chapter  20
Japan—Domestic life, economy and War Effort; Defence forces and Civil Defence; Culture
Pages 17

FOLLOWING Japan’s conquest of Manchuria in 1931, the Japanese government successfully encouraged planned industrial development and modernization, a process which was helped by the existence of the large conglomerates, the Zaibatsu, which combined mining, shipping, manufacturing, and banking activities. Textiles experienced relative decline but heavy industry grew rapidly, accounting for 73% of industrial production at the end of 1941 compared with 58% at the start of the China Incident in July 1937. Increasing numbers of workers left the land to word in urban factories so that the percentage employed in agriculture dropped from 48% in 1930 to 42% a decade later. Of even greater significance was the creation and expansion of distinctly modern sectors of military production. The motor vehicle, aircraft, and shipbuilding industries expanded rapidly and were sustained by army and navy expenditure which, by 1938, absorbed 75% of Japan’s national budget. To support this increase in public spending bank credit was expanded and large deficits became a lasting feature of national accounting. Very high inflation was the result and the retail price index rose from 100 in 1936 to 175 in 1940. During the same period the UK’s rose to 125 and that of the USA to just 101.