The Money Trail: Burmese Currencies in Crisis, 1937-1947 9781891134050, 1891134051

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H6 , 1220.7 L664 2002

The Money Trail: Burmese Currencies in Crisis. 19371947

Marilyn Longmuir

The Money Trail: Burmese Currencies in Crisis, 1937-1947

Photograph (Cover): Marilyn Longmuir Cover Design: NIU Publications Copy Editors: Kate Babbitt, Edwin Zehner Production Editing: Lisa Wilcox Indexer: Lesley Bryant

Southeast Asia Publications Center for Southeast Asian Studies Northern Illinois University DeKalb, IL 60115 ©2002 by Southeast Asia Publications All rights reserved. Published 2002. Printed in Canada. ISBN 1-891134-05-1

ACKNOWLEDGMENTS This monograph began life as a University of Queensland Honors thesis, and I am very appreciative of the encouragement and guidance of my two supervisors, Professor Martin StuartFox and Dr Robert Cribb of the History Department. I would also like to thank the unknown referees, who, on reading my first submission, made valuable suggestions and encouraged me to expand this work. Since then it has experienced a metamorphosis and I am greatly indebted to Edwin Zehner who personally edited the expanded manuscript. I have appreciated his thoughtful suggestions, which I found beneficial to my work. My special thanks also go to Dr Cribb, who obtained for me much of the primary source material from the India Office Records of the British Library, and to Patricia Herbert who introduced me to the Potter files, also held in the India Office Records. As well I am most grateful to Kate Babbitt who undertook the final editing, to Lisa Wilcox, the Production Editor, who has been most patient and caring over the past few months, and to Lesley Bryant, who has generously produced the index, with a minimum of fuss.

TABLE OF CONTENTS

Acknowledgments Abbreviations

INTRODUCTION

1-2

CHAPTER 1 FROM TICAL TO BRITISH BURMA RUPEE 3-29

CHAPTER 2 THE JAPANESE OCCUPATION YEARS, 1942-1945 30-68

CHAPTER 3 CURRENCY PLANNING FOR THE “RETURN,” 1942-1945

69-110

CHAPTER 4 CURRENCY SOLUTIONS, 1945-1947 111-124

CHAPTER 5 MONETARY PROBLEMS IN RETROSPECT, 1942-1947 125-130

REFERENCES

131-136

INDEX

137-149

ABBREVIATIONS ALFSEA

Allied Land Forces, South East Asia

BMA

British Military Administration

C-in-C

Commander-in-Chief

CAS(B)

Civil Affairs Service (Burma)

CCAO

Chief Civil Affairs Officer

CFA(B) (Burma)

Controller of Finance and Accounts

DCCAO

Deputy Chief Civil Affairs Officer

FE Weekly Intelligence Summary Far East Weekly Intelligence Summary GHQ

General Headquarters

GOC-in-C

General Officer Commanding-in-Chief

IGHQ

Imperial General Headquarters (Japanese)

HR

Institute of International Relations

INA

Indian National Army

IOR

India Office Records

Jap Rupee

Japanese Occupation Currency issued in Burma

PW

Political Warfare

RBI

Reserve Bank of India

SACSEA Asia

Supreme Allied Commander, South East

SCAO

Senior Civil Affairs Officer

SEAC

South East Asia Command

SOE

Special Operative Executive

WO

War Office

The Money Trail

Introduction When the Japanese attacked Burma in December 1941, the country was catapulted into a period of currency chaos. This disruption of Burma’s monetary system was not completely settled until 1947, two years after the conclusion of World War II, and the lasting effect of those years continues to resonate in modem Burma. During the war years in Burma, a monetary crisis was exacerbated by hyperinflation caused by the occupation currency issued by the government of Japan. In addition, Burma’s cities, major towns, and infrastructures suffered widespread war damage; Burma sustained the most extensive devastation of any country in Southeast Asia. Mandalay and Meiktila were almost completely destroyed. The destruction of Mandalay early in the conflict could well have served as a metaphor for the destruction of Burma; four-fifths of the town was burned to the ground by Japanese bombing. The Japanese occupation also cut off Burma’s trade. Unlike the other Southeast Asian countries, Burma conducted its export and import trade with India and points farther west. After the occupation, Burma’s gigantic export trade of rice to India collapsed overnight. Imports, which had come principally from India and Britain, dried up, and living standards fell dramatically. Except for handicrafts, few goods were manufactured locally. Some cotton was grown in Burma, but manufactured textiles had been imported from India; during the war years, the price of available clothing rose alarmingly. It is generally thought that all classes in Burma suffered, with the possible exception of some remote hill tribes who were not yet integrated into the world economy, but peasants generally suffered less than the upper classes and town-dwellers. In 1942, as the British forces were retreating to the safety of India, the currency of Burma, which was held in banks, treasuries, and sub-treasuries throughout the country, was, on the British Government of Burma’s instructions, deliberately destroyed to deny it to the Japanese. During the occupation, the Japanese introduced first military yen, then government of Japan occupation currency (notes or scrip) that the British referred to later as the “Jap rupee.” As the war progressed, the Japanese began to issue more notes to cover inflation. When the British realized that Burma would be the first of their Southeast Asian territories to be reoccupied, considerable discussion took place at British government departmental levels to decide what value, if any, to attribute to the Japanese-

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occupation rupee. Finally, the decision was taken to demonetize the occupation currency except in exceptional circumstances. Brigadier Arthur K. Potter, Controller of Finance and Accounts (Burma) (part of the Civil Affairs Service, Burma, that accompanied the British advance into Burma) was given the difficult task of carrying out these instructions. Potter and his staff virtually demonetized the Japanese occupation currency by giving the notes no value at all, except for a brief period in Arakan. When the British reached Rangoon, low-denomination Japanese rupee notes lay on the streets like confetti. After the war, the Burma High Court of Judicature pressured the government of Burma to pass the Japanese Currency (Evaluation) Act (1947). The Japanese Currency Evaluation Act set a decreasing value on the Japanese-occupation notes during the period 1942-1945. Once this scale was in place, post-war Burmese currency could be used to repay loans that had been contracted in Japanese-occupation currency, thus avoiding further litigation over the loans. This monograph examines the many issues involved in the currency transactions that occurred in Burma during the years 1937-1947 and the thinking behind the British decision to demonetize the Japanese-occupation currency in 1945. These demonetizations have left behind a regrettable legacy that has resulted in three further demonetizations of the Burmese currency in the ensuing forty-two years.

1. J. H. McEnery, Epilogue in Burma, 1945-48: The Military Dimensions o f the British Withdrawal, 2nd ed. (Bangkok: White Lotus Press, 2000), 87-88; and Louis J. Walinsky, Economic Development in Burma, 1951-60 (New York: Twentieth Century Fund, 1961), 57. 2. A. K. Potter, autobiographical memoir, 26, OIOC, Mss Eur C414/11. 3. Burma Intelligence Bureau, Burma during the Japanese Occupation, vol. 2 (Simla: Government of India Press, 1944), 174-175. 4. Ibid. 174-175, 179. 5. Ibid. 175.

CHAPTER 1 From Tical to British Burma Rupee This chapter examines Burma’s currency from pre-colonial times to the British period and the currency changes that resulted from the separation of Burma from India on April 1,1937. While these changes were taking place, the Japanese invaded Burma on December 15,1941. In an effort to deny Burma’s currency to the invaders, the British gave instructions to destroy the notes and coins held by government sources throughout the country. The difficulties associated with this hurried denial of currency will be considered, and the considerable effort to reconcile the currency accounts will be discussed.

Pre-colonial Burma In India, a sophisticated currency system was in operation by the seventeenth century, where 994 different coins were recorded as being in circulation.1 However, until the late nineteenth century, the Burmese distrusted coined silver, although they used a monetary token known as the tical or kyat (the latter is the name of Burma’s currency today), which was valued at one-hundredth part of a vis or 3.5 pounds of silver.2 J. S. Fumivall suggests that the tical was a lump “of uncoined metal containing a mixture of silver with alloy in various proportions which only an expert could assess.”3 This mixture is often referred to as “flowered silver.”4 In larger population centers, the tical were assayed by brokers (pweza)5 or by silversmith-bankers to determine purity and value.6 However, even the tical were not widely used as a medium of exchange; a barter system prevailed for normal living requirements.7 Only in Arakan and Tenasserim was there a limited use of coin;8 in Tenasserim, money coined from locally mined tin was being used in the early nineteenth century.9 The Burmese King Bodawpaya (r. 1782-1819) attempted to issue a coinage for use throughout his kingdom,10 but only under King Mindon (1853-1978) did coinage come to be used on a large scale. Using machinery imported from Birmingham in the 1860s, Mindon minted a variety of coins, particularly silver kyat in denominations of 1, one-half, and one-quarter, which were equivalent to the Indian rupee denominations. Mindon promoted the circulation of his coin by using them when making donations to monasteries in the Mandalay area and also when giving rewards to monks who passed religious examinations. Mindon

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also used the new coins to pay his administrators a cash salary, replacing the older system in which they were given part of the tax collections.11

British Burma Despite these beginnings under Bodawpaya and Mindon, it was not until the advent of British rule that currency became a truly universal means of exchange. Britain absorbed Burma in the course of three wars, and after each war they introduced coins in the territory they conquered. The British introduced coins in 1835 in Arakan and Tenasserim, in 1852 in Lower Burma, and in 1886 in Upper Burma. Burma’s monetary association with India therefore dated back to the nineteenth century. At the conclusion of the Third Anglo-Burmese War in 1886, when Thibaw, the Burmese monarch, was deposed, the British made Burma into a province of India. Over the years there were many changes in the form of government, but throughout the colonial period, India’s currency doubled as Burma’s currency. In 1926, the Indian rupee was pegged to sterling at a value of one shilling and sixpence, which gave an exchange rate of 13 1/3 rupees to the English pound. This rate remained current for the next 40 years in India. In 1946, a Burma Currency Board was formed; on April 1, 1947, it took control of the country’s currency, valuing the Burmese rupee the same as the value of the Indian rupee to the English pound.13 In 1923, although still a province of British India, parliamentary government was introduced to Burma. Under the newly granted dyarchical constitution, finance and revenue were in the hands of the British-appointed governor and the currency remained that of India. Until 1935, the Government of India continued to print the bank notes and minted the coin that circulated in both India and Burma. The Imperial Bank acted in a limited fashion as the central bank of both countries. In 1935, the Reserve Bank of India (RBI) took on the role of central bank and was given prerogative to issue banknotes for both countries, though the Government of India continued to mint the coin that the RBI issued along with the notes.14 1

Currency Changes in 1937 The Government of India Act (1935) decreed that Burma would be separated from India on April 1, 1937. Responsibility for Burma was placed directly under the British Parliament. The secretary of state for India added Burma to his title to become

From Tical to British Burma Rupee

5

secretary of state for India and Burma. A Burma Office was established in London headed by an under-secretary of state for Burma, and the Burmese legislature became bicameral with expanded powers. But the governor still retained reserved powers over the “excluded areas” of the Shan states, Karenni, and the tribal hills, as well as defense and foreign relations. The act also granted to the governor de jure authority over currency, coinage, and monetary policy, though in practice these matters remained in the hands of the RBI. 5 Until 1935, the Imperial Bank of India acted in a limited fashion as the central bank of both India and Burma, but with the establishment of the RBI, the Imperial Bank relinquished its role.16 The arrangement changed slightly in 1937, when the India and Burma (Burma Monetary Arrangements) Order (1937) made provisions for them to have a separate entity. The order stipulated that RBI was to continue managing Burma’s currency and banking and that for the time being Burma would continue using Indian coins. But separate Burma banknotes were to be issued almost immediately. Separate coins for Burma would be introduced only at a later date, until then, Indian coins were used. The governor of Burma was to obtain the profits of seigniorage on the Indian coins manufactured by the Government of India for Burmese use18 and share in the profits of the RBI, which was now acting as the central bank for Burma. The share was to be first based on “the ‘appropriate fraction’ for the transitional period,” and then on the ‘“note ratio fraction’” for the ensuing periods. U Tun Wai describes “the ‘note ratio fraction’ as being the ratio of the quantity of Burma notes (numerator) to the total quantity of Burma and India notes in circulation (denominator).”19 U Tun Wai believed that because Indian notes circulated in Burma but Burma notes did not circulate in India, this formula did not provide Burma with a fair share of the RBI’s profits.20 In time, as Burma notes replaced India notes as the currency of Burma, this anomaly may have been rectified. In 1937, the highest value coin in Burma wets the Indian silver rupee (sometimes called the British silver rupee). This coin was ll/12ths fine, until shortly after the commencement of World War II, when the silver content was reduced in 1940.21 The rupee was divided into 16 annas, with each anna divided into twelve pies. Other silver coins were an 8-anna (half-rupee) and a 4-anna coin. Coins made from nickel included a 4-anna, a 2-anna, and a 1-anna coin. The lowest value coin was a copper

6

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quaiter-anna, the equivalent of 1/64 rupee or three pies, known as a pice.22 The coins were minted in India, and although they were used interchangeably between India and Burma, they were considered “Indian” coin. Table 1.1 Simple Monetary Table for India and Burma Currency Quarter anna 1 pice 1 rupee 16 annas 1 lakh of rupees 100,000 rupees (usually expressed as 1,00,000) 1 crore of rupees 10.000.000 rupees (usually expressed as 1.00.00.000) The new Burma banknotes were to be issued in denominations of 10,000, 1,000, 100, 10, and 5 rupees.23 While the new issue was being developed, the RBI intended to overprint Government of India issued notes with the inscription “Legal Tender in Burma Only.”24 The overprinted notes continued to be issued, even as the new “Burma Banknotes” were being released. In May 1938, the RBI issued the 5-rupee denomination of the Burma notes followed by the 10-rupee note in June 1938. In May 1939, the 100-rupee and 10,000-rupee notes were issued, and in July 1939 the series was completed with the issue of the 1,000-rupee note. The RBI finally stopped issuing the overprinted Government of India notes on April 1, 1940. Because of the rapid changes from 1938 until 1942, there were four kinds of legal tender notes in Burma; all of them liabilities of the RBI: (1) the old Government of India notes issued before 1 April 1937; (2) the overprinted “Legal Tender in Burma Only” Government of India notes; (3) the newly issued Burma banknotes; and (4) the new Indian series banknotes issued by the Reserve Bank of India, after 1 April 1937. All Indian currency notes were to have ceased to be legal tender on March 31, 1942, except for the Government of India 1rupee notes that had been issued on July 24, 1941, to supplement the limited supply of silver rupee coins. However, the Japanese invaded Burma before this plan could be carried out.26 U Tun Wai comments that the Burmese preferred notes to coin.27 In fact, they were prolific users of notes, especially in the cities, because most banks were situated in these centers, principally in Rangoon. Most payments were made with cash

From Tical to British Burma Rupee

7

rather than by checks. Members of the Indian commercial community, the backbone of Burmese commercial and economic life, were especially heavy users of banknotes; it was no; unusual for their clerks to “take fortunes in paper money from place to place on the railway or Irrawaddy Flotilla lines.”28 Despite this heavy use, the British Burma currency notes were always in excellent condition, because it was the practice of the banks and the currency offices never to reissue a used note.29 By the time banknotes reached a bank or currency office, most would be well used, grubby, and possibly tom. Issuing new notes was a way of renewing the quality of the notes. In the countryside, where banks were rare and the commercial communities were less active, the government maintained currency chests in district headquarters, in subdivisional offices, and in townships. These treasury and sub­ treasury currency chests were involved in “limited financial transactions with the business community.” They were also used “in the collection of taxes and payments on behalf of the government.”30 Later, the proliferation of these currency chests throughout Burma would become a major monetary problem during the British retreat. Farmers tendered to keep their valuables, including any surplus currency, buried close to their homes in boxes or bottles. J. Russell Andrus records that these were usually buried “ten feet from the kazin (embankment) which was 100 paces due south of the village pagoda” or in some other hidden spot.31 In an early work, Andrus mentions that these boxes were also buried near the kazin “between the fourth and fifth mango trees of their farm.”32 On the other hand, merchants tended to hold their cash holdings in strongboxes 33

Japan Invades Burma A week after Singapore and Pearl Harbor were attacked, World War II came to Burma. On December IS, 1941, the Japanese attacked and captured Victoria Point, the southern tip of Burma. When their major advance into Burma commenced later in the month, the campaign was swift. Most of Burma’s monetary system was destroyed in the retreat. Just before the fall of Rangoon, the staff of the RBI there had relocated “stocks of currency notes and high-silver content coin” to Myitkyina in the far north.34 Other government documents were evacuated to Maymyo and then to Myitkyina. However, the army was withdrawing by a different route than the

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documents had taken, and by the time the government realized this, it was too late to evacuate the papers yet again. During the six days that the government remained in Myitkyina,33 numerous government documents were burned to keep them from the Japanese, including the currency records and a large quantity of currency.36 On arrival in India, the Burmese colonial government and its top officials were united, and in August 1942, under instructions from London, due to a lack of suitable accommodation elsewhere, a Burma govemment-in-exile was set up at Simla, 1,000 miles inside India.

Denial of Currency to the Enemy Shortly after Japan entered the war, Arthur Potter, the controller of finance in Burma,38 instructed district officers throughout the country “to make plans in advance” for destruction of notes and coin. The currency officer at the RBI in Rangoon later sent more specific instructions, which advised that if enemy occupation became imminent, the currency-chest holdings in the treasuries and sub-treasuries held in the district offices should be reduced to a minimum. District officers were told that if it became impossible to evacuate the funds, the remaining currency should be destroyed. If possible, notes were to be burned or jettisoned, and the coin to be jettisoned or buried as well. A certificate of destruction was then to be completed, preferably signed by “the Treasury or Sub-Treasury Officer or Agent of the Imperial Bank of India, and countersigned by the Deputy Commissioner, or at least by a responsible Government officer, who should, if possible, be a gazette officer of the highest rank available.”39 As the Japanese advance into Burma continued, methods of destruction depended on local ingenuity. At Taunggyi, for example, all the paper currency was burned, while the silver rupees and lesser coin were thrown down a disused well, which was blown in, however, the implementation of the denial instructions was uneven. 40 Many officers had difficulty in complying with the instructions, but some did exacdy as they were told, dispatching certificates of destruction first to Rangoon, then to Maymyo, and these records arrived finally at Myitkyina. At Myitkyina, Arthur Potter supervised in great haste the final destruction of the remaining notes, coin, and records. As he later described in his autobiographical memoir, he first arranged for bullock carts to transport the silver coin down to the bank of the Irrawaddy River, where it was “loaded into a motor-boat and

From Heal to British Burma Rupee

9

scattered into the river’s deep-water channel.”41 The banknotes posed a greater challenge: Disposal of the large stock of currency notes was more difficult, because most were brand new and in tightly packed bundles. At first we tried undoing the bundles, crumpling the notes into a trench and setting fire to them there; but this did not work and in any case was taking too long. Then one of my small bands of helpers had the bright idea of building little domes, with the bundles as loose-brick walls and an opening at the top. One bundle was then undone and the notes crumpled into the dome. A match was put to this tinder and the dome quickly became a glowing mass and burned completely away. The courtyard round the treasury was all aglow with these small furnaces. This task took us almost the whole of one night.42

How India Treated Burma Notes In India, in the first half of 1942, the encashment of Burma notes presented a major problem. In the beginning, no policy had been put in place to handle the flow of Burma notes into India that was carried by the flood of refugees who were still pouring into the country from Burma as late as May 1942.43 As soon as this tapered off, the Government of India intended to prohibit the importation of Burma notes. Only frontier authorities would be given exemptions, where necessary, to allow the importation of Burma currency. Such a measure, which prohibited the importation of notes issued by a country’s own bank (in this case, the RBI), was not unusual in a wartime situation. Shortly before, the British government had acted in a similar manner when it discovered that the Germans and their allies had looted European holdings of British currency.44 On June 4, 1942, an agreement was finally reached between the secretary of state for India, the Government of India Finance Department, and the governor of Burma.43 Due to the parlous state of the financial affairs of the Government of Burma, the Government of India had agreed, for the present, to accept the liability for the further payment of Burma notes. Two days later, on June 6,1942, the Burma Notes Ordinance of 1942 was issued by the Government of India Legislative Department on behalf of

10 Marilyn Longmuir

the governor-general of India that regulated the payment in British India of Burma banknotes. This ordinance gave the Government of India the power to prohibit the payment of these notes by the RBI, after a date for non-payment had been published in the official gazette.46 There was also a proviso that, in special circumstances, the Government of India might authorize “general or special payments.”47 On June 11, 1942, a press communique advised that Burma notes would still be cashed by the RBI, but because of the Burma Notes Ordinance, they would be cashed on behalf of the Government of India instead of the RBI, which had issued the notes.48 The Burma notes referred to in the press communiques related to denominations of 5 rupees and upward. As previously explained no Burma notes had been issued for lower denominations. The Government of India issued the 1-rupee note and the coin, and they still remained legal tender in both India and Burma.49 A further press communique, entitled “Preventing Smuggling of Burma Notes,” advised that after July 15, 1942, the cashing of notes would be restricted to genuine refugees who could establish genuine proof of ownership. It specifically stated that the Burma Notes Ordinance was being made “to prevent the possibility of Burma notes being smuggled into India by enemy agents.” As will be seen from what took place in Chungking, the capital of Chiang Kai-shek’s Nationalist government, die Indian government was hesitant to prohibit persons entering India from Burma or elsewhere from cashing “smuggled” Indian notes. The Burma notes would only be cashed at the eastern Indian towns of Dibrugarh, Dimapur, Silchar, Margherita, and Imphal, which were closest to the Burma border, and at the RBI’s offices at Calcutta, Cawnpore, and Madras. Until July 15, 1942, any person holding Burma notes was advised to cash these notes at the nearest branch of the Imperial Bank of India.30 On August 1, 1942, the import of Burma notes was prohibited “except that refugees coming by the direct land routes from Burma are permitted after verification to bring in any Burma notes in their possession.” Passengers traveling by air from China were given until August 4, 1942, unless they had been informed of the prohibition before their departure.5 No explanation was given in this communique of how it was proposed to inform the passengers from China before embarkation, but undoubtedly press releases to this effect were also issued by the British Embassy in Chungking.

From Tical to British Burma Rupee

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A final communique advised that after August 31, 1942, no Burma notes could be cashed anywhere in India “unless the possession of such notes had been duly vouched for by a responsible Police Officer of the status of District Superintendent or a District Officer.”52 An interesting sidelight on this issue was revealed in September 1943, when Brigadier Potter53 presented a policy document on “Currency for Reoccupied Burma.” In this document, Potter revealed that Burma notes were still being accepted “in payment of Govt. Dues including payment for salt, opium etc. sold to villagers.” These payments would have been made in the “frontier fringe” areas on the northeastern and western borders of Burma. Officers and other ranks returning from Burma were allowed to exchange up to Rs 30 of Burma notes for India notes. “Otherwise,” Potter stressed, “Burma notes are not accepted in exchange for India notes.”54

Chinese Troops Complicate Matters The currency issue was further complicated in early 1942 by the arrival in Burma of Yunnan-based Chinese troops. These troops had been offered by Chiang Kai-shek to assist the British in Burma in holding back the advancing Japanese and by March 1942 they were defending Toungoo. The Chinese troops were under the command of a legendary American, Lt. Gen. Joseph (“Vinegar” Joe) Stilwell. Estimates vary on how many Chinese were deployed in Burma. Official figures supplied by the Chinese to the liaison mission attached to the Chinese armies give a total of 130,000 (V Chinese Army 60,000, VI Chinese Army 40,000, LXVI Chinese Army 30,000), but the British officials believed these figures were greatly inflated. The chief liaison officer estimated 70,000, although for safety’s sake, the liaison mission worked on a basis of 86,000 when arranging food supplies.56 The Chinese troops required British logistical support as they moved south into Burma. They lacked engineers and had no medical ordnance or supply and transport corps; they did not even have a pay office.5 The British administration therefore became burdened with the responsibility of moving, feeding, and maintaining these troops without any assistance from the Chinese government. The liaison mission, which was attached to British headquarters, was the conduit for payments to the Chinese troops and also provided local funds to enable the Chinese to purchase goods the British could not supply. The

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British field cashiers attached to Chinese formations were able to access Burma currency in “certain specified civil treasuries” and transfer these funds to members of the liaison mission for disbursement.58 The British also provided currency exchange to prevent circulation of foreign money in Burma. When the Chinese troops arrived in Burma, they brought with them small quantities of Chinese National Currency (CNC) from Yunnan, which the British Burma field cashiers exchanged for Burma notes.59 The British also provided Burma notes when cashing U.S. Treasury dollar checks for the American staff of Lieutenant General Stilwell.60 In his autobiographical memoir, Potter mentions the difficulty at this time of maintaining a money supply for the British and Chinese fighting forces while ensuring that “the contents of the various district treasuries and sub-treasuries” were denied to the Japanese.61 On April 30,1942, when the last Allied troops evacuated the major supply center of Mandalay and began their long trek to the safety of India, the retreating Chinese armies were left to their own resources; they “lived on the country by purchase [presumably with Burma notes] or looting.”62 In the ensuing months, between 8,000 and 9,000 Chinese troops retreated to India, some arriving as late as July 1942,63 and the balance of the Chinese forces, approximately 60,000 (minus casualties), returned to China.64

Burma Notes Appear in Chungking As troops and refugees65 flowed into southern China from northern Burma, they began tendering their Burma notes to local banks for exchange. As soon as the British financial representative in Chungking became aware of the increased exchange of Burma rupee notes, which were being drawn on the RBI, he advised the Government of India on May 6, 1942, by telegram “that large amounts of Burma rupee notes are held in China and thousands are being converted daily in good faith by the Chinese banks on behalf of refugees from Burma.”66 Upon receipt of the telegram, the Government of India immediately advised the India Office67 in London of the increased traffic in Burma notes, and G. H. Baxter, the India Office’s financial expert in London, took up the matter. Baxter approached the Foreign Office, noting that the treasury and the Burma Office should also become involved. Baxter pointed out that the Government of India already had a procedure in place to handle

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refugees reaching its shores from Hong Kong, Malaya, and Java and that the local currency brought in by these refugees was being cashed “up to a reasonable limit.”68 Presumably the discretion of the encashment officers was relied upon to determine a reasonable amount. However, the refugees in China did not fall into this category, for most were returning to their homeland and were not refugees from recently occupied areas who had escaped to India. In London, Baxter envisaged that the Government of India would face two main difficulties in dealing with this problem. The first was related to the fact that “a considerable part of the currency . . . [was] identical with that of India.”69 These were the Government of India notes issued before April 1, 1937, and the new Indian series of banknotes issued by the RBI after April 1, 1937. Finally there was the Government of India 1-rupee notes, issued on July 24, 1941, to cover the shortage of silver rupee coins. This presented a decided problem, for the Government of India was not an occupied country; its currency was therefore in common use throughout India and could not be demonetized. There was no way to circumvent this unless India prohibited the importation of notes issued by their own bank. Baxter had discussed this topic briefly in a section entided “How India Treated Burma Notes,”70 but those India notes overprinted “Legal Tender in Burma Only” and those specially printed for the Government of Burma by the RBI were another matter. Entry of these notes could be restricted. The second difficulty related to China and the Chinese troops. The contention of the Government of India, which was conveyed in a telegram to the British Ambassador at Chungking and the secretary of state for India in London, was that these funds represented “not only [the Chinese troops’] pay but loot from Burma Treasuries”; the Indian government suspected that “Japanese operating in Chinese territories may also be dumping looted stocks.”71 This issue needed a little more time to sort out and more information from Chungking. In the meantime, the Government of India had no desire to give value for these notes, because at the time of the invasion, it had been the neighboring Government of Burma’s policy to destroy as many notes as possible held in Burma’s banks and treasuries and thus deny the use of these funds to the Japanese. A further complication was the development of a black market in Burmese and Indian notes in Kunming.72 The possibility arose that genuine holders of the currency could have exchanged their notes on the black market

14 Marilyn Longmuir

for a discounted rate and that the present holders-presumably black marketers-would benefit if the Government of India paid full value for the notes. The black-market trade in the notes added further complications to the monetary mess. After consultation with the RBI, the Finance Department suggested in their reply to the embassy at Chungking that the Chinese government should be approached and asked to provide a deadline after which it would be an offense to possess either British Burma or India notes. The Finance Department also wished the Chinese government to have the Burma notes tendered to the Chinese government without payment. Unless the owners of the notes could establish genuine proof of ownership, the notes were to be confiscated. After acceptance of these conditions, the Chinese government was to advise the Finance Department of the total of accumulated notes and, “if the figure is not fantastically high,” the Finance Department would make payment in sterling or Indian rupees.73 This plan bore similarities to what had occurred in Chungking with Hong Kong notes; in that instance the Chinese government had announced that after a specified date there would be no more conversion of these notes,74 but in this case there was no mention of confiscation. The Finance Department urged the British Ambassador in Chungking to approach the Chinese government in this manner, provided the ambassador or the British government did not object.75 In normal times, the Chinese banks in Yunnan and Szechwan, where Chungking was situated, purchased Burma and India notes from customers, held these notes in their treasuries, and resold the Burma notes to businessmen and travelers returning to Burma. They then forwarded surplus notes to their chief offices; in this instance, presumably in Chungking. However, these were abnormal times and, because no one was returning to Burma, the banks' chief offices needed to clarify their position with regard to these “unsaleable” notes. Chinese banks were pressuring the British embassy76 and their government for a solution, and the Chinese government was pressuring the British embassy in Chungking for an answer. While the Finance Department awaited a reply from the India Office in London confirming their proposal to the Chinese government, another telegram arrived from Chungking informing them that “the Central Bank and Bank of China had already bought more than 50 lakhs [5,000,000 rupees] and influx continues.” Chinese banks were now buying Burma rupee notes at a rate equivalent to the normal exchange rate of rupees to

From Heal to British Burma Rupee

15

sterling-that is, l/6d per rupee-and Chungking required confirmation that the RBI would refund at this rate. Before an answer could be dispatched, further information arrived from Chungking that in addition to the Burma notes being purchased, the Bank of China in Yunnanfu held “8 million rupees [80 lakhs], which they had evacuated from their Lashio office.”78 On June 6, 1942, a telegram from the secretary of state for India urged the Government of India to settle this matter promptly. The secretary supported destruction of notes rather than confiscation, referring to the Chinese government’s dislike of the latter, as detailed by a telegram from W. C. Cassels, a financial officer at the British embassy in Chungking.79 The Government of India Finance Department immediately dispatched a telegram to Chungking: We are therefore prepared to arrange for Reserve Bank to make payment in full in Calcutta on receipt of telegraphic advice of destruction [of Burma notes] by denominations in the presence of Consular authority to be followed by particulars of series and numbers of notes of Rs 100 and over to be sent by air mail. If this will assist Reserve Bank are also prepared to pay sterling at Rupee sterling rate of l/6d. These facilities are offered on condition that they terminate on date to be fixed and Chinese Government may be requested to suggest one as early as possible.80 In China, a general exchange of Burma notes was accepted until August 10,1942; genuine refugees were given an extension until October 10.81 In India, normal encashment facilities had ceased on July 14, 1942, and for the ensuing six weeks, encashment continued in the designated towns of Dibrugarh, Dimapur, Silchar, Margherita, and Imphal and at the RBI’s offices at Calcutta, Cawnpore, and Madras until August 31, 1942. Thereafter, arrangements were made for encashment for genuine refugees, but it was announced that certification was required by either a responsible police officer of the status of district superintendent or a district officer.82 Although from the correspondence it would appear that the Government of Burma, now regrouped in India, had little input into these currency negotiations, the government had been consulted.83

16 Marilyn Longmuir

Currency Problems Surface in India The question of what to do with the outstanding notes began to arise as soon as the Government of India’s Finance Department realized that Burma was to fall completely to the Japanese. By early May 1942, panicked by the loss of communications with the Government of Burma, the Finance Department sent a telegram to the India Office in London expressing a number of concerns, including its belief that “the Government of Burma is no longer an entity capable of entering into normal relations.”84 The department requested corrective actions, saying that the RBI could not be expected to fund the Burma government and cover its liabilities.85 The Finance Department also demanded that the treasury “advances to Burma Government,” which the British government in London, had guaranteed, should be paid back to the Treasury of India (by the British government) before June 30, 1942. The Government of India’s Finance Department was also concerned about the currency that had been held in reserve in the currency chests at treasuries and sub-treasuries throughout Burma, because this currency was a potential liability whose value the Finance Department estimated at 10 crores (100 million) of rupees,86 the full face value of the currency that had been handed over to the Burma government. The Finance Department’s final proposal was to stop the practice of publishing active note circulation figures because this provided “information to the enemy in Burma.”87 The secretary of state replied promptly. He informed the Finance Department that there was no intention of dissolving the Government of Burma, which by then had relocated to India. He was puzzled about how circulation figures could assist the enemy, but agreed that “any figures that might conceivably give such assistance should be suppressed.” He expressed great surprise at the claim that notes worth 100,000,000 rupees could have been “neither removed nor certified as destroyed.”88 At the request of the Burma Office,89 the secretary of state added that “the liability [for the unaccounted currency] cannot be assumed to be that of the Government of Burma but must presumably depend upon the circumstances in which the loss occurred.” On May 21, 1942, the Government of India Finance Department replied that the missing 100 million rupees were in currency chests located at district and sub-district offices throughout the countryside. Although no certificates of

From Tical to British Burma Rupee

17

destruction had been received, they were expected to appear because contact with district officials had been reestablished. The Finance Department did not know that many of these certificates had been destroyed at Myitkyina two weeks earlier along with the rest of the government records or that much of the holdings had been already disbursed as the retreating military drew down funds, although the Finance Department pointed out in a more conciliatory tone that the amount was not “inordinate" because these notes were used for maintenance and military payments. The secretary of state was also advised that “the amount of Burma notes legitimately outstanding in Burma covered by assets is approximately 30 crores [300 million rupees] of which 2 crores [20 million rupees] have so far been cashed in India on account of evacuees.”91 Wild rumors circulated regarding the missing notes. One theory was that before retreating to China, the Chinese troops had looted Burma treasuries.92 However, Cassels refuted this suggestion; he insisted that the embassy had no knowledge of the looting of any treasuries by the Chinese troops. He suggested, most plausibly, that it was possible the Burma notes were still being used in the frontier areas.93 Another fear was that the Japanese were disposing of captured currency in China.94

Efforts to Reconcile Currency Accounts After an ordinance was issued on June 6, 1942,95 prohibiting the RBI from cashing Burma notes without the approval of the Indian central government,96 the Government of India agreed to accept the liability for the further payment of Burma notes. Subsequently, “a corresponding amount of assets” from RBI’s Issue Department would be transferred to cover the major portion of these liabilities. “To avoid too great an appearance of finality these arrangements are to remain in force until cancelled by an official notification.”97 Sufficient funds were therefore transferred to the Government of India to meet the estimated liabilities and credited to a suspense account98 to which the amount of such purchases of these notes was debited when Burma banknotes were cashed or exchanged.99 Previous correspondence had assumed that during the Japanese occupation of Burma it was unlikely “that further encashment” of these notes by evacuees to India would exhaust the funds held.100 As was later discovered, many of the outstanding banknotes would be held quite legitimately. At this time, the British authorities appeared aware of the

18 Marilyn Longmuir

possibility of “bogus money being issued by the enemy”101 but believed that this possibility should not influence their actions. They also believed that “the possibility of the Japanese printing and circulating notes may be left to be dealt with later if and when the need arises. (It may be pointed out, however, that the burden of such issues by the Japanese would seem likely to fall rather on the population as a whole in the shape of inflation than directly on Government resources).”102 Even at this early stage, the British anticipated that the issuance of occupation currency by the Japanese would cause severe inflation, die burden of which would fall directly on the Burmese people.

