The CIA’s Post-War Vassalization of Japan
Until 1941, Japan carried out these crimes against humanity with the assistance of the United States and Britain. And the pro-Kuomintang China Lobby inside the United States and the Wisemen (John J. McCloy, Dean Acheson, Averell Harriman, etc.) prevented the Roosevelt Administration from even engaging with the Communist Party of China led by Mao Zedong. This was despite the fact that General Joseph Stilwell, Colonel David Barrett, and John S. Service described the People’s Liberation Army as the most effective fighting force against the Japanese Imperial Army, as opposed to Chiang Kai Shek who was more concerned with repressing internal opponents and had zero interest in uniting with the Communist Party to fight against the Japanese occupation, despite the support for a united front from Mao and Stilwell.
That year though, the US, Britain and the Netherlands finally decided to take action against Japan for its imperial aggression in China and the Asian continent, imposing crushing oil embargo. It was on that basis that Japan attacked Pearl Harbor, bringing the United States into World War II.
However, after World War II, John J. McCloy became the President of the World Bank and decided that the new strategy was to once again build up Japan as an opponent to China and the Soviet Union. According to Washington and the US Treasury, the policy was supposed to be that all Asian countries are subservient to a new Japanese empire that was really just a colony of the US.
And the role of this new US-led Asian order is that all countries on the continent were to export raw materials to Japan so that they can be turned into manufactured goods. This strongly differed from the approach of US President Ulysses S. Grant who toured Asia after leaving office and advocated for China to lead the way on the continent’s industrial and commercial development. He further emphasized a US-China relationship that is based on mutual respect and explicitly denounced European colonialism.
And now newly declassified JFK Files released by the Trump Administration reveal how Japan, through the ruling Liberal Democratic Party, became a permanent US vassal during the Cold War with CIA funding. One document in particular from March 1996 reveals that Washington and Tokyo were still working overtime to hide the existence of the CIA’s Tokyo Station. And their reasoning was the protect this notion that Washington created that Japan was a sovereign state.
The US State Department memo was titled “Official Acknowledgement of Tokyo Station” and it shows former US Vice President turned Ambassador to Japan Walter Mondale, along with Japanese officials in Tokyo, in full damage-control mode. Two years before, the New York Times wrote a report exposing secret CIA funding for Japan’s ruling right-wing Liberal Democratic Party during the 1950s and 1960s. Their fear was that if they confirmed the CIA’s presence in Tokyo, it would re-ignite the scandal by confirming the allegations in the NYT’s report.
Then-Japanese Foreign Affairs Minister Yohei Kono warned Mondale to keep it secret because the official confirmation would hurt the LDP far more than the NYT’s allegations and threaten the entire post-war security framework between the Washington and Tokyo because it would expose Japan as nothing more than an imperial colony dependent on the United States. Kono had previously claimed, in response to NYT’s allegations, that Japan had “no knowledge” of any organized CIA presence inside the country.
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🇺🇸🇯🇵🇰🇷⚔️🇨🇳🇰🇵🧵 HOW THE UNITED STATES TURNED JAPAN AND SOUTH KOREA INTO IMPERIAL COLONIES AS PART OF ITS COLD WAR AGAINST CHINA AND THE DPRK
American policy in the Asia-Pacific has always been centered in building up Japan’s industry and leveraging Tokyo’s power at the expense of the economic independence of other country’s in the region. This doctrine goes all the way back to the early 20th century as Theodore Roosevelt committed the United States to the establishment of a global empire and JP Morgan created a monopoly over large sectors of the American economy in the aftermath of the Panic of 1907.
The Meiji Restoration, which established the Empire of Japan, brought industrialization and modernization to the Japanese economy. However, this was mostly done on the backs of foreign loans and had been a continuation of work already theorized in China under Sun Yat Sen, whose Three Principles (Nationalism, Democracy, People’s Livelihood) inspire Chinese socialism today and were based on the state-led economic frameworks of Alexander Hamilton and Abraham Lincoln. Sun himself was educated in Hawaii by protégés of Lincoln.
And it ultimately led to this notion among leaders in Tokyo that Japan is now becoming a partner of the Anglo-American Empire. A major reason why this was is because Theodore Roosevelt agreed in the Taft-Katsura Agreement that the United States would give Japan control over the Korean Peninsula if they did not interfere with Washington’s violent seizure of the Philippines. However, what Tokyo didn’t notice at first is that they were not becoming a regional empire but a proxy of American imperialism.
From there, the groundwork was set for Japan’s wars of mass genocide against the people of China, Korea, Russia and across the Asian continent. After its war with Russia in 1905, Tokyo fully annexed Korea in 1910, which would then be used as a launching pad for their wars against China. The Japanese previously launched a failed war against China in 1894, after which European colonial empires set up spheres of influence as part of the Century of Humiliation.
And then in 1931 and 1937, as a result of false flag incidents staged by the Japanese Kwantung Army along the South Manchuria Railway in Mukden and the Marco Polo Bridge near Beijing, Japan launched the Asia-Pacific Theatre of World War II waging mass genocide and engaging in sexual exploitation against the people of China, Korea and across Asia. Unit 731 was established in Manchuria under the command of Dr. Shiro Ishii and with the approval of the puppet dictatorship in Japanese-occupied Manchuria led by former Emperor of the Qing Dynasty Puyi.
