Oct. 9 will mark 50 years since the residents of Okinawa were subjected to the “dollar confirmation” procedure to compensate for the losses caused by the ‘Nixon Shock’ that marked the end of the U.S. gold standard.
The United States turned away from the Bretton Woods system, a postwar international monetary system it had helped to create for its own benefit. While Japan shifted to the new floating exchange rate system, it took no action with regard to Okinawa, which at the time had a dollar-based economy. As prices soared, Okinawa was thrown into chaos.
The political leader Yara Choubyou described the process leading up to the dollar confirmation procedure as “a treacherous path.” It was a path of survival, of being at the whim of a superpower, of watching one’s assets lose value. This period of history is worth reflecting on, as so many who live here today want to see Okinawa fully exercise its right of self-determination.
After World War II, the United States agreed to converting the dollar to gold and maintaining fixed exchange rates. However, as the trade surplus gradually decreased and the cost of the Vietnam War grew, it became impossible to bring order to the disequilibrium in the international balance of payments system. These circumstances led the U.S. to end the gold standard and introduce an import surcharge to limit imports and reduce the foreign outflow of dollars. This is what became known as the Nixon Shock.
This in effect brought an end to the era of the fixed exchange rate system, leading to an increase in the value of the yen against the dollar with repeated fluctuations. In Okinawa, which still used the dollar and imported most of its daily commodities from Japan, prices rose dramatically due to the devalued dollar and the strengthened yen.
Okinawa had no economic or diplomatic means of its own to overcome this crisis. The government of the Ryukyu Islands made a series of emergency requests to both the U.S. and Japanese governments, including a request to set a currency exchange rate of $1-to-360 yen before Okinawa was returned to Japan and the cessation of surcharges on exports to the U.S. from Okinawa.
The United States, which governed Okinawa at the time, put no economic measures in place despite the requests. The Japanese government similarly took no action on currency exchange before Okinawa was returned to Japan, fearing that a large volume of U.S. dollars would be brought to Okinawa for speculative purposes while the prefecture remained outside the control of the Japanese currency authorities.
Yara instructed Lt. Chief Miyazato Matsushou to devise a secret operation alongside Director General of the Prime Minister’s Office Yamanaka Sadonori. They agreed on a backup plan to count the currency held by all residents in Okinawa on a certain date before control over the prefecture passed back to Japan. They would then pay the difference between the conversion rate of 360 yen-to-$1, and the actual exchange rate at the time the U.S. relinquished control of Okinawa on all dollars that had been checked. The dollar confirmation procedure was executed on Oct. 9, despite opposition from the Ministry of Finance right up until the operation took place.
Despite the plan’s success, the eventual losses in cash and savings of citizens in the prefecture due to the introduction of the floating exchange rate system amounted to $784 million, or 43.1 billion yen.
At the time, Okinawa was at the mercy of the political convenience exercised by both the American and Japanese governments. This dynamic still persists today in the form of issues surrounding U.S. military bases in Okinawa.
At the reversion ceremony, Yara pledged that “Okinawa will no longer be used as a means to an end as it has been throughout history.” The weight of his words can still be felt looking back over the dollar confirmation procedure. It is a chapter of history we must not forget.