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Takahashi Korekiyo, the Man Who Brought Japan Out of the Great Depression Read chapter Read first chapter

2021 | OriginalPaper | Chapter

2. Japan’s Plunge into and Emergence from the Great Depression

Author : Masato Shizume

Published in: The Japanese Economy During the Great Depression

Publisher: Springer Singapore

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Abstract

In this chapter, I first overview modern Japanese economic history from a long-term perspective for the period between the mid-nineteenth and mid-twentieth centuries while putting the Japanese economy in its global context. I then review Japan’s macroeconomic performance and policies during the 1930s focusing on exchange rate, fiscal, and monetary policies.

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Footnotes
1
The remaining five clauses were achieving a clean government, rousing the people’s spirits, enforcing discipline among officials, establishing a social policy, and reforming education (Metzler 2006: 200).
 
2
Until August 1969, the BOJ’s official discount rate was expressed in terms of the daily rate of interest per 100 yen. As of January 1930, the daily rate was 1.5 sen (1/100 yen) per 100 yen, amounting to an annual rate of 5.475% (1.5/100*365).
 
3
According to Fukao et al. (2017), from 1885 through 1940, the Japanese economy grew at an annual rate of + 3.1% and domestic prices (the implicit deflator) rose at an annual rate of + 3.7% on average.
 
4
During Takahashi’s second term as finance minister from 1918 to 1922, the government reduced military spending while increasing expenditure on civic services including infrastructure building (Chapter 4 of this volume), and the BOJ raised its official interest rate three times, from 5.84 percent to 8.03 percent.
 
5
The use of commodity prices for measuring inflation expectations follows Hamilton’s notion that commodity futures prices contain some information about people’s expectations of price fluctuation (Hamilton 1987). For the baseline regression, they use cotton yarn. For robustness check, they test other commodity prices and obtain qualitatively similar results.
 
6
The full sample of the raw data, the identified structural shock data, and the historical decomposition data for the January 1920–December 1936 period is available on the Kobe University Research Institute for Economics and Business Administration (RIEB) website: http://​ccss.​kobe-u.​ac.​jp/​en/​research/​database/​.
 
7
The United States departed from the gold standard in April 1933. The Chinese monetary system was complex, but suffice it to say that China was on the silver standard until its November 1935 currency reform (Shiroyama 2009, Horesh 2012). When Manchukuo was established in 1932, it inherited the previous monetary standard and then linked its currency to the Japanese yen in 1934 to become part of the yen bloc (Yasutomi 1997). The yen’s depreciation may have had a switching effect on trade with non-yen-bloc regions including the United States and China and alleviated the adverse income effect of the Great Depression.
 
8
Crafts and Mills (2013) show that the fiscal multiplier in Britain during the 1930s was significantly less than one. The Japanese case may resemble the British case.
 
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Metadata
Title
Japan’s Plunge into and Emergence from the Great Depression
Author
Masato Shizume
Copyright Year
2021
Publisher
Springer Singapore
Book
The Japanese Economy During the Great Depression

Print ISBN: 978-981-13-7356-5

Electronic ISBN: 978-981-13-7357-2

Copyright Year: 2021

DOI
https://doi.org/10.1007/978-981-13-7357-2_2

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