In short, Japan expanded their wartime production by eliminating inefficiencies and by the allocation of increasingly large proportions of national labor, funds, and supplies to those key industries.

The US submarine campaign, meanwhile, was plagued at the beginning of the war by logistical and tactical dead weight, and took some time to really get rolling.

So the short answer to your question is: the submarine campaign didn’t reach peak effectiveness until late 1943 and into 1944, which corresponds well with the freefall of Japan’s wartime production in mid/late 1944. Japan’s stockpiles of raw materials carried it through the initial wave of losses from newly equipped and more aggressive US submarine patrols, but by late 1944 and throughout 1945, those stockpiles had been all but used up by the continual demands for expanded production of war materiel. By the end of the war, Japan’s factories were essentially starved.

The reasons for the slow start of the US submarine campaign are mainly two-fold, namely numerous problems with the design and supply of the Mark 14 torpedo and an overly cautious pre-war doctrine of remaining submerged during the day, which limited both the mobility and spotting distance of submarines in the vast Pacific theater.

The Mark 14 torpedo had several major issues: an unreliable new magnetic detonator, unreliable depth control, slow production time, and finally a faulty manual contact detonator.

A magnetic influence detonator is a good idea in theory -- rather than blowing up the torpedo against the side of a ship, you let the torpedo run under the ship and explode when it detects the metal hull above. This focuses the energy of the warhead upward into a force that breaks the keel of the ship, potentially snapping it in half instead of just opening a hole in the side.

However, the Mark 14’s magnetic detonator design and testing regime failed to consider that the Earth’s magnetic field varies by location, sometimes by quite a lot. This meant that when at Navy testing centers, the detonators would behave as expected, but out in the Pacific torpedoes would fail to explode entirely or detonate as soon as they armed, a few hundred yards from the sub that had fired them. BuOrd attributed these duds and misfires to poor maintenance by the submariners or as excuses for a lack of aggressiveness by the skippers, and it took months to finally order the magnetic detonators deactivated.

BuOrd similarly didn’t believe reports that the Mark 14s were running deeper than set, in many cases passing harmlessly under a target and doing nothing beside drawing a long, white wake straight back to the sub that had attacked. It took several field tests by RADM Lockwood at a sub base in Australia where they fired torpedoes at fishing nets before BuOrd agreed to do their own tests and found that yes, the Mark 14s were running ten or eleven feet deeper than their set depths.

This wasn’t the end of the submarine force’s problems with their primary weapon, however. With the torpedoes running at their correct depths and the magnetic detonators deactivated in favor of contact detonators, skippers continued to report duds.

This trouble peaked on August 6th, 1943, when Lieutenant Commander “Dan” Daspit of the USS Tinosa returned to port after a frustrating patrol. While patrolling near Truk, Tinosa had encountered a 19,000 ton merchant target and attacked from nearly a perfect 90 degree angle with a spread of four torpedoes. They observed at least two hits but no damage to the enemy ship. The merchant ship attempted to run, but Tinosa fired its last two forward torpedoes on the retreating target and got two hits aft which exploded and stopped the ship dead in the water.

Commander Daspit closed with the target again to sink it, and conscious of orders to conserve torpedoes, moved to under 1000 yards and into an ideal firing position on his stationary target. He fired a single torpedo and observed a large splash at the point of aim, but no explosion. One by one, he fired eight more torpedoes at the target over the course of an hour and a half from various ideal firing positions.

As enemy reinforcements were approaching to rescue the merchant ship, Daspit saved his last torpedo to be examined for faults and returned to port after 11 confirmed duds.

The last torpedo was tested after Tinosa returned to port and no faults were found. It took a final test to finally identify the issue, where live torpedoes were fired at a vertical cliff until they got a dud, and then an extremely brave diver from Honolulu swam down to the torpedo and put a line on it so it could be pulled up.

This revealed the problem: the physical mechanism that set off the torpedo was too fragile, and was being bent off its guides in hard impacts. This meant any torpedo that hit at a solid 90 degree angle was likely to be a dud, but torpedoes impacting at oblique angles were more likely to explode. After weeks of further testing, an improved design was finally incorporated and new Mark 14s coming into theater near the end of September, 1943 began to operate more reliably. Tonnage sunk by submarines began rising steadily, until by late 1944 and 1945 targets began to become scarce through overhunting.

This devastation of Japan’s merchant fleet is reflected in aircraft production numbers, which peak in mid-1944 and then fall drastically in autumn and essentially flatline going into 1945. Stockpiled materials were able to maintain growth to a point during the submarine campaign, but it was unsustainable growth for an island nation with its merchant marine scattered across the bottom of the Pacific.

Sources:

OKAZAKI, TETSUJI. “The Supplier Network and Aircraft Production in Wartime Japan.” The Economic History Review, vol. 64, no. 3, 2011, pp. 973–994. JSTOR, www.jstor.org/stable/41262485. Accessed 10 Mar. 2021.

Pape, Robert A. “Why Japan Surrendered.” International Security, vol. 18, no. 2, 1993, pp. 154–201. JSTOR, www.jstor.org/stable/2539100. Accessed 10 Mar. 2021.

Lockwood, Charles A. Sink ‘Em All: Submarine Warfare in the Pacific. EP Dutton, 1951.

While it is accurate to note that, while eventually, the various Allied commerce interdiction campaigns effectively swept the seas of Japanese merchant shipping, there were several mitigating factors that enabled Japanese war production to continue accelerating despite these losses. I apologise, as I'm going to have to mostly speak in generalities. I don't have the book that I'm relying on in front of me, so am going off of memory. I'd love to illustrate my point with direct reference to production numbers, but, alas, I cannot.

The first is that for the first half of this period, the Allied submarine campaign was relatively ineffective. Issues with the Mk 14 torpedo would not be resolved until the latter half of 1943, and the vast distances between the available submarine bases such as Midway and Australia and the valuable Japanese shipping lanes (especially the Singapore-Japan route) meant that for much of the first half of this period, Japanese merchant shipping losses were less than what they had estimated pre-war. At the same time, Japanese merchant shipbuilding efforts were proving more efficacious than was anticipated, with yards outperforming their pre-war projections in terms of merchant tonnage lost. While this would ultimately come back to bite the Japanese in the back, as it seemed to indicate that their limited ASW and convoy efforts were successful enough, it did mean that despite the common conception of the seas being swept clean of Japanese shipping, the actual devastation of Japanese merchant shipping did not come into full force until later in the war, as the issues in US submarine torpedoes were resolved and US submarines could begin operating from bases much closer to the dense and vital Japanese shipping lanes.

The other aspect is of course that throughout the war, the Japanese effectively shut the civilian sector of their economy out of nearly everything. While pre-1941 allocations of steel and other vital resources had hardly been enough to maintain or expand the industrial base to the extent that advocates of autarky had desired (partially due to the demands of the war in China), as the war progressed, and the needs of the military in war superseded even that limited amount. Military production was maintained and even expanded by reducing allocations for nearly everything else, even items that were theoretically of extremely high importance. Just as an example, by the latter periods of the war, the synthetic oil plants that were supposed to help bring Japan to autarky were clashing over even being allocated bricks for expansion and repair of their facilities.

I do apologise for the short response, but most of my access to sources is limited at the moment. Hopefully this has helped to answer your question, and please feel free to ask any follow ups.

Sources

• Mark Parillo, The Japanese Merchant Marine in World War II

• Michael A. Barnhart, Japan Prepares for Total War: The Search for Economic Security, 1919-1941