Mainly because of government reforms and cash infusions Japan enjoyed one of the biggest economic recoveries and most prosperous decades in the history of any country. By 1952 wages had returned to prewar levels and were continuing to increase. From 1953 to 1960 Japan’s overall economy grew an average of 9.3%. Because of the increased investment in industry and technology and with a highly skilled, well educated labor force Japan was able to increase productivity 7.2% annually from 1953 to 1962.

The expenditures in industry also helped to escalate steel production from 5 million tons in 1950 to 82 million tons by 1969. By 1956 Japan was the largest shipbuilder in the world and by 1970 over 50% of all ships were manufactured in Japan. Another rise in industry developed when the U.S. contracted Japan to make munitions for the Korean war effort. By 1965 manufacturing increased to four times that of pre-World War II levels.

This stunning recovery and growth is highlighted by Japans exports in 1950 being 820 million and imports 974 million and exploding to 16.7 billion in exports and just 12.7 billion in imports by 1969. This fostered an expansion of Gross National Product (GNP) from 10.9 billion in 1950 to 202 billion in 1970.

During World War II, the Yen followed a pattern of extreme instability and near the end of the war seesawed between 70-400 Yen per US dollar. After the war, the price of the Yen was fixed to the US Dollar at Y360 to one. This form of pegging a currency to the US Dollar was instituted under the Bretton Woods system created in New Hampshire in 1944. The Bretton Woods system established the International Monetary Fund (IMF) and allowed various currencies to be converted into U.S. dollars which was then convertible to or backed by gold. This system continued throughout the U.S. occupation and into the early 1970s until 1971 when the Vietnam war began to accelerate inflation in the U.S. and America began to have a trade deficit. With what was dubbed “Nixon Shock” gold was no longer tied to the U.S. dollar and with one of the primary components of the Bretton Woods system gone, the Japanese Yen began to trade independently.

In the months since the tsunami the Japanese Yen has been extremely erratic. Against the U.S. dollar it went down to around 76-78 which was the lowest it had been since post World War 2. If you are not familiar with foreign exchange markets or how currency is traded there are a couple things you should know. One a lower yen price indicates a stronger yen. Two, this is bad for Japan’s economy because it is heavily dependent on exports. A stronger Yen means that an equal amount of dollars are being exchanged for goods while once that money is repatriated it turns into less yen. In the last few weeks the Yen has jumped up to around 82-84 against the dollar thanks in part to a G7 conference on March 17 that called for other countries to sell yen and buy U.S. dollars. In addition the central Bank of Japan has been printing money in excess of 15 trillion yen and issued government bonds to exchange traded funds in amounts up to 10 trillion yen.

The extent of the damage of this years tsunami won’t be fully known for a long time. As of early April 2011 around 200,000 structures have been destroyed, 13,498 deaths and 14,739 were still missing. Four nuclear power plants comprised of 11 reactors experienced both major and minor problems. Transportation was affected, possibly not to the extent that it was disrupted during World War II, but more than 60 out of 70 of the JR train lines were damage. One 4 car train derailed and 23 stations on seven lines were washed out to sea. There was severe damage to Sendai Airport, one of the countries largest airports. Areas around the radiation contaminated zones, the roads and railways are still unable to be inspected.

Paralleling the years following World War II, the nation of Japan will need help from other nations to fully recover from this disaster. While Japan is a modern first world economy printing your own money can only do so much. Initially the rebuilding costs were estimated at 122 billion US dollars and now have been estimated at as much as 300 billion US dollars. As of early April the Japanese Red Cross is reporting donations of almost $1 billion US dollars, the American Red Cross $120 million US dollars, Taiwan $9.3 million and the Singapore Red Cross $3.15 million US dollars. With help and intelligent decisions from world leaders Japan can emerge stronger than it was before.

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