US – Japan Economic Relations in WWII

Words: 1718
Topic: Politics & Government


Japan is located in the Pacific Ocean towards the Far East; it has a culture, an economy, and a history that disproves its tiny footprint. The United States (U.S.) and Japan are the two largest economic powers in the globe. Theodore (11) argues that when the Gross Domestic Products (GDP) of the two countries is combined, it accounts for approximately 30% of the world’s domestic product. He further argues that this is a significant amount of international trade in goods and services for a major section of international investment. This has made the two countries to be the most powerful actors in the world of economy.

The economy of the two countries has a considerable influence on the rest of the world. The U.S and Japan bilateral economic relations have had an impact on the economies of other nations, and the two nations were connected through highly integrated trade in various goods and services with a large market for exports and imports, linked through huge capital flows. Japan was considered to be the main foreign source financing U.S. national debt and is also the major source of foreign private portfolio and direct investment. United Nations Development Program (14) cites that Japan is the location of much of the U.S. foreign investment.

After World War II, Japan gravitated to become one of the best countries with the largest economy in the world. They maintained that status for more than 30 years since the early 1970s. Schwartz (16) suggests that China has moved past Japan to become one of the largest economies in the world. Japan was considered the nation that set the standard for growth in Asia, especially in 1944, just immediately after the war by adopting an export-oriented model. It is important to note that Japan is a small country with a large population ranked tenth globally and is affected by frequent volcanoes and earthquakes.

Japanese aggression and role in World War II

Bergsten & Henning (15) argued that during the 20th century, Japan started a strategy of antagonistic militarization that led to the expansion of its empire. The country was engaged in military war with other nations like Russia, China and also gained its supremacy by controlling Korea and Taiwan. The anguish and pain caused by the works of attack in Japanese taken regions received widespread condemnation from other parts of the world. Because of this reason, the United States placed oil sanctions on Japan. Later Japan bombed the United States naval base in December 1941 at Pearl Harbor.; this led to the bombardment of the Japanese towns of Nagasaki and Hiroshima in August 1945 by the U.S. It is after the bombardments that the Second World War came to an end along with the Japanese pursuits.

Eventually, Japan’s complete monarch arrangement was replaced by a liberal democratic system and later changed to a constitutional monarchy which had a parliament. It is important to note that the Liberal Democratic Party (LPD) ruled from World War II till 2009, where the Democratic Party of Japan took over. For a nation that had been devastated by war, and overwhelmed with the animosity of most of the leading nations in the universe, Japan has really passed through a daunting path to emerge as the global economic power. Jacobson & Oksenberg (10) cite that the Japanese economy in the early 1950s had greatly progressed to become second best worldwide since it was about 5 percent that of the U.S. and its GDP was half that of West Germany. By the year 2010, China’s economy had overtaken Japan to become the second-largest (Jacobson & Oksenberg). Currently, the Japanese economy is believed to be 1.5 times that of Germany, 33 percent of the U.S. economy, and 1.8 times that of the United Kingdom.

Japanese infrastructure and industry, which were seriously damaged in World War II, were steadily rebuilt to renovate the nation into a global economic power by the beginning of 1960. According to United Nations Development Program (20), “the post-World War II, the seven-year U.S. occupation of Japan showed that it was a blessing in a disguise as the Japanese government received a lot of funding from the U.S. that amounted to $2 billion in the form of industrial materials, food, fertilizers, petroleum products, fertilizers, and other products.”

The economy of the Japanese government got a boost from the United States, which assumed the role of their military budget as a result of the agreement after World War II, which delegated the duty of defense to the U.S. government in the event of aggression. Another possible boost to the economy of Japan is the culture of saving that the people adopted. Throughout the 1950s, Japan established stable financial organizations that facilitated investment and business opportunities (Theodore 12).

The Japanese position in the league of the world’s most prosperous nations was boosted in 1964 by its Organization of Economic Co-operation and Development (OECD). Olympic Games, which were held the same year, portrayed Japan as an economically powerful nation of the world by then. According to the history of the Olympic Games, Japan was the first Asian country to successfully host the Olympic Games, which gave it a high status among the nations of the world. Japan had an overwhelming growth trajectory of over 10 percent per decade (Jacobson & Oksenberg, 30).

Japan’s Economic growth

Jacobson & Oksenberg (26) pointed out that Japan houses one of the most skilled, educated, and healthy human populace in the universe. According to recent research statistics, Japan has the highest life expectancy in the world. In fact, their achievement in terms of economic growth is far much better than their scarce resources and arid land. Whilst the unmatched economic recovery of Japan after World War II was driven by the manufacturing division, steelworks, majorly by the automobile and the consumer electronics industry, the economy became more established after being changed to a service-centered economy.