Further Currency Complications The currency issue was further complicated by the fact that both Burma and India rupee notes were legal tender in Burma, although at the time of the Japanese invasion the India notes were in the process of being withdrawn. This process had begun on November 1, 1941, and, except for Government of India 1rupee notes, it was initially scheduled for completion by March 31, 1942.103 The Japanese invasion had disrupted this process, and during the British retreat, both Indian and Burmese currency notes were lost or destroyed. In fact, Potter believed that very few RBI India notes (Rs 5 and above) were still in circulation by May 1942.104 After the Burma govemment-in-exile had resettled in Simla in August 1942, it set about reconstructing the financial records that had been destroyed at Myitkyina, hoping to ascertain the amount of Burma notes still in circulation. All district officers who had reached the safety of India were requested to furnish reports advising the amount of currency destroyed. Some officials had copies of the certificates of destruction with them, but many officers simply relied on memory. On September 29, 1943, Brigadier Potter was able to report to the War Office that the Government of Burma had almost completed their investigations. He noted that they should show that: 1) Reserve bank officials destroyed virtually all the Burma notes held by the Reserve Bank in Burma. 2) Out of the Burma notes held in treasuries all wore [sic] destroyed by officers of the Govt. Of Burma except about Rs 75 lakhs [7.5 million rupees] which are known to have been left undestroyed and Rs 31 lakhs [3.1

From Tical to British Burma Rupee

19

million rupees] about the fate of which there is no information.105 Finally, on October IS, 1943, H. C. Baker, secretary to the Government of Burma’s Finance Department, situated in Simla, made a similar report to the under secretary of state for Burma in London. The Finance Department was “satisfied that a total of 4,89,39,643 [approximately 4.89 crores or 48.9 million rupees] in notes and coin was destroyed or otherwise denied to the Enemy.” 106 This was made up of: Burma notes India notes Coin

Rs. 4,68,68,547 [46,868,547] 2,23,175 [223,175] 18,47,931 [1,847,931 ] 107

The Finance Department was also certain that Rs 74,80,639 in notes and coin had definitely been lost, having been abandoned by officials, “and must be presumed to have fallen into unauthorized hands.” Also unaccounted for were the holdings from other treasuries and sub-treasuries, which were either in inaccessible areas or were unreported “because officers in charge had not evacuated to India.” A rough estimate of this figure, totaling Rs 31,14,102 (approximately 31 lakhs) was made by using the last RBI reports received from these centers.108 Details of these figures as of May 1942 are set out below in international numerals:109 Table 1.2 Currency in Burma, May Rupees known to have been destroyed Burma notes India notes Coin Total

46,868,547 223,175 1,847,921 48,939,643

1942 Rupees known Rupees that to have been were abandoned unaccounted for 2,944,442 6,059,909 18,330 11,960 1,402,400 157,700 7,480,639 3,114,102

Many believed that most treasury balances had been run down and therefore were rather small. “It had been necessary in many cases to draw upon the balances of the Currency Chests as shown in the latest figures available to meet the demands of the civil and military authorities in the latter days.”110 The Finance

20 Marilyn Longmuir

Department reported to the Burma Office in London via microgram after it completed its investigations. The repoit showed that Rs 30,71,09, 653 [approximately 30.71 crores] of Burma notes “must be presumed to be in circulation.”111 The following table clearly shows the perceived position as of October 1943.112 Table 1.3 Disposition of Currency in Burma, 1941-1943 Details Amount in rupees Total value of Burma notes in circulation as of 213,675,955 December 30,1941 Burma notes in office of Reserve Bank 607,110,455 87,192,780 Burma notes in currency chests Burma notes remitted to Burma by RBI 2,800,000 Total 910.779.190 Burma notes remitted to India by RBI 103,850,000 authorities after December 12,1941 Burma notes remitted to India by Burma 6,262,010 authorities after December 12,1941 Burma notes known to have been destroyed in 46,868,547 Burma by officials of legal government Burma notes destroyed by staff of RBI in 359,841,205 Burma Burma notes cashed in India since evacuation 63,457,535 Burma notes cashed in China since evacuation 23,390,240 Subtotal Rs 603,669,537 Burma notes assumed to be in circulation as of Rs October 1943 307,109,653 Total Eg

mimw

Circulation of currency was much higher than normal because of the necessity to provide funds for the British army. In fact, in normal conditions in prewar Burma, circulation was only approximately twenty crores (200 million) of rupees.113 Calm now appeared to have been restored on the British India/Burma currency front, and the original missing ten crores (100 million) of rupees, reduced to a figure of Rs 74,80,639, well below one crore, provided the funds from the unaccounted treasuries and sub-treasuries had been destroyed. This issue would reappear

From Tical to British Burma Rupee

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again after the end of the war (see Chapter 4). The salient points of this Financial Department microgram were repeated in a Burma Office report of November 24, 1943, which informed those concerned at the War Office, the Treasury Office, the India Office, the Bank of England, and the Colonial Office of the latest position. This report explained that ‘‘the volume of notes and coin now presumed to be in circulation (Rs 30,71,09,653) [May 1942] . . . [was] higher than the total value of Burma notes in circulation on 30.12.41 (Rs 21,36,75,955).” The increase was caused because of the inclusion of the 10,00,00,000 rupees held in the currency chests on December 30, 1941, prior to the Japanese invasion. It also explained that only one-fifth of the notes in circulation on December 30, 1941 had been destroyed during the retreat. The importance of these figures was that they established the Government of Burma’s eventual liability for the notes still presumed to be in circulation in occupied Burma. The circulation figure of Rs 21,36,75,955 quoted for December 1941 would have been a sufficient amount of currency in normal conditions, but the higher figure of Rs 30,71,09,653 in May 1942 covered four months of conflict when military costs were drawn from the reserve held in the currency chests maintained in the treasuries and sub-treasuries throughout Burma.114 Interestingly, a handwritten note on the report reveals the British thinking at that date: “The general idea is that we will honour our own notes (if lawfully possessed) but give no value for Japanese or Ba Maw issues.”115 Although these words seem a portent of what the British currency policy would be when the British began their advance into Burma in late 1944, it was not as clear-cut a decision as this note would indicate; not all the facts were known at the time. For example, no Ba Maw currency notes were ever issued, although there had been planning for such an issue. Eighteen months later, on May 31, 1945, Potter revised the amount of currency circulating in Burma in May 1942. This time a figure of Rs 34Vi crores (345,000,000) was quoted, made up as follows: Reserve Banknotes of Rs 5 and denominations = Rs 30 crores116 Govt. Of India Re 1 notes = Rs ”117

higher

As can be seen, the war years were not the best times for accurate accounting. Nevertheless, the figure of 34.5 crores of

22 Marilyn Longmuir

rupees was mentioned again in 1946.118 Seven crores of rupees had been redeemed in India by evacuees, and Potter believed that a large quantity of British Burma notes, plus a substantial quantity of Indian 1-rupee notes, were secretly being hoarded by the Burmese. Even allowing for wastage, due to three years of war, the unsettled conditions, and tropic climate, it was anticipated that close to 20 crores of rupees would return to circulation once the British reoccupied the country.119 During the war years, British Indian coin did not disappear entirely from Burma. John L. Christian has described how “the British silver rupee ... remained the queen of the black market and the village hoarder.”120

Conclusion Just as the country was about to come of age monetarily with the issuance of its own notes and the possible future issuance of its own coinage, the Japanese invaded the country. The suddenness of their attack and the swiftness of their advance left the British no choice but to deny to the enemy the currency notes and coins held in Rangoon by the RBI and the contents of the currency chests maintained in the treasuries and sub-treasuries of district offices throughout Burma. The final reckoning of the currency accounts by Indian finance officials and the Burma govemment-in-exile was delayed until late 1943 when refugees, predominantly Indian, flooded into the country and British officials, some still clutching their certifications of currency destruction, struggled to reach the safety of India over mountainous jungle paths. Chinese soldiers and refugees from the Burma/Yunnan border regions who were retreating to China with Burma notes added further complications to the situation. The Chinese exchange of the Burma/India currency represented a three-way problem for authorities in Chungking, India, and London, though this was finally settled with die assistance of Chiang Kai-shek’s Chinese government. Ten crores of rupees held in reserve in currency chests and used to cover military expenditure increased the amount of currency circulating in Burma. As late as May 31, 1945, Brigadier Potter reported in his “Currency Report, Burma,” that there was an amount of almost 30 crores of Burma rupees and 4.5 crores of Government of India 1-rupee notes in circulation at the time of the British withdrawal in May 1942. It was a period of complete currency chaos.

From Heal to British Burma Rupee

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1 U Tun Wai, Burma's Currency and Credit, rev. ed. (Bombay: Orient Longmans, 1962), 19. 2 J. F. Cady, A History o f Modem Burma (Ithaca, NY: Cornell University Press, 1958), 48. 3 J. S. Fumivall, An Introduction to the Political Economy o f Burma, 3rd ed. (Rangoon: Peoples’ Literature Committee, 1957), 147. This passage is also quoted in J. Russell Andrus, An Economic Survey o f Burma: Prepared fo r Division o f Economic Studies Department o f State, 15 November 1943 (Stanford, CA: Hoover Institute of War & Peace, 1976), 110. 4 M. Robinson and L. A. Shaw, The Coins and Banknotes o f Burma (Manchester: The Authors, 1980), 68. s Robinson and Shaw, Coins and Banknotes, 26, quotes the Rev. Howard Malcom as referring to “a numerous class of as sayers or brokers, called pwa-zahs or poyzahs [who] subsist by melting up silver, to improve or deteriorate it as they are desired.” Howard Malcom, Travels in South East Asia, vol. 1, Burma Empire (Boston, 1839). 6 Cady, History o f Modem Burma, 48. 7 Fumivall, Introduction to the Political Economy o f Burma, 147. 8 U Tun Wai, Burma’s Currency and Credit, 19. 9 J. S. Fumivall, The Fashioning o f Leviathan: The Beginnings o f British Ride in Burma, ed. G. Wijeyewardene (Canberra: Department of Anthropology, Australian National University, in association with Economic History of Southeast Asia Project & Thai-Yunnan Project, 1991), 75-76. 10 Robinson and Shaw, Coins and Banknotes, 70. Chapter 8, 6672, covers this attempt fully and explains how Captain Hiram Cox brought minting equipment and silver and copper coins that Bodawpaya had ordered from Calcutta to Amarapura in 1797. 11 Robinson and Shaw, Coins and Banknotes, 83-90. 12 U Tun Wai, Burma's Currency and Credit, 95. 13 Robinson and Shaw, Coins and Banknotes, 105 and 130. 14U Tun Wai, Burma’s Currency and Credit, 95 15 D. G. E. Hall, A History o f Southeast Asia, 4th ed. (Houndmills, Basingstoke, Hampshire: Macmillan Education, 1981), 780-784. 16U Tun Wai, Burma’s Currency and Credit, 29. 17Ibid. 22. ,8Ibid. 22 and 95. ,9Ibid. 100.

24 Marilyn Longmuir

^ i d . 100-101. 21 Andrus, Economic Survey o f Burma, 175; Robinson and Shaw, Coins and Banknotes, 107, note a shortage of silver rupees in India due to coin hoarding after the fall of France in 1940. 22 J. Russell Andrus, Burmese Economic Life (Stanford, CA: Stanford University Press, 1948), 295; Andrus, Economic Survey o f Burma, 174-175; Robinson and Shaw, Coins and Banknotes, 114. ^U Tun Wai, Burma's Currency and Credit, 92-93. 24 Ibid. 25 Ibid. 93. 26 Ibid. 93-94. 27 Ibid. 22. 28 Andrus, Burmese Economic Life, 295; U Tun Wai, Burma's Currency and Credit, 22. 29Andrus, Economic Survey o f Burma, 175. 30 Andrus, Burmese Economic Life, 295. 31 Ibid. 302. Andrus, Economy Survey o f Burma, 165. 33 Ibid. 34Potter, autobiographical memoir, 28, OIOC MSS Eur C414/11. This currency was probably transferred by rail, although Myitkyina also had an airfield. 35 Maurice Collis, Last and First in Burma (1941-1948) (London: Faber and Faber, 1956), 157. 36 H. C. Baker, Secretary to the Government of Burma, Finance Department, to the Under Secretary of State for Burma, microgram, October 15,1943, IOR M/3/854. 37Collis, Last and First in Burma, 186. 38Potter, autobiographical memoir, 26 and 28. 39 Baker, Government of Burma, to Under Secretary of State for Burma, microgram, October 15,1943, IOR M/3/854. 40 E. J. Lessing to Secretary, Minister for War, Whitehall, London, March 3,1957, IOR M/3/854. Most of those involved in this episode lost their lives on the trek to India, and the surviving corporal later wondered if the silver had been recovered. 41Potter, autobiographical memoir, 28. 42 Ibid. See also Robinson and Shaw, Coins and Banknotes, 108. In an airgraph, A. K. Potter to R. E. Potter (his father), June 16, 1942, OIOC MSS Eur C414/7, Potter estimated that he had destroyed 600,000 rupees in notes and silver. 43 Estimates vary, but Hugh Tinker has estimated between

From Tical to British Burma Rupee

25

100,000 and 200,000 Indians survived the arduous trek overland from Burma to India. “The Indian Exodus from Burma 1942,” Journal o f Southeast Asian Studies 6, no. 1 (March 197S), 6, quoted in Louis Allen, Burma: The Longest War, 1941-45 (London: J. M. Dent & Sons, 1984; London: Book Club Associates, 1984), 81. A further 70,000 Indians had escaped from Rangoon by ship (Allen, Burma: The Longest War, 80-81). 44 G. H. Baxter, India Office, to Sir John Brenan, Foreign Office, enclosure (copy also to Treasury, Burma Office, and Bank of England), May 20,1942, IOR M/3/798. 45 Government of India, Finance Department, to Secretary of State for India, telegram, June 4,1942, IOR M/3/S73. 46 The official gazette was a regular Government of India publication in which recent legal and government policy changes were published for the benefit of civil servants and interested t^opy of Government of India Legislative Department, Ordinance No. XXVffl of 1942, June 6,1942, IOR M/3/798. 48 Finance Department, New Delhi, press communique, June 11, 1942, IOR M/3/798. 49A. C. Turner, Government of India, Finance Department, to G. H. Baxter, India Office, London, November 18, 1942, IOR M/3/798. 50 Finance Department, New Delhi, press communique, June 20, 1942, IOR M/3/798. 51 Finance Department, New Delhi, press communique, August I,1942, IOR M/3A798. 52 Finance Department, New Delhi, press communique, August 23,1942, IOR M/3/798. 53At the time of the Japanese invasion, Potter, a member of the Indian Civil Service (ICS), was the controller of finance in Burma, attached to the staff of the governor of Burma. From July 1942 to May 1943, he was finance secretary to the governor of Burma in Simla; and in May 1943, he was seconded as financial adviser to the Indian Expeditionary Force, part of General Headquarters, India. In September 1943, when the South East Asia Command was formed under Admiral Lord Louis Mountbatten, he was transferred to the army group as its financial adviser and given the task of planning the financial requirements of the Military Administration when Burma was recaptured. 54 “Currency for Reoccupied Burma,” policy document,

26 Marilyn Longmuir

September 9,1943, IOR M/4/306. 55Allen, The Longest War, 59,61. 56 Major General S. W. Kirby, et al., The War against Japan, vol. 2 (London: HMSO, 1958), 475. 57 Ibid. 474. 58 Ibid. 475. 59 Enclosure 3, Potto-, Financial Adviser (Burma), 19 September 1943, IOR M/4/306. Also A. K. Potto- to R. E. Potter (father) and sisters, 28 March 1942, OIOC MSS Eur C414/7. 60 Potto* to father and sisters, 28 March 1942. See also Potter, autobiographical memoir, 26. 61 Potter, autobiographical memoir, 26. 62 Kirby, The War against Japan, vol. 2,475. a Ibid. 212 and 245; also Charlton Ogbum, The Marauders (New York: Quill, 1982), 18. In Kirby, The War against Japan, vol. 2, the figure is given as 8,000 troops, while Ogbum quotes 9,000. 64 Because he was the chief liaison officer and his staff was providing sustenance to these troops, we can assume that Potter’s assessment of 70,000 Chinese troops involved is more accurate than the Chinese figures. 65 Even in this period, many Chinese lived across the border in northeastern Burma. 66 Baxter, India Office, to Brenan, Foreign Office, enclosure, May 20,1942. 67 The India Office, which was constituted under the Government of India Acts of 1858, 1915-1916, and 1919, was the British government office. It was headed by the secretary of state for India and was responsible for the administration of India. Under the terms of the Government of Burma Act 1935, when Burma was separated from India in April 1937, a secretary of state for Burma was appointed and the Burma Office came into existence. To complicate matters, the position of the secretary of state for Burma was always held by the secretary of state for India, and the parliamentary under secretary of state for India acted for Burma in that role, too. 68 Baxter, India Office, to Brenan, Foreign Office, May 20,1942. 69 Ibid. 70 Baxter, India Office to Brenan, Foreign Office, enclosure, May 20,1942 71 Government of India, Finance Department, to Ambassador at Chungking (copy to Secretary of State for India), telegrams, May

From Tical to British Burma Rupee

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19,1942, quoted in Baxter to Brenan, enclosure, May 20,1942. 72 Government of India, Finance Department, to Ambassador at Chungking, telegram, May 19,1942. 73 Government of India, Finance Department, to Ambassador at Chungking, telegram; repeated by the former to Secretary of State for India, May 19,1942, IOR M/3/798. 74 Cassels, British Embassy, Chungking, to Foreign Office for Treasury (repeated to Government of India Finance Department), telegram, June 1,1942, IOR M/3/798. 75 Government of India, Finance Department, to Ambassador at Chungking, telegram, May 19,1942, IOR M/3/798. 76 Cassels to Foreign Office for Treasury, telegram, June 1,1942. 77 British Embassy, Chungking, to Government of India, telegram, May 23,1942, IOR M/3/798. 78 Cassels to Foreign Office for Treasury, telegram, June 1,1942. 79 Secretary of State for India to Government of India, telegram, June 6, 1942, IOR M/3/798; Cassels to Foreign Office for Treasury, telegram, June 1,1942 80 Government of India, Finance Department, to Ambassador, Chungking (repeated to Secretary of State for India), telegram, June 6,1942, IOR M/3/798 81 Sir H. Seymour [British Ambassador at Chungking] to Mr. [Anthony] Eden, extract, dispatch, August 27, 1942, IOR M/3/798 82 Government of India, Finance Department, press communique, “Encashment of Burma Notes,” August 23,1942, IOR M/3/798. 83 Government of India, Finance Department, to Secretary of State for India, telegram, May 30,1942, IOR M/3/798 84 Government, of India, Finance Department to Secretary of State for India, telegram, May 5, 1942, IOR M/3/573 85 In this period, the RBI acted also as the Central Bank of Burma. These liabilities would include not only the currency issued but also any other Government of Burma accounts maintained at the bank, but the currency would be the largest amount. 86 Usually expressed in Indian terms as 10,00,00,000 rupees 87 Government of India, Finance Department, to Secretary of State for India, telegram, May 5,1942 88 Secretary of State for India to Government of India, telegram, May 8 and 9,1942, IOR M/3/573 89 Much of the British government’s outgoing correspondence was circulated to associated agencies before remittance to keep

28 Marilyn Longmuir

them informed, either officially or unofficially, as was incoming correspondence upon receipt 90 W. H. T. [W. H. Turner], Burma Office, to Under Secretary of State, note, May 7, 1942. Further notations dated May 8, 1942 were added; also Secretary of State for India to Government of India, telegram, May 8 and 9,1942, IOR M/3/573. 91 Government of India, Finance Department, to Secretary of State few India, telegram, May 21,1942, IOR M/3/573. 92 Baxter, India Office, to Brenan, Foreign Office, May 20,1942. 99 Cassels, British Embassy, Chungking, to Foreign Office for Treasury, telegram, June 1,1942. 94 Government of India, Finance Department, to Ambassador at Chungking (copy to Secretary of State for India), telegrams, May 19, 1942, quoted in Baxter to Brenan, enclosure, May 20, 1942; Government of India, Finance Department, to Secretary of State for India, telegram, June 6,1942. 95 Copy of Government of India Legislative Department, Ordinance No. XXVffl of 1942, June 6,1942, IOR M/3/798. 96 Cassels, British Embassy, Chungking, to Foreign Office for Treasury, telegram, June 1,1942. 97 G. H. Baxter, India Office, to N. E. Young, Treasury, June 5, 1942, IOR M/3/573. 98 A term used in financial circles to describe an account in which items of monetary value are held temporarily, pending correct disbursement. 99 Baker, Government of Burma, to Under Secretary of State for Burma, microgram, October 15,1943, IOR M/3/854. 100Secretary of State for India to Government of India, telegram, May 28,1942, IOR M/3/573. 101 Ibid. 102 W.H.T. [W. H. Turner] to the Under Secretary of State for India, note, May 27,1942, IOR M/3/573. 103 Copy of advertisement, Burma Gazette (Rangoon), 1 November 1941, IOR M/3/573. 104 A. F. Potter, “Currency Policy, Burma,” May 31, 1945, IOR M/4/306. 105 Potter, Financial Adviser (Burma), to C. E. Key, F5, War Office (WO), September 29,1943, IOR M/4/306. 106 Burmese currency is usually expressed in this manner. The division of die amount clearly shows the amount of crores. One crore = 1,00,00,000 (10,000,000) and one lakh = 1,00,000 (100,000).

From Tical to British Burma Rupee

29

107 Baker, Govt, of Burma, to Under Secretary of State for Burma, microgram, 15 October 1943, IOR M/3/854. 108Ibid. 109Robinson and Shaw, Coins and Banknotes, 111. 110 Baker to Under Secretary of State for Burma, microgram, October 15,1943. 1,1 Ibid. U Tun Wai has quoted an estimated figure of Rs 30.43 crores in circulation during 1941-1942 in Burma's Currency and Credit, 22. But he qualifies this figure by noting that “there was no way of telling what was the quantity of notes in circulation in a precise manner.” 11 Robinson and Shaw, Coins and Banknotes, 111. 1.3 Extract FE Weekly Intelligence Summary No. 82 for week ending August 4,1944, IOR M/4/306. 1.4 Burma Office to Under Secretary of State for Burma, report, November 24,1943, IOR M/3/854. 1.5 Ibid. 116 This is the figure of the Burma-issue notes. Very few Indiaissue notes were still in circulation. 117 “Currency Policy, Burma,” May 31,1945, IOR M/4/306. 118 G. Davey, “Redemption of Japanese Currency in Burma,” December 4,1946, IOR M/4/306. 1,9 Potter, “Currency Policy, Burma,” May 31,1945. 120John L. Christian, Burma and the Japanese Invader (Bombay: Thacker, 1945), 356.

CHAPTER 2 The Japanese Occupation Years, 1942-1945 As British Burma currency disappeared, the Japanese forces funded their occupation with military scrip, which was soon replaced by Japanese occupation currency, later referred to by the British as the “Jap rupee” or by the euphemisms “banana money” or “banana currency.”1At first inflation crept gently into the economy; however, by December 1943, prices for scarce consumer items had begun to increase and, in an effort to keep the economy alive, the Japanese increased the money flow by printing more and more of the occupation currency. The granting of a form of “independence” by the Japanese authorities on August 1, 1943 was politically significant to the Burmese. Burma was the first country in Southeast Asia to be so treated by the Japanese.2 However, with greatly depleted revenue, the incoming government headed by Dr. Ba Maw, who had the title of Adipadi (leader), struggled to stay financially afloat. Efforts were made to bolster revenue, and several initiatives were introduced. The Burma State Bank opened, and plans for the issue of its own banknotes were soon in the pipeline. Independence bonds came on the market, and the state lottery was revived to increase income. But the country’s finances were in sharp decline because of the collapse of the allimportant export trade in rice. On the war front, Hugh Seagrim, who had not fled to India and continued to maintain an undercover British presence in the Karen Hills, requested silver rupees for payment to his supporters. By February 1943, the British began to send groups of long-range penetration forces, known as Chindits, deep into enemy territory, and these groups carried with them Indian currency, particularly silver rupees, which were well-liked by the local villagers. So British Indian currency was returning to Burma. On the other hand, both Japanese and British forces were conducting monetary “war games” and had begun to forge each other’s currency notes. These were years of great confusion to the Burmese. The Japanese occupation proved to be an enormous economic burden, but this was not perceived in the euphoria of early 1942.

Japanese Military Scrip On November 20, 1941, shortly before the Japanese offensive

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31

began in World War n, the imperial general headquarters (IGHQ) and the Japanese government held a liaison conference. This conference established Japanese policy for the Greater East Asia Co-Prosperity Sphere, which included the Southeast Asian region. Currency plans were discussed and circulation of the existing currency of the occupied nations was to be encouraged. If problems arose, military scrip in the monetary units of the occupied country was to issue.3 Both would have the same effect; they would shield the domestic economy of Japan from the cost of these overseas campaigns. Dealing with currency and monetary problems in occupied territories presented no problems to the experienced Japanese. Military scrip had been used in the Sino-Japanese War (18941895), as it was again in the Russo-Japanese War (1904-1905) and the conflicts in China that began in 1931 and continued until the end of World War n.4 William L. Swan has described military scrip as “literally ‘campaign money’ used by armies during military operations overseas.”5 The use of die scrip allowed the aggressor or occupier to fund the campaign abroad without having to provide domestic capital. In this instance, the national income and the associated monetary system of Japan-its domestic economy-could continue as usual without bearing the cost of substantially increased military expenditures. These costs were covered by the issuance of Japanese military scrip that had no relationship to the domestic economy and its money supply; thus Japan was insulated from the high cost of an overseas war. Military scrip differs from legal tender primarily because it is not “legal”; this scrip could well be described as “military play money.”6 Legal tender represents coin and banknotes that creditors are bound by law to accept when tendered or offered in payment of money debts.7 A contemporary Japanese military source described the military scrip as having “no legal basis.” There is no law mandating its circulation. Thus in the strict sense it is not currency. It is a certificate with no time limit, no interest and no signature, and only to the extent that a creditor accepts it as payment is it effective in concluding a settlement.8 In essence, during the Japanese military occupation, the citizens of the occupied countries were coerced into accepting the military scrip with virtually no recourse. Further aspects regarding the legality of the Japanese military scrip and

32 Marilyn Longmuir

occupation currency that was issued in Burma are discussed more fully in Chapter 4.

Japanese Monetary Plans for Southeast Asia In previous campaigns, the Japanese had issued military scrip in yen denominations, giving the impression that this scrip might be exchanged later for silver or perhaps even for gold.9 In Southeast Asia, by contrast, the Japanese planned to issue military scrip in the currencies of each of the countries to be invaded if necessary and, even more radically, to value these various scrips at par with the Japanese yen. Thus, there would be Straits dollar scrip for Malaya and Singapore, peso scrip for the Philippines, and guilder scrip for the Dutch East Indies. A rupee scrip was issued later for Burma, as was a British pound scrip for other British colonies that did not use the Straits dollar.10 The British pound scrip would have been used in New Guinea and parts of Oceania. All these new currencies were grouped together as Nampo Gaika Hyoshi Gunyo Shuhyo (Southern Region Foreign Currency Designated Military Scrip). W. L. Swan suggests that the Bank of Japan be to be instructed to begin printing the currency in early November 1941.11 M. Robinson and L. A. Shaw insist this began much sooner and that the Japanese War Ministry requested the production of “military notes for ‘certain unspecified areas’ as early as 16th January 1941.” Notes for the Dutch East Indies and Malaya were ordered on April 1, 1941, and supplied to the Bank of Japan between May 23 and August 28, 1941. Notes for the Philippines were ordered by September 13, 1941.12 The date when rupeedesignated military notes were first introduced into Burma is still unclear, but a Japanese military document of March 15, 1942, refers to their intended circulation along with the Burma rupee currency.13 In the early months of the Japanese occupation, two types of military notes, one designated in dollars (intended principally for Malayan use) and the other designated in rupees were introduced for military transactions with the local population; their use was confirmed by a military ordinance dated May 1, 1942. During this period, as was the Japanese intent, the British Burma rupee continued to circulate. On September 15, 1942, the commanderin-chief of the Japanese forces in Burma issued a further edict, the Burma Monetary Arrangements Ordinance (1942), confirming the continued use of the “currency which was legal tender in Burma on December 8,1941”. For a year, this currency

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33

circulated together with the Japanese military rupee and dollar notes, but by 1943, people had begun to hoard the legal currency, and after the first quarter of 1943 it disappeared from circulation.14 A similar situation occurred in Malaya.13 Paul Kratoska believed its disappearance there was related to a perception “that its use seemed to imply a lack of confidence in the new regime and could be hazardous.”16 The situation in Burma is discussed later in this chapter, but the Japanese occupation currency began to depreciate in value in Burma in the first half of 1943 (see Chapter 4). All Greater East Asia Co-Prosperity Sphere currencies operated on the decimal system.17 This system came into operation in Burma on October 15, 1942,18 but whether the smaller-cent notes were available immediately is difficult to ascertain.19 Initially, the Japanese issued “‘Government of Japan’ notes of the following denominations: Rs 5, 1, Vi, V* and cents 50:10:5:1.” A British report of September 9, 1943 does not mention the issuance of a 10-rupee note, but that did occur. There were no coins; the small notes took their place.20 In Burma, the rupee was given the old Burmese name of kyat and was divided into 100 pya or cents; previously, the rupee had been divided into 16 annas and each anna divided into four pice. Pya had been the Burmese term used to describe this small copper coin of the prewar Indian-Burmese system, which was equivalent to one sixty-fourth of a rupee.21 The two name changes can be seen as a deliberate decision by the Japanese to influence the Burmese to accept the new currency. Interestingly, although the rupee and anna denominations were reintroduced after World War II in Burma, in March 1952 the independent Union of Burma decided to reintroduce the decimal system, under which 100 pya were the equivalent of one kyat. In fact, as early as 1944, the British had noted, with a peculiar turn of phrase, that “the modernization of Burma by the Japanese,” with its increased use of the metric system, had introduced “the international system of counting” to the Burmese.22 In addition, the newly created East Asian currencies constituted a “yen bloc.” After the Japanese takeover, all the area’s currencies were placed at parity with each other and with the Japanese yen. Thus one yen became equal with one Philippine peso (1941 value ¥ [yen] 2.13), or one Straits dollar (1941 value ¥ 2.01) or one Dutch East Indies guilder (1941 value ¥ 2.26). In 1941, one Burmese rupee equaled ¥ 1.29, but when the new monetary system was introduced, one rupee equaled one

34 Marilyn Longmuir

yen.23 In British Malaya, which included Singapore, within a week of the surrender of Singapore the yen was the equal of the Straits dollar, which had previously been worth twice as much.24 This can be seen as a carefully devised plan to bolster the value of the previously weak yen, which had been devalued in the early 1930s.25 Japan would be the beneficiary of any trade transactions with the Southeast Asian nations. Swan points out that there was “an ambiguity in Japanese monetary policy" regarding the introduction of the new scrips, because the Japanese had intended to continue to use each country’s present scrip for as long as possible without substituting their military scrip.26 This plan was certainly thwarted in Burma and Malaya by the denial by the British authorities of much of the currency of these countries to the invading forces. Because Thailand was not “officially” occupied by the Japanese, the Thai government retained a form of independence, and the baht, whose value was over 50 percent higher than the value of the yen, was not devalued immediately. When the Thai government declared war on Britain and the United States on January 25, 1942, Thailand’s foreign reserves in these countries (65 percent of total currency reserves) were frozen. No transactions could take place on these accounts, and the funds could not be repatriated to Thailand. In essence, these reserves were now lost to the Thai government, and in an endeavor to restore currency stability, the Thai government approached the Japanese government for a 200-million-fcaAf loan. Before approval of the loan, one of the conditions demanded by the Japanese was that there should be parity between the yen and the baht. The Thais refused to accept this condition, but by February 1942, the value of the baht had begun to drop in relation to the yen, and a Thai mission arrived in Japan in April to talk over financial matters. After considerable discussion, the two governments formally agreed on April 22, 1942, to a ycn-baht parity agreement, which would become effective on that day.28 The yen bloc was complete.

