In October 1929 the New York stock market crashed. The global economic crisis that followed was a key incident in the conjuncture of events that brought about Japan’s political shift. The world depression coincided in destructive fashion with a recent initiative in Japanese financial policy. A Minseito¯ government under Prime Minister Hamaguchi had come to power in July 1929. It resolved to implement two policies that had been pursued on and off throughout the 1920s to revive the stagnant economy.
First, domestic prices would be forced down and exports encouraged by tightening the money supply and cutting government spending (i.e., retrenchment). Second, in
ternational trade and investment would be stabilized by returning to a fixed exchange rate. Japan would follow the lead of the Western powers by going back to the gold
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standard (which Japan and the other powers had left during World War I) at the prewar rate.
The fiscal retrenchment program came first. It appeared to be succeeding in the second half of 1929. Wholesale prices fell 6 percent. So, in January 1930, Japan returned to the gold standard as promised. At a moment of plunging prices worldwide, this move brought disaster. Deep global deflation erased the benefit of lower domestic prices. The fixed exchange rate prevented further devaluation that might have boosted Japanese exports.1
In addition, Japan’s zaibatsu banks behaved in a way that was economically smart but politically damaging. Bankers quickly realized that the government would have no choice but to abandon this move to the gold standard and devalue the yen. They sold massive amounts of yen for dollars. When Japan indeed left the gold standard in 1931, the value of the yen quickly fell by half against the dollar. The banks happily doubled their money by repurchasing the cheaper Japanese currency with their dollars.
This behavior reinforced the widespread belief that capitalists and their allies in the political parties were greedy and selfish: They were profiting handsomely by selling out the country during a depression that was impoverishing everyone else.
Well beyond the small circle of Marxian intellectuals who first took this view, it be
came a commonplace idea that Japan stood at a systemic “dead end.” The economy and political structure seemed paralyzed. Social disorder and immorality appeared rampant.
The crisis was especially acute among farmers. Between 1929 and 1931 the av
erage price of basic agricultural commodities including rice and barley fell by 43 percent. As their incomes tumbled, small-scale landowners were unable to pay taxes.
Many sought to raise their earnings by retaking land from tenants. They wanted to work these fields with family labor, including unemployed children returning from the cities. Tenant farmers resisted eviction. Land disputes surged in number.
The quality of disputes changed as well. Most tenant-landlord struggles in the 1920s saw the tenants on the offensive, demanding rent reductions. Now tenants were desperate and defensive. The proportion of disputes over contractual matters such as eviction rose from just 5 percent in the early 1920s to nearly 50 percent by the depression years. Tenant farmers often built crude fences around their fields and set up picket lines to protect them. More of these disputes than ever involved violence.
In the cities, the depression threatened shopkeepers and factory owners as well as their employees. Retail traders faced bankruptcy when wage cuts and job losses cut the buying power of their customers. Annual rates of failure among Tokyo retail stores nearly doubled from 1926 to 1930. The newspapers were filled with tales of small storeowners fleeing their creditors in the dead of night. Small-scale manufac
turing businesses also failed by the thousands.
Disgusted with the ineffective response of the established political parties, thousands of small businessmen joined movements to found new ones. They lambasted the Seiyu¯kai as well as the ruling Minseito¯ as “running dogs of big capital.” One such group, the Imperial Middle Class Federated Alliance, claimed “the established parties have betrayed us, becoming the political lackeys of the capitalist cliques and trampling the middle class of commercial, industrial, and agricultural producers.” To save the long-suffering middle class, which had “supported the state financially and defended
Tenant farmer dispute, 1930, in Niigata. Standing on a pile of rice stalks, a leader of the farmers’ union addresses the members. Such disputes surged in number and intensity during the depression years.
Courtesy of Shogakkan Publishers.
the country resolutely,” Japan needed a “revolution in economic thought.” These groups demanded new policies to guarantee the “prosperity of the mainstay class” of taxpayers, producers, and exporters. This class in turn would save Japan from “a bloody war of labor and capital.”2
The men who issued such fearful claims had reason to be worried. They faced unprecedented hostility from employees who faced a dramatically increased threat of unemployment. One historian’s estimate of joblessness in 1930–32 places nationwide unemployment at about 15 percent of the industrial work force. Jobless rates in the city might have been double this, and they surely exceeded 20 percent.3
Unlike bankrupt shopkeepers, the men and women who lost their jobs did not flee quietly into the night. Labor disputes, like agrarian struggles, took place in un
precedented numbers and with a new intensity. They took place in small factories as well as large ones. More women than ever took part, especially in the embattled textile industry. As a female speaker shouted at a rally during one such strike in Tokyo in 1930: