The Japanese Economy Prior to Sustained Direct Air Attack

The orientation of the Japanese economy toward war began in 1928, and continued with increasing emphasis during the Manchurian and Chinese campaigns. By 1940, total production had arisen by more than 75 percent; heavy industrial production by almost 500 percent; and 17 percent of Japan's total output was being devoted to direct war purposes and expansion of her munition industries, as against 2.6 percent at that time in the United States. Construction of industrial facilities in these years assumed -- for the Japanese conditions -- gigantic proportions. Her aircraft, aluminum, machine tool, automotive, and tank industries were erected from almost nothing during this period.

This industrial expansion was based and depended on the availability of raw materials. Great efforts were devoted to the increase of raw material output in the home islands. In some respects, major results were achieved. Coal production in Japan rose from 28,000,000 tons in 1931 to 55,600,000 tons in 1941. Domestic iron mining made considerable progress. Nevertheless, no country could have been farther from self-sufficiency, with respect to raw materials, than Japan. The development of basic material sources on the continent of Asia constituted almost the central issue of Japan's economic policy during this period.

Although progress in Manchuria and China helped significantly to alleviate Japan's raw material shortages in coking coal, iron ore, salt and foods, insufficiency of raw materials continued to be the most important limiting factor on Japanese industrial output. Negligible quantities of oil and no bauxite sources existed within Japan's "Inner Zone." Output of aluminum ingots had risen from 19 tons in 1933 to 71,740 in 1941, 90 percent of which was produced from bauxite imported from the Dutch East Indies. Plans to develop a synthetic oil industry failed to yield significant results and Japan was almost wholly dependent on oil imports from the United States or the Dutch East Indies. A similar dependence on imports existed for rubber, ferro-alloys such as manganese, chrome, nickel, cobalt and tungsten, and for non-ferrous metals such as tin, lead, and mercury.

Pending seizure and economic exploitation of the oil and bauxite resources of the southern area, stock piling of these vital materials was a necessity. By the end of 1941, bauxite stocks of 250,000 tons, constituting a 7 months' supply, and 43,000,000 barrels of oil and oil products were stored in Japan.

Considering the economic performance of the decade, one cannot but be impressed by the intensity of the effort and the magnitude of the results. Nonetheless, Japan remained with an economy having approximately 10 percent of the potential of the United States economy. It was desperately vulnerable to attack on its shipping. Having a comparatively small, newly developed industry, it had to work without much cushion of under-utilized physical plant capacity. Having had little experience with mass production, the country had no opportunity to build up a large force of industrially and mechanically trained personnel. This meant shortages of skills, ingenuity and ability to improvise later on, when the economy was under the stresses and strains of large-scale warfare.

This economic potential could support a short war or a war of limited liabilities. The accumulated stocks of munitions, oil, planes and ships could be thrown into action and produce a devastating effect on unmobilized enemies. When this initial blow failed to result in peace, Japan, without significant help from Germany, was doomed. Its economy could not support a protracted campaign against an enemy even half as strong as the United States.

In addition, the success of the initial Japanese military operations delayed total economic mobilization until after the defeats of late 1942. Computed in constant prices, the gross national product rose from a level of 39.8 billion yen in the fiscal year beginning with April 1940, to only 41 billion yen in the fiscal year 1942. That this was due to an inadequate realization of requirements and inadequate planning, and not to the inherent limitations of the Japanese economy, is clear from the expansion that was secured after 1942. In the fiscal year 1943, the gross national product rose to 45.4 billion yen, and in 1944 to 50 billion yen.

The share of the gross national product devoted to direct war and munitions expenditures increased from 23 percent in 1941 to 31 percent in 1942, 42 percent in 1943 and 52 percent in 1944. In 1944, half of the remaining national product was accounted for by food. In 1943, however, the United States was devoting 45 percent of its vastly greater national product to direct war purposes. By the summer of 1944, the Japanese had exhausted the possibility of forcing a greater share of their economy into direct war activities. Their plants, railroad and mines were being, and had been for some time, under-maintained to a point where breakdowns were becoming more and more serious. The civilian population was underfed, was receiving practically no new clothing or miscellaneous civilian supplies, and was being worked to a degree of fatigue which was reflected in rising rates of absenteeism.