The Administration of Burma, 1942-1945 Burma was initially ruled by a Japanese military administration; this was the policy Japan used during its occupation of other Southeast Asian nations. This was a blow to the Burmese nationalists, who had expected independence as soon as the British were driven out. The Japanese had encouraged this expectation. In a speech on January 21, 1942, Japanese Prime

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35

Minister Tojo had promised the Burmese independence if they cooperated in the establishment of the Greater East Asia CoProsperity Sphere.29 Idealists such as the members of the Japanese Minami Kikan (Minami Organization), the previously underground organization with which the “thirty comrades,” including Aung San, were associated, were intent on demanding independence for Burma.30 But the military, particularly Colonel Ishii Akiho, a young influential staff officer in the Southern Area army, believed military strategy required that the army maintain control of Burma. Because the army was involved in complex matters, the time was not right for Burmese independence, he argued, and his view prevailed for a time.31 The delay in granting independence began to sow “the first seeds of mistrust” in the younger Burmese nationalists’ attitude toward the Japanese.33 The period of direct military rule lasted only 18 months. Burma was formally granted independence on August 1,1943; it was the first Southeast Asian nation to be granted its independence by the Japanese (it was followed by the Philippines in October). The Japanese probably hoped to gain more Burmese support for the Japanese war effort. In all likelihood, they also hoped that granting Burma its independence would inspire Indian nationalists to continue their disruption of the British war effort in India34 and to provide assistance to Japanese forces should General Mutaguchi’s planned invasion of Imphal in the Indian state of Manipur be approved.35 Although independence was part of Japan’s overall plan for Southeast Asia countries and Burma was formally granted independence, the period of 1943 to 1945 is best seen as one of indirect rule. Like a puppeteer, the Japanese army kept firm control over the country’s “political, military, diplomatic, and economic affairs through secret treaties,”36 which were considered important to the war effort. Meanwhile the nominally independent government of Dr. Ba Maw37 functioned as a mere “instrument of Japanese control.”38 Because of its association with the Japanese military, whose harsh “demands [on Burmese] for goods and services” had alienated the populace, the Ba Maw government began to lose its popularity with the Burmese people.39

Economic Disruption It was only natural that the occupation of Burma by the Japanese would create havoc in the Burmese economy. In the British colonial period, Burma’s rice exports were the largest in

36 Marilyn Longmuir

Southeast Asia; India and United Kingdom were its major markets. Rice alone accounted for 40 to 45 percent of Burma’s annual exports.40 Additionally, Burma had produced 270 million gallons of oil annually before the war.41 After supplying local demand, the majority of the refined oil products, including kerosene, were exported to India for a return of £10 million (133,333,333 rupees).42 In a successful effort to deny the use of Burmese oil to the enemy, the British deliberately destroyed the refineries and the oil wells in March and April of 1942.43 Although some oil was recovered, Japan was forced to import petrol from Sarawak in October 1943 and also from Malaya.45 Teak was also another major Burmese export, again mainly to India,46 but it was not possible to export it during the war. In 1939-1940, the value of Burma’s exports totaled 54.75 crores*7 (547.5 million) of rupees, three-fifths of which were directed to India, the supplier of half of Burma’s imports.48 This was a complementary trade: “India needed Burma’s rice, timber and oil products; Burma wanted India’s coal, textiles, iron and steel.”49 Once the Indian market was no longer there, rice growing in Burma declined dramatically; oil refineries, the pipeline, and oil wells had been destroyed and thus denied to the enemy; and the timber trade wound down. With one fell swoop, Burma’s export trade in rice, oil and teak evaporated with the arrival of the Japanese. The only exports that left the country were transshipped to Japan as loot, and there were minimal imports from Japan and its occupied territories. The Burmese economy, which had been based principally on its extensive export trade, had collapsed. The Japanese plan to capitalize on Burmese resources to assist their war effort did not prove feasible.51 Thailand and Indo-China were closer to Japan, so Japan imported rice from these countries instead of from Burma. Oil was readily available to Japan from the Dutch East Indies; it was not necessary to resurrect the greatly damaged oil wells and rebuild refineries in Burma, which the Allies continued to bomb. In 1944, oil production in Burma was still well below 10 percent of prewar figures, although some low-grade petrol (gasoline) was supplied to the Japanese military.52 The timber industry suffered, too; teak could be obtained from the closer Thailand. Thus, these three active industries declined in importance. No other Southeast Asian nation relied so heavily on nations to the west for markets for its goods, and Burma suffered accordingly. By 1942, it was estimated that Burma’s foreign trade had declined to only 5

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37

percent of normal prewar trade, if military trade was omitted.33 Within months, Japan lost control of the vital shipping lanes from Japan to the Southeast Asian “colonies.” Allied air attacks and submarines wrought havoc on Japanese shipping, and the route around the Malay Peninsula became very dangerous. By 1943, this route was used only to transport vital supplies. Thailand was the only country in the Japanese bloc that shared a land border with Burma, and there were few railways and good land routes to Burma. The notorious Thailand-Burma railway was an attempt by the Japanese to provide a railway linking Thailand with Burma; when it was completed, it was restricted chiefly to military traffic.55 Internal transport was disrupted because the retreating British had applied a scorched-earth policy to Burma’s infrastructure in an effort to deny it to the Japanese. Bridges and locomotives were all out of action,56 and oil refineries at Syriam and Thilawa and the vital oil-well facilities at Yenangyaung and Chauk were greatly damaged.57 As the war continued, Burma’s infrastructure was further disrupted by Allied bombing; Burma was the only occupied Southeast Asian country within the range of Allied bombers. Although Burma produced sufficient food to supply its population, civilian transport was needed to move these products, such as rice-from Upper Burma’s wet zone and Lower Burma’s rice fields-to-central Burma’s dry zone. Ngapi, dried and salt fish from the delta region, were needed in the dry zone, and its cooking oil was needed in the south. During the war years, civilian transport was in disarray, partly due to petrol shortages and partly due to the destruction of infrastructure; this lack of transport contributed to a poor supply of certain goods.58 At first, the Burmese were willing to accept Japanese currency at par, despite the devaluing of the Burmese currency, because it gave them “a taste of co-prosperity.” This initial euphoria did not last for long; the supply of imported manufactured goods dwindled, the remaining stocks of manufactured goods left by the British disappeared, and the promised “shiploads of manufactured goods, cheap and durable” from Japan failed to appear.59 The primary reason was that the British Navy had regained control of the Bay of Bengal in 1943. Because of the increasing presence of American submarines, the Japanese were using the sea route around the Malay Peninsula only for the transport of military supplies.60 By September 1944, the value of Japanese 1-rupee notes was

38 Marilyn Longmuir

falling in relation to the former currency. The lowest rate reported indicated that these notes were being exchanged for “8 annas [1/2 rupee] in old Burma and British India note currency.”61 However, by March 1945, as the British forces returned to Burma, for a limited time in Arakan, the British Military Administration accepted Japanese currency for relief supplies at a rate of 1 anna to each Japanese rupee.62

“Banana Money” Flourishes and Wanes In early 1942, the Japanese did not immediately ban the use of British Burma currency, whose continued use had been an initial part of their monetary plans. During the first months of the occupation period, the Japanese began to use a military scrip denominated in yen. The reason they chose yen-based military scrip probably related to the fact that the Japanese did not add Burma to the Southern Region territories until December 30, 1941. By then, the Foreign Currency Designated Military Scrip for most of the other Southeast Asian countries had already been produced. As early as April 1, 1941, the Japanese Cabinet Printing Office had been asked to print the first invasion currency notes for Malaya and the Dutch East Indies.63 In retrospect, it is not exactly clear when the rupee-designated military notes were first introduced to Burma. However, on March 15, 1942, the Japanese issued a military document that concerned the “General Plan for the Control of the Occupied Areas under the Hayashi Army Group.” It stated that in Burma, “both rupee currency and rupee military currency shall be, for the time being, circulated.” The document qualified this by adding that when a new currency system, presumably a Burmese one, was in place, these two currencies were to be withdrawn as soon as possible.64 The document also mentioned that the Indian-rupee currency should be withdrawn from circulation without delay.65 As late as October 1943, the Burmese Intelligence Bureau reported in addition to the Japanese-introduced rupee notes, the British Burma rupee currency was still in use in Burma,66 but E. Maung suggests that the currency began to disappear after the first quarter of 1943 67 Burmese observer U Hla Pe has suggested two reasons for this. Banks no longer issued Burma currency after it was deposited,68 reissuing Japanese occupation currency instead, and the feared kempeitai (Japanese military police) began to arrest as spies anyone found in possession of the Burma currency.69 In place of coin, the Japanese introduced small-

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39

denominated paper money, which the Burmese disliked.70 The Burmese began to hoard prewar small coins, in addition to the more valuable coins like Indian silver rupees. 71 Soon it was reported that the Japanese would arrest anyone found with silver money as a spy.72 This course of action by the Japanese may have been influenced by the fact that the silver rupee was used extensively as payment by the clandestine organizations of the Chindits and the Allies as they launched their forays into Burma. Even Captain Hugh Seagrim asked the British for silver rupees for his Karen spy network from his hideaway in the Karen Hills.73 As well, the Japanese military “M & B” series of Straits dollars, printed earlier for military use in Malaya and Burma, were also soon circulating in Burma. A 1944 report from the controller of finance and accounts of the Civil Affairs Service (Burma), Brigadier A. K. Potter, advised that these “M & B” series notes were being issued “to Japanese troops and the local populace on the Salween front,”74 but whether in Burma or just in China is not clear. Throughout the Japanese-occupied territories, small notes with a value of 10, 5, and 1 cents were introduced, though in the Philippines the word “centavo” was substituted for cent. A common design and size were used for each value throughout the occupied areas of Burma, Malaya, the Philippines, the Dutch East Indies, and Oceania. Each area was designated with a different color and a code letter. For example, B stood for Burma and M stood for Malaya. The decimal system was new to Burma, and the design plate for the 10-cent note was used, with a slight variation, for a quarter-rupee note,73 presumably as a replacement for the 4-anna coin. In Burma, although the word “cent” appeared on the notes, the word pya came to mean one cent.76 Throughout Southeast Asia, the military scrip introduced by the Japanese was referred to as “banana money,” a euphemism derived from the banana plant which appeared on the 10-dollar notes issued as occupation currency in Malaya and Singapore,77 and the East Indies, where it was a prominent feature on their guilder-occupation currency.78 On Burma’s rupee currency, by contrast, the principal feature was not bananas but pagodas. Rupee notes were issued commencing at 1/2 rupee, followed by 1/4 rupee, and then by 10-, 5- and 1-rupee notes; the 1/4 rupee, the equivalent of 25 cents, or pya, was unique to Burma. Unlike the British, the Japanese did not issue 10,000, 1,000 or 100

40 Marilyn Longmuir

rupee-valued notes, though toward the end of the occupation, probably early in 1945, the Japanese finally found it necessary to issue Rs 100 notes.79 The only surprise was that this move had been delayed so long. If one excludes the 10,000-rupee note, the 10-rupee notes were the most popular in 1938-1939; they accounted for 41.7 percent of the India and Burma notes in circulation. The 100-rupee note accounted for 33.6 percent of the notes in circulation, and the 5-rupee note accounted for 18.1 percent. (Separate figures are not available for Burmese currency.)80 It is apparent that even in this prewar period, the Rs 100 note accounted for one-third of note usage. The words “The Japanese Government” were written boldly in English on the obverse side of the occupation notes, as was the value of the currency.81 The notes were not numbered, nor did a promise to pay appear on them.82 This contrasted with the recent 1938-1939 British Burma notes issued by the RBI, which were numbered and bore the words “Promise to Pay the Bearer on Demand at any Office of Issue in Burma” the amount of rupee value.83 To Burma’s Buddhists, the pagodas were decidedly irreverent; they were also particularly offensive to Burmese women, who considered it “improper to tuck the notes into their htamein (skirts).”84 It has been suggested that the pagodas were “not [even] of Burmese pattern.”85 Until July 24, 1941, when the British issued a 1-rupee note, the 5-rupee note was the lowest denomination of paper money issued in British Burma. (The new note, printed by the Government of India86 rather than the RBI, was needed because of the shortage of silver.) Since people were accustomed to coin for all smaller denominations, the Burmese disliked the plethora of paper currency issued by the Japanese for the smaller denominations.87 Although there was wide circulation of the Japanese notes by October 1943, the Burmese were said to have found them inferior to the previous British Burma issue because of their poor-quality paper, colors that ran, the detested pagoda design, the fact that no promise to pay was inscribed on them, and that no coin was introduced to back this paper money.88 But Brigadier Arthur K. Potter was impressed with the notes,89 which were printed on Japanese paper that contained kudsu and mitsumata fibers that gave the paper an unusual texture.90 In January 1943, a report in the German press stated that the notes issued by the Japanese were meant to replace the British Burma notes destroyed during the evacuation and were not intended to

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41

contribute to inflation.91 A point of disfavor with the British was that the notes were not numbered a feature that would lataprevent the British Military Administration from ascertaining the exact amount of notes printed. Serial numbers not only allow a government to record the number of notes issued; they also provide a check against forgeries. The British also criticized the Japanese for printing money too liberally. After the war it would be estimated on the basis of Japanese sources that S60 crores of Japanese-occupation notes were produced,92 an amount roughly 16 times the amount of British Burma currency in circulation at the time of the Japanese invasion.93 Prices began to rise, even in the first year, and two scales of value prepared after the war ended showed that by June 30, 1943, the value of the occupation currency fell between 25 and 28.5 percent. A year later, the Japanese rupee had fallen a further 60 to 75 percent from its initial value (see Chapter 4 for inflation table). Inflation resulted from the proliferation of notes, and even as early as October 1943, rumors were circulating that the Japanese, members of the military and civilians alike, carried portable presses with them to meet the demand. Other sources reported that the notes were printed not only in Rangoon but also in Mandalay and Myingyan.95 However, this was not tnie. Dr. Set, who had been finance minister in the Ba Maw government from November 1943, stated to Brigadier Potter in an interview after the recapture of Rangoon on May 26,1945, that all the Japanese notes “issued in Burma were printed in Japan; the rumour that these notes were printed in Burma on portable presses carried round by the Jap [anese] Army was not true.”96 Nonetheless, Robinson and Shaw have queried this statement. Although one British Military Intelligence report has suggested that notes that were issued after November 1944 were printed in Bangkok,97 Robinson and Shaw are more inclined to believe that the narrow Japanese [Burma] 10- and 100- rupee notes with silk threads were produced “at the Kolff Printing Works in Jakarta, using paper supplied from the Pataran Paper Company.”98 The new military scrip was initially issued by the Yokohama Specie Bank, which had operated branches in Burma before the war but was closed down on December 8, 1941." The bank returned to Rangoon with the occupation troops and later opened upcountry branches in Maymyo, Moulmein, Prome, Bassein, Taunggyi, Lashio, Toungoo, Tavoy, Mergui, Myingyan, and

42 Marilyn Longmuir

Mandalay.100 The Yokohama Specie Bank continued issuing military scrip until April 1, 1943, when this task was taken over by the Nampo Kaihatsu Kinko (Southern Regions Development Bank).101

Currency Circulation Figures After the British recapture of Rangoon on May 3, 194S (the Japanese having departed on April 24), Japanese forces retreated eastward toward Thailand and Malaya, and economic turmoil in Burma intensified. As the British fought their way southward toward Rangoon, the value of the Japanese currency depreciated almost daily. In later years it was contended that at this time, 100 Japanese rupees were worth only five British rupees, or onetwentieth of the nominal value of the rupee.102 Shordy after the recapture of Rangoon, Brigadier Potter visited the city as controller of finance and accounts (CAS[B]) and reported observing that the streets were still littered with lower-valued Japanese notes. At the Reserve Bank building, these notes still “lay thick on the floor,” providing an indication of the value looters had placed on the currency. On May 21,1945, Ian Morrison, special correspondent to the Times, issued a communique from Rangoon that described the situation as “Currency Chaos,” mentioning that some unnamed observers believed die Administration should exchange the Japanese occupation notes “for a certain period at a rate, say, of 100 to 1.” This, Morrison hoped, would provide the Burmese with negotiable currency with which to purchase goods.104 Although Morrison’s article would raise new problems for Potter, his immediate task was to estimate the amount of Japanese currency in circulation. This figure had direct bearing on whether the British government would relent and give limited value to the rapidly depreciating Japanese-occupation rupee. In June 1945, Potter advised C. E. Key of the War Office that on his last visit to Rangoon he had received further information that implied that by April 1945 the Japanese had issued rupees totaling 350 crores (3,500 million rupees). Potter noted that this was a revision upward from an earlier estimate of 231 crores as of March 1945, which had been supplied by Dr. Set, the finance minister in the Ba Maw government, and Potter was following up this claim.103 Further correspondence between Potter and Key revealed that A. W. Benson, a former Chartered Bank of India, Australia and China employee who was subsequently employed by the Nampo Kaihatsu Kinko, had been keeping a running total

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of the amount of Japanese-rupee currency in circulation. He reported that on April 7, 1945, the figure stood at 350,46,05,723 (approximately 350 crores) of rupees.106 These figures compared with a May 1942 circulation of 34.5 crores of British Burma and Indian currency-a circulation that had already been inflated by the British war effort. In addition to the Japanese currency, it was believed that the Burmese had secretly hoarded a large quantity of British Burma notes plus a substantial quantity of Indian 1rupee notes. Even allowing for wastage, it was anticipated that close to 20 crores of rupees would return to circulation. 07 F. S. V. Donnison, who has written authoritatively on the British Military Administration in this period in East Asia, gives a different figure. He states that “up to the fall of Rangoon, the Japanese had issued in Burma some Rs.231,000,000 [231 crores] worth of currency.”108 However, this statement is based on Potter’s early estimates, not the corrected figures he issued in June 1945. To add to the confusion, during the interval of ten days between the Japanese withdrawal from Rangoon and reoccupation of the city by the British, considerable looting took place throughout the city; “bands of dacoits” engaged in a frenzy of plundering of military supplies left behind by the Japanese and of wealthier homes. Nothing transportable was safe.110 During this period, a further 8.5 crores (85 million) of Japanese rupees, which had been left behind in the Reserve Bank of India’s vaults, were looted.111 These premises had been occupied by the Nampo Kaihatsu Kinko, which had been distributing the Japanese-rupee currency since April 1943. Donnison has quoted a further figure of “Rs 3,000,000,000” [300 crores] as being issued by the retreating Japanese Army in the four months (possibly the end of March to mid-August) prior to their final surrender112 when the Japanese forces were trying to hold the southeast comer of Burma. Although this figure seems ridiculously high, the occupation currency was fast depreciating in value, and it is not surprising that the Japanese forces issued such a substantial amount as they endeavored to buy support and supplies. The final figure of 560 crores issued during the occupation113 seems relatively close to the figures supplied to the Bank of Japan Foreign Business Office by Nampo Kaihatsu Kinko, which stated that the amount of occupation notes issued at August 15, 1945, was 565,55,48,000 (approximately 5,655 million) rupees, or 565.5 crores.114

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Burma State Bank With the encouragement of the Japanese, the new Burmese government moved quickly to establish a national banking system. In August 1943, the same month in which independence was granted, Dr. Ba Maw formed a committee of ten eminent Burmese to establish “a State Bank and a currency system.”115 Most prominent among the committee’s members were Dr. Thein Maung, then finance minister; U Set, the future finance minister; and U Ba Maung, who had had a long and successful career as manager of the Pegu Central Cooperative Bank and was considered to be “Burma’s outstanding financial figure.”116 He therefore became the first governor of the State Bank.117 The committee was assisted by Japanese financial advisors. The committee reported in October 1943, and shortly thereafter the State Bank Act was passed.118 The Burma State Bank opened its doors on January 15,1944, with a capital of Rs 1 crore (10,000,000 rupees) supplied by the government, which British intelligence sources believed was loaned by the Japanese.119 The bank was to act as a central bank for Burma and the Shan States120 and as a trading and savings bank, paying interest on current (checking) accounts at .5 percent and on savings bank deposits at 2 percent.121 A flurry of publicity tried to encourage Burmese to deposit surplus funds. At the opening, U Set urged the people to deposit “idle money” in the bank and promised that this money would be used for “productive purposes.” Dr. Ba Maw was the bank’s first depositor, banking one lakh (100,000 rupees) “on behalf of the people,” which were probably government or party funds. Like U Set, he urged the Burmese to save. Advertisements promoting “public saving” also appeared in the press. By the end of January 1944, the bank held deposits totaling Rs 55.6 lakhs (5,560,000 rupees) and had loaned 3.9 crores (39 million rupees). The amount of loans far exceeded the amount of capital and deposits. This was not normal banking practice and was most irregular. Burma Intelligence Bureau sources, discussing this anomaly, suggested that the funds to cover this shortfall were either borrowed from elsewhere, presumably other banks, or were provided by the issuance of paper money (presumably supplied by the Japanese).122 There was no mention of to whom the loans were made, and it is possible that the bank began to cover the government’s shortfall in revenue The rapid deposit of Rs 55.6 lakhs, which was still small in comparison to the amount that had been loaned, surprised British

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intelligence personnel. One explanation for this large deposit given by an observer who was in Burma was “that everyone had plenty of money which could not be spent because there was nothing to buy.”123 Most of these funds were deposited in the current (checking) accounts, which could be withdrawn more quickly than the savings accounts.124 Because the Japanese supplied only one crore to the government for capital,123 further funds to support the extensive loans must have been raised either from the Japanese military administration or from the Japanese banks operating in Burma. In 1948, J. Russell Andrus, writing of the Bank, suggested that it was “principally a channel through which vast quantities of irredeemable paper money were issued, for there is evidence that it helped support the government and little evidence that its earnings or deposits were proportionately great.”126 Andrus also recorded that although the Bank planned to open numerous branches throughout Burma, this did not occur.127

Burma State Banknotes The Bank also planned to issue currency.128 U Hla Pe relates that “currency was one of the many root causes” of the people’s undernourishment, and he describes how efforts were made after the establishment of the independent government to strengthen “Burma’s economic structure.”129 U Hla Pe reports that a research mission was sent overseas to Manchukuo, Japanesecontrolled China, Formosa (Taiwan), and the other Greater East Asia Co-Prosperity Sphere colonies, but he gives no dates. On its return, the mission recommended that Burma be allowed to control its own currency.130 On August 4, 1944, a British Far East (FE) Weekly Intelligence Summary advised that “an order has been placed in Tokyo, through the ‘Burmese Ambassador’ for the printing of 3,000 millions Burma State Banknotes. The Southern Development Bank will finance the expenditure.” A further notation stated that officials did not know the denomination of the ordered notes, nor did they know the total amount ordered, although it was pointed out that the total currency in prewar Burma was approximately 200 million rupees [20 crores]. U Hla Pe, who was director of press and publicity (1942— 1945) under the Ba Maw govemment,132believed there was an understanding given by the Japanese to the government that the Japanese notes were to be withdrawn when the Burmese notes were printed.133 This would have followed the usual Japanese

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occupation practice of issuing military scrip until the establishment of a Japanese-controlled government. In turn, this government would establish its own central bank, which would then be given authority to issue its own currency, and the military scrip would be withdrawn. Japan had followed this procedure since the Sino-Japanese War of 1894-1895, and Japanese-controlled governments had issued their own currencies in Taiwan and Korea and later in Manchuria and China.134 In this instance, the Japanese had issued rupee occupation currency, but the Ba Maw government intended to issue Burma State Banknotes. At the launch of the Burma State Bank on January 15, 1944, U Set had already predicted the bank's future involvement in the issuance of currency notes and coin.135 However, the notes never appeared. U Hla Pe has confirmed this, stating that the Burma State Banknotes never reached Burma, although sample notes “graced the notice boards of the three banks in Burma.”136 U Hla Pe does not clarify whether this occurred only in Rangoon or throughout the country. U Set, who was then Ba Maw’s finance minister, told the British that no Burma State Banknotes were received, though the government was anxious “to carry out a currency conversion.” U Set also reported that the Burmese government was continually put off “with excuses [by the Japanese,] and [they] never did more than produce specimens of the Rs. 5 and Rs. 10 Burma State Banknotes.”137 There are two possible reasons these notes never appeared. First, as the war crisis deepened, the Japanese government may have considered the printing of Burmese money less essential than other goods. In early 1944, the Japanese were fighting a war on many fronts in Burma-in the Akyab region of Arakan-against the persistent Chinese in the Hukawng and Salween valleys, and their planned invasion of India, which was to end in defeat, was about to begin. In the Pacific Ocean, particularly in the Oceania region, the American fleet was on the prowl, and by midyear, the Americans had captured the Marianas. In October 1944, the Americans landed on Leyte Island in the Philippines. Earlier, on June 13, 1944, American B-29s bombed the island of Kyushu.138 The previous year, in the summer of 1943, American submarines began commanding the seas surrounding Japan and along the Indochina coastline. The Japanese lost almost a ship a day.139 The second reason may have been the desire of the military to continue to directly control the issuance of the occupation currency at a period when further military activity was in

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progress in Burma rather than face the need to rely on a third party, the new and untried Ba Maw government, to do their bidding. The latter reason seems the most probable one. To fund further campaigns, the Japanese needed to control the currency, and the simplest way to do this was to issue their own unsupported (by bullion or legality) military scrip without interference from the Burmese government. After Britain’s reoccupation of Burma, U Set reported that toward the end of the occupation the Burmese government was so desperate for Japanese currency, which had become difficult to obtain even from the Japanese, that it printed Rs 100denomination Burma State Banknotes on its own press in Rangoon, using paper intended for state lottery tickets. However, he said, these notes were never issued.140

Other Banks The Japanese invasion saw the demise of the numerous foreign banks that were operating in Burma. Most were based in Rangoon, where the foreign-exchange banks were closely associated with Burma’s large export trade. This vacuum was immediately filled by the Yokohama Specie Bank, which had only recently closed its doors on December 8, 1941, when Japan entered the war.141 This bank became the most prominent of the Japanese banks. Its chief office was in Rangoon, and by 1945 it had eleven branches at Bassein, Lashio, Mandalay, Maymyo, Mergui, Moulmein, Myingyan, Prome, Taunggyi, Tavoy, and Toungoo.142 The Yokohama Specie Bank was given the task of liquidating the foreign banks and it offered to pay 10 percent of the value of deposits to customers if they could provide proof of ownership. The bank also endeavored to persuade debtors to repay loans advanced by the British banks. As Andrus remarks, “Debtors and creditors alike ignored the request.”143 Closely associated with the Japanese Military Administration, the Yokohama Specie Bank was involved in the transformation of the forty-five branches of the Bank of Chettinad, the leading Chettyar144 firm, into the People’s Bank.145 There were at least another 1,500 of these firms, most of which were involved in agricultural lending, but there had not been a great deal of Chettyar lending since the world slump in 1931.146 As early as 1942, the Japanese Military Administration intended to open a People’s Bank, initially to be capitalized at Rs 1 lakh (100,000), but soon afterward it was announced that the Bank of Chettinad would change its name to the People’s Bank

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and reopen.147 There were four Indian directors, presumably Chettyars, and Chettyars also managed some branches, but the Japanese oversaw the bank’s activities.148 Andrus believes that there were few loans made and that deposits were minimal.149 Two other Japanese banks followed the Yokohama Specie Bank into Rangoon. The major one, the Nampo Kaihatsu Kinko (Southern Regions Development Bank) played the greater role. Representing the Bank of Japan, it was to eventually fund the newly independent Burmese government of Dr. Ba Maw and to provide long-term finance (in excess of 100,000 rupees) for business firms.150 The Chosen Bank was the third Japanese Bank,151 but the Azad Hind Bank also opened, possibly in 1944, and was associated with the “Provisional Government’’ of Subhas Chandra Bose and his Indian National Army (INA).152 Funds totaling Rs 15,00,00,000 (150 million) were raised by Bose from Burmese Indians, and presumably the Azad Hind Bank handled these funds.

Ba Maw Government’s Financial Woes Financially, the Ba Maw government was in deep trouble. When the Japanese granted Burma independence in August 1943, its budget for the ensuing year projected a deficit of Rs 14,60,00,000 (146 million); the 1944-1945 budget showed a further deficit of Rs 18,00,00,000 (180 million). These budgets included expenditures for the purchase of paddy. In the first year Rs 5,86,85,140 was to be spent on this paddy purchase scheme, and in the second year Rs 14,60,00,000 was allocated. The first deficit was to be covered by loans from the Japanese Southern Regions Development Bank, while the second was to be covered by loans from the insolvent Burma State Bank. It can only be assumed, however, that these funds were provided by the issuance of “unbacked paper money;”154 there were not sufficient assets in the government coffers to cover the issuance of the currency. In normal circumstances, the government would have received revenue from custom receipts, income tax, forestry revenue, excise duties, and land revenue that would include fisheries; petroleum royalties; mining royalties; rents and fees; excise duties on liquor, opium, and other drugs; registration of deeds; betting taxes; taxes on motor vehicles; mill production; stamps; and the state lottery. There would have been large discrepancies in the war period in the income received from

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revenue sources such as customs, income tax, excise, and petroleum royalties. Burma Intelligence Bureau sources seemed confused about whether the Ba Maw government of Burma received any income from customs or whether the Japanese controlled customs receipts. An early agreement published by the Japanese commander of the Burma Independence Army in March 1942 advised that custom duty would be controlled by the Japanese, and intelligence sources in 1944 believed that this might still have been the case.155 In 1940-1941, these receipts earned the government Rs 3,99,37,764. Income tax received in 1940-1941 amounted to Rs 1,65,01,427, compared with 19421943 tax receipts of Rs 22,07,322. Excise duties of Rs 1,70,97,807 were collected in 1940-1941; however, 1943-1944 estimates of Rs 53,48,000 were significantly lower. Petroleum royalties, which accounted for Rs 41,66,154 during 1940-1941, were nil in 1942-1943 and were estimated at only Rs 2,07,000 in 1943-1944.156With revenue receipts so markedly reduced, it was no surprise that the Ba Maw government was struggling financially.

Introduction of Independence Bonds The financial problems were recognized early, and the Ba Maw government made one more attempt to raise additional funds from the public: an issue of independence bonds, printed in Japan, with a value of Rs 10 each. The term of the bonds was for ten years, and although no interest was payable on the bonds, there were half-yearly drawings for prizes. The two major prizes were for 5,000 rupees each. Four minor prizes were offered at Rs 1,000 each, and 120 smaller prizes were offered at Rs 50;157 altogether the prizes totaled Rs 20,000 each half-year. These bonds went “on sale from August 1943, or (according to ‘The Burmese Era’) from the 20th November, to the end of January in Rangoon and the end of February in rural areas.” The issue was for Rs 20 lakhs (2 million) and by January 1, 1944, a report claimed that Rs 17 lakhs (1.7 million) had been “sold in the first month.”158 But the Burma Intelligence Bureau believed “that the sales were flagging.” In uncertain times and in the context of rising inflation, an independence bond was not a safe investment. There was no guarantee that the government would be in power in ten years, and day by day the value of the bond depreciated in relation to purchasing power. As the Burma Intelligence Bureau pointed out, “As a gamble for prizes the bonds were much less attractive than the State Lottery.”159 Canny Burmese ignored the

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bonds and invested in gold, jewelry, and goods.

State Lottery When instituted by governments, lotteries are usually a painless way to raise revenue. When King Thibaw (r. 1878-1885) found his treasury funds depleted, he introduced such an innovation to the kingdom of Ava, but it was not a monetary success.160 But the idea reemerged after Burma separated from India in 1937.161 The prewar Ba Maw government introduced a popular state lottery to replace the revenue that was lost when capitation and thalhameda taxes162 were gradually reduced and then finally abolished in January 1942. This new source of revenue proved very remunerative; 40 percent of the gross proceeds were retained by the government.163 In 1940-1941, the government’s share of the revenue was Rs 27,07,826, less an expenditure of Rs 1,97,382. Expenditures in 1940-1941 and 1941-1942 averaged between 7 and 8 percent.164 Lotteries continued in the first half of the 1941-1942 financial year under the incumbent British Burma government, although they were canceled in the months following the Japanese invasion. Shortly after Dr. Ba Maw and his executive administration were installed in August 1942, the state lottery was reopened by his administration, and it continued after the Japanese granted independence. Street sellers sold tickets at two rupees each; they were also available at the state lottery office and at post offices and government treasuries and sub-treasuries throughout Burma. Prizes continued at the prewar values. For every 10 lakhs (1 million) of rupees subscribed, six lakhs (600,000 rupees) of prize money were paid, including one major prize of one lakh (100,000 rupees) and further smaller prizes of various amounts.165 None of the early wartime lotteries were as successful as the prewar ones, but the receipts of the fifth lottery, which was drawn in February 1944, were estimated at Rs 6,95,000, which was an improvement on the previous four lotteries. In the fifth lottery, prizes totaling Rs 4,17,000 were distributed, and assuming this still represented 60 percent of total proceeds, gross revenue retained by the government should have been Rs 2,78,000, less expenses.166 This was substantially lower than the returns during the British period, and increased expenditures ate away at revenue.167 Ticket sales were gradually increasing, but the farming communities, whose crops were unsold or unplanted, could ill afford to buy tickets. In 1944, the Burma Intelligence Bureau

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believed that as the people’s confidence in the stability of the Ba Maw government increased, lottery revenues might continue to grow.168 However, the reverse would occur as confidence in the government declined.

