of its meagre gold reserves into the scale. Between August 1937 and July 1938 it shipped to America gold valued at $254,000,000. This resource, according to the best available estimates, is now coming to an end. The Government has at its disposal little if any gold apart from the 501,000,000 yen maintained as a token currency reserve and the 300,000,000 yen earmarked as a revolving fund to stimulate exports. Loans from this fund are granted to manufacturers who need imported materials to make export goods. Except for newly mined metal (the value of which is kept secret but is generally estimated at from 15,000,000 to 20,000,000 yen a month) exports of gold are almost ruled out for the future. The Japanese Government is therefore trying to pay the foreign expenses of the war by starving domestic consumption of imported raw materials. Such goods as cotton, wool, steel, copper, lead, tin, rubber and leather are entirely, or nearly so, reserved for the needs of the armed forces and of the export trade.

People are urged, and in some cases compelled, either to go without manufactured goods or to accept homemade substitutes. Leather shoes are giving way to getas, or wooden clogs. Just as in Germany and Italy, there is a feverish hunt for domestic substitutes for imported materials. The use of charcoal as a fuel and the mixture of alcohol with gasoline are encouraged, and there are more or less fanciful suggestions about the use of shark skin and whale skin instead of leather.

So a survey of Japan's economic horizon reveals many clouds. But I strongly doubt whether these difficulties, serious as they are, portend a speedy collapse of the war effort. It is remarkable on how little an individual can live when he is overtaken by misfortune. And a nation's economy, like an individual's, possesses more elasticity than one would suspect in advance. There still are foreign securities held by Japanese firms and subjects which could be mobilized as a last resort. More gold could be scraped out of private hoards if the Government launched a severe drive. The economy screw could be turned in many places without producing unendurable hardship. Japan's regulations about taking money out of the country are still more lenient than those of many European nations. The big campaigns in China are apparently ended and expenditure during 1939 may slacken off.

The conflict in China has demonstrated both the strength and the weakness of Japan's war economy. Its strength is selfsufficiency in food. Foreigners in Japan may miss luxuries and comforts, but the Japanese masses are not likely to feel any pinch of hunger so long as sea communications with nearby Korea, Manchukuo and Formosa are maintained. Its weakness is a complete lack of several important materials and a serious shortage in others. This weakness makes Japan theoretically vulnerable to sanctions. A concerted withholding of such key commodities as oil, scrap-iron, copper, lead, nickel and rubber would not yield immediate results because the military and naval authorities have laid in stocks of such vital supplies. But a prolonged blockade would cause great industrial dislocation and might finally bring the continental adventure to an unsuccessful end.

Sanctions, however, could not be applied safely without taking full measures for the protection of the oriental possessions and dependencies of the participating Powers. For it is hardly likely that the Japanese Army and Navy would bow to economic pressure from other Powers and accept defeat without a struggle. It is far more probable that they would strike out desperately for the Netherlands Indies, French Indo-China, the Philippines, Malaya -- any places within naval range which could provide the necessary iron, oil, rubber, tin. Economic sanctions cannot be considered a safe and easy halfway house between neutrality and war Weak sanctions will scarcely prove effective: a nation keyed to war pitch will find means of evading or overcoming them. Strong sanctions, in all psychological probability, will lead to war.

Does the war make revolution in Japan inevitable? Much depends on the definition of the word "revolution." There is no sign of any popular revolt against the war. There have been no preliminary symptoms, no mutinies, no strikes or riots. And experience shows that a powerful stimulus is needed, either overwhelming defeat in the field or widespread hunger, to cause a popular rebellion when a nation is in the strait-jacket of intensified military and police control which war always brings. Japan stands in no visible danger of either of these contingencies.

On the other hand, the war will inevitably bring about important political, economic and social changes. What form these changes will assume depends very largely on what the issue of the war may be. I think there are three broad possibilities if one takes a fairly long-term view of the future:

1. Japan wins, proves stronger than China in the economic endurance contest which seems to be taking the place of large military operations; defies with impunity the protests of Great Britain and the United States; and establishes its hegemony, in one form or another, over a large part of China. In this case the grip of the Army on the state would be strengthened. There would be an adaptation to Japan of Fascist ideas and institutions, although the creation of an outright Fascist system, for reasons already outlined, does not seem probable.

2. The war ends in some kind of draw or compromise. Japan holds its own on the military side, but finds it impossible to exploit the occupied areas economically. The economic strain becomes too severe; much of China remains unconquered; the attitude of America and Great Britain becomes increasingly hostile. Under such circumstances it is not impossible that the moderate statesmen in Japan, now very much in the background, might regain their lost influence. A settlement might then be worked out which would give Japan some concessions that could be held up to the people as fruits of victory, but which would leave China a sovereign state and safeguard Western economic interests. In this event some return to the now discarded and condemned tenets of political and economic liberalism in Japan might occur.

3. Japan is decisively defeated. Japan overestimates and overtaxes its strength, becomes involved in war with the Soviet Union, with the Western Powers, or both, and goes down to defeat after a desperate struggle of attrition. The effect of the defeat would be all the more stunning because of the general popular Japanese conviction that Japan's Army and Navy are invincible. I doubt whether the best informed student of Japan could predict what form the reaction to such a defeat would take. Organized Communism is weak in Japan; it has been driven so deeply underground that even the police experience difficulty in finding traces of it. The first shocks of social upheaval would probably be unorganized, spontaneous, like the rice riots after the World War. The movement of social revolution would crystallize later, possibly along Communist lines, more probably in some form more compatible with Japanese tradition and psychology.

[i] It is noteworthy that the total index of Japanese industrial production shows a negligible increase (from 167.3 to 171.2) between the first half of 1937 and the first half of 1938, although the war output grew very substantially during this period. There was, therefore, a considerable reduction in peacetime production.

[ii] Between 1936 and 1938 the index of farm prices rose from 102.4 to 117.9; the index of commodity prices from 101.2 to 140.

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