Japanese Occupation of Hong Kong - Economy

Economy

Economically, all trading activities were sternly guarded, and the majority of the factories were taken over by the Japanese. Having deprived the vendors and banks of their possessions, the Hong Kong Dollar was outlawed and replaced by the Japanese Military Yen. The exchange rate was fixed at 2 Hong Kong dollars to one military yen in January 1942. Later, the yen was re-valued at 4 Hong Kong dollars to a yen in July 1942, which meant local people could exchange fewer military notes than before. While the citizens of Hong Kong became poor in forced exchanges, the Japanese government sold the Hong Kong Dollar to help finance their war-time economy. Later, the yen was made the sole legal tender for official purposes in June 1943. Prices of commodities for sale had to be marked in yen. Hyper-inflation then disrupted the economy, directly affecting Hong Kong citizens. Enormous devaluation of the Japanese Military Yen after the war made it almost worthless.

Public transportation and utilities unavoidably failed, owing to the shortage of fuel and through the augmentation of American air raids on Hong Kong. Tens of thousands of people became homeless and helpless, and many of them were employed in shipbuilding and construction. In the agricultural field, the Japanese took over the race track at Fanling and the air strip at Kam Tin for their rice-growing experiments.

With the intention of boosting the Japanese influence on Hong Kong, two Japanese banks, the Yokohama Specie Bank and the Bank of Taiwan, were re-opened. These two banks replaced the HongKong and Shanghai Bank and two other British banks responsible for issuing the banknotes. They then liquidated various Allied banks. British, American and Dutch bankers were forced to live in a small hotel, while some bankers who were viewed as the enemy of the Japanese were executed. In May 1942, Japanese companies were encouraged to be set up. A Hong Kong trade syndicate consisting of Japanese firms was set up in October 1942 to manipulate overseas trade.