Inflation “U Hla Pe’s Narrative of the Japanese Occupation” provides a vivid account of how difficult daily life was under the occupation. Nevertheless, some Burmese were able to take advantage of the situation, and U Hla Pe describes how “the policy of the army contractors was ‘say any amount so long as the materials required were obtained for the Army.’”169 In his account, U Hla Pe stated simply, “Men and women-specially the latter-made money. They supplied all requirements of the [Japanese] Army or the firms attached to the Army at exhorbitant [sic] prices.”170 As the remaining stocks of manufactured goods left by the British disappeared, only “arms and ammunitions, sake and comfort women” were imported, while the Burmese found themselves supplying food, cattle, timber, minerals, and even clothing to the army.171 But the Japanese quartermasters and army contractors who were prepared to pay any price to obtain goods for the army contributed as much to the increasing inflation as the Burmese who sold them the goods at inflated prices. In addition, many parts of the Burmese economy were directly under Japanese control. U Hla Pe contends that “building materials, transport vehicles and vessels, medicines, cattle, clothes . . . were to all intents and purposes a Japanese monopoly.”172 Paul Kratoska describes a similar trend in Malaya in 1944 and 1945 and attributes the depreciation in the Malayan currency to the issuance of notes by the Japanese to cover expenses in a period when there was “litde economic activity . . . taking place.”173 As goods disappeared, prices rose dramatically. A simple table sets out the rise in prices: Table 2.1. Rangoon Market Prices Commodity Prewar price March 1943 (Rupees) (Rupees) Rice 18 10-11 (3 baskets)

Dec. 1943 (Rupees) 15-25

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Cooking oil 7 26-27 95-140 (10 viss) Dried fish 40-60 600-625 900-1400 (100 viss) Chilies 37-40 260 500 (100 viss) Onions 25 65-95 1100 (100 viss) Ngapi 40 220-300 350-425 (100 viss) Source: Burma Intelligence Bureau, Burma during the Japanese Occupation, vol. 2 (Simla: Government of India Press), 241 Clothing, too, escalated in price. In Mandalay, cotton longyis [Burmese long skirts] that had sold for Rs 1.5 before the war were Rs 8 each by February 1944, and cotton shirts that had also cost Rs 1.5 before the war were Rs 25 by early 1944.174 U Hla Pe quotes the price of “meat, fowl or pork” toward the end of the occupation as Rs 600, compared to Re 1 before the war. He tells the tale of a district judge who was traveling by trishaw (“a bicycle side car combination”) and stopped at a fruit stall to buy a bunch of bananas for his children. He could not afford the 10 rupees for the fruit. “The trishaw men [sic] intervened and said if ‘Uncle wanted them for his children’ he would make them a present for them.”175 U Hla Pe presumably inserted this anecdote to show how the middle class, especially those employed by the government, were suffering financially, while a trishaw man, possibly a wheeler dealer and thus one of the “nouveau riche,” could afford to make such a gesture. As prices rose due to scarcity, efforts were made to stabilize them by rationing and price control, but these measures were not successful. The black market continued to flourish, and there was widespread price evasion. On August 22, 1943, rationing was temporarily withdrawn, and a New Light o f Burma editorial described the situation in these terms: “As soon as prices were controlled everything disappeared. As soon as the control is lifted the goods will reappear suddenly.” The Greater Asia newspaper of August 29, 1943, described it as “a game of hide and seek.”176 Part of the problem was caused by the fact that Burma’s prewar wholesale trade had been in the hands of European, Indian, and Chinese merchants who, by large shipment of goods throughout the country, had managed to

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maintain stable prices. Now this wholesale trade had devolved to the inexperienced Burmese, though Burmese women still continued to manage the country’s day-to-day retail trade in the markets and bazaars.177 The smarter Burmese began “to invest in 17ft goods and gold,” avoiding the accumulation of currency. Notices in shops read, ‘Today’s price is today’s price-and tomorrow’s price will be tomorrow’s-Hesitate and you will repent-Buying now your money will be well spent.” U Hla Pe also heaps scorn on the “Khit thit pwe-sa-the New Order Broker, the Nouveau Riche of New Order Burma,” the wheeler-dealers of the Japanese occupation, the black-marketeers making and spending fortunes with “a wad of notes above his pockets almost up to his nose.” He explains that the black marketeers bought and sold whatever made money, such as “pins and motor cars, onions and potatoes, junk and opium, women and wine.” U Hla Pe is particularly disparaging of these khit thit pwe-sa, which he describes as a “parasite class.”179 As prices escalated, the cost of supplying the Japanese army with food and general supplies began to climb. Faced with rapidly burgeoning inflation and unable to increase the supply of goods or drastically increase the level of taxation, the Burmese government could meet their own costs only by relying on the Japanese to continue to push money into the economy. The worsening situation is clearly shown in figures relating to public finance. As the Burmese economy declined, the government was faced with decreasing revenues while at the same time experiencing decided inflation. In 1944, the budget for the year ended March 31, 1945, showed anticipated revenues of Rs 69.000.000, as against the 1941-1942 estimate of Rs 171.318.000, which was the last budget prepared during the British period. For the previous year, 1943-1944, government revenue was shown as Rs 68,732,000 (customs revenue not included) as against expenditures of Rs 129,417,140, leaving a deficit of Rs 60,685,140. The Burma Intelligence Bureau believed that the only way this and future deficits could be covered was by the “steady use of the printing press.”180 Inflation was progressing. By June 1944, British Burma rupees were being exchanged at a premium for Japanesesponsored rupees; the British Indian silver rupee was being exchanged for four to five Japanese rupee notes.181 By the time of the British return in 1945, the value of the occupation currency had sunken so far that for a limited time in Akyab, the British Military Administration was exchanging one British

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[Indian] anna for one Japanese rupee, the equivalent of 16 annas.182 In February 1945, the Times special correspondent in central Burma reported that the Japanese notes had fallen to “one-twentieth the value of the Indian and Burmese notes.”183

Infiltrating Indian Currency into Burma Even after the retreat, the British remained active in Burma’s financial affairs. They did so through the infiltration of Indian currency and forgeries of occupation scrip. There are two documented cases of infiltration. The first concerns the case of British-headed networks of local resistance against the Japanese. Some British military personnel, such as Captain Hugh Seagrim, never left Burma. As the British retreated, Seagrim, who had been training levies184, stayed behind in the Karen Hills. There he maintained a lone British presence, rallying his Karen friends and waiting for the British return. Eventually, almost a year later, on February 18, 1943, a small group of Karen were dropped by plane in the Karen Hills,185 but it was another eight months before a British officer and five more Karens arrived with wireless equipment.186 Then, at last, Seagrim was able to transmit information received from his Karen associates. By October 1943, British intelligence was aware that the Japanese had driven “coin” underground. This involved the simple procedure of recalling all small coin, the annas and pice, and replacing them with the new occupation cent notes.187 This decision was disliked intensely by the Burmese and it was believed that “many lakhs worth were hidden and still being hoarded” and used in deals between friends.188 It was no surprise, then, that one of the messages from the Seagrim group requested “3,000 rupees silver” as well as other items.189 But the Japanese soon disrupted Seagrim’s network, killing his British associates and torturing and carrying out reprisals against the loyal Karens. To protect his Karen friends, Seagrim gave himself up in March 1944.190 While Seagrim was in hiding in the Karen Hills, Lieutenant Colonel Orde Charles Wingate was developing and initiating his plans for long-range penetration groups, also known as Chindits (from a mispronunciation of the Burmese word for lion, chinthe).191 The Chindits were divided into columns equipped with wireless transmitters and operators who would arrange supply drops by air; they were to enter Burma and attack far behind the enemy lines, destroying enemy installations and strategic positions.192The Chindits almost acquired the legendary

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status of their namesake, the chinthe, though opinion today tends to devalue their effectiveness. On their forays into Burma, the Chindits carried with them Indian currency (not the RBI Burma rupees that had been denied to the Japanese), coin in particular, presumably Indian silver rupees, to reward helpful Burmese and pay for supplies. The coin was heavy to carry, but though the local Burmese accepted the notes, they preferred coin; they were “overjoyed at receiving even a part payment in coin.”193 In these rural areas, coin had been the normal means of payment in prewar Burma and was more tangible than paper money. Indian coin was used because no Burmese coin had ever been minted; though the Government of Burma had planned to eventually issue coins. As Justice Blagden of the Burma High Court would note in 1947, the Japanese never successfully drove out the king’s rupee. Not only did villagers value it, but also “every column of General Wingate’s forces introduced and put into circulation more of them.”194

Forgeries The British also attempted to forge Japanese military scrip and to circulate this scrip by supplying the notes to their agents. This scheme was developed under the code name Grenville. The idea came from Mr. J. A. T. Galvin in Chungking in March 1942, and the forgeries, denominated in rupees and dollars were specifically aimed for use in Burma and Malaya.195 Galvin was an operative with the Special Operations Executive (SOE) who was ostensibly working as an advisor to the Institute of International Relations (UR), a Chinese-run intelligence and propaganda organization in Chungking that was partially funded by SOE, a British covert organization.196 When the idea of the British forgeries was first put forward, the RBI was not in favor, “fearing reprisals in kind.”197 After delays, however, SOE, one of the twelve secret organizations operating in the SEAC (South East Asia Command) region, began printing the notes in England.198 Eventually, in addition to the notes destined for Burma and Malaya, Siamese ticals (bahts), Nanking dollars bound for China, and other forged occupation notes for the Netherlands East Indies were printed and put into use.199 The printing of counterfeit notes was not an easy matter. First, mint specimens of notes had to be found, and then plates had to be made. The British endeavored to print on paper identical to that used by the Japanese. Apparently unaware that the Burmese were accustomed to receiving notes in mint

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condition, the SOE aged the notes in an effort to make them less conspicuous. They did so first by soaking the notes in weak tea, then by “folding and crinkling, and finally [by] rubbing in a judicious amount of dirt.” By July 1944, the forgeries were finally on their way to India. In all 1,000,000 10-rupee notes and over 1,000,000 1-rupee notes were forged in England and sent out by ship. Force 136201 took the role as banker and set up a system of accountancy to cover their issue and those of other forgeries. In 1945, British forgeries were introduced to Burma.202 In early 1945, agents such as those employed by Force 136 carried these notes into Burma on a clandestine guerrilla operation, which was designated Operation Character, involving nearly 12,000 officers and men who were situated behind the enemy lines in Burma, from north of Maymyo to close by Rangoon.203 “One party going into Burma carried 10,000 genuine Burmese and Indian rupee notes, twenty sovereigns (these were only to be used in emergencies), 204 and 15,000 Grenville, as the counterfeit military notes were code-named.”205 The Burmese and Indian rupee notes were a sure indication that the Allied forces were returning206 and were also used as a safeguard in case the Grenville were not accepted. The coin was carried because the Burmese hill tribes preferred coin. They particularly disliked the Grenville that had been deliberately soiled but “were [prepared] to accept any [Grenville] in mint condition.” These they kept ‘“flat in a book or carefully rolled.’”208 Anyone knowledgeable in Burmese currency matters should have been aware that Burmese preferred mint notes, having become accustomed to the prewar practice of Burmese banks of always issuing mint notes. Nevertheless, it was not unusual for governments to supply agents with counterfeit notes. Japanese agents carried forged notes-in particular, Indian 10-rupee notes.209 On examination, “The notes were slightly smaller than the genuine, the coloring was not quite right, and the paper was limp and without ‘crackle.’” 10 John L. Christian also mentions in a 1945 book that “British Burma currency notes have suffered somewhat from a flood of excellent Japanese counterfeits.”211 In all probability, when Christian described the currency notes as “British Burma,” he meant Indian notes circulating in Burma, as British officials have only ever mentioned the counterfeiting of Indian notes. The RBI currency note most susceptible to forgery was the Indian Rs 10-denomination note. In a letter to C. E. Key at the War Office, Brigadier Potter explained that “apparently the Rs. 5

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and Rs. 100 are much more difficult to forge.” Potter also pointed out that the forgery of Rs 5 notes was not worthwhile compared with that of Rs 10 notes and that “Rs.100 forgeries are difficult to pass.”212 He had been informed that the Indian authorities did not anticipate the appearances of forgeries of their 5-and 100-rupee notes, and none did occur. To combat the Indian Rs 10 forgeries, a new series of Rs 10 notes was printed with a special security watermark by mid-1944.

Conclusion These years, 1942-1945, are vital to an understanding of the monetary chaos with which the British Military Administration was forced to contend as they planned for the return to Burma. This issue will be discussed more fully in the following chapter. The Japanese authorities, not with deliberate intent, had ruined the economy of Burma, and their military presence in the country did not stimulate the economy. There was nothing to counteract the loss of Burma’s huge export trade in rice, oil, and teak. The economy stagnated. As the circulation of money increased, prices of food and consumer goods continued to rise, and Burma was unable to break out of the currency whirlpool. Those on salary and earning wages suffered the worst, and only the “nouveau riche” benefited. Even the granting of independence in 1943, which the Burmese desired, could not bring any improvement in the country’s economy. The Ba Maw government struggled to increase revenue, but there was no magic wand to increase rice exports, and paddy farmers simply reduced their cropping. The massive dislocation of the country’s export trade had simply gutted the revenue-producing sectors of the Burmese economy. These were difficult times, and the Ba Maw government did institute initiatives in an endeavor to stimulate the economy, such as the establishment of the Burma State Bank, but without capital the bank could not grow. The promised Burma State banknotes failed to materialize, and the introduction of independence bonds did not entice the Burmese to invest. Nonetheless, the failure of these initiatives was more a product of the times than lack of skill. During these crucial years, Burma’s currency was finally driven underground and exchanged surreptitiously only between reliable friends, as those Burmese found to possess British Indian and Burma notes and Indian coin were suspected by the Japanese of being spies. This suspicion was probably reinforced by the

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practice of groups such as the Chindits and the Allies’ other clandestine organizations who, from 1943 onward, ventured into Burma carrying supplies of Indian rupees, both notes and the popular silver rupee, to pay for provisions and information. Forgeries of notes by both sides occurred during the war, with the Japanese forgeries of the Indian Rs 10-note, causing the most serious problem. It is important here to realize that for the vast general population, the Japanese-occupation currency was the only source of income for everyday use, and they were bound to use it. The sensible ones exchanged it for gold and other valuables. The imprudent hoarded it and, as the following chapter shows, eventually received no value for it. 1 Hugh Tinker, The Union o f Burma: A Study o f the First Years o f Independence, 3rd ed. (London: Oxford University Press, 1961), 254-255; Robert Cribb “Political Dimensions of the Currency Question, 1945-1947,” Indonesia 31 (April 1981): 114; Paul H. Kratoska, “Banana Money:” Consequences of the Demonetization of Wartime Japanese Currency in British Malaya,” Journal o f Southeast Asian Studies 23, no. 1 (1992): 322; U Hla Pe, “U Hla Pe’s Narrative of the Japanese Occupation of Burma,” recorded by U Khin. Paper Number 41, Southeast Asia Program (Ithaca, NY: Department of Far Eastern Studies, Cornell University, 1961), 93 n. 3 refers to the Japanese occupation currency as “banana notes.” 2 The Philippines proclaimed their independence on October 14, 1943. 3 Document No. 4, “Summary of Enforcement of the Administration in the Southern Occupied Areas,” quoted in Frank N. Trager, ed., Burma: Japanese Military Administration: Selected Documents, 1941-1945, trans. Won Zoon Yoon (Philadelphia: University of Pennsylvania Press, 1971), 37. 4 W. L. Swan, “Thai-Japan Monetary Relations at the Start of the Pacific War,” Modem Asian Studies 23, no. 2 (1989): 315, 5 Ibid. 314. 6 Ibid. 315. 7 Interestingly, in Malaya, one week after the British surrender in Singapore on February 15, 1942, the Japanese military yen currency, “denominated in dollars [presumably Straits dollars] and printed in English, but unnumbered-was declared legal tender,” according to Paul H. Kratoska. “Banana Money,” 325. 8 Okurasho, Showa Zaiseishi, vol. 4, 334 and 338, which cites

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Gunyo shuhyo ni kan suru sankosho (Reference Book on Military Scrip), published by the Ministry of Finance in January 1941. Quoted in Swan, “Thai-Japan Monetary Relations,” 315. 9 Swan, “Thai-Japan Monetary Relations,” 316. 10 Ibid. 315-317. " Ibid. 316-317. 12 K. Fujita, “The Issue Amount of the Southern Development Bank, Journal o f the Japanese Military Currency Society 1, no. 2 (March 1979): 11-17, quoted in M. Robinson and L. A. Shaw, The Coins and Banknotes o f Burma (Manchester: The Authors, 1980), 113. 13 Trager, Burma: Japanese Military Administrated Selected Documents, 1941-1945, quoted in Robinson and Shaw, “Coins and Banknotes,” 113. 14 E. Maung, “Enemy Legislation and Judgments in Burma,” Journal o f Comparative Legislation and International Law, Parts 3 and 4 (1948): 13. Burma Intelligence Bureau, Burma during the Japanese Occupation, vol. 1 (Simla: Government of India Press, 1943), 68, suggests that it be as late as October 1943. 15 Kratoska, “Banana Money,” 322. 16 Ibid. 326. 17 J. Russell Andrus, Burmese Economic Life (Stanford, CA : Stanford University Press, 1948), 297. 18 Noted in an extract from the Berliner Borsen Zeitung, dated September 22, 1942, quoted in Robinson and Shaw, Coins and Banknotes, 114. 19 In the Philippines, the small-valued notes were called centavos. 20 “Currency for Reoccupied Burma,” Policy Document, September 9,1943, IOR M/4/306. 21 Burma Intelligence Bureau, Burma during the Japanese Occupation, vol. 2 (Simla: Government of India Press, 1944), 231. Also FCC [Federal Communications Commission] Daily Report concerning Domei broadcast in English, October 3, 1943, quoted in J. Russell Andrus, An Economic Survey o f Burma: Prepared fo r Division o f Economic Studies Department o f State, 15 November 1943 (Stanford, CA: Hoover Institute of War & Peace, 1976), 174-175. In this work, Andrus refers to the pya as pyat. Burma Intelligence Bureau, Burma, vol. 2,238. 23 Swan, “Thai-Japan Monetary Relations,” 317-318. 24 Kratoska, “Banana Money,” 325.

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25 Swan, “Thai-Japan Monetary Relations,” 317-318. Andrus, Burmese Economic Life, 297, notes that “the Burma rupee, during the Japanese occupation, was theoretically equated to the dollar of China, the Straits Settlement, and Sumatra, as well as to the guilder of Java, the baht of Siam, and the piaster [sic] of Indo-China.” 26 Swan, “Thai-Japan Monetary Relations,” 317. 27 Kratoska, “Banana Money,” 324-325. 28 The material in this paragraph comes from Swan, “Thai-Japan Monetary Relations,” 327-332. 29 Won Zoon Yoon, Japan's Scheme fo r the Liberation o f Burma: The Role o f the Minami Kikan and the “Thirty Comrades" (Athens, OH: Ohio University Center for International Studies, Southeast Asia Program, 1973), 41. 30 Tsunezo Ohta, “Japanese Military Occupation of Burma: The Dichotomy,” Intisari 2, no. 3 (1967): 33; Louis Allen, “Studies in the Japanese Occupation of South-East Asia, 1942-45 (1),” Durham University Journal 63, no. 1 (New Series 32, no. 1) (December 1970): 14. 31 Allen, “Studies in the Japanese Occupation,” 14. 32 Ibid. 15. 33 Won Zoon Yoon, “Japan’s Occupation of Burma, 1941-1945” (Ph.D. dissertation. New York University, 1971), 288; Allen, “Studies in the Japanese Occupation,” 15. 34 Won Zoon Yoon, “Japan’s Occupation,” 289. 35 Allen, “Studies in the Japanese Occupation,” 6. 36 Won Zoon Yoon, “Japan’s Occupation,” 3 and 290. These secret treaties were presumably concluded with Dr. Ba Maw’s new government. 37 Dr. Ba Maw was the first premier under the 1935 constitution. He was in office from March 1937 until February 1939, when his party was ousted. U Pu led the next government until September 7, 1940, when his party was defeated in a no-confidence motion, and U Saw was asked by the governor to form a new government. U Saw led the government until January 19, 1942, when he was arrested in Egypt by British authorities after he was discovered having covert communications with Japanese officials in Lisbon. He remained a prisoner of the British in Uganda for four years. The next premier was Sir Paw Tun, who followed the government into exile in Simla. 38 Won Zoon Yoon, “Japan’s Occupation,” 290. 39 David J. Steinberg, ed., In Search o f Southeast-Asia: A

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Modem History, rev. ed. (Sydney: Allen & Unwin, 1987); and 394. 40 Andrus, Economic Survey o f Burma, 114. 41 Burma Research Society, The Burma Petroleum Industry (London: Longmans, Green, 1946), 52. 42 G. E. Harvey, British Rule in Burma 1824-1942 (London: Faber and Faber, 1946), 61. 43 Burma Research Society, Burma Petroleum, 9-10. 44 Burma Intelligence Bureau, Burma, vol. 2, 193. 45 Dorothy Hess Guyot, “The Political Impact of the Japanese Occupation of Burma,” (Ph.D. dissertation. Yale University, 1966), 171 n. 2. 46 Harvey, British Rule, 60. 47 Tinker, Union o f Burma, 251, n. 1. 48 J. S. Fumivall, Colonial Policy and Practice, 182, quoted in Tinker, Union o f Burma, 251. 49 Tinker, Union o f Burma, 251. 50 Ibid. 254. 51 Guyot, “The Political Impact of the Japanese Occupation,” 171-172. In these pages, Guyot discusses in detail the non-use of these resources by the Japanese. 32 Burma Intelligence Bureau, Burma, vol. 2,194. 53 Ibid. 175. 54 Guyot, “The Political Impact of the Japanese Occupation,” 172. 55 Tinker, Union o f Burma, 254. 56 Guyot, “The Political Impact of the Japanese Occupation,” 171-172. 57 Burma Intelligence Bureau, Burma, vol. 2,193-194. 58 Burma Intelligence Bureau, Burma, vol. 1,67, and vol. 2,184. 59 U Hla Pe, “U Hla Pe’s Narrative of the Japanese Occupation of Burma,” 55. 60 Guyot, “The Political Impact of the Japanese Occupation,” 172. 61 A. K. Potter, CFA, to C. E. Key, [Accounting Officer], War Office (WO), September 23,1944, IOR M/4/306. 62 A. K. Potter, CFA, to C. E. Key, WO, March 13, 1945, IOR M/4/306. 63 Robinson and Shaw, Coins and Banknotes, 113. 64 This proposed plan was never implemented. 65 F. N. Trager, Burma: Japanese Military Administrated Selected Documents, 1941-1945 (University of Pennsylvania

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Press, 1971), quoted in Robinson and Shaw, Coins and Banknotes, 113. 66 Burma Intelligence Bureau, Burma, vol. 1,68. 67 Maung, “Enemy Legislation,” 13. 68 Before the issuance of Japanese rupee currency, banks had begun to reissue used British Burma notes; this departed from the former custom of issuing only brand-new notes. 69 U Hla Pe, “U Hla Pe’s Narrative of the Japanese Occupation of Burma,” 56. 70 See Chapter 1. There had been three silver coins-a rupee, a half-rupee (8 annas), and a quarter-rupee (4 annas). There were also nickel-zinc coins, representing 4-anna, 2-anna, and 1-anna denominations. The lowest value coin was a copper quarteranna. 71 Burma Intelligence Bureau, Burma, vol. 2,231. Andrus, Burmese Economic Life, 297. 73 Ian Morrison, Grandfather Longlegs: The Life and Gallant Death o f Major H. P. Seagrim, GC, DSO (London: Faber and Faber, 1947), 115. 74 The Salween River rises in China and runs through presentday Shan State, entering the sea near Moulmein. During the war, the Salween front in the area adjoining Yunnan was a scene of Chinese-Japanese hostilities. 75 Robinson and Shaw, Coins and Banknotes, 113. 76 Burma Intelligence Bureau, Burma, vol. 2, 231. 77 Kratoska, “Banana Money,” 322. 78 Cribb, “Political Dimensions of the Currency Question,” 114. 79 Lieutenant General C-in-C. Allied Forces, South East Asia to Under Secretary of State for War, June 3, 1945, with enclosure, A. K. Potter, CFA (B), “Currency Policy, Burma,” May 31, 1945, IOR M/4/306. 80 U Tun Wai, Burma's Currency and Credit, rev. ed. (Bombay: Orient Longmans, 1962), 93. 81 Raymond S. Toy and Bob Meyer, Axis Military Currency (Tucson, AZ: Monitor Offset Printing, 1967), 79-81; and Robinson and Shaw, Coins and Banknotes, 113 and Plates 3 and 4. 82 Andrus, Burmese Economic Life, 296. 83 Robinson and Shaw, Coins and Banknotes, Plate 1. 84 British Ministry of Information, New Delhi, Fortnightly Intelligence Report, No. 2, April 10, 1943, quoted in Andrus, Economic Survey, 175.

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85 Robinson and Shaw, Coins and Banknotes, 113. 86 This was because the Government of India had the rights of seigniorage to mint the coin of India (and Burma) and this was a replacement note for the silver rupee coin. 87 Burma Intelligence Bureau, Burma, vol. 1,69. 88 Ibid. 89 He described the Japanese paper currency as “quite good notes, well-printed with a special design of pagodas etc. for Burma. This is only another instance of the care and thoroughness with which they must have been preparing for their war for months and probably years past.” A. K. Potter to R. E. Potter (father) and his sisters, 28 March 1942, OIOC Mss Eur C414/7. 90 Toy and Meyer, Axis Military Currency, 92. 91 Burma Intelligence Bureau, Burma, vol. 1,68-69. 92 G. Davey, Burma Office, “Redemption of Japanese Currency in Burma,” December 4,1946, IOR M/4/306. 93 Kratoska, “Banana Money,” 326, referencing Translation Report No. 76, 9 Oct. 1945, BMA ADM/9/27, suggests that Japanese administration records for Malaya show that just under $4,000 million (Straits dollars) in currency were issued during the war years, which was “about eighteen times the amount circulating before the war.” British analysts believed the amount “was substantially higher,” based on the belief that in the last vear of the war controls were poorly kept. G. Davey, Burma Office, note, June 5,1947, IOR M/4/310. 95 Burma Intelligence Bureau, Burma, vol. 1,6. 96 “Currency Policy, Burma,” May 31,1945. 97 Robinson and Shaw, Coins and Banknotes, 118. 98 K. Fujita, “The Issue Amount of the Southern Development Bank,” Journal o f the Japanese Military Currency Society 1, no. 2 (March 1979): 11-17, quoted in Robinson and Shaw, Coins and Banknotes, 118. 99 Andrus, Burmese Economic Life, 305. 100 Ibid. 312. Both the Burma Intelligence Bureau, Burma, vol. 1, 70, and Andrus, Economic Survey, 172, which was published in late 1943, mention only Rangoon and six country branches, Moulmein, Bassein, Toungoo, Mandalay, Myingyan, and Lashio. 101 Andrus, Economic Survey, 172-173; and U Hla Pe, “U Hla Pe’s Narrative of the Japanese Occupation of Burma,” 55. 102 The Japanese Currency (Evaluation) Act 1947, Burma Act No. 36 of 1947,18 July 1947, IOR M/4/310.

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103 “Currency Policy, Burma,” May 31,1945. 104 Special Correspondent [Ian Morrison], “Currency Chaos in Burma,” Times (London), May 22, 1945. This issue is discussed more fully in Chapter 3. 105 Potter to Key, letter with enclosures, Item 8, June 10, 1945, IOR M/4/306. For discussions with Dr. Set, see Potter, “Currency Policy, Burma,” dated May 31, 1945, IOR M/4/306. In his report, mentioned above, Morrison suggested that the Japanese note issue exceeded 3,000 million rupees, attributing this figure to “U Set.” 106 A. K. Potter to Key, undated report (c. July 10, 1945), IOR M/4/306. 107 Potter to Key, letter with enclosures, Encl. 2, “Statement, Currency Policy, Burma,” June 10,1945, IOR M/4/306. 108 F. S. V. Donnison, British Military Administration in the Far East, 1943-46 (London: HMSO, 1956), 222. 109 Potter to Key, letter with enclosures, Item 8, June 10, 1945, IOR M/4/30. 110 Louis Allen, Burma: The Longest War, 1941-45 (London: J. M. Dent & Sons, 1984), 485. 111 Donnison, British Military Administration, 222; Statesman (Calcutta), May 8, 1945. The Statesman reported that the looting took place soon after the arrival of Gurkha troops from landing craft and that the thieves were unable to open the vaults and “took only packets of worthless Japanese occupation currency.” 112 Donnison, British Military Administration, 222-223. 113 Davey, “Redemption of Japanese Currency in Burma,” December 4,1946. 114 Fujita, “Southern Development Bank,” 1, no. 2 (March 1979): 11-17, quoted in Robinson and Shaw, Coins and Banknotes, 118. 115 Burma Intelligence Bureau, Burma, vol. 2,105. 1.6 Ibid. 234. 1.7 Ibid. 106. 118 Ibid. 105. Later, on 234, U Ba Maung is described as “President of the Board of Directors” of the Burma State Bank. 1,9 Burma Intelligence Bureau, Burma, vol. 2, 105-106. 120 Under the 1935 constitution, which came into force on April 1, 1937, the “excluded areas,” which included the Shan States, remained under a separate form of administration. However, on August 1, 1943, when Burma became a new independent state, the Shan States and Karenni were integrated into Burma, and two

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areas, Kengtung and Mongpan, were handed over to Thailand. 121 Burma Intelligence Bureau, Burma, vol. 2,105,107. 122 Ibid. 107. 123 Ibid. 106-107. 124 A Domei report quoted by Burma Intelligence Bureau, Burma, vol. 2,234, gives the first ten days’ deposit figures as Rs 5,461,983.97 into current accounts and meager Rs 11,825 into savings accounts. At the time, intelligence sources wondered if the low level of savings bank deposits indicated a “lack of faith on the part of the people in the bank’s future, and in the stability of price levels.” 125 Burma Intelligence Bureau, Burma, vol. 2,106. 126 Andrus, Burmese Economic Life, 313. 127 Ibid. 128 Burma Intelligence Bureau, Burma, vol. 2,106. 129 U Hla Pe, “U Hla Pe’s Narrative of the Japanese Occupation of Burma,” 69. 130 Ibid. 131 Extract, FE Weekly Intelligence Summary No. 82 for week ending August 4,1944, IOR M/4/306. 132 U Hla Pe, “U Hla Pe’s Narrative of the Japanese Occupation of Burma,” foreword, unpaginated. 133 Ibid. 69. 134 Swan, “Thai-Japan Monetary Relations,” 315. 135 Burma Intelligence Bureau, Burma, vol. 2,105. 136 U Hla Pe, “U Hla Pe’s Narrative of the Japanese Occupation of Burma,” 69. 137 A. K. Potter, “Currency Policy, Burma,” May 31, 1945, IOR M/4/306. 138 Edwin P. Hoyt, Japan's War: The Great Pacific Conflict, 1853 to 1952 (New York: Da Capo, 1989), 346. 139 Ibid. 329-330. 140 Lieutenant General C-in-C Allied Forces, South East Asia, to Under Secretary of State for War, June 3, 1945, IOR M/4/306; A. K. Potter, CAS (B), Finance & Accounts Dept., to C. E. Key, WO, with enclosures, Item 7, June 10,1945, IOR M/4/306. 141 Andrus, Burmese Economic Life, 305. 142 Ibid. 312. 143 Ibid. 144 A Hindu caste of professional moneylenders who were prominent in Burma from the 1890s until World War II. Burma Intelligence Bureau, Burma, vol. 2,233.

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146Harvey, British Rule, 56. 147 Burma Intelligence Bureau, Burma, vol. 1,70. 148 Burma Intelligence Burma, Burma, vol. 2, 233; Andrus, Burmese Economic Life, 312. 149Andrus, Burmese Economic Life, 312. 150 Burma Intelligence Bureau, Burma, vol. 1, 70; and vol. 2, 233. 131 Ibid. vol. 1,70. 152 Andrus, Burmese Economic Life, 313. 153 John F. Cady, A History o f Modem Burma (Ithaca, NY: Cornell University Press, 1958), A ll. 134 Burma Intelligence Bureau, Burma, vol. 2,108. 155 Ibid. 84-86. 156 Ibid. 86-87,94. 157 Burma Intelligence Bureau, Burma, vol. 2,108-109. 158 Ibid. 159 Ibid. 109. 160Harvey, British Rule, 21. 161 Ibid. 87. 162 Early Burmese forms of income tax. 163 Cady, A History o f Modem Burma, 390. 164 Burma Intelligence Bureau, Burma, vol. 2,103. 165 Ibid. 166 Ibid. 104. 167 Ibid. 103. 168 Ibid. 169 U Hla Pe, “U Hla Pe’s Narrative of the Japanese Occupation of Burma,” 55. 170 Ibid. 23. 171 Ibid. 55-56. 172 Ibid. 47. 173 Paul H. Kratoska, The Japanese Occupation o f Malaya: A Social and Economic History (Honolulu: University of Hawai’i Press, 1997), 212-213. 174 Burma Intelligence Bureau, Burma, vol. 2,246. 175 U Hla Pe, “U Hla Pe’s Narrative of the Japanese Occupation of Burma,” 68. 176 Burma Intelligence Bureau, Burma, vol. 2,212. 177 Ibid. 207. 178 U Hla Pe, “U Hla Pe’s Narrative of the Japanese Occupation of Burma,” 56. 179 Ibid. 67.

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180 Burma Intelligence Bureau, Burma, vol. 2,235-240. 181 Ibid. 232. 182 A. K. Potter to C. E. Key, March 13,1945, IOR M/4/306. 183 Times (London), February 22,1945. 184 "Levies" is the term the British used for groups of local tribesmen who were enlisted to train as guerilla fighters against the Japanese. I Morrison, Grandfather Longlegs, 104. 186 Ibid. 108; C. Cruickshank, SOE in the Far East (Oxford: Oxford University Press, 1983), 166. 187 Burma Intelligence Bureau, Burma, vol. 1,68. 188 Ibid. 69. 1 ftO Morrison, Grandfather Longlegs, 115. 190 Ibid. 223. 191 In Major Gen. S. W. Kirby, et al., The War against Japan, vol. 2 (London: HMSO), 244, the chinthe is incorrectly described as “a mythological beast. . . half lion and half eagle.” 192 First Wingate Expedition “Operation Longcloth,” February to May, 1943. Second Wingate Expedition, “Operation Thursday,” February/March 1944 to July 1944. 193 Burma Intelligence Bureau, Burma, vol. 1,69. 194 Judgement, Mr. Justice Blagden, Civil Reference No. 5 of 1947, IOR M/4/310. 195 Cruickshank, SOE, 220-221. 196 Ibid. 151. 197 Ibid. 220. 198 Ibid. 169-170 footnote. 199 Allen, The Longest War, 578. 200 Cruickshank, SOE, 221. 201 The name by which SOE was known in South East Asia Command. 202 Allen, The Longest War, 578. Cruickshank, SOE, 221, suggests only 200,000 1-rupee notes. 203 Allen, The Longest War, 578. 204 British gold coin with the equivalent value of £1 English. 205 Cruickshank, SOE, 221. 206 On December 3, 1944, an Indian Army brigade crossed the Chindwin, and the campaign had begun. 207 Mostly Kachin, Chin, and Karen who resided in the hilly frontier areas. 208 Cruickshank, SOE, 221. 209 Potter to Mr. Key, WO, extract from letter (?), 105 FAB(c)

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43, May 31 [1944], IOR M/4/306. 210 Cruickshank, SOE, 220. 211 John L. Christian, Burma and the Japanese Invader (Bombay: Thacker, 1945), 356. 212 Potter to Key, WO, May 31 [1944]. 2.3 Ibid. 2.4 Ibid. 2.5 Burma Intelligence Bureau, Burma, vol. 2, 184-185.

CHAPTER 3 Currency Planning for the “Return,” 1942-1945 This chapter examines the background to the crucial decision taken by the British, on their return to Burma, to give no value to the Japanese-occupation currency and the consequences of this action—consequences that still resonate in the economic life of modem Burma. It was not a rash or hurried decision, but like the introduction of the British Military Administration notes, had been planned for years. The British never intended to give any great value to die currency; they were afraid of the flow-on effect to their other Far Eastern colonies, especially Hong Kong, and to the British economy, too, if any value was given. Burma, the first British territory in Southeast Asia to be reclaimed, was to be the testing ground. However, the final decision was also dictated by the continuing depreciation of the value of the Japanese rupee in the preceding years, and the British resolve was supported by the decision of the returning Philippine government to give no value to the Japanese-occupation peso. That the British decision resulted in the free fall of the Japanese rupee was not altogether a surprise, although some Burmese were not as astute as others were in ridding themselves of the valueless currency, and many suffered considerable hardship.

Getting Ready Although the British had been caught unprepared (and lead­ footed) by the Japanese invasion of Burma in 1942, they were determined this would not be the case when the country was ieoccupied. In offices and barracks from Simla, where the Government of Burma-in-exile was ensconced, to New Delhi, where the British Military Administration (BMA) was headquartered, and in various government departments in London, planning for the return to Burma was soon underway. But although the Government of Burma-in-exile was involved in political and commercial reconstruction planning, Burmese officials seemed to have had little input into decisions about solutions to Burma’s currency problems when the British returned, including the critical decision regarding the value to be given to the Japanese-occupation currency. These matters were in the hands of Brigadier Arthur K. Potter, controller of finance and accounts, Civil Affairs Service (Burma), which was

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eventually part of the British Military Administration responsible for Burma; C. E. Key, who represented the War Office’s financial section, FS, in London; and members of five other British government departments—the India Office, the Burma Office, the Colonial Office, the Treasury, and the Bank of England.

Early Days Not all of Burma was lost to the Japanese. On its northeast and western borders and in the southwest, in Arakan, small sparsely populated pockets known as the “frontier fringe” still remained under nominal British control. The first two areas, which included part of the Chin Hills District to the north of Arakan and half of the prewar Upper Chindwin District, were in the hands of a civil administration. In the Chin Hills, much-needed regular supplies of rice had come from Burma proper; now the new focus was westward to India.1 In the British-controlled portion of Upper Chindwin District, the administration’s presence consisted of “a pledge that the British administration had not given up its interest in the area.”2 A commissioner resident in Assam controlled this diverse area of 300,000 people with powers delegated by the governor of Burma. The deputy commissioners and other civilian officers of the administration endeavored to provide some normality to the area, which was supporting irregular defense units as well as normal rural activities. In Arakan no civilian administration remained, but a military administrator was appointed to control the area.3 Although according to the law, the governor of Burma was in control of “the uninvaded fringe of Burma,” in fact Sir Archibald Wavell, military commander-in-chief, India, had de facto control of these areas.4Indian currency was predominantly used during this period; the Reserve Bank of India (RBI) was discouraging the use of Burma notes (see Chapter 1). On February 15, 1943, as planning for the return to Burma continued, a new organization, the Civil Affairs Service (Burma), known as CAS (B), came into existence. Eventually, it would become part of the military administration of Burma, but for the time, the Civil Affairs Service (Burma) would stand alone.5 When the Allied forces returned to Burma, CAS (B) personnel would be attached to every division and at times even to independent brigades. Their duties would consist of setting up civil administration throughout the reoccupied area,6 which,

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until the Government of Burma resumed control, would be under the control of the military administration. C. F. B. Pearce was appointed to the new position of Chief Civil Affairs Officer, Burma (CCAO), which carried the army rank of major general. Pearce was a civilian who had formerly been a member of the Burma branch of the Indian Civil Service7 but for this purpose was given a military rank. In December 1943, only one staff officer was attached, but the numbers increased as the headquarters began to take control of the frontier fringe and the military administrative areas in Arakan.8 When the long awaited advance eastward into Burma began on December 3, 1944,9 staff formerly attached to the Government of Burma became part of the CAS (B).10 At this time, the CCAO became a staff officer under the direct control of the Supreme Allied Commander South East Asia (SACSEA) so that the power of the CCAO could extend to all parts of Burma and even cover Chinese troops employed in the campaign.11 The appointment at the end of May 1943 of Brigadier Potter as Financial Adviser (Burma) was an early development in the administrative process that would have direct bearing on the currency question. Attached to 11th Army Group, he was also given “the additional task of planning the financial side of the Military Administration” that would administer Burma when it was reoccupied.12F. S. V. Donnison explains that this position was created on June 1,1943, after the Commander-inChief, India, requested such an appointment. Modeled on financial controllers in the Middle East, the Controller of Finance and Accounts (Burma)—a title that Potter did not use for some months—was to provide advice on financial matters to the CCAO and, through him, to the military commander in Burma while also reporting direcdy to the accounting officer at the War Office in London.3In his new position, Potter kept up a lengthy correspondence with Key, the War Office’s accounting officer, which established the monetary and fiscal policy that was to apply during the reoccupation. In its efforts to establish financial policy for Burma, the War Office in London was assisted in London by a comprehensive network of departments and institutions. The Government of Burma, far from the action in Simla, was almost forgotten in the fluny of cipher telegrams and airmail letters marked “most secret.”

