U.S. economist Joseph Dodge (1890-1964) arrived in occupied Japan in 1949 as the financial adviser to the Supreme Commander for the Allied Powers.

Tasked with implementing postwar economic stabilization programs, which came to be known as the Dodge Line, he stated during a news conference on March 7 of 75 years ago that Japan’s economy had been standing on stilts.

Noting that the pair of stilts consisted of U.S. aid and Japanese government subsidies, Dodge called for a super-balanced budget policy.

In the immediate postwar era, Japan was supported by massive amounts of U.S. aid that far exceeded its own annual budget.

And Japanese government subsidies were used to pay the difference generated by export import controls.

Dodge insisted that the only way to curb Japan’s hyperinflation was to lop off those “stilts.”

This seriously alarmed the then-Democratic Liberal Party (Minshu Jiyu-to) Cabinet of Prime Minister Shigeru Yoshida (1878-1967), who had just won the general election of January 1949 by a landslide after pledging massive tax cuts.

Implementing an austerity policy would constitute an outright breach of the party’s election pledge.

His finance minister, Hayato Ikeda (1899-1965), was in a bind.

He held repeated negotiations with Dodge, hoping, at least, to carry out partial tax cuts.

But the budget outlook could not have been more different from what the party had pledged, and intraparty dissatisfaction erupted.

At one point, Ikeda was said to have been prepared to step down.

Ultimately, Yoshida basically “shut everyone up and got the budget approved,” recalled former Prime Minister Kiichi Miyazawa (1919-2007) in his memoir.

Miyazawa was Ikeda’s policy aide at the time.

The drastic budget-balancing “remedy” served to bring the nation’s hyperinflation under control, but it also caused severe side effects.

A great number of small and midsize enterprises went belly-up, and many workers were let go around the nation in what came to be called the “Dodge recession.”

In July 1950, the stock average plummeted to 85.25, the lowest level ever.

And on March 4 this year, the Nikkei stock average topped 40,000 for the first time.

The nation’s “stilts” economy is a thing of a long-past era, but I feel uneasy.

Perhaps that’s because I don’t see any politician today agonizing over the weight of their election pledge or asserting leadership to forge party unity.

--The Asahi Shimbun, March 5

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Vox Populi, Vox Dei is a popular daily column that takes up a wide range of topics, including culture, arts and social trends and developments. Written by veteran Asahi Shimbun writers, the column provides useful perspectives on and insights into contemporary Japan and its culture.