Greetings! I'll be weighing in on the effects of the Great Depression on Japanese society and politics (spoiler alert: it's quite the rollercoaster). Unfortunately my knowledge on the impact of the Great Depression on China is rather lacking so hopefully another AH traveler with access to great sources or pre-existing knowledge on that will chime in with their tuppence on the matter. For now however, let's get started on the impacts of the Great Depression upon the Empire of the Rising Sun.
Note: As a shameless plug, parts of this response have been sourced and adapted from an earlier three-part response I made on the interwar politics of Japan. Give it a read if you'd like to understand the long-term developments and context of the Great Depression in 1930s Japan.
The Countryside and the Cities
When the New York Stock market crashed in October 1929, the Japanese economy was, like much of Europe and America, hit hard by the global impact of the resulting economic depression. Perhaps one of the most drastic consequences of the depression was the impact it had on one of Japan's key exports to the west at the time: silk. Between the end of 1929 and June of 1931, the price of silk fell by 60%, and by 1936 its price had dropped more than any other commodity on the international market, a major concern for Japan's industry. What was particularly damaging to the silk market (and by extension, the rise of nationalistic, anti-western sentiments) was the fact that America was the main buyer of Japanese silk. In the latter half of the 1920s for example, 60% of Japanese silk produced was often exported to the US, with just 10% being sold to other countries.
The impact this had, alongside the decrease in prices of other agricultural commodities such as rice and barley (which fell an average of 43% between 1929 and 1931), was disastrous for the common farmers. Due to the tenant-system of land ownership in Japan (in which farmers paid landlords a certain percentage of their crops' profit for continued use of plots), many small-scale landowners quickly found themselves accumulating alarmingly high level of debt. In line with this phenomenon, land disputes quickly rose in number as well, as tenant farmers refused to be evicted by financially-pressed landlords.
In the cities, the situation was equally (if not slightly less) dire, Andrew Gordon does a good job summarising the chaos that the Depression caused in urban Japan:
"In the cities, the depression threatened shopkeepers and factory owners as well as their employees. Retail traders faced bankruptcy when wage cuts and job losses cut the buying power of their customers. Annual rates of failure among Tokyo retail stores nearly doubled from 1926 to 1930. The newspapers were filled with tales of small storeowners fleeing their creditors in the dead of night. Small-scale manufacturing businesses also failed by the thousands."
Unemployment soared considerably, with some historians estimating nationwide figures between 1930-1932 at about 15% of the industrial workforce, with citywide figures often exceeding 20%. Such despair from the economic consequences inevitably caused social unrest amongst the Japanese workers and farmers, who believed that the government was doing a poor job of handling the crisis, and their complaints often targeted one group of businesses in particular: the Zaibatsu.
The "Capitalist Cliques"
The Zaibatsu refers to a group of large business conglomerates within 20th century Japan, who by the 1920s had risen considerably in power and influence over the economy and the government. Otherwise known as the "Big Four", these Zaibatsu were: Mitsubishi, Mitsui Sumitomo, and Yasuda. They had already progressed their power signifcantly in the banking sector during the 1927 financial crisis in Japan, which saw over three-quarters of the nations banks fail. The Zaibatsu during the Great Depression were economically shrewd, but their face-saving methods came at the cost of public (and to an extent, political) prestige. When the Japanese government under Prime Minister Osachi Hamaguchi (a politician from the Minseito party) put Japan back on the gold standard at the onset of the depression, the timing could not have been worse. In January 1930, Japan's move back onto the gold standard and the subsequent fixed exchange rate came exactly when there was a global deflation and plunging prices worldwide.
The Zaibatsu realised that before long, the gold standard would have to be abandoned, and the yen would need to be devalued. Due to this insight, they began selling massive amounts of yen for dollars. The result was that when the Japanese economy did go off the gold standard in 1931, the value of the yen fell by half against the dollar. The Zaibatsu then happily doubled their profits by buying back the now-cheaper yen with the dollars they had initially exchanged them for. This prompted widespread social outrage at the Japanese economic and political system. The Zaibatsu were likened to corrupt, monopolistic, and profit-seeking elements of Japan's system, which many believed was now at a systemic "dead end."
