2 September 1945: Japan signs its unconditional surrender

On this day in 1945 – 75 years ago – Japanese officials formally surrendered, ending the Second World War, and creating the conditions for Japan's economic miracle.

The story of the Japanese recovery after 1945 is one of the great economic tales of the 20th century. By the time of the surrender signed 75 years ago today the economy was a wreck. The “Greater East Asia Co-Prosperity Sphere” had turned into a nightmare of Japan's own making. Cities and industrial capacity had been levelled by allied bombing, both conventional and, at Nagasaki and Hiroshima, nuclear.

Industrial production was at one tenth of pre-war levels. Hyper-inflation and commodity shortages were rife. A contemporary allied report estimated that Japan had lost up to a quarter of its entire national wealth in the conflict.

As Japanese officials boarded the USS Missouri in Tokyo Bay to sign an unconditional surrender that was to put Japan under foreign occupation for the next seven years, it might have seemed that the humiliation was only just beginning.

In fact, the US occupation proved to be not so much the end as a new beginning. The allied administrators, ever suspicious of monopolies, worked to abolish the Zaibatsu the big industrial conglomerates that had dominated the Japanese economy for decades. However, they were unable to create a world of free-wheeling liberal capitalism in its place.

A new model, the Keiretsu, based on cross-share ownership and cosy relations with government officials, sprang up to replace the old conglomerates. These groups included such famous names as Mitsubishi (which owns interests in diverse sectors, such as banking, shipping and construction, as well as cars) and Mitsui, a group which includes Sony and Toshiba.

In politics, too, a distinctively Japanese model asserted itself. Yes, Japan was democratic, but it was the sort of democracy where one big-tent party (the Liberal Democrat Party, or LDP) could remain in power for 38 years without interruption.

Out of a cataclysm, Japan was able, in a few short decades, to transform itself into the world's second-largest economy, a nation associated not with ruined cities, but with cutting-edge innovation and big-name brands. In the 1950s, Japanese GDP grew at an average rate of 9.1% per annum in the 1960s it topped 10% a year.

Recommended

Early repayment charges: should you abandon your fixed-rate mortgage for a new deal now?
Mortgages

Early repayment charges: should you abandon your fixed-rate mortgage for a new deal now?

Increasing numbers of homeowners are paying an early repayment charge to leave their fixed-rate mortgage deal early, and lock in a new deal now. Shoul…
30 Sep 2022
Energy meter reading day: why you need submit your gas and electricity readings now
Personal finance

Energy meter reading day: why you need submit your gas and electricity readings now

Energy meter reading day - you need to submit your gas and electricity readings as soon as possible ahead of the October energy price increase
30 Sep 2022
Should you fix your mortgage? Here are the best rates available now
Mortgages

Should you fix your mortgage? Here are the best rates available now

Rising interest rates look set to spring a nasty surprise on millions of homeowners next year. You need to take steps today to protect yourself from a…
30 Sep 2022
Why the Bank of England intervened in the bond market
Government bonds

Why the Bank of England intervened in the bond market

A sudden crisis for pension funds exposed to rapidly rising bond yields meant the Bank of England had to act. Cris Sholto Heaton looks at the lessons …
30 Sep 2022

Most Popular

What to do as the age of cheap money and overpriced equities ends
Investment strategy

What to do as the age of cheap money and overpriced equities ends

The age of cheap money, overpriced equities and negative interest rates is over. The great bond bull market is over. All this means you will be losin…
29 Sep 2022
Why everyone is over-reacting to the mini-Budget
Budget

Why everyone is over-reacting to the mini-Budget

Most analyses of the chancellor’s mini-Budget speech have failed to grasp its purpose and significance, says Max King
29 Sep 2022
Mini-Budget: will Kwasi Kwarteng’s gamble on growth work?
Budget

Mini-Budget: will Kwasi Kwarteng’s gamble on growth work?

The government has launched the biggest dash for growth in 50 years, relaunching an approach known as supply-side economics. What is the plan – and wi…
30 Sep 2022