731 carried out some of the most cruel and tortuous human experimentations against civilian victims, including infecting prisoners with deadly diseases and amputating their limbs, conducting vivisection and organ harvesting, suffocating victims and hypobaric chambers and exposing prisoners to chemical, explosive and biological weapons. Even more outrageous is the fact that Ishii escaped prosecution after the US granted him immunity in exchange for research from Unit 731. And some of that research was used by the CIA for Project MKUltra.
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BRUTAL BLOODBATH IN ASIAN MARKETS 🩸
Nearly $500 BILLION has been wiped out from Japan, South Korea, and Taiwan markets today alone as markets price in the war escalating.
🇰🇷 South Korea: ₩245 TRILLION wiped out
🇯🇵 Japan: ¥17.38 TRILLION wiped out
🇹🇼 Taiwan: NT$6.48 TRILLION wiped out
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Protests have erupted across Asia over the rising cost of fuel. Negotiations to end the war are ongoing but if the Strait of Hormuz doesn't open soon, Asian governments could be in trouble. Learn how some countries are diversifying their energy sources:
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“Asian games” usually mean East Asian games. My Indonesian-inspired game is going to change that since my country has the most underrated art in the world 🇮🇩
Rupee slips with Asian peers as hopes of imminent U.S.-Iran peace deal falter
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I explained the Chinese real estate & debt crisis in much detail in 2024 on my Substack. Nothing has changed since. China is in what we call "the largest balance-sheet recession the world has ever seen". And it will take years to get out of it and assuming the CCP's investment-led growth model does not dig the next hole in the meantime - a likely.
The FT published added some colour to it two days ago:
"Housing is important to every economy. But to China, it’s extra important. According to the PBoC, 96% of urban households own a home, and 41% own at least two. The average household owns 1.5 properties. And as such, property constitutes around 70% of China’s private wealth. The comparable figure for the US is around 30%. So when Chinese property prices fall, the authors make a pretty compelling case that this has all sorts of particularly bad economic spillovers. And fall they have.
The negative wealth effect is substantial, and “effects are amplified by elevated household debt, much of which consists of mortgage obligations”. This — and the weaker income expectations that the falls generate — goes some way to suppressing consumption.
Moreover, declining land-sale revenues constrain local government budgets, “limiting their capacity to finance developmental projects and maintain existing public infrastructure”. And this is even before any credit impacts from rising non-performing loans and mortgages on bank balance sheets are considered. Tl;dr: bad bad bad.
Of course, China isn’t the first soon-to-be-global-economic-hegemon-East-Asian-power staring down demographic oblivion to have piled its savings into a property boom. Back in 1991, the world was fretting over the rise and rise of Japan. And the Japanese were buying Japanese residential real estate at outlandish prices. Japan’s house prices peaked back in 1991 and spent the next 30 years on a downward trajectory.
We’re only a few years into the Chinese property bust, and its ultimate trajectory is both unknown and unknowable. But Rogoff and Yang have pulled together some cool data they kindly shared with Alphaville, allowing us to make this chart below.
So far, it looks like prices in Chinese cities are falling at around the same pace as they did over the first five-to-10 years of Japan’s bust. Japan’s property crash is associated with a lost decade (or two) of economic growth. In the 10 years leading up to 1991, Japanese real annual GDP growth averaged 4.4%. In the subsequent 10 years it averaged only 0.9% per annum.
The same numbers for China, with 2021 marking its property zenith, are 7.0% per year and 4.6% per year (so far). If the IMF’s forecasts turn out right, this latter number will fall to around 4.0% per annum. While the levels are different, the before-and-after drop looks comparable.
Was it housing wot dun it? Rogoff and Yang reckon that a 40% decline in house prices translates into a total consumption loss of 2-4% of GDP. Not nothing, but not a single answer explaining life, the universe and wiggles in the decadal pace of real economic growth.
To get here, they construct a historical dataset comprising subnational data across 47 prefectures, and input and output data at granular industry levels. They then use this to examine the macroeconomic implications of Japan’s real estate bust. And the authors argue that: a housing bust can generate substantial adverse effects on the economy via real channels. . . . overbuilding during the boom can trigger a demand-driven recession with limited reallocation and low output.
Unlike financial channels, which amplify shocks through leverage, bank balance sheets, credit constraints, or fire sales, real channels operate directly through investment, consumption, labour markets, or productivity. In Japan’s case, the housing market collapse depressed activity through three key real channels: investment, consumption, and sentiment. This is all pretty intuitive.
But using city-level and household-level Chinese data plus some whizzy maths, they put meat on the bone for these three channels. They find that Chinese cities that overbuilt housing the most are less keen on new building, suppressing investment. Sounds legit.
Chinese household consumption is estimated to be more responsive to house price changes than it was in either Japan or the US given its outsized role in private wealth. And it looks to the authors like people have scrambled to rebuild precautionary savings they thought they had amassed in property. Understandable.
Then, on the sentiment side, Rogoff and Yang use an LLM to gauge market perceptions of the housing market. And by incorporating city-specific perceptions, they double the estimated effect of house price changes on consumption. Huh.
While China is not Japan, 1991 was not 2021, and a *lot* of other things are/were going on, it’s interesting to see that the overall magnitude and pace of property price falls — as well as the aggregate drop in the pace of headline GDP growth — has (so far) been spookily similar. And as for the big question — are we there yet?
"If China’s adjustment unfolds in a similar way as Japan’s, it would mean China has not gone half way through the transition. By contrast, if China’s path is eventually comparable to the United States, it appears to have already covered roughly two-thirds of the adjustment before reaching the bottom."
So more to come.
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