The "Problem" of Illicit American Cigarettes and Japan’s Long Black Market Era, 1945–75

During the occupation of Japan, many U.S. service members made small fortunes reselling American goods to Japanese civilians. Army restrictions on selling American goods and laws prohibiting Japanese citizens from buying American products failed to stop the thriving black market in U.S. luxury items. American cigarettes were in extremely high demand as Japanese consumers preferred American brands over low-quality Japanese cigarettes. Demand for black-market American cigarettes grew during the Korean War when Japan’s “special procurement” boom led to rising living standards and more Japanese were able to afford expensive black-market tobacco products. The black market in American cigarettes was still a problem for U.S. military officials and the Japanese government during the 1960s and 1970s. At that time, the politician Noda Uichi called black-market cigarettes the “great enemy of Japan’s national finances” because they hindered the government’s ability to collect taxes from its monopoly on tobacco sales.

In this paper, I argue that the U.S. military’s restrictions on the sale of American goods led to the development of black markets in occupied Japan. The U.S. and Japanese officials saw the illicit sale of American tobacco products as a problem because it deprived Japan of tax revenue, which it desperately needed for its economic recovery. At the same time, the illicit sale of American cigarettes solved problems facing U.S. servicemembers and Japanese civilians. The former resorted to black marketing due to a lack of purchasing power caused by an unfavorable exchange rate set by the U.S. military. The latter used black market channels to acquire goods that they could not purchase through formal channels. My paper also challenges the view that the postwar black market was a phenomenon of the occupation by showing how the black market in cigarettes survived for nearly two decades after Japan regained its sovereignty in 1952.