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To a considerable extent, the British government and its associated departments had been focused on the war in Europe. This was to change after the conclusion of the Quadrant Conference in Quebec in August 1943 between British Prime Minister Winston Churchill and American president Franklin D. Roosevelt. The British and Americans had set up a new South East Asia Command (SEAC) under Admiral Lord Louis Mountbatten, who would become the supreme allied commander14and would thus oversee all British and American forces in India; the British commander-in-chief India, General Auchinleck, would report directly to him. Later, when the advance on Burma began, this would include members of the BMA, including Brigadier Potter. At this time, the British plan was for SEAC to carry out a seaborne invasion, possibly on Akyab or Rangoon or even farther afield, Singapore or Hong Kong or even Sumatra,15but in time, this plan was to change.

Initial Currency Planning for Reoccupied Burma The monetary and fiscal planning for the return to Burma had proceeded to such an extent that by September 9, 1943, Brigadier Potter had produced his initial policy document, “Currency for Reoccupied Burma.” It discussed the pre­ evacuation currency, the Japanese-occupation currency, the recently announced Central Bank of Burma notes,16 and even the currency policy prevailing in “areas of Burma not occupied by the Japanese.” Armed forces operating in Burma, presumably early Chindit missions, were using India notes, and the Burma notes were issued only for “special purposes” (which were not disclosed). Burma notes were being accepted in only two instances. In the frontier fringe areas, Burma currency was being used for payment for government dues and for salt and opium sold to villagers by the authorities. In addition, soldiers returning from operations in Burma were allowed to exchange up to 30 rupees of Burma notes for India notes. The document also noted those pre-evacuation notes and coin were still circulating, “but to a very small extent.” The main purpose of the document was to describe the British Military Administration notes, which would be the future currency for reoccupied Burma and the eventual method of introduction.17 Potter’s document is valuable for the picture it gives of monetary conditions in wartime Burma and initial British thinking on currency policy. An interesting last paragraph

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advises that “the War Office has promised instructions regarding the treatment of the ‘Government of Japan’ rupee notes and the dollar and yen notes. The War Office has been reminded but so far the instructions have not yet been received.”18 When the British forces returned to Burma, Brigadier Potter announced that the military planned to replace the Burma notes with an entirely new currency, to be known as British Military Administration (BMA) notes. The RBI would issue notes in the denominations of Rs 100, 10 and 5, and the Government of India would issue a smaller 1-rupee note. Breaking with tradition, the Government of India would also issue notes of 8and 4-anna denominations, instead of the previous half- and quarter-rupee coins. All notes would be overprinted or specially printed with the words “Military Administration of Burma. Legal tender in Burma only.”19 The War Office had agreed to cover the amount of BMA notes issued in pounds sterling and to cover the cost of production.20 Later, it was revealed that a separate currency deposit account was opened by the paymaster-general in London and controlled by the Treasury Department.21 On its return, the Government of Burma would undertake the issue of new currency.22 Potter predicted that the 8- and 4-anna notes would prove unpopular; the Burmese had always preferred the small coin the Government of India provided to the Burma government. While he recognized that the notes were a necessity—in the initial phases of the campaign, the small coin would be too heavy to transport over rough mountainous jungle tracks—he also expected that they would not succeed in enticing the old silver and copper coins out of the hands of hoarders, especially in the context of the inflation rate of the Japanese paper money. Accordingly, in May 1944, Potter recommended that as soon as the Government of India was prepared to supply it, coin should be reintroduced to restore confidence so that the hoarded Indian coins would emerge.23 In the beginning, it was intended that Allied armed forces would first use India notes. Then, when reoccupied areas of Burma were “reasonably secure,” BMA notes would be introduced, would be exchanged for Burma notes held by bona fide owners, and would eventually become the only legal tender in the occupied areas of Burma. The document did not explain the criteria for bona fide owners, but a senior officer, General

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N. M. S. Irwin, stated that ‘‘no large amounts of the new currency should be issued to any single family or group of persons.”24 Potter’s September 9, 1943, currency policy document envisaged that BMA currency would become legal tender as soon as possible. Initially, Potter had supported the proposal that the Burma notes should be exchanged as soon as a reoccupied area was considered “reasonably secure.” This suggestion had come from General Irwin, commander of India’s Eastern Army, who believed that this action deprived the enemy of “the power to purchase treachery.”25 It is likely that at this stage Irwin was unaware that the Japanese were already introducing large quantities of their occupation currency, which allowed them to do just that. Irwin’s suggestion had been communicated to the War Office on February 20, 1943,26 to which the War Office had responded by commenting “that they saw no reason for it.”27 General Headquarters (GHQ) staff continued to press for this action, however, giving the reasons that “it was most desirable that the Govt, of India’s liability for redemption of the Burma notes should not continue indefinitely but should end as speedily as administratively feasible.” Staff at GHQ believed that “the sooner the old Burma currency was liquidated the better from the military point of view since large amounts of it must be in enemy hands.”28 At this time, the Government of Burma’s Finance Department still held the belief that over 10 crores of rupees (Rs 100,000,000) had been looted from treasuries in Burma. This matter appeared to have been cleared up by September 29,1943, but it reemerged after the war (see Chapters 1 and 4). Although Potter had first been in agreement with Irwin’s suggestion, he subsequently realized the magnitude of the task“a formidable undertaking if reoccupation was slow, and an impossible undertaking if the reoccupation was fast.” Potter realized that even if the currency were to be exchanged, the Japanese would still “find ways to get hold of BMA notes” and would use the captured notes to buy further supplies. The proposed exchange of Burma notes might not be popular with the Burmese,29 who saw Burma notes as valuable, probably because they hoped to hold on to them until the British returned. They might not view the BMA notes in the same light Potter recommended that the proposal to exchange the notes as soon as possible be dropped until order was fully restored in

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Burma.30 Potter’s suggestion eventually became policy and, in fact, the military continued to use India notes until May 1, 1945, when the BMA currency was introduced,31 which was nearly six months after the campaign began in December 1944. Only one major issue remained to be settled. What value, if any, should be given to the Japanese-occupation currency?

Exchange Rates for Japanese-Occupation Currency The most complex problem to be resolved before the British returned to Burma was how to deal with the occupation currency. Should value be given or not? As early as November 24, 1943, a handwritten note on a financial report stated, “The general idea is that we will honor our own notes (if lawfully possessed) but give no value for Japanese or Ba Maw issues.’ This note seems premature; a continuous flow of correspondence between concerned departments of the British government issued on this subject for much of another year. The departments involved were the financial section (F5) of the War Office, the India Office, the Burma Office, the Treasury, the Bank of England, and the Colonial Office. As early as September 7, 1943, discussions had already taken place in Washington about the position of the United States on “Japanese issued notes” in the Philippines. At that stage British officials believed that the Americans would be “pretty lenient” on the notes but would scrutinize bank balances. U.S. officials did not support a British suggestion to announce that “no value” would be given to the Japanese notes; they believed that local “resentment” about this decision might affect military relations at a later date.33 The British were also concerned about what action the Chinese would take on “any note issued by the Japanese.”34 On October 14, 1943, Key of F5 wrote of the difficulties the Dutch and the British would face when they reoccupied their territories and were forced to deal with the occupation currencies. His letter gives an indication of early views on the subject. Key believed that “some sort of money”— presumably Japanese-occupation or prewar Burmese currency—should be handed over by the local people for relief supplies and for payment of taxes. When order was restored, then payments could be requested in the new currency introduced by the military. He went on to say that he was “all in favor of feeling our way in regard to our attitude to the Japanese occupation

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currency. Our policy should be not to declare our intentions, but to keep everybody guessing from day to day.” Key considered it likely that initial amency rates might not be permanently set and that changes might occur as varying circumstances prevailed.35 In addition to deciding the value to be given for die occupation currency, the British needed to formulate a policy for the exchange of hoarded prewar Burma and India currency and possibly for the exchange of Japanese-occupation currency. In early 1944, Potter flew to London to confer with senior officials at the War Office, the India Office, and the Burma Office plus other involved public servants; he returned to India in March by air with a heavy sack of valuable papers related to his work.36 By June 1944, the War Office had received a copy of a Dutch plan for exchange of the occupation currency that was being used in the Netherlands East Indies, where the Japanese had issued guilder scrip.37 The War Office’s Lord Hawke observed in a note to a treasury official that the Dutch ‘Visualise changing money village by village.” Though he said the Dutch felt able to administer the scheme, Hawke seemed astonished that they would attempt this procedure. Casting about for reasons, he suggested that perhaps “the Dutch had a far bigger machine of Government, which they anticipate being able to revive quicker, than we had in Burma or Malaya.”38 According to an attached memorandum written three months earlier, the Dutch government intended to provide two rates of exchange. Each individual would be allowed to exchange “first f[lorin]5,00 or 5 yen nominal rate” of occupation currency for f.5,00 in the new currency. The rest of that person’s occupation currency would have to be exchanged at a much lower rate.39 Hawke said, “it looks as if the proceedings will prove to be like sheep dipping or cattle round up without the possibility of branding or marking, or perhaps the Dutch can do these things.”40 The major flaw in the Dutch scheme was the amount of paperwork and time required ensuring that there was no double dipping. On September 23,1944, Potter advised Key that a number of currency transaction reports had been received (the sources were not noted). The lowest rate of value reported was the Japanese 1-rupee notes that were being exchanged for “8 annas [1/2 rupee] in old Burma and British India note currency.”

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Potter’s recommendation was that “an exchange rate of 1 Japanese rupee, military yen, military dollar or Burma Puppet Govt, rupee to 4 annas [1/4 rupee] in Old Burma, British India and British Military Administration currency” should be used as the exchange rate for payments in Japanese-occupation currency.41 This rate gave the occupation currency a value in British sterling of 4 l/2d against the going rate of 3d for occupation currency in the Pacific region, in contrast to the prewar value of the Burma rupee of l/6d. Potter noted that Supreme Allied Commander Lord Mountbatten of Allied Land Forces, South East Asia (ALFSEA) “had the discretionary power to alter the rate downward without notice” and presumed that Mountbatten would delegate this power to the chief civil affairs officer (Potter’s superior) and himself as controller of finance and accounts (Burma). Potter also recommended that no Japanese-occupation or Burma puppet-govemment currency42 be accepted above Rs 10, apparently unaware that larger notes had not yet circulated and that the Ba Maw government’s notes had not been issued. Burmese citizens would also be encouraged to deposit their holdings of Japanese and Burma puppet-govemment notes at BMA offices until such time as the British government had decided if it would give value to these notes.43 Potter’s proposed exchange rate of one Japanese rupee to 4 annas of British currencies was not accepted by the Treasury Department, which found it too generous. On November 4, 1944, the Treasury Department communicated to the War Office that it was too soon to set the rates for the currencies. Young, one of the senior treasury officials, commented that “my own belief is that no figures yet available are any use for estimating the local rates where reoccupation is clearly imminent.” Young believed “that 4 Vi d will prove too high a value” for the Japanese rupee and pointed out that the Burma currency had appreciated in value while the Japaneseoccupation currency had been depreciating. Young also noted that various occupation currencies, illogical as it sounded, might be depreciating at different rates.44There was substance to this statement; inflation and the corresponding depreciation of the occupation currency were purely matters of local supply and demand, and, because the occupation currencies were not backed by anything, different occupied countries would have different rates, depending on the prevailing economy.

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On December 20, 1944, “The Provisional Monetary and Fiscal Guide—Burma*’ was issued by the War Office to the supreme allied commander, SEAC. Japanese-occupation currency was not to be exchanged for BMA notes in any general way, but Article 3a in the guide gave government and military officials the right to accept small denominations as they saw fit “in payment both for relief supplies and government dues of any kind.”43 In reoccupied North Africa, the BMA had accepted only Italian lira for similar relief and government taxes.46The latter provision in the guide was seen as a possible means to help the many Burmese who would have no other currency to use in their dealings with the returning administration. To regulate these payments, an exchange rate would be set at the appropriate time, which could be altered downward without notice. As Potter had recommended on September 23, 1944, larger-denomination notes (eventually defined as those above ten Japanese rupees) were not to be accepted for any purpose.47 This decision to demonetize the Japanese-occupation currency was not taken lightly. Negotiations between the interested parties in the British government departments and BMA officers in the field, such as Potter, had continued for many months. The final decision to deny value to the Japaneseoccupation currency affected not only Burma but also all the occupied British territories in the Far East. As Donnison reports, this official action, which completely destroyed the wartime currency systems existing in the occupied territories, created “much controversy.” Two groups strongly supported nonrecognition from “two quite different standpoints. The first group was very conscious of the inflationary pressure that would fall upon the British currencies if value were given to still-unknown quantities of rapidly inflating Japaneseoccupation currencies.49 These currencies had been issued willy-nilly and, if reoccupation were not swift, would continue to be issued until the territories were completely retaken. The second group supported this standpoint but saw recognition of the currencies as an opportunity for the Japanese to continue to “buy treachery” as long as the conflict continued. They believed that nonrecognition would immediately discredit the occupation currency, particularly if the Japanese were losing the war. On the other hand, those who opposed nonrecognition stressed the hardship this policy would inflict on the inhabitants, particular

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the poor and disadvantaged, the salary- and wage-eamers of the towns, and those who were forced to accept the currency in the normal course of trade. This group believed that “the initial pauperization of a large part of the population of re-occupied territories would have undesirable political results.” But recognition of the Japanese-occupation currency was too big a risk for Britain to take, and the hard decision was taken. As stated earlier, an exception was made that in cases of severe hardship, currency “at a greatly depreciated rate” could be accepted for relief supplies and government dues.50 Nevertheless, as late as April 23, 1945, L. Waight of the Burma Office, while acknowledging the reason for nonrecognition of the Japanese-occupation currency, believed that the Japanese currency should be accepted for food and clothing from the local population “at a depreciated rate” in Burma to allow the Burmese “a sense [of] independence and self-respect, even though the paper we receive is worthless to us.”51

Comparison with Currency Policies Elsewhere It is useful to compare the currency policies that occurred in other non-British countries. In early 1945, the only reoccupied Asia/Pacific country of significant population (other than parts of China) was the Philippines, whose reoccupation began in October 1944; the capital, Manila, was finally in American hands by March 1945.52 Because Burma was the first of Britain’s colonial possessions in the East to be retaken by British forces, the British treasury was particularly interested in how the United States planned to handle monetary policy on their reoccupation of the Philippines. In March 1945, a United Kingdom Treasury Delegation then in Washington endeavored to obtain information regarding American currency policy in the South Pacific. However, the United States was not forthcoming. Apparently Washington was not the right place to gather information on the Philippines. C. T. Crowe, a member of the delegation, advised that the U.S. Treasury was “still very much in the dark about what goes on in the Philippines.” He attributed this to the facts that the Philippine government was in charge of the financial policy, not die American army-in contrast to the British in Burma-and that “Macarthur is apparently not prone to report back developments in the civil affairs field at all fully.”53

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At one point, the treasury noticed a story in the Shanghai Evening Post (New York edition) of January 5, 1945, saying that there had been “an ‘order declaring illegal and worthless all currency and notes issued under authority of Japanese’ in Philippines.”54The treasury asked Crowe if the story were true. Crowe advised that he had “had a crack at the U.S. Treasury again. . . and the story given in the Shanghai Evening Post was correct.”55 Enclosed with his letter was a copy of [Philippine] Executive Order No. 25, which had been issued by President Osmena on November 18,1944. This order covered currency, banks, treasuries, and debts. It ordered the demonetization of Japanese-occupation currency and declared a temporanr moratorium on all debts incurred after December 31, 1941. 6 The order was explicit about the demonetization of the currencies issued under the Japanese. Article 6 reads as follows: Japanese currency, Philippine National Bank Notes (except duly authorized emergency issues), Notes of the Bank of the Philippine Islands, New Central Bank Notes and unauthorized emergency currencies are not legal tender. Transactions in these currencies are prohibited.57 Thus, the BMA and the Philippine government had devised essentially the same policy-nonacceptance of the Japanese currency. On the other hand, the commonwealth government of the Philippines was proposing to redeem “emergency currency issued during the war by authorized guerilla forces.” During the occupation, guerrilla governments had been set up in certain Philippine provinces; these governments had then issued their own currencies.58 But this issue had no bearing on the situation in Burma. In the Netherlands East Indies, the Dutch had believed the islands would be recovered island by island on a “piecemeal” basis, and their plans were thrown into confusion when the Japanese, who were still in control of the major islands of Java and Sumatra, surrendered on August 14, 1945. Almost immediately, the Indonesian nationalists Sukarno and Hatta declared Indonesia independent, and for the next four years, a struggle for independence continued between the Dutch and their former subjects. The initial Dutch plan has been discussed

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earlier in this chapter, but only in Hollandia, Biak, Morotai, Balikpapan, and Tarakan59 was their new currency, known as “Nicageld, oenang Nica, or, from its red color, oeang merahred money," put into circulation and the Japanese-occupation notes dumped at sea.60The day before the Japanese surrender, faced with the difficulties envisaged in exchanging the currency hurriedly, the Dutch declared the Japanese currency “worthless immediately.”61 However, to complicate matters, in October 1945, in a presidential proclamation, Sukarno recognized both the prewar Netherlands guilder and the Japanese-occupation currency as legal tender.6 The ensuing monetary confusion can be followed in detail in Robert Cribb’s article, “Political Dimensions of the Currency Question, 1945-1947.’,63

Further Occupation-Currency Problems The proposed limited acceptance of Japanese-occupation currency in Burma raised a further problem. Should the currency be held or destroyed? In early December 1944, Potter wrote to the War Office suggesting periodical destruction of the Japanese notes received at the treasuries throughout the reoccupied area under supervision of the treasury officer and one other commissioned officer. He intended to keep “an exact record . . . of the total face value of each denomination and each kind of enemy currency destroyed” in case a claim for reparations against the Japanese government was sought at a later time.64 Whether or not the British intended to claim reparation payments from the Japanese became an issue in the War Office and its associated departments in London. The discussion focused on the Malkin Doctrine, which had evolved from a committee formed under the auspices of the British coalition government to prepare a policy on German reparations. This committee included representatives of the Treasury, the Foreign Office, the Board of Trade, the Admiralty, the economic section of the Cabinet Secretariat, and other officials. Chaired by Sir William Malkin, the Foreign Office’s legal adviser, the committee produced their report in June 1943, followed by a revised version on August 31, 1943.65 As Young explained, if the Malkin Report doctrine was accepted, such claims would not be allowed; the Malkin committee disallowed occupation costs.66This included any claim relating to German banknotes, which had been circulated in occupied areas;67the situation was

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similar to the situation in Burma. When a similar reparation claim had arisen recently in Greece relating to enemy currency that had circulated in a liberated territory, the British government had upheld the Malkin Doctrine. Young believed that until the Malkin Doctrine was formally accepted as government policy and then “applied to the Far East,” the Japanese notes must be kept. Young advised “that the actual enemy currency notes would be preferable to the records of notes destroyed as the basis for a reparations claim," but he did concede that the Japanese notes could be held “in store-rooms rather than strong-rooms.”68 Fisher of the Bank of England agreed with Young, reminding Lord Hawke that the French were not destroying the German mark notes they took.69 Both Fisher and Young believed that the physical presence of the notes might carry more weight for reparation claims than written certificates compiled by British officers. Interestingly, at this point in time, January 10,194S, the British must have intended to accept the Japanese notes for relief payments in case a reparation claim was forthcoming; otherwise there would have been no point in keeping the notes. As a result of these discussions, on January 16,1945, the War Office instructed Potter to retain the Japanese currency in store rooms. However, any form of storage in Burma was a problem, and on January 21, the commander-in-chief, India, Lieut. -General Sir Claude Auchinleck expressed his concern regarding the physical difficulties of maintaining the actual notes, stating he was strongly against storage.70The War Office capitulated, advising that if difficulties in providing storerooms became “insuperable,” Auchinleck could destroy the currency, but he had to keep records of what he did.71 But these points soon became irrelevant; by March 1945, the British Fourteenth Army, the major force advancing through Upper Burma, found it unnecessary to accept Japanese-occupation currency in exchange for relief supplies and government dues.72 Two months later, on May 31, 1945, Potter reported that relief supplies were being distributed free to local people who had neither British currency nor the ability to earn it.

Public Criticism of the Burma Currency Policy

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On February 22, 1945, the Times of London published an article by a special correspondent named Ian Morrison critical of the British demonetization policy in Burma: The currency problem has not yet been faced. The allies pay in Indian and old Burmese rupees, but refuse to accept the Japanese notes still in circulation in the villages. People caught through no fault of their own with large amounts of these notes, which have already sunk to one-twentieth the value of the Indian and Burmese notes, are wondering anxiously what is going to happen.74 A March 13, 1945, communique from Potter to the War Office refuted Morrison’s assessment of the situation, which reflected poorly on Potter’s control of the currency. He supported his own assessment of the position—that the currency problem had already been faced and the policy settled—by noting that his men in the field, the civil affairs officers accompanying the Fourteenth Army,75 had informed him they had not experienced difficulty in implementing the policy contained in the provisional monetary and fiscal guide for Burma. They believed that there was no need to apply the concession contained in Article 3a, which allowed them to accept Japanese-occupation currency in certain circumstances. The deputy chief civil affairs officer (DCCAO), Fourteenth Army, had been convinced all along “that the only persons in possession of large amounts of Jap currency are former Jap agents and contractors who have used the Jap occupation to make fortunes.” Consequently, the Fourteenth Army apparently did not accept Japanese-occupation currency at all. The DCCAO had recently justified his action by saying that “no difficulty is being experienced over absolute non-acceptance of Jap currency,” and he reiterated his view “that Jap currency should be left to die a natural death.76 The DCCAO’s conviction that only “former Jap agents and contractors” held large quantities of Japanese notes is supported by U Hla Pe, who states that although some honest people did accumulate riches, in general, the new rich comprised mainly “rogues of all variety, whose god was the riches they gained out of the ruins of a war shattered country.”77 While the Fourteenth Army was refusing occupation

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currency, in Akyab in Arakan, the senior civil affairs officer (SCAO) of 15 Corps (which was unrelated to the Fourteenth Army) was accepting currency in payment of relief supplies. Potter had set the initial rate of exchange at “1 anna British for 16 annas Jap [one Japanese rupee].” In Akyab and at Kyaukpyu, south of Akyab, there was a shortage of Burma notes and “new British currency” (India notes used by the BMA to purchase supplies), presumably because the local population had not hoarded Burma notes to any extent and because the military administration had not been involved in large spending. The DCCAO of 15 Corps stationed in the Akyab region reported that things had been difficult, and although the exact difficulties are not stated, the Arakanese may have protested over the exchange rate of their Japanese notes, which reduced the purchasing power of the note. Potter predicted that this shortage would soon be overcome because of large-scale military spending, including “the purchase of the paddy surplus in Akyab District”78 Though Potter defended himself to the War Office, he admitted that the situation was not as good as could be desired in a letter to his sister: “Much of [Morrison’s] criticism of Civil Affairs in Burma was exaggerated, but there were elements of truth in it.” Officials at Civil Affairs were “faced with appalling difficulties” that made it hard to do any better.79 A major difficulty was a scarcity of Civil Affairs officers; if value were to be given to the Japanese notes, there were not enough officers to facilitate rapid exchange of the currency.80 In retrospect, it is difficult to see that giving value to the enemy currency would have dramatically changed the postwar situation in Burma, though a degree of resentment probably endured. The decision, an all-encompassing one that affected all British Far East territories, was made while World War n was still in progress. Provided the Burmese people (or those in the other occupied territories) did not starve or suffer because of lack of negotiable currency, then the decision taken can be seen as a practical one. Although it appears grossly unfair in a peacetime environment, there are no niceties in war. Donnison has made the pragmatic point that the destruction of “the currency and credit systems” of these colonial economies was not as traumatic as would have been the case if it had occurred in Europe to industrialized communities.81

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The Introduction of BMA Notes There had been two printings of the currency to prepare for the issuance of the BMA notes, and the following denominations were printed: Denomination Rs 100 Rs 10 Rs 5 Rs 1 As 8 As 4 Total

Rs (lakhs) 700 1500 800 490 10 10 3510

Though the newly issued BMA 5-, 10- and 100-rupee notes were overprinted with the words “Military Administration of Burma. Legal Tender in Burma Only,” it was originally intended that the smallest note issued by the BMA, the 4-anna, would have restricted use; these notes were to be “legal tender only inpayment or on account for any sum not exceeding one rupee.” 2 In May 1944, one small hiccup occurred when extensive Japanese forgeries of the RBI Indian 10-rupee note were detected.83 It was decided on advice from the governor of the RBI that the first series of overprinted BMA 10-rupee notes should be replaced by a second series of overprinted 10-rupee notes that were imbedded with a security thread.84Later in May 1945, Potter made provision to place “Rs 5 crores of old design [Burma Rs 10] notes in reserve” and made no plan to use them “except in emergency.”85 By the end of March 1945, the Allies had fully reoccupied much of Upper Burma and Arakan—an area of 125,000 square miles, amounting to almost half of Burma, that covered eight civil districts, Arakan Hill Tracts, Akyab, Myitkyina, Naga Hills, Chindwin, Bhamo, Shwebo, and Lower Chindwin—and contained 30 percent of the population, or 3.8 million people. Much of Katha, Mandalay, Sagaing, Pakokku, and the Chin Hills were in the hands of the British forces,86 and the Fourteenth Army was continuing its advance southward toward Rangoon. Finally victory was in sight, and British authorities turned their attention to introducing BMA currency.

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Even though the BMA notes had been planned as early as September 1943, their introduction was delayed until May 1, 1945.87 Donnison has suggested that the delay may have been because of a desire to ensure first that the British return to Burma was permanent88 This is undoubtedly the reason. We can trace the first initial change in policy to Potter, he suggested as early as September 9, 1943, that the proposed exchange of these notes to bona fide possessors of Burma currency should be delayed until order in reoccupied Burma had been restored. No doubt he had realized the enormity of accomplishing this task while war raged against the Japanese. Presumably the anticipated reoccupation of Rangoon, which began on May 3, 1945, was the trigger for the issuance of the notes.89As early as April 22, 1945, Lieut. -General Hyotaro Kimura, head of the [Japanese] Burma Area Army, realizing the inevitability of the situation, had decided to evacuate Rangoon.90 By the time the British forces arrived, the Japanese forces had been gone for ten days. Proclamation No. 6 of 1945 was issued by the British Military Administration on May 1, 1945. It stated that henceforth legal currency would be as follows:91 1) Reserve Bank of India Burma notes of 5,10 and 100 rupees 2) All RBI India notes and Government of India coin 3) British Military Administration overprinted notes 4) British Military Administration special notes of 4 and 8 annas92 All notes issued by the Government of India, even those overprinted “Legal Tender in Burma Only,” were now no longer legal currency; the same was true of the RBI Burma notes of 10,000 and 1,000 rupees. Although these high-denomination notes—May 1939 and July 1939 Burma notes of Rs 10,000 and Rs 1,000 respectively—were no longer negotiable, legitimate owners did not necessarily lose the value they represented. Note-holders had until the end of July 1945 to deposit these notes with the SCAO of the district in which they resided. The SCAO would issue a receipt on behalf of CFA (B) Brigadier Potter and would take a statement detailing the circumstances by which the notes came into the hands of the owner. If the CFA (B) were satisfied

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that the owner had a legal right to the surrendered notes, payment would be made in legal tender notes. Otherwise, the CFA (B) might direct that an enquiry be held to ascertain the depositor’s legal rights to possess the notes.93 To assist in the introduction of the BMA notes, SACSEA proposed a propaganda campaign aimed at discrediting the Japanese and “Burma Puppet government” currency.94 In his telegram of enthusiastic support for this initiative, Potter stated that the propaganda should have two main objectives: first, to “embarrass Jap war effort,” and second, to provide “advice to inhabitants in their own interests." As no puppet currency was issued, these notes need not be mentioned. Potter admitted he had delayed suggesting such propaganda himself only because he feared that the Japanese might respond with counter­ propaganda. However, now that the British position in Burma had become stronger, he could see no serious danger from this.93 Presumably this project went ahead, but it is impossible to judge its success. As late as May 31, 1945, it was still necessary to arrange for airdrops of leaflets informing villagers of the worthlessness of the Japanese rupees.96 On May 20,1945, Potter told Key that neither the 4-anna or 8-anna note had been issued.97Presumably there was sufficient Indian coin circulating in Burma in the first days of reoccupation to meet the needs of the people. Further supplies of coin from India in the ensuing months meant that neither of these small currency notes were ever issued.98 Potter also told Key that he was still holding back five crores of the old-design 10-rupee notes and another 20 lakhs of the two smaller anna notes, which would leave the British administration with Rs 29.90 crores of BMA notes on hand.99

Currency Chaos? The British amphibious task force landed south of Rangoon on May 2, 1945;1 the Fourteenth Army reached the city only a few days later. In six weeks of desperate fighting, the Fourteenth Army covered the 450 miles from Mandalay to Rangoon,101the last week batding monsoon conditions. On May 7,1945, the Union Jack was hoisted on Government House. 2 In the ten days that had elapsed since the withdrawal of the Japanese forces eastward, lawlessness had been rife and general disorder reigned. Looters had removed packets of Japaneseoccupation currency from the RBI building, and the returning

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British found lower-denomination notes “scattered like leaves” in the streets.103Before the return of the British forces there had been spurious rumors that the British would accept Japanese currency. Many shops were closed, and when some bazaar traders stopped accepting Japanese-occupation notes, rioting resulted.1 Shortly after the British arrived, Calcutta’s Statesman reported that while some shopkeepers were refusing Japanese-occupation currency, at other shops its value was depreciating hourly. By the time of this report, dated May 8, its value had already dropped as low as 300 Japanese rupees to one Indian rupee, (the equivalent of one Burmese rupee).105 Proclamation No. 6 had clearly stated the four forms of legal currency, and the Japanese-occupation currency was not included, so the BMA held firmly to these conditions. Those Burmese with goods and no legal currency were encouraged to barter for rice;106 able-bodied men were directed to find employment on military-inspired projects that were soon under way. In Mandalay, for example, the workers were at first dismayed at the small payment in “uninflated military currency” compared to the highly inflated Japanese currency. But gradually the labor camps began to supply not only rice and salt but also other hard-to-get items. Schools were even provided for the children at the camps, and workers and their families began to appear.107 Times special correspondent Morrison picked up on discontent about the change in currency, and shortly afterward, on May 22, 1945, the paper published a further article criticizing the British currency policy in Burma. The article charged that the British army’s refusal to accept Japaneseoccupation currency was causing great hardship to the Burmese people and that the policy was “complicating the life of the Burmese people more than anything that has happened during the past three years.” Not only were traders and other people finding their currency holdings worthless, but speculators, taking advantage of the uneven publication of the May 1 Proclamation No. 6, were visiting the countryside and were buying up goods with worthless Japanese currency from ignorant peasants who were unaware of the proclamation.109 Calling the proclamation a mistake—“a complete misreading” of the circumstances—Morrison pressed for the exchange of Japanese currency notes for a limited period, suggesting a rate of 100 Japanese-occupation rupees to one

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British rupee. The journalist also condemned the British authorities for their “laissez-faire” approaches, which assumed that eventually everything would be sorted out, and demanded that “the chief financial officer of the Civil Affairs Services” in Rangoon “with a wide mandate” and takes The same edition of the Times carried an item (“A False Step in Burma”) demanding similar action, while admitting that the Japanese notes “had depreciated heavily even before the liberation of the country, owing to the shortage of consumer goods and other ‘benefits’ of the Japanese new order.” However, the actions of the military authorities in declaring the Japanese currency, which the Times described as the “principal medium of exchange,” worthless was deplored, and the paper called for “speedy remedies.”1" In the following days, reporters in London sought the military’s perspective to follow up on the May 22 articles. The financial editor of the Times and a reporter from the Economist contacted the War Office, which gave them background information regarding Burma’s currency problems.112Two days later the Times presented a follow-up piece that presented the military’s view; the Economist followed on May 26.113 The occupation notes, the Times stated, were a direct “liability of the Japanese Government”; therefore, giving the Japanese currency “an exchange value into Indian or British currency” would not be prudent for the British government because there was only a small possibility of recouping this liability from Japan as a form of reparations at the war’s end. Nonrecognition of the notes amounted to “a most desirable ‘loss of face’” for the Japanese throughout the Far East. The Times article noted that “hardship” would necessarily arise in many instances, but it was pleased to know that these cases were being “accorded special assistance on their merits—frequently in supplies of commodities of various kinds.” It emphasized that “a decision to purchase these notes might have serious effects on the attitude of the populations in the other territories—Malaya and the Dutch East Indies, not to mention Indo-China and Hong-kong—where the Japanese have put their own notes in circulation.” Once the population in Japanese-held regions realized that the Allies would give no value to the Japanese currency, there was less likelihood that the Japanese would be able to buy their way out of trouble. The article also pointed out that enemy currency

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might flow from Malaya to Burma for exchange, and it noted that refusal to exchange enemy currency was in line with the policy of the United States in the Philippines. If value, even “fractional” value, were given to the Japanese currency, at a later date Hong Kong would be inundated with Japanese currency from the Chinese mainland because the currency was identical with that issued in Hong Kong.114 This was a major problem that the British authorities did not wish to face. Once the British gave value for Japanese-occupation currency in a British colony, other colonies, when reoccupied, would expect similar treatment. At the War Office, Key seemed pleased with the papers’ latest response, advising Potter that there were “some useful paragraphs” in an article in the Times that should “allay the alarm” of the earlier report.115 Nevertheless, the War Office took the May 22 article seriously. The very day of publication, the War Office telegraphed Lieut. -General Sir Oliver Leese, the general officer commanding-in-chief at advance headquarters, ALFSEA, to demand a special report.116Potter was dispatched from India to Rangoon,11 where he investigated the situation over the next few days. On May 31, he provided a full report to Leese, which was forwarded to the War Office. In his report, Potter said that the crisis had passed and that Japanese-occupation notes were not being accepted. He admitted that Proclamation No. 6 had led to confusion as had been reported, but the confusion had been enhanced by “the disorders and the wanton dispersal of Jap notes” that occurred as the Japanese withdrew. Of course the May 1 proclamation had not immediately been published in Rangoon, which at that time was not yet occupied by the British, and uncertainty about British policy had been enhanced by “the false rumour which had previously been current in Rangoon that the British in Upper Burma were giving some value to Jap notes.” (Only in Akyab in Arakan, for a short period of time, had Japanese notes been accepted.) But this rumor was being replaced by word that the British authorities were not accepting the Japanese currency. Leaflets were now being dropped from the air to alert villagers to “the true facts about the currency.” Although there had been riots in the bazaars because of the nonacceptance of the Japanese currency, the unrest had settled and the bazaars were flourishing again.118 In addition to the Times special correspondent, there were others in Britain who had earlier expressed doubt over Potter’s

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decision not to recognize Japanese currency. This action repudiated an earlier decision that some value would be given. A note written by L. Waight of the Burma Office indicated that he had hoped that repudiation would only occur when the whole country was occupied and the British had “given ample notice of our intention to accept no more Japanese or puppet currency after a stipulated date.”119 Potter himself acknowledged that nonrecognition caused hardship, especially to people who had accepted payment honestly in Japaneseoccupation currency. As he explained, “It must be remembered that . . . [these people] had no option but to accept Jap currency.” But there were still further problems. Scarcity of British currency in certain local areas could dislocate the economy if the problem was not rectified. Even at the markets, some villagers preferred to receive “large wads of brand new Jap notes” for their produce instead of BMA currency. Yet, even though he was aware of these problems, Potter was confident that if the British gave even “a depreciated value” to the Japanese currency, racketeers would benefit rather than “the simple-minded villagers of whom Burma is mainly composed.”120 There were overtones of British paternalism in this remark. Nonetheless, he had also discussed the position with three other senior military officials, the DCCAO, Fourteenth Army; the DCCAO, Rangoon Area; and the chief of police, Rangoon. All were of the opinion that the present policy did not require modification. On a practical note, Potter pointed out that he lacked the staff and machinery to conduct a well-organized exchange of Japanese notes immediately, and if the exchange were delayed or done poorly, “the unscrupulous” would take advantage of “simple-minded villagers.” Later, in August 1945, a similar reason forced the Dutch to give up their plan of providing an exchange of currency.122 Potter firmly believed that “alleviation of the hardship in Burma would not be achieved by [the British administration] giving a depreciated value to the Jap notes.” The current British policy was a far better approach. It ensured “that no one shall be handicapped by lack of British currency”; those without currency were given foodstuffs. In addition, supplies were being delivered to farming villages in exchange for collective promises “to pay in cash or kind after the harvest.” While most Burmese would stay cash poor for the time being because what wartime savings they

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had had been wiped out, an increasing amount of BMA currency was being injected into the economy by payments for supplies and services and through advances “of three months’ full pay or pension to all Govt, servants and pensioners who remained in Burma during the Jap occupation and whose conduct was loyal and proper.”12 In his autobiographical memoir, Potter recalled that many of his Burmese friends had served under the Ba Maw government and that “this was not deemed a slur on them, provided they had not adopted an antiBritish attitude and gone out of their way to assist the Japs.”124 While in Rangoon, Potter also consulted with members of the Burmese political establishment. He held talks with two of the leading financial figures under the Japanese, Dr. Set, finance minister in the Ba Maw government, and U Ba Maung, manager of the Burma State Bank, both of whom he described in a letter to his sister as “old friends.”125 He had known both men in prewar Burma when he was controller of finance in Burma on the staff of the British governor. They discussed British policy, but Potter obtained further information regarding Japanese note issue during the occupation period from Dr. Set on May 26.126 Potter had also discussed matters with Ian Morrison; he felt that Morrison was sufficiently satisfied by his explanations regarding the reasons for nonrecognition of Japanese currency.127 He confided in a letter that “in a subsequent dispatch he reproduced almost word for word all the points [I] had made to him.”128 In this dispatch, which appeared in the Times on June 9, 1945, Morrison reported that Civil Affairs Service finance officers were “fully alive to the hardship being caused to the people.” These financial officers had pointed out “that, after a period of inflation, it is impossible to bring the currency under control again without causing widespread hardship, and that, whatever measures were adopted, the burden would still tend to fall most heavily on the people in the country districts. The same problem exists in the Philippines, and the same general policy is being enforced there as in Burma”.129 Morrison also clarified that relief goods were being issued free “or against payment in cash or kind after the rice harvest.”130 In addition, Potter’s memoirs reveal that at Ian Morrison’s suggestion, he met with two leading members of the Burmese nationalist movement, General Aung San, commander of the

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Patriotic Burmese Forces, and U Than Tun, secretary-general of the Anti-Fascist People’s Freedom League (AFPFL).131 In his currency report he stated that the AFPFL represented “the only organized body of political opinion in Burma.” However, this meeting and those with Dr. Set and U Ba Maung “produced no suggestion of a practicable alternative policy” to present policy.132 That is not to suggest that policies were not put forward, simply that Potter did not see them as practical ones. Potter concluded his currency report by saying that if the present British policy were to be reversed, those loyal hilltribesmen who had never collaborated with the Japanese or enriched themselves with Japanese currency might feel let down.133 These were tribesmen inhabiting the frontier or excluded areas, principally those on the Indian/Burma border. Prior to World War II, these areas were not fully integrated into Burma; they were governed by the British using a form of “indirect rule” that used district commissioners supported by local leaders.134 Frontier areas were considered to be loyal to the British, unlike Burma proper, where many of the population had welcomed the Japanese.

