Raising taxes for democracy: The Japanese policy environment of the Shoup mission

When the Shoup mission members arrived in Tokyo in May 1949, they entered a highly politicized arena where Japanese protagonists, acting under the authority of the occupation supergovernment, battled each other for control over fundamental economic decisions. This is not a story of Americans unilaterally imposing their views on Japanese. The American fiscal experts not only entered a complicated field of Japanese economic and political opinions, but they disagreed among themselves. Their recommendations and the effects of their reforms on the tax structure were understood through the ideas and institutions already in place. Nor did the Americans provide levels of fiscal expertise that Japan lacked. As Finance Minister Ikeda Hayato stated shortly after the end of the occupation – proudly and accurately – “as for our country’s tax system as a system, we had deeply researched the examples of various continental European countries and had advanced the tax system’s theoretical grounding to a relatively high level, so in that domain we did not particularly need to ask for foreign guidance”. Rather, he said, the reason for welcoming the foreign experts’ mission was political. Taking a cue from Ikeda, this chapter addresses the Japanese policy environment encountered by the Shoup mission and discusses some basic questions concerning money and taxation in modern times. We focus on three points.