Neither the Minseito government (which fell shortly after the attempted assassination of Hamaguchi in November 1930), nor their rivals in the Seiyukai party, seemed capable of halting the Zaibatsu's rise. As a result, they were often seen as supporters of the Zaibatsu, and lambasted for their complicity in depriving the common Japanese worker of economic security during the crisis years of the Depression. One conglomeration of businesses formed in the wake of the Depression, the Imperial Middle Class Federated Alliance, issued the statement below summing up this belief:
“the established [political] parties have betrayed us, becoming the political lackeys of the capitalist cliques and trampling the middle class of commercial, industrial, and agricultural producers.”
Developments Abroad
Amidst the backdrop of Japan's economic depression, there were a series of other political developments abroad which further shifted the country onto a militaristic and nationalistic path. In 1930, Hamaguchi’s cabinet sent Wakatsuki Reijiro as head of the Japanese delegation to the London Naval Conference. Militant elements in the navy and in the populace had been calling for a revision to the Washington Naval Treaty of 1922, which had set a shipbuilding quota on the United States, Great Britain, Japan, France and Italy based on tonnage. The Article of the Treaty dealing with this “tonnage ratio” is below:
“The total capital ship replacement tonnage of each of the Contracting Powers shall not exceed in terms of standard displacement, for the United States 525,000 tons; for the British Empire 525,000 tons; for France 175,000 tons; for Italy 175,000 tons; for Japan 315,000 tons.”
In the eyes of expansionist elements within Japan’s government, that ratio was far too low to enable the Navy to effectively challenge either the United States or Britain in a future war, and they called for a revision during the London Naval Conference. Unfortunately, the Western negotiators were unwilling to entertain Japan’s request for a 10:10:7 ratio, and Japan left the conference will little more rights than it entered it with. Keichi Yamasaki, a Japanese translator for the Pacific Affairs journal, published an article immediately after the signing of the London Naval Treaty regarding the opinions of the Japanese press, writing:
“The Japanese press is unanimous in rejoicing at the conclusion of the London Naval Treaty, considering it as a step forward in the direction of a further limitation of armaments, while it expresses its dissatisfaction over the inability to still go further toward the curtailment of naval expenditure.”
Part 1 of 2
Hello! sorry for the late response, and I see Japan has been covered already, so lets get into what was going on in Republican China during the Great Depression. No nation could escape a depression that was so.. great. And fortunately for us, there has been quite a revival in the interest of Republican China's economics in recent years. Perhaps unfortunately, scholars have yet to really reach a universally accepted decision whether the Great Depression specifically effected China as harshly as other nations or not.
The first important thing to note is that China's economy rested on the silver standard up to 1935. When the Kuomintang took control after the warlord period, Chinese currency in circulation was more or less useless (one could draw comparisons to modern Venezuela or Zimbabwe). When many think of the Republican period, one of the first things that comes to mind is certainly corruption, and while corruption was always an issue within the ranks of the KMT, China did see a period of stability and moderate economic growth beginning in early 1927 after the Northern Expedition. To be fair, it would've been hard for China to have fallen much further than where it stood during the Warlord period.
Shanghai, Urban Development and Silver
The KMT made it a point to focus a lot of modernizing efforts on the urban coast. The greatest asset to China and shining beam of hope for Chinese nationalists was Shanghai, the most powerful of China's eastern ports. So it was in Shanghai that Chiang and the gang wanted to focus on. Early after unification, the KMT decided to develop bank credits through land mortgages in Shanghai in order to help finance their flourishing cotton-textile and silk reeling industries along the Yangzi Delta. Growth for these industries went swimmingly up to about mid-1930, and then things get really bad for China. Uniquely bad from most Western nations, as China not only had to fight off an economic disaster affecting the world, but also foreign encroachment. Keep in mind that while the Great Depression was wreaking havoc on the world economy Japan invaded and conquered Manchuria in 1931. In 1932 Japanese marines and KMT troops clashed in Shanghai. Chinese nationalists called for a boycott of Japanese products. Manchuria was a great loss indeed, although I wont go into specifics lets just mention that it was one of the largest producing areas of soybeans in the world, as well as hosting economically vital railways such as the CER which had been jointly operated and owned by the USSR and China (who was forced to relinquish control over to Japan).