From the earlier discussions, Japan is highly dependent on exports, which are a key driver that supports the economy. As a result, Japan is only second to China in the world in terms of stocking foreign reserves. Nevertheless, Japanese external requirements are driven primarily by manufacturing; it was considered that over 65 percent of its exports include electrical equipment, general machinery, and transport equipment (Schwartz 10).

Until the early 1980s, the Japanese economy was stable, with very low inflation and a low employment rate though it was considered higher than that of the United States. According to Schwartz (12), “the Japanese currency appreciation in 1985 made the export division uncompetitive, leading to moderation in growth from 4.4 percent to 2.9 percent in 1986. The Japanese government attempted to provide a stimulus with the drastic easing of the monetary policy via deep rate cuts.” Companies made huge profits as a result of this enabling a large flow of funds in the economy, thereby leading to exaggerated values of the assets. As discussed earlier, Japan’s economy recovered greatly from the U.S. government and the Korean War due to its position as a major supplier to the United Nations (U.N.) force.

The Japanese economy grew well in various sections like car manufacturing, manufacturing of electronics, and steelworks. Theodore (7) cited that the high economic growth and political serenity of the late 1960s were brought down by quadrupling of oil prices in 1973. He further argues that “because Japan is dependent on imports for petroleum, Japan experienced its first-ever recession since the Second World War. The U.S. forced Japan to correct the imbalance, demanding that Tokyo increase the value of the yen and allow its market to facilitate more imports from the United States.” He pointed out that to illustrate the necessity of the U.S. to Japan’s economy, it is vital to observe the world financial crisis; originated in the U.S in 2006, and the subsequent weakening of the global economy which greatly affected Japan, which was highly leveraged by its external division, a weak spot.


The United States dominated the relations with Japan for many decades after the Second World War. The U.S. was the largest economy in the world, and the Japanese government was relying on the U.S. for national security. It was clear from the defeat of Japan and the consequent occupation of the American military, Japan has been greatly affected by the U.S. in the cultural, economic, and political arenas. The Japanese constitution was written during that time of occupation, which allowed the U.S.-Japan Security treaty that led to extensive military presence in Japan, showing the tie between the two nations.

The U.S. sponsored Japan’s attachment in many international organizations like the United Nations, the General Agreement on Tariffs and Trade (GATT), and the Organization for Economic Cooperation and Development. Also, the U.S. is the major market for Japanese exports and the main source of imports strengthening the economy of Japan.

Besides giving technology and financial capital, America has removed its import barriers whilst concurrently allowing Japan to protect its industries and markets in a similar way that built America’s wealth and industry. It was vital to state that the Americans were in an obvious effort to compensate for the loss and transfer of wealth from America to Japan through the mercantile principle. The United States helped Japan to build the most modern industry and capturing the markets in the world.

The post World War occupants of Japan set the standard for post-conflict country building that has not been matched. However, the national building can be considered a normative concept that has various meanings to different people; it involves programs that are dysfunctional or unstable or failed nations or economies that are given help in the development of governmental civil society, infrastructure, financial aid, dispute resolution measures in order to increase stability.

The national building also involves doing something international. Japan was built by the U.S. through the various ways discussed above. Therefore, the building of Japan by the U.S. was considered to be evolutionary rather than revolutionary, it took a long time, and it was not only as a result of political leadership, but also changes in economic processes and technology, culture, and civil society, communications and other factors. In conclusion, the U.S. introduced modernization, political development, modernization, peacebuilding, democratization, and post-conflict reconstruction that led to the economic development of Japan.

Works Cited

Bergsten, Fred & Randall, Henning. Global Economic Leadership and the Group of Seven Washington, DC: Institute for International Economics,1996. Print.

Jacobson, Harold & Michel, Oksenberg. Use the term KIEOs in China’s Participation in the IMF the World Bank, and GATT: Toward a Global Economic Order Ann Arbor, MI: University of Michigan Press, 1990. Print.

Schwartz, Herman. States Versus Markets: The Emergence of a Global Economy, 2nd ed. New York: St. Martin’s Press, 2000. Print.

Theodore, Cohn. Governing Global Trade: International Institutions in Conflict and Convergence. Burlington, VT: Ashgate, 2002. Print.

United Nations Development Program. Human Development Report 2009. New York: Palgrave Macmillan, 2009. Print.