Staple food control and industrial development in postwar Japan, 1950–1957: The role of the black market

Japanese rice policy in the early postwar period consisted of a compulsory delivery and rationing system designed to transfer economic surplus from farmers to urban workers to relieve upward pressure on industrial wage rates. The system was not consistent with private incentives so a black market in rice about half the size of the official market existed. This paper uses simple welfare analysis to estimate the magnitudes of the transfers and social costs involved for 1950–1957. The analysis suggests that the black market played an important role in the success of the rice policy during this period and provides a rationale for the apparent willingness of Japanese authorities to allow the black market to function alongside the official market.