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Wartime Financial Control and Allocation of Capital: The Case of Japan during World War II

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  • Tetsuji OKAZAKI

Abstract

During World War II, the Japanese government implemented financial controls to reduce funds for nonessential and nonurgent industries, and thereby secured funds for the strategic industries. For this purpose, the government classified industries into classes, and regulated fund flows to Class C industries, regarded as nonessential and nonurgent. This paper identifies the impact of this regulation on capital allocation using firm-level panel data. The regulation lowered capital growth by around 6.5 percentage points, and that the total capital of the Class C industries in 1942 was around 30% lower than its counterfactual value assuming there had been no regulation.

Suggested Citation

  • Tetsuji OKAZAKI, 2025. "Wartime Financial Control and Allocation of Capital: The Case of Japan during World War II," CIGS Working Paper Series 25-007E, The Canon Institute for Global Studies.
    • Handle: RePEc:cnn:wpaper:25-007e
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    1. Higgs, Robert, 1992. "Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s," The Journal of Economic History, Cambridge University Press, vol. 52(1), pages 41-60, March.
    2. Fetter, Daniel K., 2016. "The Home Front: Rent Control and the Rapid Wartime Increase in Home Ownership," The Journal of Economic History, Cambridge University Press, vol. 76(4), pages 1001-1043, December.
    3. Tetsuji Okazaki, 2023. "Designing wartime economic controls: Productivity and firm dynamics in the Japanese cotton spinning industry, 1937–9," Economic History Review, Economic History Society, vol. 76(4), pages 999-1022, November.
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