Financing Japan’s World War II Occupation of
Southeast Asia

Gregg Huff

Pembroke College, University of Oxford

Shinobu Majima

Faculty of Economics, Gakushuin
University

Abstract

This
paper analyzes how Japan financed its World War II
occupation of Southeast Asia, the transfer of resources to Japan, and the
monetary and inflation consequences of Japanese policies. In Malaya, Burma,
Indonesia and the Philippines, the issue of military scrip to pay for resources
and occupying armies greatly increased money supply. Despite high inflation ,hyperinflation hardly occurred because of a
sustained transactions demand for money, because of Japan’s strong
enforcement of monetary monopoly, and because of declining Japanese military
capability to ship resources home. In Thailand and Indochina, occupation costs
and bilateral clearing arrangements created near open-ended Japanese purchasing
power and allowed the transfer to Japan of as much as a third of Indochina’s
annual GDP. Although the Thai and Indochinese governments financed Japanese
demands mainly by printing large quantities of money, inflation rose only in
line with monetary expansion due to money’s continued use as a store of
value in rice-surplus areas.