Further Currency Matters Despite the BMA’s proclamation, Japanese notes continued to circulate in reoccupied Burma, and their value had rebounded from May 8, when the rate had been 300 Japanese rupees to one Indian rupee. Japanese rupees of less than Rs 5 denomination had “lost all value,” but among the locals, Japanese-occupation notes of Rs 100, 10, and 5, now had a value of “1 rupee Brit: 100 rupees Jap but only brand new [Japanese] notes” were being accepted by those engaging in currency transactions.135 There were to be further fluctuations in the currencies. On June 10,1945, when Potter returned again to Rangoon, he advised Key that the Japanese rupee had appreciated from 100 to the British rupee to 80 to the British rupee.136 Although the currency situation in Upper Burma appeared to be under control, there was still a shortage of British currency. Potter advised Key, possibly in late July 1945, that traders from the dry zone, who were bringing agricultural products, including vegetable oil, to Lower Burma, were bartering their goods for the paddy and rice they needed in their own districts.13 In his May 31 report, Potter stated that it was now believed

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that in May 1942, when the British withdrew from Burma, 34.5 crores (340 million) of rupees were in circulation. Of these, 4.5 crores were believed to be Government of India 1-rupee notes, and the rest were thought to consist of the new RBI Burma issue notes issued prior to the Japanese invasion. The view was that there were few RBI Indian-currency notes circulating in the early months of 1942. Rs Seven crores (70 million) of rupees had been redeemed in India, and, allowing for wastage, it was estimated that at least Rs 20 crores of Burma-issue notes that had been hoarded during the war years would soon return to circulation. It was assumed that most of the 4.5 crores of Government of India 1-rupee notes had returned to India with 118 refugees, but it was impossible to estimate. Ian Morrison has suggested that only 10 to 12 crores of the old Burma and India notes had been hoarded and that 300 crores of occupation currency issued by the Japanese were still circulating.139At this date, Potter was in agreement with Morrison’s figure of 300 crores of Japanese rupees in circulation,140but this estimate was to increase as the Japanese departed from Burma. At the end of June, the military administration moved its offices from Barrackpore in India to Rangoon. There it was attached to the Twelfth Army, which had replaced the Fourteenth Army.141 This move provided Potter and his staff with firsthand views of the currency situation in Burma.

Usage of BMA Notes Less than one month after the introduction of BMA notes on May 1,1945, Potter placed a further order for more BMA notes, which amounted to 25 crores of rupees: 600 lakhs of Rs 100, 1,200 lakhs of Rs 10,300 lakhs ofRs 5, and 400 lakhs of Re 1. He believed that the addition of 25 crores to the approximately 30 crores already in circulation would give the military administration a sufficient supply for the ensuing 12 to 15 months, and possibly “a reasonable working reserve.” Estimations were that during the coming months Rs 4 crores per month would be required to meet demand until the rupee was counterbalanced by “sale of consumer-goods, sale of rice to meet the needs of the local population, [and] collection of revenue,” but Potter did not predict how long that would be. In the first three months of 1945, the military had used only 2 crores per month, but expenses were expected to increase when bases were established in Rangoon and funds were needed to

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purchase the rice surplus in Lower Burma. Additional BMA notes would be required for gradual replacement of the old Burma notes, “which have been in circulation without replacement for nearly 4 years.” Potter proposed “an extensive but not unrestricted exchange of Burma notes for BMA notes” in order to restore confidence in the British currency.142BMA currency was circulating, and Potter would later state that the Fourteenth Army believed that lack of legal tender provided “the greatest single incentive for the inhabitants to come forward and work for the Allied Forces”; those workers received BMA notes in payment.143 Not every Burmese had been astute or fortunate enough to hoard prewar Burmese currency; working for the military presented an opportunity to earn wages paid in the new currency. Potter’s report was endorsed fully by Lieutenant-General William Slim, commander-in-chief of ALFSEA.144 While the military reoccupation of Burma was taking place, the Government of Burma in Simla was relegated to a minor role. Nevertheless, the Government of Burma communicated regularly with the Burma Office in London and had been consulted regarding repudiation of the Japanese-occupation currency, though its views had not been accepted. Potter also wrote to the Government of Burma inquiring how far their currency planning had progressed. Potter estimated that the new Burma currency would take twelve to fifteen months to print and, as he told Key, the Government of Burma might be prepared to use the BMA notes if the military administration ended within that period.145 This actually occurred when the Government of Burma resumed control of Burma on October 16, 1945. Robinson and Shaw record that three days after the Government of Burma resumed control of Burma, the total distribution of BMA notes was given as 349.7 million rupees (34.97 crore). By January 26,1946, when the BMA ceased to be responsible for these notes, 387.57 million rupees (38.757 crore) had been issued.146Donnison estimated in 1956 that 34 crores of rupees (Rs 340,000,000) of BMA notes and 1 million pounds of British India coin (13,333,333 rupees) were placed in circulation in Burma before the end of the military administration in October 1945.147 No sources for this information are given for these figures, but they correspond with the figures quoted by Robinson and Shaw.

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Financial Problems in Lower Burma Once Rangoon had fallen to the British, Brigadier Potter’s attention turned to Lower Burma, the rich alluvial delta area surrounding Rangoon. Until 1942, the wet rice fields of the delta had produced three-quarters of Burma’s rice exports,148 but the three intervening years had not been kind to the region. In 1940-1941,7,500,000 acres were under cultivation. Potter’s estimate of 3,250,000 acres for the 1945-1946 season was less than half this figure.149 Early in the Japanese occupation, problems emerged in the delta region. When the British retreated before the Japanese advance in 1942, the sale of the 1941-1942 paddy crop had not taken place. This led immediately to an enormous crisis for the delta region, and in following years, during which the region lost the export market in India (which meant that nearly two-thirds of the rice produced during those years was lost),150 rice production and income in the region fell sharply. Many of the fields lay uncultivated and reverted again to unproductive jungle. Difficulties also arose in transporting the harvested rice because of petrol shortages and destruction of the infrastructure, so rice that was needed in Upper Burma still remained in storage. The first problem Potter confronted was the apparent absence of any British Burma currency in these rural areas. During the intervening years, the cultivators had used what little British Burma currency they possessed to support their families by buying supplies.151 In Upper Burma, once the BMA was in place, hoarded notes and coin had begun to surface.152In Lower Burma, a much richer area, this was not to be the case. Many members of the Indian Chettyar153community of moneylenders and property-owners had departed with the British. Those remaining, together with other Indian landowners, were forced to contribute to fund-raising levies with “British currency” (presumably India notes and coin or Burma notes) that were organized by the Indian Independence League to support Subhas Chandra Bose’s Japanese-sponsored Azad Hind FaujIndian National Army (INA),154 which comprised approximately 10,000 troops.155 From January 1944, Bose, his army, and his Azad Hind (Indian National) government were domiciled in Burma.156 The INA, which had previously been based in Singapore, was formed from disgruntled Indian prisoners of war captured by the Japanese in Malaya and

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Singapore.157The presence of the INA in Burma was very real to the Indian inhabitants of the delta, and the INA saw this rich area as a lucrative source of funds. On July 10,1945, a cipher telegram from Brigadier Potter to the War Office gave comprehensive details of the problems being faced in Lower Burma. In some areas in the lower delta region (such as the Maubin, Myaungmya, and Pyapon districts), military administration had not yet been set up, but even in the districts where units were in operation problems had arisen. The original intention was to purchase surplus paddy stocks with BMA currency and sell relief supplies. Neither project could proceed. All available storage facilities in rice mills were filled; some stock still remained from 1942-1943 and 1943-1944 harvests and there was no space for further paddy purchases. Until some of this stock, which presumably was owned by the millers, was dispersed, no further purchases could take place. A shortage of gunnysacks and transportation also exacerbated the problem,158and Potter could not foresee an early settlement of the paddy-stock congestion. The second plan, which was to supply relief supplies, was halted because of insufficient supply. Economic woes and discontent continued in Maubin, Myaungmya, and Pyapon districts, and until the military administration was established there, no efforts could be made to reduce the unrest. Although the Japanese had withdrawn from these three districts, the presence of “Local Burmese Forces,” as Potter described the former members of the Burma National Army forces,159 added to the unrest, and the military administration would not be established until the intervention of British armed forces forced the Burmese forces to step aside.160 Unable to purchase paddy stock, Potter had to find an alternate way to introduce BMA currency into the delta communities, where the military authorities did not require as much infrastructure work. As Potter pointed out, residents in Upper Burma and Arakan solved the currency dilemma by paying for services and goods with Indian and (after May 1, 1945) BMA currency. In Lower Burma, the problems were much more serious, and time alone would not rectify them. This was Potter’s most urgent call for help: “Present crisis in Lower Burma is of different order and requires special and immediate remedy.”161 Potter’s proposed remedy addressed both the needs of the rice-growers and his own desire to inject new currency into the

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rural economy. After discussions with civil officers who had lengthy rural experience and “representatives of informed Burmese opinion,” Potter proposed to the War Office that interest-free loans be granted to paddy cultivators. He recommended 24-rupee loans for cultivators “actually working one yoke of cattle” and 36-rupee loans for cultivators “actually working more than [one] yoke.” He reported that one yoke normally worked ten to fifteen acres.162 Potter estimated that the loans would amount to a modest 66 lakhs (6,600,000 rupees). Cultivators would repay the loans after the next harvest, which would take place from January to March 1946; they could pay in cash or baskets of paddy. All the cultivators in a particular village were to be collectively responsible for the repayments. The scheme would be applicable only to the rural districts of Maubin, Myaungmya, Pyapon, Bassein, Henzada, Prome, Tharrawaddy, Insein, Hanthawaddy, Pegu, and Toungoo, which were the major ricegrowing areas.163 Since the 66 lakhs (£495,000 English) represented only one-eighteenth of the projected value of the 1945-1946 harvest (approximately 11.9 crores of rupees), Potter foresaw no difficulties in recovering this sum. In his telegram, Potter also reminded the authorities that in a normal season, the Chettyars and the big landowners had financed the growers up to a sum of five crores (50,000,000 rupees or £3,750,000). Potter’s concession of interest-free loans would also appease Aung San’s Anti-Fascist People’s Freedom League and others (whom Potter did not identify) who would see this as the goodwill gesture they had been urging on the British.164 Although some might see Potter’s scheme as adding to the current inflation, Potter saw it as combating “extreme deflation” in these rural areas. The money loaned to the cultivator would, in turn, be used to pay day laborers and would spread throughout this rice-growing community.165 To accelerate the spread of the currency, most of the loans would be paid in small coin, which Potter felt the cultivators would appreciate.166 Potter stressed the urgency of this matter in his telegram,167and the scheme was approved a week after he proposed it.168 The provision of interest-free loans to the paddy growers of the Lower Burma delta region was the last significant act of Potter and his staff. They saw the interest-free loans as a measure of relief made necessary because no value was given to

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Japanese-occupation currency.169Unfortunately, the returning Government of Burma saw these interest-free loans in a different light They contended that they were simply normal agricultural loans and that “it would prejudice their schemes for agricultural credit if no interest were charged.” The British government in London upheld their decision, and interest was subsequently charged at the prevailing rate for such advances, which was 6.25 percent.170 After the initiation of loans by the BMA, the rice-growers were encouraged to replant, and when communications were in place and the transport facilities, including the docks, were repaired within the space of two years, “the natural economy came back to life with surprising rapidity.”171

Footnote Potter’s role as CFA (B) did not cease with the return of the governor, Sir Reginald Dorman-Smith, and his civil government from India in mid-October 1945. The final handover of military administration financial matters to the Government of Burma was not completed until March 1946. However, Potter’s task continued for a further year in Rangoon while the final accounts of the military administration were prepared and a full report submitted to the War Office.172 In September 1945, shortly before the return of the Burma government, Potter was called to Singapore by Lord Louis Mountbatten to discuss the currency experience in Burma with the incoming military administration there, who, Potter explained in a personal letter, were “very skeptical about applying my Burma policy of nonrecognition of Jap currency to Malaya.” He believed that he left them “convinced that the policy was right & was working out well.” Interestingly, Potter adds in brackets, “I say ‘my policy’ because I first proposed it to HMG in 1943 & have been fighting for it ever since.”173

Conclusion Planning for the return of British military forces to Burma began almost immediately the British were driven out in May 1942. An integral part of this planning concerned the currency to be used when the British recaptured Burma. Brigadier A. K. Potter became seriously involved in this when he was appointed to the military position of Financial Adviser (Burma) on June 1, 1943. Far away from India and Burma, in wartime London, six

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departments of the British Government also became vitally involved in this currency decision-making. Three of the departments, the India Office, the Burma Office, and the Colonial Office, were directly concerned with Britain’s distant “empire” in the Far East. However, even F5, the financial department of the War Office, the Treasury, and the Bank of England (the latter two concerned principally with British monetary affairs) were more interested in an Asian solution to the problem rather than a European one. Except for the Malkin Doctrine, the European war seemed to have little relevance to their thinking on Burma. As they searched for the solution to their major problem—what value, on their return, the British should give to the Japanese-introduced occupation currency— the group focused on China and Hong Kong, the Dutch in the Netherlands East Indies, and on the Philippines. To add complications to their problem, the British had no real indication of how much currency was issued by the Japanese. In fact, even as they retreated eastward out of the country, the Japanese military continued to issue more occupation notes. When the British were reestablished again in Burma, they did not want to find themselves liable for enormous amounts of enemy currency, which had continued to inflate from 1943 onward. Also, a serious doubt had emerged about whether British Burma would be able to claim reparation from the Japanese for the currency, if value were to be given. An important consideration was the belief that demonetization of the occupation rupee would further discredit the Japanese in their remaining Asian-occupied territories. The decision of the Philippine government to refuse to recognize the enemy currency after reoccupation by the Americans certainly encouraged the British decision to deny any value to the occupation currency. This decision was criticized in Britain, especially by Times special correspondent in Burma Ian Morrison, who believed that the Burmese people were suffering and would continue to suffer hardship by this apparently heartless action. Potter, who was the human face of Finance and Accounts (Burma) and his men were given the unenviable task of ensuring that the British demonetization of the Japaneseoccupation currency was a success. Only in Arakan was any value given to the Japanese rupee, and small value at that The CFA (B) and his staff continued to believe that where possible,

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relief supplies should be paid by the prewar India or Burma notes and coin or the Indian currency introduced by the army to pay for rice supplies and the work done to support the reconstruction of Burma. Food was free only where the Burmese had no available currency and no chance of obtaining work. In rice-growing areas, supplies were given against payment after the harvest in cash or in kind. As the advance continued south toward Rangoon, the value of the occupation currency continued to slide. When the British forces reached Rangoon, the Japanese rupee was fetching between 100 to 300 Japanese rupees to one Indian rupee. Only on May 1,1945, when Rangoon was about to be recaptured and the British return was secure was the new BMA currency introduced. Times special correspondent Ian Morrison saw the Burmese monetary situation as “currency chaos,” but Potter held his nerve and ensured that the nonrecognition of Japaneseoccupation currency became normal procedure, not only in Burma, but in other reoccupied British territories, including Singapore and Malaya. Before Potter’s task was finally over, he was required to settle a problem that occurred in the formerly rich delta region, where there was a shortage of Burma currency because of forced donations to Subhas Chandra Bose’s Japanese-sponsored Indian National Army. This was overcome by Potter’s proposal, approved by the War Office, to advance loans to paddy cultivators, and although the intention was to make these interest-free loans, sad to say, this decision was later rejected by the Government of Burma on their return. Only then, in October 1945, was the BMA’s role in reestablishing Burma’s monetary system complete. Although Potter and his staff were aware that many Burmese had only the demonetized Japanese rupees in their possession and suffered hardship, they strongly believed that those with large quantities of these notes were mostly Japanese collaborators and black marketeers. To a certain extent the suffering was an indirect cause of colonization. One of the compelling reasons for the British not to give value to the Japanese-occupation currency in Burma and its other Far Eastern colonies was the adverse flow-on effect to Britain’s war-damaged economy should value be given. 1F. S. V. Donnison, British Military Administration in the Far

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East, 1943-46 (London: HMSO, 1956), 11-12. 2 Ibid. 12. 3 Ibid. 13-15. 4 Maurice Collis, Last and First in Burma (1941-1948) (London: Faber and Faber, 1956), 53,197,295. 5 Donnison, British Military Administration, 53. Donnison suggests that because Burma had only recently separated from India, “it was politically undesirable to appear in any way to undo this separation, by placing the administration of the country under the Commander-in-Chief, India, who was himself under the control of the Indian Government.” 6 J. H. McEnery, Epilogue in Burma, 1945-48: The Military Dimensions o f British Withdrawal, 2nd ed. (Bangkok, White Lotus Press, 2000), 22. 7 Donnison, British Military Administration, 53. The officials who controlled India and Burma on behalf of their governments were members of the Indian Civil Service (ICS). Most were recruited from Great Britain straight from school or university after they had sat for an entrance examination. 8 Ibid. 54. 9 Louis Allen, Burma: The Longest War, 1941-45 (London: J. M. Dent & Sons, 1984), 396. McEnery, Epilogue in Burma, 20, gives the date of the capture of “Kalewa, the gateway to Burma” as December 2,1944. 10 McEnery, Epilogue in Burma, 54. "ibid. 59. 12 A. K. Potter, autobiographical memoir, 31, OIOC Mss Eur C414/11. 13 Donnison, British Military Administration, 218. 14 Christopher Sykes, Orde Wingate (London: Collins, 1959), 461. 15 Allen, The Longest War, 156. 16 This information would have been based on a report that in August 1943, Dr. Ba Maw convened a committee to discuss the establishment of a state bank of Burma and a currency system. On January 15, 1944, the Burma State Bank opened, but although the issue of notes reached the printing stage, none were ever issued. In September 1943, the exact name of the bank might not have been decided. 17 A. K. Potter, Financial Adviser (Burma), “Currency for Reoccupied Burma,” Policy Document, September 9, 1943,

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IOR M/4/306. 18 “Currency for Reoccupied Burma,” September 9,1943. 19Ibid. 20 M. Robinson and L. A. Shaw, The Coins and Banknotes o f Burma (Manchester: The Authors, 1980), 125. 21 H. H. Thomas, Treasury to A. [j i c ] H. Wagstaff, WO, May 30, 1945; O. H. Wagstaff to Thomas, June 6, 1945, IOR M/4/306. 22 A. K. Potter, CFA (B) to C. E. Key, WO, “Subject: BMA NOTES,” May 20,1944, IOR M/4/306. 23 “Currency for Reoccupied Burma,” September 9,1943. 24 Ibid. 25 G.O.C.-in-C. Eastern Army, General Irwin’s letter, quoted, n.d., in “Currency for Reoccupied Burma.” The Eastern Army was responsible for Assam, Bengal, Orissa, and Bihar and for the protection of eastern India from a possible Japanese attack, which was expected from the direction of Arakan. 26Armindia’s telegram 39099/G, February 20,1943, quoted in “Currency for Reoccupied Burma.” 27 Troopers’ telegram 62223/F5, March 19, 1943, quoted in “Currency for Reoccupied Burma.” 28 Armindia’s telegram 46396/G, April 13, 1943, quoted in “Currency for Reoccupied Burma.” 29 “Currency for Reoccupied Burma,” September 9,1943. 30 Ibid. 31SACSEA (Supreme Allied Commander, South East Asia) to WO, telegram, April 16,1945, IOR M/4/306. 32 Burma Office to Under Secretary of State for Burma, report, November 24,1943, IOR M/3/854. 33 REMAC 259, Washington, to Foreign Office, cipher, September 7,1943, IOR M/4/306. 34 E. Rowe-Dutton, Treasury, to S. Caine, Colonial Office, September 23,1943, IOR M/4/306. 35 C. E. Key, WO, to E. Rowe-Dutton, Treasury, October 14, 1943, IOR M/4/306. Much of the correspondence relating to this issue is located in IOR M/4/306. 36 Potter to R. E. Potter (father) and sisters, March 12, 1944, OIOC Mss Eur C414/8. The sack was lead-weighed so that it could be jettisoned if the plane crashed. 37“Memorandum on the Withdrawal of Currency Circulating in Reoccupied Territory and its Replacement by the New

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Netherlands Indies Government Guilder Notes,” March 31, 1944, IOR M/4/306. 38 Lord Hawke, WO, to Norman Young, Treasury, June 16, 1944, IOR M/4/306. 39“Memorandum on the Withdrawal Of Currency-Netherlands Indies,” March 31, 1944, IOR M/4/306. 40 Lord Hawke, WO, to Norman Young, June 16, 1944, IOR M/4/306. 41 Potter, CFA, to C. E. Key [Accounting Officer WO], September 23, 1944, IOR M/4/306. 42 Plans were made for these notes to be issued by the Burma State Bank. See Chapter 2. 43 Potter to Key, September 23, 1944. 44 Young, Treasury, to Lord Hawke, WO, November 4, 1944, IOR M/4/306. 45 “Provisional Monetary and Fiscal Guide—Burma,” December 20, 1944, IOR M/4/306. 46 Donnison, British Military Administration, 222. 47 “Provisional Monetary and Fiscal Guide—Burma.” 48 Ibid. 49 That is, the amount of Japanese occupation currency circulating in Burma at date of issuance of the directive. By March 1945, a figure of 231 crores was believed to have been issued, almost 6.7 times the currency circulating at the time of the British withdrawal. 50 Donnison, British Military Administration, 222-223. 51L. Waight, Government of Burma, note, to Mr. Nash, Burma Office, April 23,1945, IOR M/4/306. 52 General Douglas MacArthur and his U.S. troops reached Manila in early February 1945, but bloody fighting ensued for another month. 53T. Crowe, United Kingdom Treasury Delegation, to Norman Young, Treasury, March 30,1945, IOR M/4/306. 54 Norman Young, Treasury, to T. Crowe, United Kingdom [Treasury] Delegation, March 7, 1945, IOR M/4/306. 55 Crowe to Young, March 30,1945, IOR M/4/306. 56Copy of “By the President of the Philippines Executive Order No. 25,” November 18,1944, IOR M/4/306. 57 Philippine Executive Order No.25. 58 Extract from Shanghai Evening Post, January 5, 1945, IOR M/4/306.

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59 C. F. Scheffer, Het bankwezen in Indonesia sedert het uitbreken van de tweede wereldoorlog (Jakarta: NoordhoffKolff, 1951), 79, quoted in Robert Cribb, “Political Dimensions of the Currency Question, 1945-1947,” Indonesia 31 (April 1981): 116. 60 Cribb, “Currency Question,” 116. 61 Ibid. 62 Merdeka [Jakarta], October 5,1945, quoted in ibid. 114. 63 Cribb, “Currency Question,” 113-136. 64 Potter to Key, WO, extract—dispatch, par. 16, December 8, 1944, IOR M/4/306 65Alec Caimcross, The Price o f War: British Policy on German Reparations, 1941-1949 (New York: Basil Blackwell, 1986), 19-20,28. Economist John Maynard Keynes was an influential member of the committee. A printed copy of the report can be found in PRO FO 942/53, dated 31 August 1943, numbered 121 quoted in above. 66 Young, Treasury, to Lord Hawke, WO, January 10, 1945, IOR M/4/306. 67 Caimcross, The Price o f War, 28. 68 Young to Lord Hawke, January 10, 1945. 69J. Fisher, Bank of England, to Lord Hawke, WO, January 22, 1945, IOR M/4/306. 70 C-in-C. India to WO, telegram, January 21, 1945, IOR M/4/306. 71 WO to Rear Echelon ALFSEA, Civil Affairs, for Potter, telegram, January 26,1945, IOR M/4/306. 72 Potter to Key, March 13,1945, IOR M/4/306. 73 A. K. Potter, “Current Policy, Burma,” May 31,1945, IOR M/4/306. 74 “Responsibility in Burma,” Times (London), February 22, 1945, 5; Potter to Key, March 13,1945. 75 The civil affairs officers involved in dealing with the Japanese-occupation currency were members of the BMA who were attached to the armies fighting in Burma. 76 Potter to Key, March 13,1945. 77U Hla Pe, “U Hla Pe’s Narrative of the Japanese Occupation of Burma.” Recorded by U Khin. Paper Number 41, Southeast Asia Program. (Ithaca, NY: Department of Far Eastern Studies, Cornell University, 1961), 67. 78 Potter to Key, March 13,1945.

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79A. K. Potter to Kate Potter, March 14,1945, OIOC Mss Eur C414/8. 80 “Currency Policy, Burma,” May 31,1945. 81 Donnison, British Military Administration, 223. 82 BMA, Burma, Proclamation No. 6 Currency, May 1,1945. 83J. Fisher, Bank of England, to C. E. Key, WO, May 23,1944, IOR M/4/306. 84 Potter to Key, “Subject: BMA NOTES,” May 20,1945. 85 Ibid. 86 SACSEA to Secretary of State for War, telegram, 29 March 1945 [IOR: L/PO/9/lO), quoted in Hugh Tinker ed., Burma: The Struggle fo r Independence, 1944-1948, vol. 1 (London: HMSO, 1983), 110-111. 87 SACSEA to WO, telegram, April 16,1945, IOR M/4/306. 88 Donnison, British Military Administration, 224. 89Major Gen. S. W. Kirby et al., The War against Japan, vol. 4 (London: HMSO, 1965), 400 and U Hla Pe, “U Hla Pe’s Narrative of the Japanese Occupation of Burma,” 91, give the date of the British arrival as May 3,1945; Allen, The Longest War, 476 and 480, notes that the British amphibious operation, which combined naval and land forces, was planned for May 2, 1945.The operation was code-named Dracula. 90 Allen, The Longest War, 386,481. 91 British Military Administration, Burma, Proclamation No. 6 Currency, May 1,1945, IOR M/4/306. 92 Robinson and Shaw, Coins and Banknotes, 125. 93 British Military Administration, Burma, Proclamation No. 6 Currency, May 1,1945. 94 SACSEA to WO, telegram, April 16,1945, IOR M/4/306. 95 CFA (B) to SACSEA, telegram, April 21, 1945, IOR M/4/306. 96 “Currency Policy, Burma,” May 31,1945. 97 Potter to Key, “Subject: BMA Notes,” May 20,1945. Ofi Robinson and Shaw, Coins and Banknotes, 126. 99 Potter to Key, May 20,1945. 100 Sir William Slim, Defeat into Victory (London: Landsborough Publications, 1958), 412. 101 Statesman (Calcutta), May 8, 1945. At this stage in the Pacific war, the Americans held a strong position on Okinawa; they had launched their invasion there on April 5. Fighting had continued on Mindanao in the Philippines, and Australian and

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Netherlands Indies troops had captured the center of Tarakan. Super fortresses had attacked Southern Japan, and the British Pacific fleet had bombarded part of the southern Ryukyus. 102 Statesman (Calcutta), May 8,1945. 103 Ibid. “Currency Policy, Burma,” May 31,1945. 104 “Currency Policy, Burma,” May 31,1945. 105Statesman (Calcutta), May 8,1945. 106 Donnison, British Military Administration, 100. 107 Ibid. 104. 108 Special Correspondent [Ian Monison], “Currency Chaos in Burma,” Times (London), May 22, 1945. In a letter to Key dated June 10,1945, Potter names Ian Morrison as the Times' special correspondent and notes that he had recently discussed the article with the journalist in Rangoon. IOR M/4/306. 109 Special Correspondent [Ian Morrison], “Currency Chaos,” Times (London), May 22,1945. 1.0 Ibid. 1.1 “A False Step in Burma,” Times (London), May 22, 1945. 112C. E. Key, WO, to A. K. Potter, CFA (B), June 1,1945, IOR M/4/306. 113“City Notes: Currency Problem in Burma,” Times (London), May 24, 1945, 7; and “Currency Troubles in Burma,” Economist (London), May 26,1945,709. 114“City Notes: Currency Problem in Burma,” Times (London), May 24,1945. 115 Key, WO, to Potter, CFA (B), June 1,1945. 116 WO to GOC-in-C, Adv. HQ, ALFSEA, telegram, May 22, 1945, IOR M/4/306. 117 Adv. Leese [Lieut-General Oliver Leese, GOC-in-C, ALFSEA] to WO, telegram, May 23,1945, IOR M/4/306. 118 “Currency Report, Burma,” May 31,1945. 119L. Waight, Burma Office, to Nash, memo, April 23, 1945, IOR M/4/306. 120 “Currency Report, Burma,” May 31,1945. 121 Ibid. 122Cribb, “Currency Question,” 116. 123 “Currency Report, Burma,” May 31,1945. 124Potter, autobiographical memoir, 38. 125 Potter to D. S. B. Potter, May 29, 1945, OIOC Mss Eur C414/8. 126 “Currency Policy, Burma,” May 31,1945.

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127 Ibid. 128 Potter, autobiographical memoir, 36. 1 *90 Special Correspondent, “Two Currencies in Burma— Introducing New Notes,” Times (London), June 9,1945, 3. 130 Ibid. 131 Potter, autobiographical memoir. 132 “Currency Report, Burma,” May 31, 1945. 133 Ibid. 134 Hugh Tinker, The Union o f Burma: A Study o f the First Years o f Independence, 3rd ed. (London: Oxford University Press, 1961), and 130. 135 “Currency Policy, Burma,” May 31,1945. 136Potter, CFA (B), to Key, WO, June 10,1945, IOR M/4/306. 137 A. K. Potter to Key, undated report (refers also to recent telegram of July 10,1945), IOR M/4/306. 138 “Currency Report, Burma,” May 31, 1945. 139 Times (London), May 22,1945. Potter appears to have been closer to the mark with his figure of 20 crores, as can be seen from the figures mentioned below. Robinson and Shaw, Coins and Banknotes o f Burma, 126 and 127, state that between January 5,1942, and March 31,1945,68,257,715 Burma rupee notes were cashed in India, followed by 9.95 crores between 1945 and 1946. They also state that after the Government of Burma became responsible for note issue in January 1946, “encashment facilities for Burma notes in India were continued, resulting in a further 8.4 crores in 1946-47, and 1.03 crores in 1947-48, making a total of 26.22 crores up to that time.” For the period April 1, 1945, to June 30, 1948, a total of 19.38 crores were cashed against Potter’s May 1945 figure of 20 crores. 140 Potter to D. S. B. Potter, May 24, 1945, OIOC Mss Eur C414/8. 141 Potter, autobiographical memoir, 38. 142 Potter to Key, May 20,1945. 143 “Currency Report, Burma,” May 31, 1945. 144 Lieutenant-General Slim, C-in-C, ALFSEA, to Under Secretary for War, WO, June 3,1945, IOR M/4/306. Slim had been the general commanding the Fourteenth Army and was promoted to this new position under Lord Mountbatten. 145 Potter to Key, May 20,1945. 146 Robinson and Shaw, Coins and Banknotes, 126.

