Freezing of Japanese assets
The freezing of Japanese assets refers to a significant economic measure taken by the United States and its allies in July 1941, aimed at impeding Japan's military actions during the Second Sino-Japanese War and its expansion in Southeast Asia. This decision came in response to Japan's aggressive military operations, which included the occupation of French Indochina and the signing of a military alliance with Germany and Italy. The freezing of assets effectively restricted Japan's economic activities within the United States and hindered its trade relations globally, as many international transactions were settled through U.S. banks. In conjunction with an oil embargo announced shortly thereafter, Japan faced severe resource shortages, particularly in oil, which was vital for its military operations. This economic pressure left Japan with limited options: either to negotiate the lifting of sanctions by withdrawing its forces or to engage in direct military conflict. Ultimately, Japan chose the latter path, leading to the attack on Pearl Harbor on December 7, 1941, which marked a pivotal moment in the escalation of World War II. The freezing of Japanese assets remains a critical example of how economic sanctions can influence military strategies and international relations.
Freezing of Japanese assets
The Event President Franklin D. Roosevelt’s issuance of an executive order to freeze Japanese assets in the United States
Date July 26, 1941
The United States issued a series of economic sanctions against Japan between 1938 and 1941, as a reaction to Japan’s expansion into East and Southeast Asia. A freeze of all Japanese assets in the United States was one of these sanctions. Although the intent was to gain a form of control over Japan without military conflict, this economic act was unsuccessful in preventing the outbreak of war in the Pacific.
Japan’s invasion of China began with an incident near Beijing in July, 1937. This was the beginning of a long-lasting conflict between Japan and China, the second Sino-Japanese War, although both counties did not declare the war until December, 1941. Japan soon occupied Shanghai, and this expansion became a great concern for countries of the West, particularly the United States, the United Kingdom, and France.
In July, 1938, the U.S. government issued an oral embargo on the export of airplanes and aircraft parts against countries that were using these materials to attack civilian populations. Japan was among those countries. This moral embargo was extended to materials for building airplanes, such as molybdenum, aluminum, and nickel, in December, 1939. President Franklin D. Roosevelt restricted export licenses for selling iron, heavy scrap steel, lubricating oil, and aviation gasoline to Japan on July 26, 1940. Because Japan had relied on imports from the United States, this restriction made it difficult to continue the war against China.
In September, 1940, Japan occupied the northern part of French Indochina to hinder China from the import of arms and fuels by the United States and Britain. Japan also signed a military alliance with Germany and Italy on September 27, 1940. Although Japan demanded from the Dutch East Indies an increase of oil export to Japan, the negotiations ended unsuccessfully.
In July, 1941, the Japanese military began invading the southern part of French Indochina to build air and naval bases under an agreement with the French Vichy government. As retaliation for the Japanese occupation, President Roosevelt issued an executive order to freeze Japanese assets in the United States on July 26, 1941. Britain and the Dutch East Indies followed. This was a serious blow to Japan because the order not only restricted Japanese economic activity in the United States but also affected Japanese trade with Latin America and Europe, because those transactions were settled in the United States. On August 1, the United States announced an embargo on exports of oil to Japan. As a result, Japan lost access to nearly 90 percent of imported oil. Japan’s oil supply would last three years, and only one and half years if it went to war.
Impact
The last and most harsh economic sanctions against Japan, the freezing of Japanese assets and the oil embargo, left Japan with two options: either withdraw its occupation troops from Southeast Asia and negotiate the release of the sanctions, or initiate war against the United States. On December 7, 1941, the Japanese navy conducted a strike against the United States naval base at Pearl Harbor, prompting U.S. entrance into World War II.
Bibliography
Cashman, Greg, and Leonard C. Robinson. An Introduction to the Causes of War: Patterns of Interstate Conflict from World War I to Iraq. Lanham, Md.: Rowman & Littlefield, 2007.
Thompson, Robert S. D. Empires on the Pacific: World War II and the Struggle for the Mastery of Asia. New York: Basic Books, 2001.
Utley, Jonathan G. Going to War with Japan, 1937-1941. Knoxville: University of Tennessee Press, 1985.