The Gold Standard in Prewar Japan and Its Role in the Rise of Japanese Nationalism

This thesis discusses the role of the gold standard in Japan’s shift to militarism in the 1930s. Since its adoption in Japan in 1897, the gold standard and the price stability inherent in it had advantaged Japanese creditors and helped them finance Japan’s empire in Asia. At home, however, the gold standard generated deflation and prevented the Bank of Japan from responding to economic turmoil with interest rate decreases. Japan’s ill-advised return to gold in January 1930—amidst a recession—caused the nationalist and fiscally expansionist Rikken Seiyūkai party to gain the upper hand in public opinion over the liberal internationalist and fiscally conservative Rikken Minseitō party. This economic miscalculation was a major—perhaps the major—reason for the overwhelming loss of the liberal internationalists in the 1932 elections, setting Japan on its path to militarism. The paper begins with an outline of the history of money in Japan prior to 1897, using Japanese-language materials from the Japanese Currency Museum in Tokyo. Next, it provides a theoretical description of the gold standard and its variants and follows the history of the gold standard in Japan from its adoption in 1897 through 1932. It ends with an analysis of the interaction between the economic situation in the late 1920s and early 1930s and the shift to militarism in Japanese politics at that time.