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147 Donnison, British Military Administration, 225. 148 G. E. Harvey, British Rule in Burma 1824-1942 (London: Faber and Faber, 1946), 49. 149 Potter, CFA (B), to F5, WO, telegram, July 10,1945, IOR M/4/306. 150Harvey, British Rule, 60. 151 Potter, CFA (B) to F5, WO, telegram, July 10,1945. 152‘Two Currencies in Burma,” Times (London), June 9,1945, 3. 153The Chettyars were a South Indian caste who specialized in banking. Encouraged by the British administration, the Chettyars were the most important source of funding for Burma’s rice industry. By 1942, much of the country’s ricegrowing lands were in their hands through default of mortgagors. 154Potter to WO, telegram, July 10,1945. 155 Allen, The Longest War, 169. 156Ba Maw, Breakthrough in Burma: Memoirs o f a Revolution, 1939-1946 (New Haven: Yale University Press, 1968), 352. 157 John F. Cady, A History o f Modem Burma (Ithaca, NY: Cornell University Press, 1958), 475. 158 Potter to WO, telegram, July 10,1945, IOR M/4/306. Also “Burma as Rice Exporter,” Statesman (Calcutta), July 6,1945. The latter report notes that 1,000,000 gunny sacks were due to arrive in Burma from India in July to partly overcome the shortage of rice sacks. 159 On May 30, 1945, Lord Louis Mountbatten, SACSEA recognized this army, which had changed from the Japanese to the British side in March 1945, as the “Patriotic Burmese Forces.” The disbandment of these forces began on June 30, 1945, though some members were absorbed into the regular army. 160Potter to WO, telegram, July 10,1945. 161 Ibid.

164 Ibid. Major-General Ranee, who had succeeded Pearce as chief civil affairs officer on May 10,1945, had initiated weekly meetings with leading citizens of Rangoon to explain the workings of the Military Administration and Potter had spoken on currency at the first meeting. A small subcommittee was

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formed to assist Potter in “getting the [currency] policy across to the people.” Potter also had met with a further deputation of three young Burmese from the AFPFL and the Burma Communist Party to discuss the currency question. See A. K. Potter to C. E. Key, undated report, (refers to telegram of July 10,1945), IOR M/4/306. 165 Potter to WO, telegram, July 10,1945. 166 Potter to Key, undated report, IOR M/4/306. In retrospect, the amount of the loans seems small when it is related to the rural population of the region, which was 4.5 million people in the 1931 census. 167 Potter to WO, telegram, July 10,1945. 168 A. K. Potter to Kate Potter, 20 July 1945, OIOC Mss Eur C414/8. Potter was so pleased with the War Office’s quick approval that the usually reticent man expressed his delight in a family letter. 169Donnison, British Military Administration, 225 n. 1. 170 Ibid. 171 Tinker, Union o f Burma, 255. 172 Potter autobiographical memoir, 41-42. 173 Potter to R. E. Potter, September 14, 1945; Potter, autobiographical memoir, 37. Potter’s remarks about “my policy” cannot be substantiated.

CHAPTER 4 Currency Solutions, 1945-1947 When the Government of Burma returned from exile in India to Rangoon in October 194S, the role of the BMA in the restructuring of the Burmese economy was completed. Surprisingly, the BMA notes continued as Burma’s currency until July 1, 1947,1 and the demonetization of the prewar Burma 1,000- and 10,000-rupee notes was still to take place. One question still needed to be settled. What current value should be attributed to those debts that had been contracted or repaid in part in Japanese-occupation currency? This issue came to the fore as debtors and creditors began to attempt to settle or dispute loans that still remained unpaid. Finding a solution became the concern of the Government of Burma and eventually of the High Court of Judicature, which had also returned to Rangoon. This was not an issue that Burma faced alone in the region. The British Colonial Office had also realized the difficulty of recognizing the buying power of the Japanese currency during the years of occupation in Southeast Asia. On September 20, 1946, the Colonial Office forwarded a model “Debtor and Creditor (Occupation Period) Ordinance for British Far Eastern Colonies” to Hong Kong, Malaya, Singapore, Sarawak, and North Borneo—areas that came under its jurisdiction.2 Burma, of course, did not receive this model legislation; it was not under the control of the Colonial Office and therefore had to face the problem in its own way. A further issue discussed in this chapter, although 1947 did not settle it, is Burma’s eventual claim against the Japanese for reparation. A peace treaty and a reparation agreement were not agreed upon until November 5, 1954, but an interesting proviso allowed for renegotiations when other Southeast Asian countries had setded demands.

Currency Decisions of the Government of Buraia On October 16, 1945, when the Government of Burma resumed control of Burma, it also technically accepted responsibility for currency and the issuance of the currency. The Government of India until June 1946 did not officially transfer the assets of the Government of Burma, which covered the outstanding liabilities for the prewar Burma notes. In June 1942, shortly after Burma’s occupation, the RBI transferred those funds to the Government of India. When it resumed monetary control of Burma, the

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Burma government continued to allow BMA notes to circulate and issued further supplies from the unissued stock. The Currency Notes Act 1946 (Act XXV) approved the continued issue of these notes and retrospectively approved issuance of the notes from October 16, 1945. The problem of the prewar Burma 1,000- and 10,000-rupee notes also emerged. The BMA did not declare these notes legal tender in Proclamation No. 6,4 and bona fide owners could only exchange them for legal currency. Robinson and Shaw note that there was much discussion over this issue, but the government finally decided to officially demonetize them by March 1946. The Burma Notes (Payment Restriction) Act (1947) and the Exchange of High Denomination Burma Notes Rules (1946) set this decision in place, though again, as earlier with the BMA, legitimate holders of these notes could still exchange them for legal currency until December 31, 1946.5 One of the reasons given for the demonetization was that the notes promoted “black market operations.”6 In June 1946, the government also decided to issue its own currency, thus severing the previous link with India and the RBI. To achieve this quickly, the British government amended the India and Burma (Burma) Monetary Arrangements Order (1937) so that only six months’ notice needed to be given for severance instead of two years; the monetary partnership was therefore dissolved on March 31, 1947.7 In place would be a Burma Currency Board of five members, one of whom would be nominated by the governor of the Bank of England. Burma’s currency, like India’s, would be linked to sterling, and the value of the Burma rupee would remain at the prewar figure of one shilling and sixpence.8 The currency issued would also be backed by sterling, “except for Rs 10 crores for which the Currency Board could hold securities in Burmese currency issued by the Government of Burma.” Tun Wai notes that “this fiduciary issue of Rs 100 million was inserted in the Act to cover the notes looted” from the Burma treasuries in 1942.9 However, Robinson and Shaw have clarified this statement by adding that this amount covered “notes looted during the war, together with an allowance for that portion of B.M.A. notes unbacked by sterling.” A few months later, in October 1946, the Burma Currency Board gave the estimated value of the looted notes at Rs 4 crores.10 In the light of the possibility that the exact amount of looted notes could never be accurately estimated, in all probability an arbitrary figure of ten crores of rupees was chosen

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to cover all possible contingencies. In June 1947, the Currency Board ordered new Burmese notes from London. In the interim, until a supply of overprinted RBI notes denoted “Burma Currency Board Legal Tender in Burma” was received, BMA notes would continue to circulate. As these new overprinted notes were placed in circulation, the BMA notes were slowly withdrawn without the need for demonetization.11

“Potter’s” Policy Reversed by the Courts As early as July 15, 1945, a meeting of about 40 Civil Affairs officers was held at Government House, Rangoon, at which Lord Louis Mountbatten, SAC, South-East Asia, and Major-General Hubert Ranee, who had succeeded to the position of chief of Civil Affairs Service (Burma)12 in May 1945, attended. A general discussion arose about “the attitude to be adopted regarding mortgages which had been redeemed during the Japanese occupation with Japanese currency.” Colonel Mootham, presumably one of the Civil Affairs officers, believed that if the mortgagee had accepted the payment “in good faith, then the transaction was binding.” Mootham conceded that the actions of the Civil Affairs officers would not be binding on the Government of Burma, which might view the situation differently. Mountbatten agreed to discuss this issue with the Governor of Burma.13 During the occupation, the Japanese reinstated the legal system and courts continued to try cases. A new court, known as the Rangoon City Court, was also established. However, although many senior judges (both British and Burmese) had retreated to India with the British, the law (“with minor variations”) enacted in Burma during the Japanese occupation years was basically the same as it had been in British times. When the British returned, they accepted the judgments effected during the period of occupation.14 Soon after the return of the government and the former senior judges, new cases began to arise in Burma’s legal system as debtors and creditors argued about former loans and the amount to be repaid in Burma rupees. The first case of this nature that called for determination by the High Court of Judicature at Rangoon was Sein Ko v Hla Din (Civil Appeal No. 15).15 This case related to a loan of Rs 750 in Japanese military notes, but the instrument recording this transaction did not specify if repayment was to be “in legal currency of Burma, or in

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Japanese military notes.” Although there was ambiguity, the court ruled that “the undertaking was in terms of Japanese military notes.”16 But the court also held “that the occupant [Japanese occupation forces] was not entitled to set up a parallel system of currency or to relate it to the legal system; but that such military notes, used as media of exchange, had during the occupation certain purchasing power, diminishing in value with the progress of the counter-offensive by the Allied forces”.17 The Colonial Office and the treasury in London had also held discussions on this problem and considered whether legislation should be passed “to remove the consequent injustice,”18 but on May 3, 1947, the matter was brought to a head by a high court judgment in Rangoon. A plaintiff had advanced Rs 1,000 in Japanese-occupation currency and was seeking repayment from a defendant. The high court’s decision was that “(a) a loan of Japanese currency was not a loan of money and the suit could not be treated as a suit on a negotiable instrument, but (b) the Japanese currency had some value and Section 70 of the Contract Act was applicable; the question to be determined was how much the debtor should pay for the benefit received.”19 The court believed it was essential for “a scale of the comparative values of Japanese and ‘legal currency’ at different times during the occupation” to be made available and that this scale should be embodied in legislation. This would alleviate the necessity of constantly referring each case back to the high court “for investigation on merits.”20 The judges stressed the urgency of legislation that would regulate “an exchange rate between Japanese notes and British notes.”21 The high court also pointed out that “Japanese so-called currency was never lawful here [in Burma], but . . . Japanese currency notes had a certain purchasing value.” They could be, and were, used as a medium of exchange: business was done, wages were paid, and purchases made in Japanese so-called currency: and when persons made agreements they thought of Japanese so-called currency as equivalent of money and they meant Japanese so-called currency when they referred to payment of money.22 Even if the judiciary saw the Japanese currency notes as documents rather than money, compensation had to be paid,

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because the documents had “a value in exchange for goods.”23 In the judgment, Chief Justice E. H. Goodman Roberts suggested that the value of Rs 1,000 Japanese notes (the amount in question) should be determined by assessing “the purchasing power” of this amount at the time “the advance was made.” The judge felt that the best way to ascertain the purchasing power was by reference to “some stable commodity,” not one in which “the value . . . has been at any time during or since the occupation seriously depressed or enhanced as a result of abnormal conditions.” Paddy was considered but did not meet these conditions because its value had risen dramatically since the war. The judges were unanimous in deciding a commodity should be used as a scale for ascertaining a value; the majority favored the chief justice’s suggestion of gold, and that was what the court recommended as the scale.24 Following on from the high court’s decision, the Government of Burma’s Judicial Department prepared a memorandum that carried the recommendation “that debts or contractual obligations entered into in Japanese currency during the period of the Japanese occupation shall be discharged in present legal currency by payment of an amount to be determined in accordance with a scale giving the relative values of the Japanese currency and the legal currency at different dates during the occupation period.”25 The Burma Office viewed this development with interest, hoping “that the proposals will not reopen at this late date the controversy about giving value for Japanese notes.”26 A major point of consideration for the Executive Council was what scale to use to assess the value of the Japanese-occupation currency at any given time. The Judicial Department believed that establishing the price of gold in Burma “at different times in various parts of Burma” would be “long and laborious as transactions regarding sale of gold in British currency were done in utmost secrecy.” The department suggested that the figures used should be based on those supplied “by the Controller of Finance and Accounts, CAS (B), as being estimates of the purchasing power of Japanese currency compared with that of pre-occupation currency at various periods.”27 The Government of Burma’s Finance Department had already produced such a scale when it was required to assess payments to be made to government servants, taking into account salary payments the Japanese government had made to these servants during the occupation.28 This scale gave an

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artificially high value to the Japanese currency during the war period, and a Burma Office official, G. Davey, commented that the effect of this was beneficial to the Government of Burma, “since the higher value placed on the Japanese payments to Government servants [during the occupation of Burma] the lower is the balance remaining to be paid by the Government of Burma.”29 The judicial and finance department scales were as follows: Table 4.1 Value of a Payment of 100 Japanese Rupees in British Burma Rupees, Decern >er 1941-June 1945 Assessment scale for ludicial Department Finance Debtor/Creditor Department 12/8/41-12/31/42 100.0 100.0 1/1/43- 6/30/43 71.5 75.0 7/1/43-12/31/43 55.5 75.0 1/1/44- 6/30/44 25.0 40.0 7/1/44-12/31/44 10.0 40.0 1/1/45- 4/30/45 6.6 5.0 5/1/45- 6/30/45 5.0 5.0 Source: G. Davey, Burma Office, note, June 5,1947. As can be seen, the Finance Department’s scale placed a higher value on the Japanese-occupation currency than did the scale of the Judicial Department. Manipulations of currency were not confined to Burma. In Malaya and Singapore, the Colonial Office “intentionally undervalued” the Japanese currency to assist banks liquidated by the Japanese.30 Previously, when the payments of arrears to government servants had arisen, the Burma Office had expressed to the Government of Burma “the difficulties of making a satisfactory scale.” Davey’s note ends with a touch of weariness and finality: “but it may be considered (as, I believe, in recent similar cases) that Burma must now be allowed to make her own mistakes.”31 When the Japanese Currency (Evaluation) Act (1947) was passed, the scale in the schedule was based on that of the Finance Department and not that of the Judicial Department: Table 4.2 Value of 100 Japanese-Occupation Rupees, 1942-1945 British Burma rupees Japanese notes 1942 100 100 1943 75 100

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1944 100 40 100 1945 5 Source: The Japanese Currency (Evaluation) Act 1947, Burma Act No. 36 of 1947,18 July 1947, IOR M/4/310. For the years 1943 and 1944, this scale meant that those who had borrowed Japanese-occupation currency during those years were required to repay a larger amount in British Burma notes than the Judicial Department had envisaged. In addition to providing for the settlement of debts and obligations still outstanding, the act covered repayment of these liabilities during the period of Japanese occupation: Where any debt or obligation, whether contracted or incurred before or during the Japanese occupation of Burma, had been paid or discharged wholly or partially in Japanese currency notes during the Japanese occupation of the area where the payment was made and the payment had been accepted, such payment shall be deemed to be payment in legal currency notes of the same face values, as if the Japanese currency notes were legal currency notes at the time the payment was made.32 The key word in the above quotation is “accepted.” If payment was accepted, then the debt was considered to have been paid. There was thus no recourse to further litigation. As can be seen, the Japanese Currency Evaluation Act (1947) upheld the viewpoint expressed above by Colonel Mootham at the July 1945 meeting of Civil Affairs Officers with Lord Louis Mountbatten. Mootham believed that if the mortgagee had accepted payment “in good faith, then the transaction was binding.” In its accompanying “Statement of Objects and Reasons,” the act had recognized the need for legislation to assess “the value of the debt or contractual obligation entered into during the Japanese military occupation of Burma.”34 Dorothy Guyot has raised an interesting point; she argues that although the values set by the high court attempted to estimate prices prevailing during the war years, the court’s decision ignored “the three-fold decline in value between the 1938-39 rupee and the 1947 kyat.”35 Nevertheless, in relation to international value, the 1947 rupee, or kyat, was still worth the same amount in English currency as it had been in 1938-1939— one shilling and sixpence.

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During the Japanese years, a celebrated legal case had arisen involving Dr. T. Chan Taik (appellant) and Ariff Moosajee Dooply and One (respondents). Dr. Chan Taik would not accept a check drawn on the Burma State Bank in occupation currency for payment of principal and interest that was due in September 1944.36 Eventually his debtors made payment to the City Court of Rangoon in Japanese-occupation currency on March 8, 1945. Although the currency was accepted by the Burmese Court, Dr. Chan Taik did not accept it because he believed that he was entitled to receive payment in British currency only.37 It was a courageous action to bring while Burma was still occupied by the Japanese. The matter did not proceed. It was stated that “one of his [Tail’s] lawyers . . . was intimidated by the Kempeitai [Japanese military police] and it was obvious no Court in Burma functioning under the Japanese regime could have entertained the defense to have his mortgage redeemed in British currency.”38 After the British return, the reinstated High Court of Judicature, Rangoon ruled in Dr. Chan Taik’s favor. However, under the Accrual of Interest (War-time Adjustment) Act 1947 (Burma Act XI of 1947), no interest on loans or mortgages was to accrue from December 8, 1941, to March 31, 1947, and interest was to be charged at 1.5 percent from April 1,1947, until date of payment.39 This particular act was introduced to enable those who were owed money, many of whom had evacuated from Burma in 1942, to follow up on outstanding debts and, if necessary, sue. On the other hand, because the period to initiate claims had been extended for the creditor, the debtor was protected from increased interest due to the extension of this period. The act acknowledged that the war and its aftermath may have contributed to the delay in the settlement of debts, and it recognized the difficulty of communication between debtors and creditors during the war period.40

Reparation Claims On April 29, 1946, the British Embassy in Washington forwarded to the Foreign Office in London copies of a paper circulated by a delegate from the Philippines at a conference of the Far Eastern Commission.41 This commission represented the policy-making body to govern Japan; it was created in December 1945 by the foreign ministers of the United States, the United Kingdom, China, and the Soviet Union.42 The paper’s title was self-explanatory: “Redemption of Japanese Fiat Money Circulated in the Philippines by the Japanese Military

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Authorities.” The Far Eastern Commission secretary-general noted that the paper would be referred to as “Committee No. 1: Reparations.’ The document represented the Philippines government’s claim against the Imperial Japanese government for “6,400,000,000 Japanese military notes circulated in the Philippines from the Japanese occupation up to July, 1945.” The paper stressed that when the currency, originally described as “war notes (military pass-notes),” was issued, a proclamation by the Imperial Japanese government, dated January 3, 1942, endorsed their use and encouraged circulation, stating that “said government takes full responsibility for their usage having the correct amount to back them up.” Later the commander-in-chief of the Imperial Japanese Forces proclaimed “that said military notes ‘are guaranteed by the Japanese Government.’” A similar explanation had also been given in a document entitled ‘“Explanation of the Proclamation Concerning the Currency’ (published in Volume I, Official Journal of the Japanese Military Administration, pp. 43-44).”44 The paper presented a brief history of the use of the Japanese fiat money in the Philippines, and noted that the value of the Japanese peso military note was to be equated with that of the Philippine peso. Upon liberation of the Philippines, President Osmena had issued Executive Order No. 25, and certain currencies—including the Japanese currency—were no longer legal tender and their use was prohibited. Then the paper drew five conclusions relating to the use of Japanese military notes during the occupation and the effect of this usage on the Filipino people. Similarities to what had occurred in Burma were apparent: That inasmuch as said Japanese military notes, in spite of the assurances of the Commander-in-Chief of the Imperial Japanese Forces that they are good money and that Japan assumes full responsibility for the issuance of the same, appear to us, as mere scraps of paper which cannot have any backing in gold, silver or something else of value, they were issued contrary to the rules of International Law.45 The final conclusion summed up the situation: The same can only be regarded in the eyes of the law as a series of receipts issued under the

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authority of the Imperial Japanese Government to represent services, consumers [s/c] goods and other commodities obtained from the residents of the Philippines during the occupation of our country by the enemy. In other words, said military notes constitute evidence of indebtedness on the part of Japan to the Philippines.46 The final paragraph of this section of the paper carried the threat that there was “every reason to believe that the United States of America will likewise approve the payment or redemption by Japan of said military notes circulated in the Philippines.’ As discussed in Chapter 3, in January 1945, British Treasury officials had believed that their government would not be pursuing reparations for the Japanese-occupation currency, following the 1943 findings of the Malkin Report. The action of the Philippines in demanding reparation from the Imperial Japanese government for 6,400,000,000 Japanese peso notes may have caused the British government to rethink their intentions. A note in a Burma Office file dated July 24, 1946, recorded that “More [another British official] confirms that the Japanese money circulated in Burma is being included in Burma claim for reparations against Japan—for what that is worth.”48 A further notation in a Burma Office file, dated August 6, 1946, stated “562 crores [5,620,000,000 rupees] figures supplied by Japs for reparation purposes.”49 A figure close to this amount, 560 crores, is quoted again six months later in a summary entitled “Redemption of Japanese Currency in Burma.”50 On November 5, 1954, a peace treaty and a reparation agreement between Burma and Japan were finally agreed upon. Burma received as reparation “‘the services of Japanese people and the products of Japan’ to the value of [US] $200 million [Rs 948,991,693] and in addition [Japan was] to invest [US] $50 million [Rs 237,247,923] in Burma in the form of joint ventures.”51 This reparation was to be paid over ten years.52 Burma was the first of the Southeast Asian countries to conclude a peace treaty and reparation agreement with Japan, and it accepted considerably lower compensation than was being demanded by the Philippines and Indonesia. This was due to the state of Burma’s economy; her cash reserves had been rapidly depleted because of reconstruction and expansion.53 However,

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the treaty carried a proviso that Japan would “reexamine Burma’s claim whenever a final settlement of the compensation of the other countries of South East Asia was attained.”54 By 1960, both Indonesia and the Philippines were receiving larger reparation payments than Burma, and the Burmese government of U Nu approached Japan regarding additional reparation. As a result, Burma received US $200 million [Rs 948,991,693] in additional grants and loans.55

Conclusion By the time the Government of Burma returned to Rangoon in October 1945, much of the monetary reconstruction of Burma had been carried out by CFA(B) Brigadier Potter and his officers. Following the precedent set by Potter and the CAS(B), the two large-denomination prewar Burma notes of Rs 1,000 and 10,000 were demonetized in 1946, though legitimate holders had recourse for exchange until December 31, 1946. Finally, BMA notes were withdrawn during 1947, when the Currency Board ordered new Burma notes to be issued under its own name supplemented by Burma Currency Board overprinted RBI notes. However, there still remained a major problem—the settlement of outstanding loans contracted before or during the Japanese occupation. After the return of the government, cases began to appear in the courts arguing the value of the Japanese currency during the occupation, and the high court recommended that a scale should be embodied in legislation that fixed a comparative rate between Japanese currency and the legal currency of Burma during Japanese occupation years. The Japanese Currency (Evaluation) Act (1947) was the final major measure to return the Burmese currency to normality. The Finance Department’s scale was not as generous as the one suggested by the Judicial Department, but the legislation did acknowledge the rapid deflation of the Japanese currency after 1943. The act also provided for the circumstances in which “creditors or obligors” had accepted payments during the occupation period; under its provisions these payments could not be renegotiated.56 As a result, the Japanese Currency (Evaluation) Act (1947) can be seen as the final plank in the reconstruction of Burma’s currency—a currency that had been completely undermined by the Japanese occupation. However, it was not until 1954 that Burma’s claim against Japan for reparations was finally agreed upon. This also allowed “another bite at the cherry” when compensation claims against

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Japan by Indonesia and the Philippines were finally settled. After those claims were settled, Burma again appealed to Japan and a further US $200 million in reparation was granted. Much of the industrialization that took placed in Burma in later years was financed by these reparations.37

1 M. Robinson and L. A. Shaw, The Coins and Banknotes o f Burma (Manchester The Authors, 1980), 130. 2 A copy is enclosed in G. H. Hall to Malayan Union, Singapore, Hong Kong, North Borneo, and Sarawak, September 20, 1946, C0537/137S; quoted in Paul H. Kratoska, “Banana Money: Consequences of the Demonetization of Wartime Japanese Currency in British Malaya,” Journal o f Southeast Asia Studies 23, no. 1 (1992): 334, n. 54. 3 U Tun Wai, Burma's Currency and Credit, rev. ed. (Bombay: Orient Longmans, 1962), 144; Robinson and Shaw, Coins and Banknotes, 127-128. 4 British Military Administration, Burma, Proclamation No. 6 Currency, May 1,1945, IOR M/4/306. 3 U Tun Wai, Burma Currency, 145; Robinson and Shaw, Coins and Banknotes, 128. 6 Robinson and Shaw, Coins and Banknotes, 128. 7 U Tun Wai, Burma's Currency, 145. 8Robinson and Shaw, Coins and Banknotes, 128. Tun Wai, Burma’s Currency, 145. 10 Robinson and Shaw, Coins and Banknotes, 130. 11 Ibid. 1 This position had been formerly held by Major General C. F. B. Pearce, a former member of the Indian Civil Service (ICS), who had been at odds with Lord Louis Mountbatten. Ranee was a military man. John F. Cady, A History o f Modem Burma (Ithaca, NY: Cornell University Press, 1958), 500, describes Pearce and his CAS(B) team, many of whom were recruited from former British companies operating in Burma, as “ultraconservati ve.” 13 Record of a meeting held with Civil Affairs in Government House Rangoon, July 15,1945. Present at the meeting were Lord Louis Mountbatten, Sir Montagu Stopford, Major General Ranee, T. L. Hughes, Brigadier E. J. Gibbons, and about 40 Civil Affairs Officers, PRO: WO 203/5239. Quoted in Hugh Tinker, ed., Burma: The Struggle fo r Independence 1944-1948, vol. 1 (London: HMSO, 1983), 374.

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UE. Maung, “Enemy Legislation and Judgments in Burma,” Journal o f Comparative Legislation and International Law Parts 3 and 4 (1948): 12. 15 Ibid., 13-14. 16 Ibid., 14. 17 Ibid. 18 Burma Office Register B/E 2760/47, ‘Transactions in Japanese Currency during Japanese Occupation. Relations between Debtors and Creditors,” May 28,1947, IOR M/4/310. 19 Ibid. 20 Ibid. 21 Government of Burma Judicial Department, Memorandum for the Executive Council, “Subject: Transactions in Japanese Currency during the Japanese Occupation,” May 12, 1947, IOR M/4/310. 22 High Court of Judicature at Rangoon, Civil Reference No. 5 of 1947, Ko Maung Tin and 8 Others vs. U Gon Man, Judgment, May 7,1947, IOR M/4/310. 23 Ibid. 24 Ibid. 25 Burma Office Register B/E 2760/47, ‘Transactions in Japanese Currency,” May 28,1947, IOR M/4/310. 26 G. Davey, Burma Office, possibly to Under Secretary for State, Burma, June 5,1947, IOR M/4/310. 27 Government of Burma Judicial Department, memorandum, “Japanese Currency” May 12,1947, IOR M/4/310. 28 G. Davey, Burma Office, note, June 5,1947, IOR M/4/310. 29 Ibid. 30 This enabled the banks to receive “a favourable revaluation” for prewar loans collected by the Japanese liquidators. See Kratoska, “Banana Money,” 335. Reference details are quoted in footnote 59. 31 G. Davey, Burma Office, note, June 5,1947. 32 Maung, “Enemy Legislation,” 16. 33 Record of a Meeting, July 15, 1945, PRO:WO 203/5239, quoted in Tinker, Burma: The Struggle fo r Independence, 374. 34 “Statement of Objects and Reasons” attached to The Japanese Currency (Evaluation) Act (1947), IOR M/4/310. 35 Dorothy Hess Guyot, “The Political Impact of the Japanese Occupation of Burma,” (Ph.D. diss., Yale University, 1966), 207-208, n. 2, with reference to Louis J. Walinsky, Economic Development in Burma, 1951-1960 (New York: Twentieth

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Century Fund, 1962), 660-661. 36 P. K. Basu, ed., Burma Law Reports (1948) (Rangoon: Government Printing and Stationery, n.d.), 456. 37 Ibid., 457. 38 Ibid., 466. 39 Ibid., 467-468,480. This case may be followed more fully on pages 454-480. This act had no bearing on the agricultural loans to paddy growers arranged by Potter. 40 Maung, “Enemy Legislation,” 16. 41 Halifax, British Embassy, Washington, to Ernest Bevan, Foreign Office, London, April 29,1946, IOR M/4/658. 42 Paul H. Kratoska, The Japanese Occupation o f Malaya: A Social and Economic History (Honolulu: University of Hawai’i Press), 334. 43 Nelson T. Johnson, Secretary General, Far Eastern Commission, note, April 24,1946, IOR M/4/658. 44 Paper, FEC-003/1, “Redemption of Japanese Fiat Money Circulated in the Philippines by the Japanese Military Authorities” circulated by the Philippine Delegate at the Far Eastern Commission Conference, April 24,1946, IOR M/4/658. 45 Ibid. 46 Ibid. 47 Ibid. 48 G. Davey, Burma Office, to Mr Cleobury, note, July 24, 1946, IOR M/4/658. 49 G. Davey, Burma Office, note, August 6,1946, IOR M/4/658. 50 G. Davey, Burma Office, “Redemption of Japanese Currency in Burma,” December 4,1946, IOR M/4/306. 51 Hugh Tinker, The Union o f Burma: A Study o f the First Years o f Independence, 3rd ed. (London: Oxford University Press, 1961), 119. 52 Ibid. 53 Ibid., 119,267. 54 Ibid., 365. 55 Josef Silverstein, Burma: Military Rule and the Politics o f Stagnation (Ithaca, NY: Cornell University Press, 1977), 194. 56 “Statement of Objects and Reasons” attached to The Japanese Currency (Evaluation) Act (1947), IOR M/4/310. 57 David J. Steinberg, ed., In Search o f Southeast Asia: A Modem History, rev. ed. (Sydney: Allen & Unwin, 1987), 449.

CHAPTERS Monetary Problems in Retrospect, 1942-1947 The economy of Burma was ravaged by the war. Unlike the other Southeast Asian countries, Burma was an active war zone from 1942 to 1945. Not only were there extensive ground campaigns but Burma was also within bombing range of India. The country sustained the most extensive war damage in Southeast Asia; Mandalay and Meiktila were almost completely destroyed by 1945.1 Burma’s economy had been built around its export trade, principally rice to India and Europe but also oil products and teak. As the westernmost shipping lanes to Japan came under attack by the Allies, the Japanese relied on rice exported from Indochina and Thailand rather than from Burma. The Netherlands (Dutch) East Indies provided a plentiful supply of oil to Japan, so Burma’s oil wells, which had previously supplied oil to India, were never important to Japan’s war effort. All that was required of Burma was to feed the Japanese occupation forces, and in consequence, Burma’s once-vital export economy collapsed. Only internal trade and local Japanese military purchases, supported by the issuance of Japanese occupation currency, sustained the Burmese economy. During the occupation years, both British India notes and coin and British Burma notes were eventually forced underground. Because of actual instances of spying among the Karen and by the Chindits, the Japanese associated possession of this currency with spying for the British. But even in these years, the British notes were exchanged surreptitiously between friends engaged in private transactions, and silver rupees were still respected by the Burmese, as the Chindits discovered when they carried Indian silver rupees with them on their long-range penetrations. Silver had an intrinsic value, but paper money did not. Throughout the occupation, consumer goods were in short supply because few imports, even from Japan, reached the country. Inflation increased not only because of such shortages but also because the Burmese began to charge even higher prices for all products, particularly to the Japanese.2To overcome this problem of rapid inflation and to cover the cost of their occupation, the Japanese printed increasing amounts of occupation currency, referred to by the British as the “Jap rupee,” and between May 1945 and August 1945 (by which time the Japanese were retreating eastward), the amount of currency escalated sharply. In late 1944, when the Allied forces began their advance into

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Burma, the Civil Affairs Service (Burma), part of the British Military Administration, was given the task of monitoring and controlling the currency situation. Brigadier A. K. Potter, who had been appointed CFA (B) a year earlier, oversaw its task. Potter was responsible for supplying advice and support on financial matters to both the heads of CAS (B) and the military force commander in Burma, coordinating his advice with the Financial Department of the War Office in London. As the British advance into Burma continued in late 1944 and 1945, the value of die Japanese occupation rapidly depreciated. By December 20, 1944, when the War Office issued “The Provisional Monetary and Fiscal Guide," the decision had been taken by the concerned British departments in London that Japanese-occupation currency was not to be exchanged for BMA notes in any general way. Only in exceptional circumstances would government and military officials be allowed to accept small denominations of fast-depreciating enemy currency when payment was made for relief supplies and government dues.3 Thus Potter became the key figure in deciding what to do under the exceptional circumstances, and the War Office was prepared to trust his judgment of the situation. The denial of value to the Japanese rupee was seen as a deterrent to prevent the Japanese from buying support as they retreated, but in fact the Japanese simply issued more notes. But if the British had given any value to the occupation currency, Britain’s war-damaged economy would have been weakened still further. As the reoccupation of Burma commenced, Potter began to receive information from CAS (B) officers in Burma and realized that it was not necessary to give even minimal value to the Japaneseoccupation currency for relief supplies. Only in Akyab was any value (and limited value at that) given to the Japanese rupee for a short time. In Burma proper, food and supplies were provided. Payment was required in British India notes and coin and Burma notes (the BMA notes were delayed until May 1,1945), and where no payment could be made, goods were given free to povertystricken Burmese. Paid labor was required for many army projects and the rebuilding of Burma’s infrastructure, and currency began to flow back into the communities. Gradually, hoarded British Burma notes and Indian coin began to emerge. In the delta region of Lower Burma, there was little hoarded money left and loans were provided to needy paddy cultivators to enable them to plant the 1945-1946 rice crop.

