"The Money Wormhole: Hong Kong and the Yen Bloc During the Pacific War"

The paper employs the case of Hong Kong to illuminate how individual decisions and cross-border capital mobility eroded the financial stability, and ultimately war capacity, of a belligerent empire. As with Japan’s other wartime colonies, the occupation authorities utilised unbacked credit to extract civilian wealth and resources. In his 1981 book chapter, Shibata Yoshimasa observed that in around mid-1943 the Japanese in occupied China began transferring their hyperinflated savings back home in order to leverage their profits and subsidise their families who were struggling with soaring living costs. Shibata further elaborated in his 1996 book that when currency controls were introduced between China and Japan’s home islands in early 1944, the Japanese circumvented them by first transferring the money to Hong Kong and then back home. This eventually intensified Japan’s domestic inflation. Drawing on the unpublished financial data of the Yokohama Specie Bank (YSB) Hong Kong branch, which were opened in 2003, this chapter expands on Shibata’s observation and provides insights into how and why substantial remittances could be effectuated between occupied China, Hong Kong, and Japan. It contends that the cross-border payment infrastructure across the empire, including the branch networks of colonial banks, imperial business entities, and telegraph stations, facilitated people’s desires whilst compounding their disruptions to Japan’s meticulous wartime control economics. This illuminates the importance of a borderless empire in regulating capital mobility and its agents’ behaviour whilst pursuing economic autonomy.