This book is likely to have lasting influence, both as a reference and for the appeal of its carefully argued thesis. Although most historians have viewed the July 1941 oil embargo as key to the American attempt to stop the Japanese military advance, Miller sees the “most devastating” (p. 1) action as the financial freeze that preceded it. By “bankrupt,” Miller does not mean that Japanese financial resources were depleted, but that the freeze made them unusable, leaving Japan with the choice of abandoning its conquests, war with the United States, or miring in poverty. U.S. policy had been “designed to bring Japan to its senses, not its knees,” as Miller repeatedly echoes Jonathan Utley (pp. 2, 181, 203, 242). But mid-level officials led by Dean Acheson used the freeze effectively to make that policy bellicose.
American strategists had long seen Japan as deeply susceptible to economic isolation. The ability to exploit this vulnerability grew with the 1937 rediscovery of Section 5(b) of the 1917 Trading with the Enemy Act, which empowered the United States to “paralyze dollars owned by foreign countries,” even as Japan became devastatingly reliant on U.S. trade and dollars (p. 3). In 1928, Japan's oil production matched its needs, but by 1938, its consumption had increased about 2,200 percent, of which the United States supplied almost 73 percent. By 1940, the United States had 63 percent of global oil output, with another 14 percent from other dollar countries (p. 157). Japan's 1938 five-year plan called for massive expansion of steel production, but domestic scrap metal provided only 40 percent of requirements. Again, the United States “was the only substantial source” available (pp. 90–91). From 1935 to 1940, scrap metal made up 9.4 percent of U.S. exports to Japan, while 80 percent of Japanese copper imports came from the United States. Japan was similarly reliant on U.S. cotton, machine tools, and ferroalloys.
As demand for American commodities increased, so did the difficulty of getting dollars to buy them. The 1939 war in Europe brought currency controls to Europe's Asian colonies, so Japanese exporters were paid in currencies now inconvertible into dollars. One option was sales of gold held by the Bank of Japan, but the United States “controlled the world gold market,” further increasing Japanese financial vulnerability (p. 55). The other option was exports to the United States and the dollar area.
A strength of this book is its thorough discussion of prewar U.S.–Japan trade. Silk was especially valuable because it was a native product that did not rely on imported raw materials. Japan produced up to two-thirds of the world market's silk, but it again was dependent on the United States, which by the late 1920s took 95 percent of Japanese production (pp. 20–21). American silk imports continued during the Depression because technological innovations in stocking production sustained demand. From the 1937 invasion of China until the 1941 financial freeze, silk was Japan's second-largest source of dollars ($394 million) after gold sales ($711 million). Therefore, American officials were confident that Japan soon would exhaust its gold and dollar reserves, which, combined with export controls, would force Japan to abandon its China war. They were wrong, as the Japanese government had hidden dollar reserves inside the United States. The 1940 discovery of this hoard strengthened administration interest in financial controls.
Miller sees early 1941, and Franklin D. Roosevelt's appointment of Acheson as assistant secretary of state, as “a turning point” in American will to rework “a patchwork of import restrictions into full-blooded financial warfare” (p. 108). Officials prepared the administrative structure to freeze Japanese assets, and conducted extensive vulnerability studies on the effects of curtailing about fifty commodities. When, on July 24, Japanese troops landed in southern Indochina, FDR quickly issued an order that “subjected to license all movements of Japanese assets” in the United States (p. 191). The order preserved flexibility to approve or reject individual transactions, but Acheson and the other members of the committee that regulated the freeze simply refused to release Japanese funds to pay for already licensed purchases, making it “airtight and permanent” (p. 199). Japanese attempts to mitigate the freeze were ineffective—in part, because of such inept actions as hiring a cofounder of the anti-Roosevelt American Liberty League to negotiate. Miller suggests that Secretary of State Cordell Hull and FDR at first “were apparently unaware” that the freeze had become “ironclad,” but once they understood, allowed it to continue. He also guardedly considers the possibility that Roosevelt appointed Acheson to carry out his “unwritten and possibly unspoken wishes” to push Japan harder (p. 203). The freeze cut Japan off from all American imports, and even from Indonesian oil, which also required dollars. According to Miller, three choices remained—war against the United States, economic ruin without a U.S. war, or “renouncing imperial aggression in return for thawing of the freeze,” which he suggests might have allowed Japan to join the Allies, as it had in 1914, and prosper (pp. 242–43).
Does Miller make the case that the financial freeze, not the earlier embargo regime, was a devastating policy of “financial strangulation” unintended by FDR or the cabinet, but used by mid-level officials to push “toward a warlike confrontation,” or even, as some have read him, that it goaded Japan into war? (p. 2). His portrayal of a change from piecemeal, limited sanctions to a ruthless, efficient freeze that shut down exports is thorough and convincing. He also shows that in late 1941, Japan maintained reserves of $200 million, enough for four years of American oil, so that without the freeze, Japan should have been able to buy U.S. oil to sustain its China war.
Nevertheless, the line between the pre-July 1941 sanctions regime and the freeze seems less distinct than he argues. Embargoes forced Japan into inefficient and expensive workarounds, such as importing fuel in drums, or mixing lower grades into aviation gasoline. By early 1941, months before the freeze, U.S. officials prevented export of large quantities of fuel by sitting on licenses, an action Miller calls “draconian,” but also how Acheson enforced the freeze. (pp. 159–60, 171). Meanwhile, the 1939 introduction of nylon caused a “catastrophic” shock to silk exports, which may have “contributed to a sense of isolation” in the Japanese leadership (pp. 149, 152). Other problems came with the loss of German imports shipped by rail through Russia after the German invasion of the Soviet Union, the continuing China war, and Japanese economic contraction from 1939. Furthermore, the freeze was a response to, not the cause of, Japan's move into southern Indochina, and Japan already was demanding more Indonesian oil. The freeze may have been the straw that broke the camel's back, but the camel was staggering mightily.
In short, Miller rightly points to the freeze as the essential element completing the sanctions regime. We will no longer be able to refer merely to an oil embargo. The freeze and embargoes, combined with Japan's comprehensive dependence on the American market (which Miller does much to elucidate) and its narrowing strategic options, left the Japanese leadership with what Tojo Hideki saw as a choice between war and becoming a third-rate power. Miller's book enhances our view of how the freeze seemed to present unacceptable choices even as the United States remained confident in a mistaken ability to return Japan to its senses.
