Controlling Fund Allocation for the War: Experience of Japan
Coherent Identifier 20.500.12592/n9h18b

Controlling Fund Allocation for the War: Experience of Japan

4 April 2022


The funds flow was mediated by the financial market, and the government endeavored to control the financial market to concentrate funds with the government and the industries that were the targets of the production capacity expansion policy. [...] To observe the difference in the impact of the financial controls across the ranks in the Standard for Adjustment of Industrial Funds, explained above, I identify the ranks of 19 industries in Honpo Jigyo Seiseki Bunseki, referring to the table of the Standard in the Ministry of Finance (1957). [...] The coefficients on the interaction terms capture the difference in the changes of capital growth between the larger firms subject to the regulation and the smaller firms exempted from the regulation after the financial controls commenced. [...] With respect to the larger firms subject to the controls, the difference in capital growth between the firms in the lower rank industries and those in the higher rank industries expanded when the controls commenced, while the differences in the growth of borrowing of short-term credit between them did not expand until the controls were extended to short-term funds. [...] With respect to the samples including small and medium-sized firms, for the real estate industry, ranked as low priority, the capital growth of the firms subject to the controls (i.e., firms with capital over the upper limit of the control exemption) declined compared with that of the firms exempt from the controls (under the upper limit when the controls started).

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