By 1944, Japan had increased ingot steel capacity to 225 percent of the 1937 capacity. A shortage of raw materials, however, which began with the United States embargo on scrap iron exports in July 1941 and was never overcome, prevented the operation of Japanese steel mills at anything approaching capacity. Japanese coal would not produce satisfactory metallurgical coke without the admixture of stronger continental coking coal; domestic iron ore was both limited in quantity and of lower grade than imported ores. The combination of limited quantities of high grade imported raw materials and lower grade domestic materials held production of ingot steel in the home islands to 6,800,000 tons in 1941, to a peak of 7,800,000 tons in 1943, and caused it to decline to 5,900,000 tons in 1944. This compared with a 1937 production of 5,800,000 tons and a theoretical capacity, using high-grade materials, of 13,600,000 tons in 1944. By the middle of 1i944, the increasing stringency of shipping and the interdiction of many of Japan's shipping routes had reduced coal and ore imports by two-thirds. Stockpiles of imported materials had already been heavily eaten into, and ingot steel production began to decline rapidly. In March 1945, imports of coal virtually ceased, and iron ore was cut off entirely, as the Japanese elected to devote their remaining shipping capacity to the hauling of vitally needed foodstuffs and salt. It is estimated by the Survey that, using only domestic raw materials, the Japanese steel industry could not have maintained a rate of production of ingot steel in excess of 1,500,000 tons per annum. By August 1945, the rate of output was still somewhat in excess of this figure, but would soon have been reduced. The decline in Japan's steel production can be attributed to its dependence on shipping and the destruction of that shipping. Had this industry not been mortally wounded by shipping attack and had its destruction by bombing been called for, the effectiveness of the few strategic bombing attacks directed against the steel industry indicates that destruction of the principal plants by bombing or paralysis of the industry by disruption of railroad transportation would have been possible, but only at a later date.

The steel shortage constituted an over-all limitation on the war potential of the Japanese economy. Japanese planners were, however, able to secure very substantial increases in the production of those military products which the experiences of the war had demonstrated to be of outstanding importance. Aircraft production of all types, including training planes, was stepped up from 700 planes per month in the summer of 1942 to 2,572 planes in September 1944. Aircraft engine production was not only increased correspondingly in numbers, but average horsepower was doubled. Aircraft and antiaircraft gun and ammunition production was expanded tenfold. Radar and communications equipment was stepped up fivefold. The most important consumer of steel was the shipbuilding industry. The increasingly critical nature of Japan's shipping situation caused her to expand her naval and merchant shipbuilding programs to a point where 35 percent of all steel consumed was being used in that industry alone. Construction of merchant ships increased from approximately 238,000 tons in 1941, to 1,600,000 tons of steel ships and 254,000 tons of wooden ships in 1944. During 1942, warship deliveries included one battleship of 64,000 tons and six small carriers totalling 84,000 tons. In 1944, no battleships, but four aircraft carriers of 114,500 displacement tons and 141,300 tons of escort vessels and submarines were delivered. The increases in production of high-priority items involved the scaling down of steel availability for lower priority items, such as tanks, larger caliber guns and trucks, and the almost complete elimination of steel for civilian requirements, construction, or export.

During 1944, the effects of the net loss of shipping and slow-down in ship operations became such that by the end of the year it no longer was possible to protect even high-priority war production by further shifting of allocations of scarce materials from items of lesser priority. In addition to steel, other basic elements of the economy were involved. Oil, although not as important as steel in its broad impact on the remainder of the economy, was of critical importance to Japan's military machine and to her merchant marine. Oil imports from the south began declining in August 1943, and had been eliminated by April 1945. Crude oil stocks were virtually exhausted; refinery operations had to be curtailed; and stocks of aviation gasoline fell to less than 1,500,000 barrels, a point so low as to require a drastic cut in the pilot-training program and even in combat air missions. Bauxite imports declined from 136,000 tons in the second quarter of 1944, to 30,000 tons in the third, and stockpiles were only 3,000 tons. Stockpiles and the time delay between the various stages of production cushioned for a time the inevitable effects of the blockade on finished munitions production, but by November 1944, the over-all level of Japanese war production had begun to turn down, including even the highest priority items, such as aircraft engines.

It is the opinion of the Survey that by August 1945, even without direct air attack on her cities and industries, the over-all level of Japanese war production would have declined below the peak levels of 1944 by 40 to 50 percent solely as a result of the interdiction of overseas imports.

By mid-1944 those Japanese in possession of the basic information saw with reasonable clarity the economic disaster which was inevitably descending on Japan. Furthermore, they were aware of the disastrous impact of long-range bombing on Germany, and, with the loss of the Marianas, could foresee a similar attack on Japan's industries and cities. Their influence, however, was not sufficient to overcome the influence of the Army which was confident of its ability to resist invasion.