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After the war, numerous legal cases about the repayment of debts and obligations, which were entered into during the occupation period, began to emerge. Pressure from Burma’s High Court, which was becoming overwhelmed by these cases, eventually resulted in the passing of the Japanese Currency (Evaluation) Act (1947). This act provided a scale for repayment in Burmese rupees of debts or obligations contracted in Japanese occupation currency. Thus, to a certain extent, the value of mortgages and other debts was protected by this act, and the act’s conversion table showed clearly, if not equitably, the decreasing value of the Japanese-occupation currency to British Burma rupees during the war years. On the other hand, the Accrual of Interest (War-time Adjustment) Act (1947) decreed that no interest was to accrue on mortgages or loans from December 8,1941, to March 31,1947, a period that covered both the Japanese occupation period and the time that elapsed until the act was passed. This time, mortgagors and debtors were more fortunate; this act particularly protected those who owed mortgages or debts and who had fled the country. Nevertheless, there were winners and losers during these years of financial turmoil and even after the currency chaos was resolved. Indeed, while the war was still in progress and inflation rampant, some Burmese benefited more than others did. Because consumer goods were unavailable or in most cases too expensive, “the conservative peasant” who was able to hoard food for his family was certainly a winner. This placed him in a much better position than city- and town-dwellers, which were unable to do so.4 Hoarding occupation currency was foolish unless the possessor could exchange the rapidly inflating Japanese rupee for British India silver rupees, gold, and jewelry. Those Burmese who did so found themselves much wealthier after the conflict ended.5 This group included numerous black marketeers, who were canny enough to exchange their piles of Japanese-occupation notes for tangible assets. But there were definite losers. The savings of the middle classes were wiped out.6The salaries of civil servants never kept pace with the galloping inflation. “Petty tradesmen” were less unfortunate and could adjust their prices more rapidly. Mortgagees and creditors who had accepted full repayment of their prewar debts during the war or early in the British reoccupation were definitely financially disadvantaged. So were those collaborators who were foolish enough to hoard Japaneseoccupation currency notes. Even those who legitimately held high-

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value prewar notes had to explain to CAS (B) officers how they had acquired these notes, which had been demonetized by the returning British, before encashment could proceed.7 The greatest losers were Burmese consumers, who were faced with a skyrocketing inflation they were powerless to control. This affected particularly the middle class that did not have the entrepreneurial skills of the black marketeers, and government (civil) servants in low-paying positions. Maung Htin Aung believed that by 1944 some commodity prices had risen 100 times. Scarcity of some items drove prices up. Certainly any crisis of such magnitude must have had a decided effect on Burmese society in general, particularly when coupled with the tremendous physical damage to Burma that occurred during the war years. Since 1826, when the British first introduced currency in Arakan and Tenasserim, the administration had endeavored to build up reliance on and trust in the value of their notes and coinage. The war years destroyed this trust. David Steinberg notes that even in the first decade after independence, “whatever savings existed thereafter were in the time-honored forms of gold or jewelry.”9 Another point that bears examination is whether the seeds of later demonetizations of Burmese currency by General Ne Win—the first occurred as early as May 1964—were sown by the demonetization of currencies by the returning British. In their favor, the British had clear aims in mind when they demonetized the Japanese-occupation currency and the higher-value Burma notes. First, the British denied the Japanese rupee in an effort to combat the skyrocketing inflation of the later occupation years and thus return the Burmese economy to normality. The British government did not wish to be burdened by currency liabilities incurred by the Japanese. Though the Burmese population did suffer hardship because of this action, inflation was halted. Second, the demonetization of the higher-value Burma notes was motivated by a desire to locate or render valueless the missing 1,000- and 10,000rupee notes (many of which the British believed had been stolen) and, in the process, reduce black-market activities by holders of these notes. However, legitimate owners of these notes were able to exchange them for value with authorities. On the other hand, the first demonetization of 100- and 50-kyat notes by Ne Win’s military government was an attempt to “impoverish. . . Burmese or foreign capitalists,”10but substantial numbers of ordinary Burmese lost their savings, too.11In fact, the demonetization of the larger notes in 1964 after nationalization of banks in 1963, followed by other businesses

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associated with trade and industry, added weight to the people's distrust of paper money12and was reinforced again by the 1985 and 1987 demonetizations. In 1985,100- and 50-kyat notes were again demonetized and replaced by smaller notes. In the 1987 action, 25-, 45-, and 15-kyat notes were replaced by a 90-kyat note.13 In both instances, ordinary Burmese suffered, but the Burmese government defended its act by claiming that “the black market economy of the insurgents and black marketeers” would be broken.14Residual anger against these irrational actions helped to ignite the 1988 uprising against the Burma Socialist Program Party (BSPP). But the thought cannot be dismissed that General Ne Win and many of his old-guard supporters who had lived through the early British demonetizations saw the demonetization of currency as a way to reduce the government’s note-issue liabilities. In retrospect the action of the Controller of Finance and Accounts (Burma) (with the support of the British government) in refusing to give value to the Japanese-occupation currency was inevitable. There were strong valid reasons for denying value to the enemy’s currency. The British were not alone in treating the occupation currency as valueless. The returning Philippine government had also demonetized the Japanese-occupation peso in the Philippines. But the Burmese themselves, by their depreciation of the value of the Japanese rupee during the later years of the occupation period and their rapid depreciation of the occupation currency during the British army’s advance through Burma, which virtually wiped out the value of the Japanese rupee, also gave credibility to the British action. As the war years progressed, the Burmese had become aware that the Japanese-occupation notes were only “mere scraps of paper.”15

1 J. H. McEnery, Epilogue in Burma, 1945—1948: The Military Dimensions of British Withdrawal, 2nd ed. (Bangkok: White Lotus Press, 2000), 87-88; Louis J. Walinsky, Economic Development in Burma, 1951-1960 (New York: Twentieth Century Fund, 1962), 57. 2 U Hla Pe, “U Hla Pe’s Narrative of The Japanese Occupation of Burma,” recorded by U Khin. Paper Number 4, Southeast Asia Program (Ithaca, NY: Department of Far Eastern Studies, Cornell University, 1961), 78. 3“Provisional Monetary and Fiscal Guide—Burma,” December 20, 1944, IOR M/4/306.

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4 J. Russell Andrus, Basic Problems o f Relief, Rehabilitation and Reconstruction in South-East Asia (New Delhi: Indian Council of World Affairs, 1946), 34. 5 John L. Christian, Burma and the Japanese Invader (Bombay: Thacker, 1945), 356. 6 McEnery, Epilogue in Burma, 33. 7 Hugh Tinker, ed., Burma: The Strugglefo r Independence, 19441948, vol. 1 (London: HMSO, 1983), 1024. An interesting account of an unusual exchange of these notes, described by Sir Hubert Ranee, occurs on this page. 8 Htin Aung U, The Stricken Peacock: Anglo-Burmese Relations, 1752-1948 (The Hague: Martinus Nijhoff, 1965), 121. 9 D. I. Steinberg, Burma: A Socialist Nation o f Southeast Asia (Boulder, CO: Westview Press, 1982), 77. 10 M. Robinson and L. A. Shaw, The Coins and Banknotes o f Burma (Manchester The Authors, 1980), 143. 11 Ananda Rajah, “Ethnicity and Civil War in Burma: Where Is the Rationality?” in Burma: Prospects for a Democratic Future, ed. Robert I. Rotberg (Cambridge, MA: The World Peace Foundation and Harvard Institute for International Development, 1998), 137. 12 Thabyei-nyo Maung Ko, Myan-ma dinga mya [Burmese coins] (Rangoon: Sarpay Beikman Press, 1970), quoted in Robinson and Shaw, Coins and Banknotes, 144. 13Rajah, “Ethnicity and Civil War,” 137-138. 14 Bertil Lintner, Outrage: Burma’s Struggle fo r Democracy (London, 1990), 67 quoted in Rajah, “Ethnicity and Civil War,” 138. 15 Paper, FEC-003/1, “Redemption of Japanese Fiat Money Circulated in the Philippines by Japanese Military Authorities” circulated by the Philippine Delegate at the Far Eastern Commission Conference, April 24,1946, IOR M/4/658.

References

131

Manuscript Sources Correspondence, reports etc. in The British Library, Oriental and India Office Collections (OIOC) and India Office Records (IOR) as detailed in the footnotes. Allen, Louis 1970 "Studies in the Japanese Occupation of South-East Asia, 1942-45 (1)." Durham University Journal 63, no. 1 (New Series 32, no. 1) (December): 1-15. 1984

Burma: The Longest War, 1941-45. London: J.M. Dent & Sons.

Andrus, J. Russell 1946 Basic Problems o f Relief, Rehabilitation and Reconstruction in South-East Asia. New Delhi: Indian Council of World Affairs. 1948

Burmese Economic Life. Stanford, CA: Stanford University Press.

1976

An Economic Survey o f Burma: Prepared fo r Division o f Economic Studies Department o f State, 15 November 1943. Stanford, CA: Hoover Institute of War & Peace.

Ba Maw 1968

Breakthrough in Burma: Memoirs o f a Revolution, 1939-1946. New Haven, CN: Yale University Press.

Basu, P.K. (editor) n.d. Burma Law Reports 1948. Rangoon: Government Printing and Stationery. Burma Intelligence Bureau 1943-1944 Burma during the Japanese Occupation. 2 vols. Simla: Government of India Press.

132

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Burma Research Society 1946 The Burma Petroleum Industry. London: Longmans, Green. Cady, John F. 1958 A History o f Modem Burma. Ithaca, NY: Cornell University Press. Caimcross, Alec 1986 The Price o f War: British Policy on German Reparations, 1941-1949. New York: Basil Blackwell. Christian, John L. 1945 Burma and the Thacker.

Japanese

Invader.

Bombay:

Collis, Maurice 1956 Last and First in Burma (1941-1948). London: Faber and Faber. Cribb, Robert 1981 "Political Dimensions of the Currency Question, 1945-1947." Indonesia 31 (April): 113-136. Cruickshank, C. SOE in the Far East. Oxford: Oxford University 1983 Press. Donnison, F. S. V. 1956 British Military Administration in the Far East, 1943-46. London: HMSO. Economist (London) 1945 "Currency Troubles in Burma," May 26, 709. Fumivall, J. S. 1957 An Introduction to the Political Economy o f Burma. 3rd ed. Rangoon: Peoples’ Literature Committee.

133 References

1991

The Fashioning o f Leviathan: The Beginnings o f British Rule in Burma. G. Wijeyewardene, ed. Canberra: Department of Anthropology, Australian National University, in association with Economic History of Southeast Asia Project & Thai-Yunnan Project.

Guyot, Dorothy Hess 1966 "The Political Impact of the Japanese Occupation of Burma." Ph.D. dissertation, Yale University. Hall, D. G. E. 1981 A History o f South-East Asia. 4th ed. Houndmills, Basingstoke, Hampshire: Macmillan Education. Harvey, G .E. 1946 British Rule in Burma, 1824-1942. London: Faber and Faber. Hla Pe, U. 1961 "U Hla Pe's Narrative of the Japanese Occupation of Burma." Recorded by U Khin. Paper Number 41, Southeast Asia Program. Ithaca, NY: Department of Far Eastern Studies, Cornell University. Htin Aung, U [Maung]. 1965 The Stricken Peacock: Anglo-Burmese Relations, 1752-1948. The Hague: Martinus Nijhoff. Hoyt, Edwin P. 1989 Japan's War: The Great Pacific Conflict, 1853 to 1952. New York: Da Capo. Kirby, Major Gen. S. W. with C. T. Addis and others. 1958 The War against Japan. Vol. 2. London: HMSO. 1965

The War against Japan. Vol. 4. London: HMSO.

134

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Kratoska, Paul H. 1992 "Banana Money: Consequences of the Demonetization of Wartime Japanese Currency in British Malaya." Journal o f Southeast Asian Studies 23, no. 1: 322-345. 1997

The Japanese Occupation o f Malaya: A Social and Economic History. Honolulu: University of Hawai'i Press.

Maung, E. 1948 "Enemy Legislation and Judgments in Burma." Journal o f Comparative Legislation and International Law. Parts 3 and 4: 11-17. McEnery, J. H. 2000 Epilogue in Burma, 1945-1948: The Military Dimensions o f British Withdrawal. 2nd ed. Bangkok: White Lotus Press. Morrison, Ian 1947 Grandfather Longlegs: The Life and Gallant Death o f Major H. P. Seagrim, GC, DSO. London: Faber and Faber. Ogbum, Charlton 1982 The Marauders. New York: Quill. Ohta, Tsunezo 1967 "Japanese Military Occupation of Burma: The Dichotomy." Intisari 2, no. 3: 25-39. Rajah, Ananda 1998 "Ethnicity and Civil War in Burma: Where Is the Rationality?" In Burma: Prospects fo r a Democratic Future, ed. Robert I. Rotberg. Cambridge, MA: The World Peace Foundation and Harvard Institute for International Development.

135 References

Robinson, M., and L. A. Shaw. 1980 The Coins and Banknotes o f Burma. Manchester: The Authors. Silverstein, Josef 1977 Burma: M ilitary Rule and the Politics o f Stagnation. Ithaca, NY: Cornell University Press. Slim, Sir William 1958 Defeat into Victory. London: Landsborough Publications. Statesman (Calcutta) 1945 News item, May 8. 1945

"Burma as Rice Exporter," July 6.

Steinberg, D. I. 1982 Burma: A Socialist Nation o f Southeast Asia. Boulder, CO: Westview Press. Steinberg, David J., ed. 1987 In Search o f Southeast Asia: A M odem History. Rev. ed. Sydney: Allen & Unwin. Swan, W. L. 1989 "Thai-Japan Monetary Relations at the Start of the Pacific War." M odem Asian Studies 23, no. 2: 313347. Sykes, Christopher 1959 Orde Wingate. London: Collins. Times (London) 1945a "Currency Chaos in Burma," May 22,4. 1945b "City Notes: Currency Problem in Burma," May 24, 7.

136

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Tinker, Hugh 1961 The Union o f Burma: A Study o f the First Years o f Independence. 3rd ed. London: Oxford University Press. Tinker, Hugh, ed. 1983-1984 Burma: The Struggle fo r Independence, 19441948. 2 vols. London: HMSO. Toy, Raymond S., and Bob Meyer 1967 Axis Military Currency. Tucson, AZ: Monitor Offset Printing. Trager, Frank N., ed. 1971 Burma: Japanese Military Administration: Selected Documents, 1941-1945. Won Zoon Yoon, trans. Philadelphia: University of Pennsylvania Press. Tun Wai, U. 1962 Burma's Currency and Credit. Rev. ed. Bombay: Orient Longmans. Walinsky, Louis J. 1962 Economic Development in Burma, 1951-1960. New York: Twentieth Century Fund. Won Zoon Yoon 1971 "Japan's Occupation of Burma, 1941-1945." Ph.D. dissertation, New York University. 1973

Japan’s Scheme fo r the Liberation o f Burma: The Role o f the Minami Kikan and the “Thirty Comrades. ” Athens, OH: Ohio Center for International Studies, Southeast Asia Program.

INDEX

137

Note: This index was prepared by Lesley Bryant References for tables appear in boldface and endnotes as “n”. Accrual of Interest (War-time Adjustment) Act (1947), 118 Akiho, Colonel Ishii, 35 Akyab (Arakan) see also Arakan, 84, 90,126 Americans see United States of America Andrus, J. Russell, 7,45 annas see Indian coinage Anti-Fascist People’s Freedom League (AFPFL), 93, 98 Arakan, 2,3,4,70,71, 84,90,101,126,128 Auchinleck, Lieut-General Sir Claude, 72, 82 Aung San, U, 35,92-93,98 Azad Hind Bank, 48 Azad Hind Fauj, 96 Ba Maung, U, 44,92,93 Ba Maw administration (installed by Japanese), 50 Ba Maw government (Japanese sponsored) budget, 53 currency (puppet-govemment currency), 21,47,48, 77, 87, 90-91 currency committee, 44,102 nl6 financial difficulties, 48-49,57 independence bonds, 49 Japanese role, 30,35,53 Potter's friends in, 92 Ba Maw government (prewar), 50 Ba Maw, Dr, 44,102 nl6 Baker, H. CM19 banana money see also Japanese military scrip, 30, 38-42 Bank of Chettinad, 47 Bank of China, 14-15 Bank of England, 70,75, 82, 100,112 Bank of Japan, 43,48 banknotes see currency under issuing government's name (Ba Maw, British Burma, Indian, Japanese-occupation) banks (foreign) see also specific bank names, 47-48 barter, 3, 88,92,93 Baxter, G. H., 12-13 Benson, A. W., 42-43 bhat, 34 black market or black marketeers (racketeers), 13-14,22, 52,53, 91,101,112, 127,129

138 Marilyn Longrauir

Blagden, Justice, 55 BMA see British Military Administration Bodawpaya, King, 3 bogus money see forgeries by Japanese Bose, Subhas Chandra, 48,96,101 British (Army) field cashiers, 12 British Burma currency Akyab (Arakan), 84,128 banknotes preferred by Burmese, 6-7 BMA currency exchange, 74 BMA payments, 101,126 changes in 1937-1942,4-7 Chungking, 12-15 circulation, 16,19-20,21,32,38 denial to Japanese, 1,3, 7-9,18,19, 22 destruction, 8,9,18 disposition of 1941-1943,20 forced underground, 125,127-128 frontier fringe, 56,72 May 1942,19 missing, 16-17 monetary tables, 6,19,20 Postwar, 113 prewar, 40,111-113 production, 4 reconciliation of accounts, 17-22 relocation, 7 rural areas, 96 separation from Indian currency, 5 use discouraged, 70 value (Japanese-occupation currency), 53 value (sterling), 112 value (yen), 33-34 wartime circulation, 18,21,32,38,43 wartime encashment, 9-11,12, 13, 15, 86-87 British Burma rupees see British Burma currency British Military Administration (BMA), 53-54,57,69-70, 95, 99, 111 British Military Administration (BMA) currency 10 rupee banknotes, 85 continued circulation, 111,112,113 denominations, 73,85 interest-free loans, 97-98

Index 139

introduction, 75,85-87,101 planning, 69,72-75 usage after return, 94-96 withdrawn, 121 British Military Administration (BMA) Proclamation No. 6, 86, 88-89,90,112 British paternalism, 91 British pound scrip, 32 British silver rupees see Indian silver rupees brokers (pwiza), 3 Buddhists, 40 Burma Act XI (1947), 118 Burma banknotes see British Burma currency Burma Communist Party, 110 nl64 Burma Currency Board (1947), 4,112-113,121 Burma government see Government of Burma Burma High Court of Judicature, 2,55, 111, 113-115,117, 118, 121,127 Burma Intelligence Bureau, 38,44-45 Burma Monetary Arrangements Ordinance (1942), 32 Burma National Army, 97 Burma Notes (Payment Restriction) Act (1947), 112 Burma Notes Ordinance of 1942,9-10 Burma Office, 5,70,75,95,100,115,116,120 Burma puppet-govemment currency see Ba Maw government, currency Burma Socialist Program Party (BSPP), 129 Burma State Bank, 30,44-47,48,57,92,102 nl6, 104 n42 banknotes (not issued), 30,45-47,57 check (legal case regarding), 118 Burmese government see Ba Maw government Burmese independence, 30,34-35,57 Burmese rupees see Indian silver rupees or kyat Burmese wartime savings, 91-92 CAS(B) see Civil Affairs Service (Burma) Cassels, W. C., 15,17 CCAO (Chief Civil Affairs Officer, Burma), 71 centavos, 59 nl9 Central Bank (China), 14 Central Bank of Burma see Burma State Bank certificates of destruction, 8,15,16-17,18,22 CFA(B) [Controller of Finance and Accounts (Burma)] see

140 Marilyn Longmuir

Potter, Brigadier Arthur Kingscote Chan Taik, Dr. T., 118 Chettyars, 47-48,96, 98 Chiang Kai-shek, 10,11, 22 Chief Civil Affairs Officer, Burma (CCAO), 71 Chin Hills District, 70 China British Burma currency, 10,12-15, 17, 20 dollar, 60 n25 Far Eastern Commission, 118 Japanese controlled, 45,46,100 Japanese military M & B Straits dollars, 39 Japanese military scrip, 31 regions, 79 SOE (Special Operations Executive), 55 Chindits, 30,39,54-55,58,72, 125 Chinese banks, 12,14 Chinese government (National), 10, 14-15, 22, 75 Chinese National Currency (CNC), 12 Chinese troops, 11-12,13,17,22 chinthe, 54-55 Chosen Bank, 48 Christian, John L., 22, 56 Chungking, 10,12-15,22,55 Civil Affairs Service (Burma) [CAS(B)], 69, 70-71, 84, 113, 115,117,126 clothing see cost of living in war period coinage (pre-colonial Burma), 3-4; (Indian) see Indian coinage collaborators with Japanese, 83,101,127-128 Colonial Office, 70,75,100, 111, 114,116 comfort women, 51 Committee No. 1: Reparations (paper at FEC conference), 118— 119 committee of ten eminent Burmese, 44,102 nl6 compensation see reparations Contract Act, 114 contracts see loans Controller of Finance and Accounts (Burma) see Potter, Brigadier Arthur Kingscote cost of living in war period, 1, 37,51-52,91,101,126 counterfeits see forgeries court cases see legal cases Cox, Captain Hiram, 23 nlO

Index 141

credit or creditors see loans Cribb, Robert, 81 Crowe, C. T., 79-80 currencies see Ba Maw, British Burma, Indian, or Japaneseoccupation currency Currency Board (1947) see Burma Currency Board currency chaos, 1,42,57, 87-93,101 currency chests, 7,8,16,19-21,22 Currency for Reoccupied Burma (Potter's policy document), 11, 72-75 currency (pre-colonial Burma), 3-4 Currency Notes Act (1946) (Act XXV), 112 currency policies, 11,21,72-75,79-81,83-84,92,111-113 currency see Ba Maw, British Burma, Indian, or Japaneseoccupation currency currency transaction reports, 76-77 custom duties, 49 Davey, G., 116 Debtor and Creditor (Occupation Period) Ordinance, 111 debts or debtors see loans decimal system, 33, 39 deflation, 98 delta region see Lower Burma demonetization (repudiation) of British Burma currency, 11 of Burma prewar currency, 111, 112,121 of Burmese currency (General Ne Win), 128-129 of Indian currency, 13 of Japanese-occupation currency, 2,8-9,78-79,89,100-101, 101,126 postwar distrust of paper money, 129-130 denial to Japanese (or destruction) of currency and documents, 3, 7-9,15,16-17,18,22 donations (forced) see fund-raising levies Donnison, F. S. V., 43,71,78, 84,86,95 Dorman-Smith, Sir Reginald, 99 Dutch East Indies (Netherlands East Indies), 33, 36,76, 80-81, 91,125 economic disruption, 35-38 employment on British military projects, 88,95 Exchange of High Denomination Burma Notes Rules (1946),

142 Marilyn Longmuir

112 excise duties, 49 Executive Order No. 25 (Philippines), 119-120 export trade lost, 2,36,48,57,125 F5 see War Office Far Eastern Commission (FEC), 118 fiat money see Japanese-occupation currency Finance Department (Government of Burma, postwar), 115-116, 121 Finance Department (Government of India), 16-17 Financial Adviser (Burma) see Potter, Brigadier Arthur Kingscote Fisher, J., 82 flowered silver, 3 food see cost of living in war period Force 136, 56 Foreign Currency Designated Military Scrip, 38 forgeries (counterfeits) by British, 30,54,55-57,58 by Japanese (bogus money), 18,30, 56-57,58, 85 serial number security, 41 Fourteenth Army (British), 83-84, 85, 88,94,95 frontier fringe (or areas), 11,70,71,72,93 fund-raising levies, 96,101 Fumivall, John S., 3 Galvin, J. A. T., 55 General Headquarters (GHQ), 74 General Plan for the Control of the Occupied Areas, 38 gold (or jewelry), 53,58,115,127,128 Government of Burma (postwar), 101, 111-113,115-116, 121 Government of Burma (prewar), 5 Government of Burma-in-exile (at Simla), 8 consultation re currency problems, 15-16,69, 71-72,95 financial records, 18 interest-free loans opinion, 99 liability, 16, 21 looting estimates, 74 Government of India, 4-6,9-11,12,16-17,73,111 Government of India Act (1935), 4-5 Government of India overprinted banknotes see Indian currency Government treasuries

Index 143

British Army, 12 Chinese banks, 14 currency chests, 8,16,19-21,22 denial to Japanese, 18-22 looting, 13,17,74,87-88 state lotteries, 50 Greater East Asia Co-Prosperity Sphere, 31,33 Grenville, 55,56 guilder scrip, 32,76 gunnysacks, 97 Gurkha troops, 64 nl 11 Guyot, Dorothy, 117 Hatta, Mohammed, 80 Hawke, Lord, 76 Hayashi Army Group, 38 High Court of Judicature see Burma High Court of Judicature Hla Pe, U, 38,45,46,51,52, 83 hoarding food, 127 Japanese-occupation currency, 58,127 prewar British currency, 22,43,73 prewar Burmese currency, 39,76,94,95,126 Hong Kong, 69,89-90, 111 Hong Kong banknotes, 14 htamein (skirts), 40 Htin Aung, U (Maung), 128 IGHQ (Japanese Imperial General Headquarters), 31 Imperial Bank of India, 4,5,10 Imperial Japanese government, 119 income taxes, 49 independence bonds, 30,49-50,57 India and Burma (Burma) Monetary Arrangements Order (1937), 5,112 India Office, 70,75,100 Indian Civil Service (ICS), 71 Indian coinage see also Indian silver rupees and Indian currency description, 5-6 destruction plans, 8 for Chindits, 55 for hill tribes, 56 forced underground, 125

144 Marilyn Longmuir

hoarded, 39 quantities, 19 relocated, 7 replaced by notes, 38-39,54 small coins preferred by Burmese, 73 sufficient for reoccupation, 87 Indian commercial community in Burma, 7 Indian currency see also Indian coinage and Indian silver rupees BMA payments, 126 British military, 75 changes in 1937,4-7 condition of banknotes, 7 denial to Japanese, 19 forced underground, 125 forgeries, 56-57 frontier fringe, 70,72 infiltration by British, 54 May 1942,19 monetary tables, 6,19 overprinted banknotes for Burma, 6, 13,73 overprinted Burma Currency Board banknotes, 113 prewar, 4,13 reconciliation of accounts, 18-22 wartime circulation, 43 withdrawn by Japanese, 38 Indian Independence League, 96 Indian National Army (INA), 48, 96-97,101 Indian silver rupees see also Indian coinage and Indian currency, 4, 18, 22, 30,39,53,54, 56,125,127 Indo-China (French), 36 Indonesia see also Dutch East Indies, 80-81,120-121 inflation, 18,41,51-54,77, 127,128 Institute of International Relations (IIR), 55 interest on loans, 99,127 interest-free loans, 98-99,101,126 Irwin, General N. M. S., 74

Index 145

Japan, 7-8,46,119 Japanese Currency (Evaluation) Act (1947), 2, 116-117,121, 127 Japanese currency see Japanese-occupation currency Japanese fiat money see Japanese-occupation money Japanese invasion (Burma), 7-8,22 Japanese military administration, 34-35,47 Japanese military M & B Straits dollars see also banana money, 32, 39 Japanese military scrip see also Japanese-occupation currency, 30-32,33,34, 38,41-42,55-57 Japanese military scrip (Philippines), 119-120 Japanese military yen see Japanese military scrip Japanese monetary plans, 32-34 Japanese monopoly, 51 Japanese rupees see Japanese-occupation currency Japanese Southern Regions Development Bank, 48 Japanese-occupation currency (Japanese rupees, "Jap rupees") see also peso (Japanese-occupation currency) British treatment of, 73 circulation, 38,41,42-43,93 currency problems, 81 demonetization, 21,75,78,83-84, 89-90,100-102, 126 denominations, 33,39-40 depreciation, 41,42,77,88,129 description, 39,40 exchange rate, 53-54,75-79,77 inflation potential, 18 issuance, 1-2,30,119,125 loans, 111, 113-118 looting, 43,87-88 printing, 40, 41 serial numbers, 40,41 usage, 91 valuation scale, 116-117 value assigned by courts, 113-118 value in Akyab (Arakan), 90,101,126 value in wartime Burma, 37-38,53-54,69, 115, 121 jewelry see gold Judicial Department (Burma), 115-117,121 Kalewa, 102 n9 Karen, 30, 39,54,125

146 Marilyn Longmuir

kempeitai (Japanese military police), 38 Key, C. E. (of F5), 42,56-57,70,71,75-76,87,90 khit thit pwe-sa (New Order Broker), 53 King Bodawpaya, 3 King Mindon, 3-4 King Thibaw, 4,50 Kloff Printing Works, 41 Kratoska, Paul, 51 kudsu, 40 kyat see also British Burma currency, 3, 33,117,128-129 Kyaukpyu, 84 Leese, Lieut.-General Sir Oliver, 90 legal cases, 113-115,118,121,127 legal system, 113 levies (fund-raising by forced donations), 96, 101 levies (trained by Seagrim), 54 loans (contracts, credits, debts, mortgages, obligations) before or during occupation, 121 by BMA, 98-99,101 by Japan to Thailand, 34 in Japanese-occupation currency, 2,111,113-118,127 to Ba Maw government, 48 looting, 12,13,64 nl 11, 74, 87-88,112 lotteries, 30,50-51 Lower Burma, 4, 37,95,96-99,126 MacArthur, General Douglas, 79-80,104 n52 Malaya, 34,51,58 n7, 89-90,99,111,116 Malkin Report (Doctrine), 81-82,100,120 Malkin, Sir William, 81 Mandalay, 1,125 market prices, 51-52 Maung, E., 38 Maymyo, 7-8 Meiktila, 1,125 metric system, 33 military pass-notes see Japanese-occupation currency Minami Kikan (Minami Organization), 35 Mindon, King, 3-4 mint banknotes, 55-56 minting, 5,6,23 nlO mitsumata, 40

Index 147

monetary tables, 6,19,20 Mootham, Colonel, 113,117 Morrison, Ian and Potter, 92,94 British currency policy, 83,88-89,100 Burmese leaders, 92 circulation of Japanese-occupation currency, 94 currency chaos, 42,101 mortgages or mortgagees see loans Mountbatten, Vice-Admiral Lord Louis, 72,77,99,113, 117, 122 nl2 Mutaguchi, General, 35 Myitkyina, 7-8 Nampo Gaika Hyoshi Gunyo Shuhyo (Southern Region Foreign Currency Designated Military Scrip), 32 Nampo Kaihatsu Kinko, 42,43,45,48 Ne Win, General, 128 Netherlands East Indies see Dutch East Indies new order broker (khit thit pwe-sa), 53 ngapi, 37 North Borneo, 111 nouveau riche (new rich), 52,53,57,83 Nu, U, 121 obligations see loans oil, 36,37 Operation Character, 56 Osmena, President, 119 paddy, 84,93,97,115 crop (1941-1942), 96 cultivator loans, 98-99,101,126 purchase scheme (Ba Maw), 48 parasite class (khit thit pwe-sa), 53 Pataran Paper Company, 41 Patriotic Burmese Forces, 93 peace treaty (Burma-Japan), 111, 120-121 Pearce, Major General C. F. B., 71,122 nl2 People's Bank, 47 peso (Japanese-occupation currency) scrip or military notes see also Philippine peso, 32,69,119 petroleum royalties, 49

148 Marilyn Longmuir

Philippine government, 69,100 Philippine peso, 33,119 Philippines, 75,79-80,90,92,118-121,129 pice and pies, 5-6,33 portable presses (Japanese) rumors, 41 Potter, Brigadier Arthur Kingscote [CFA(B)] appointment, 71 Aung San, U, 92-93 Ba Maung, U, 92,93 BMA currency, 74,85-86,94,95 Burmese nationalists meeting, 92-93 currency circulation figures, 18-19,21,22,42,43 currency planning, 121 demonetization policy, 2,69,129 demonetization policy (criticism), 83-84,89-90,91,93 destruction of Japanese-occupation currency, 8, 81, 82 exchange rate, 76,77 forgeries, 56-57 Government of Burma-in-exile, 95 Japanese M&B Straits dollars, 39 Japanese-occupation currency, 40 Lower Burma monetary crisis, 97-99 money supply to troops, 12 Mountbatten meeting, 99 policy document, 11,72-75,99-100,99,100-101,126 propaganda campaign, 87 reports, 18,22,94,99 role continued, 99 Set, U (Dr), 41 Than Tan, U, 92-93 Potter's policy, 113-118 price control, 52 Proclamation No. 6 (BMA), 6,86, 88-89,90,112 propaganda, 87,90 Provisional Monetary and Fiscal Guide—Burma, The, 78,83, 126 pwdza (brokers), 3,23 n5 pya, 33,39 racketeers see black marketeers Ranee, Major-General Hubert, 109 n l6 4 ,113 Rangoon British Military Administration arrival, 94

Index 149

CAS(B) officers' meeting, 113,117 CFA(B) arrival demanded, 89,90 foreign banks, 47 Japanese denied currency, 7,22 Japanese evacuation, 86,90 Japanese-occupation currency depreciation, 101, 111 Japanese-occupation currency printing, 41 looting, 43, 87-88 market prices, 51-52 reoccupation, 42,85,85-87,88 Rangoon City Court, 113,118 rationing, 52 receipts for surrendered British Burma currency, 86-87 red money (Dutch), 81 Redemption of Japanese Currency in Burma, 120 refugees, 10,12-13,15,22 relief supplies see also cost of living in war period, 82,92,97, 101,126 reoccupation, 85-87 reparations (compensation), 81-82, 89,100,118-122 repudiation see demonetization

150 Marilyn Longmuir

Reserve Bank of India (RBI) assets of Government of Burma, 111 BMA currency, 73 British Burma currency, 4,5,20,22,70,94,112,121 currency problems, 16 forgeries, 55,56-57,85 Japanese denied currency, 7, 17 rice barter, 88,92,93 delta, 96,97 exports, 1,30,35-36,125 farmers (paddy cultivator loans), 98-99,101,126 market price, 51 surplus, 95 riots, 88,90 Roberts, Chief Justice E. H. Goodman, 115 Robinson and Shaw, 95-%, 112 rumors, 88,90 rupees see British Burma, Indian and Japanese-occupation currencies Russo-Japanese War (1904-05), 31 Salween front, 39,62 n74 Sarawak, 111 SCAO of 15 Corps, 84 schools, 88 Seagrim, Major Hugh P., 30, 39,54 seigniorage, 5 Sein Ko v Hla Din, 113-114 serial numbers, 40,41 Set, U (Dr), 41,42,44,46,47,92,93 Shan States, 44,62 n74 silver rupees see Indian silver rupees Simla see Government of Burma-in-exile Singapore, 111, 116 Sino-Japanese War (1894-1895), 31 Slim, Lieut.-General Sir William, 95 South East Asia Command (SEAC), 72 Southern Region Foreign Currency Designated Military Scrip, 32 Southern Regions Development Bank see Nampo Kaihatsu Kinko Special Operations Executive (SOE), 55

Index 151

speculators, 88 spies, 38, 39,57,125 State Bank Act (1943), 44 State Bank see Burma State Bank state lotteries, 30,47, 50-51 Statesman (Calcutta), 88 Steinberg, David, 128 Stilwell, Lieut.-General J. B. (USA), 11, 33 Straits dollar scrip, 32-34,39 sub-treasuries, 8,12,16,19,20,21,22,50 Sukarno, President, 80,81 Supreme Allied Commander South East Asia (SACSEA), 71 Swan, William L., 31,32 Taunggyi, 8 teak, 36 Tenasserim, 3,4,128 Thai government, 34 Thailand, 34,36,37 Thailand-Burma railway, 37 Than Tun, U, 92-93 Thein Maung, Dr, 44 Thibaw, King, 4,50 tical, 3 Times (London), 42,54, 83, 88-90,92, 100,101 Tojo, Japanese Prime Minister, 34-35 treasuries see sub-treasuries and Government treasuries Treasury Department (British), 70,73,75,77,79,100,114,120 Tun Wai, U, 5,7,112 Twelfth Army (British), 94 U see (name), U United States of America (USA), 12,75,79-80,90,100, 120 Upper Burma, 4,96 Upper Chindwin District, 70 USA see United States of America Waight, L., 79,91 war notes see Japanese-occupation currency War Office [financial section (F5)] BMA currency, 73,74 C. E. Key, 70,71,75,90 currency decisions, 82,100

152 Marilyn Longmuir

currency exchange rates, 76, 77 currency policy, 78, 126 interest-free loans, 101 watermarks on banknotes, 57 Wavell, Sir Archibald, 70 Wingate, Lieut.-Colonel Orde Charles, 54, 55 yen bloc, 33-34 yen-baht parity agreement, 34 Yokahama Specie Bank (YSB), 4 1 ^ 2 ,4 1 ^ 2 ,4 7 Young, (Treasury), 77,81-82

Trail: irisis. 1937-1947

Marilvn Longmuir

The Money Trail outlines the rapid succession of currencies used in Burma in the 1930s and 1940s, recounts the economic effects of the wartime currency crises, and details the considerations in the formulation of the British financial policies during and after the Japanese occupation. ISBN 1-891134-05-1

$16.95