The US Occupation: Japan’s Post War Miracle

Princes of the Yen: Central Banks and the Transformation of the Economy

Directed by Michael Oswald (2014)

Film Review

Based on Richard Werner’s book by the same name, this film examines the economic forces responsible for the Japan’s post war economic miracle. The US occupation of Japan (1945-1952) was characterized by heavy censorship and US control of all political appointments, including central bank governors.

Mindful of the peasant uprising that led to revolution in China, US occupiers immediately implemented major land reform, breaking up large estates to hand the land over to their tenants. In 1951, under US oversight, Japan declared an amnesty for all war criminals. Thus while Nazi war criminals were being tried and hung at Nuremberg (or secretly smuggled into the US or Latin America), Japanese war criminals were forming (with major CIA support) the Liberal Democratic Party, which would rule Japan continuously until 1993.

Because they mainly held war bonds or loans to industries that had been destroyed, private Japanese banks had collapsed. Under US supervision, the Japanese central bank purchased these worthless assets in exchange for bank reserves (a process that would come to be known as quantitative easing).

They then set up a system known as “window guidance” to guarantee the rapid credit creation necessary for economic recovery. Under window guidance, the Bank of Japan issued quarterly directives to each bank on the amount of credit they needed to create for specific industries. The goal was to maintain a war economy with a focus on consumer goods instead of weapons. Growth skyrocketed, producing rapid income recovery with reasonable income equality for Japanese citizens.

By the 1970s, Japan was the world’s second largest economy and held major investments in the US and other western countries. In addition to owning 75% of US treasury bonds, in 1986 Japanese investors owned Columbia Pictures, Rockefeller Center and Pebble Beach Golf Course near Monterey, California.

All this changed in the 1990s, when the Bank of Japan colluded with the IMF, World Bank and Goldman Sachs for the right to be independent of the Japanese government like western central banks. As part of this scheme, which would hand Japan’s central bank over to  western speculators, the BOJ deliberately (according to Werner) created a massive asset bubble which collapsed in the mid-1990s. Between 1991 and 1996, 212,000 Japanese companies went bankrupt, stocks and land lost 80% of their value and over 5 million Japanese became unemployed.

The Japanese economy continues to be in recession to the present day.