Across the world exports of all luxuries took a nose dive, and silk was no different. Trade between rural and urban China worsened. Over in the West, drastic actions had to be taken. The gold standard was quickly dropped by nations still using it. In 1934, China was hit with a massive crisis; America passed the Silver Purchase Act and the price of silver began to fluctuate wildly. This forced the Nationalist government into action, and several banking and currency reforms were issued in 1935. The reforms again targeted that lucrative Yangzi Delta surrounding Shanghai. The hope was that a new Chinese currency which was devalued against the dollar and sterling would stimulate exports of silk. To address rural issues, the government injected money into rural financial agencies. This effectively began a period of hyper-inflation for the Nationalist government that still carries on over to Taiwan to this day. While we can speculate that the monetary stimulus' into rural China may have been effective, any benefits were decisively dashed by Japan's invasion of China in 1937. The invasion forced the KMT to pump even greater amounts of money into its military budget, and by the 1940s China's currency was once again worthless.
Loren Brandt argues that continued growth in money supply, despite falling prices, indicates strong industrial and commercial activity within China. Indeed while Brandt's sources on China's money supply are controversial, the figures for industrial output seem to be more accepted. Regardless of what was happening with monetary policy, the Chinese economy in the early 1930s did experience strong industrial output and growth. Other historians have differing opinions. Wu Chengming wrote in the third volume of History of Chinese Capitalism that "The economic crisis of 1932-1935 was, with the exception of the wars of invasion launched by foreign countries, the single most severe blow to the Chinese economy." So its safe to say that in urban China, the results of the depression, foreign invasion aside, are mixed and still in the process of being understood. Regardless, the depression did force the KMT into financial action, so there was a strong influence on Chinese monetary policy.
Growth in Rural Southwestern China
Our sources are more limited for rural China, and the most comprehensive study focuses on southwestern China, so I will too in order to avoid further speculation. So we're talking Sichuan, Yunnan, and Guizhou areas. These areas were fairly underdeveloped prior to the arrival of the KMT government during WWII, where they set up their third and final temporary capital in Chongqing and brought much industry with them as they fled Japanese occupation. This area may also be referred to as the Upper Yangzi.
These provinces relied heavily on agriculture (65% of the local economy according to Chris Bramall's figures), especially the illicit opium production. Industry made up ~6% of output. The major exports from this area were silk, opium, and tong oil. Tobacco and sugar play a close second. So mostly luxury goods for the time period, all heavily affected by the depression. Sichuan provided ~16% of all silk exported through Shanghai. According to the Sichuan Yuebao (Sichuan Economic Monthly, a contemporary magazine) the minor silk-producing center of Qionglai held trade that benefited 100,000 households. Perhaps an overestimate, but still important enough to be worth mentioning. Sichuan's exports do fall almost exactly half from its peak in 1930 from 31-34. Imports also fell.
Many historians argue that this part of China, especially Sichuan, was at this time "isolated" from China. To argue this, they look at total % of exports and indeed we get a fairly clear picture: according to Maritime Customs documents (these goods shipped by river), 6-9% of Sichuan's total goods were exported and just over 10% for the Yun-Gui region. By contrast the national provincial average was around 15-17%. This suggests that this area was fairly self reliant and not so integrated with the national market, and even less so the international market. Even though silk was important, many silk producing regions of southern Sichuan actually traded much more closely with SE Asian states than they did internally. Still, there is some evidence that commodity prices fluctuated accordingly beginning with the silver crisis in 1934, corresponding with Shanghai and especially for the price of rice. But we still see a similar trend with China's urban centers, that is a decline in incomes but no decline in production.
