Dodge Line

In the initial phases, the Occupation focused on liberalizing and democratizing Japanese society to ensure that Japan would never again be a threat to world peace.

[2] Within this permissive atmosphere, the Occupation allowed the Japanese to pursue an expansionary economic policy, but the economy quickly overheated, leading to hyperinflation.

[3] From September 1945 to August 1948, prices in Japan increased more than 700%, which precipitated major unrest across broad sectors of Japanese society.

Meanwhile on the Japanese domestic front, rampant inflation, food insecurity, and widespread poverty in the wake of Japan's defeat fostered the rapid expansion of militant leftist political parties and labor unions, leading Occupation authorities to fear that Japan was ripe for communist exploitation or even a communist revolution.

It recommended: These policies succeeded in getting Japan's rampant inflation under control, but caused significant short-term hardship for Japanese workers, leading to mass layoffs as the economy went into contraction, a painful period of economic adjustment known as the "Dodge squeeze.