There are also some external factors contributing to the local economy in southwest China during this period. The loss of Manchuria to Japan also extended into southwest China as they lots a reliable base of linen trade. Both Sichuan and Yunnan used their own currencies independent from the national government, leading to gross speculation by 1934. A local war named the Two Liu's War broke out in Sichuan in 1932-34. The CCP armies passed through Sichuan during the Long March, pillaging rice in some counties. And finally, a drought and famine began in Sichuan in 1934, and again in 1936-37, just as China as a whole began to slowly recover before the invasion.
Conclusion
So in conclusion, did the depression affect China? Well, yes, but the ways in which it did are still undetermined. Still, we have some interesting evidence and work being done in the field giving us insight into how different areas of China coped. It is important to keep in mind that unlike most nations, China in this period was suffering greatly from external pressures, the largest two being a lack of foreign investment from 1931-37 and of course Japanese imperialism. The KMT was beset on all sides with troubles it had no ability to resolve. And the Nationalist government was still in its youth, just three years established when Black Friday hit, So it gives us a very unique case compared to all other nations during this period.
Lots of info in this post, and maybe a little hard to follow, so feel free to ask questions if clarification is needed!
Sources
Distant Thunder: The Regional Economies of Southwest China and the Impact of the Great Depression, Tim Wright
China During the Great Depression, Tomoko Shiroyama
In Japan, it had a huge impact.
One of the political driving forces in this period was a group of military officers (specifically the army) known as the Kodo-ha, or "Imperial Way Faction". They were deeply militaristic and committed to an expansionist Japan supported by the spiritual force of the soldier who believed in the ideals of a pre-Westernised nation. The origins of this are connected to the "National Learning Theory" promoted by Tokugawa thinkers but start to become active during economic difficulty in the 1920s. Officers in the military start to view the westernised big business (zaibatsu) as a barrier between traditional Japanese values, most notably a wedge between the Emperor and his union with the people.
A particular gripe among the officers at the time was the conditions of rural Japan. Many of these men were originally from there and the widespread inequality angered them when compared to the profiteering of the conglomerates. They viewed this behaviour as unnecessary western greed which was opposed to their agrarian ideals. Following rice riots and famine in the 20s, the rural classes suffered further under a new type of landlord- urban businessmen buying up farms for cheap labour to fund their investments in the cities. If you want to look into this theme in particular the extremist group Gondo Seikyo is a good start.
One particular army officer convicted of attempting to assassinate the Prime Minister in 1932 sums up their motives well:
"In utter disregard of the poverty stricken farmers, the enourmously rich Zaibatsu pursue their private profit. Meanwhile the young children of the impoverished farmers....attend school without breakfast, and their families subsist on rotten potatoes"
The Depression hit Japan hard but it was an opportunity for the Kodo-ha. To them, western ways had cleared failed and their influence started to grow considering they had rattled against this economic structure for a decade. Real wages were nosediving from 1931 onwards and more ears were listening to what the militarists had to say after a decade of competing opinion and mixed messages. For them, the solution was expansion into Manchuria to grow the economy and give Japanese manufacturing demand.
On the eve of war, the militarists had struck a deal with the Zaibatsu to help them fuel the machines of war while reaping the benefits of imperialism. Defence spending greatly improved the profit margins of businesses like Mitsubishi and Mitsui who also started to expand into the new region of the empire. Over 84% of assets in Manchuria were eventually owned by the Japanese conglomerates who used cheap Chinese labour to keep the fires going (roughly paid a third of a Japanese worker).
Without this, the Depression would have severely strained the Zaibatsu's finances. In response to the Depression much of their export markets in the early 30s had raised tariffs in response to the downturn. Despite being the focal point of the Kodo-ha's anger for decades, they realised their economic survival and growth was dependent on imperialism. I wouldn't go as far as to say that the Depression directly resulted in Japan's expansionism and brutal takeover of Chinese land, but it certainly sped up the ascension of the militarists and gave huge economic incentive to empire building.
Hope this helps, particularly in regards to changes in the political direction of Japan but also their Chinese province. I will leave it to someone more learned than I to comment on the impact for China proper!
Sources:
Hane M, Japan A Short History (London 2013)
Overy R, The Road to War (London 2009)