Japan?s attempt to assert political and economic control over East Asia, an expansionists program called ?Asia for the Asiatics,? and later the ?Co-Prosperity Sphere for East Asia,? was motivated by economic conditions and the military tradition of the Japanese people. Living space, food, and raw materials were urgently needed. To secure them and also markets for their manufactured goods, the Japanese thought they had to establish control over the markets and resources of East Asia. They planned: (1) to add nearby islands to the islands of Japan, (2) to obtain possession of Korea, (3) to absorb the Malay Peninsula, Indo-China, Thailand, the Philippines, and the numerous Southwest Pacific islands into the Empire of Japan, and (4) to assert at least economic control over China. ,By the eve of World War I, the Japanese had succeeded in occupying the Bonin Islands (1874), annexing Formosa and the Pescadores Islands (1895), annexing the Liaotung peninsula and the southern half of Sakhalin island (Russo-Japanese War), annexing Korea (1910). ,, ,During World War I, Japan managed to gain control over Manchuria and Inner Mongolia, and to take the Shantung Peninsula from Germany. Further territory expansion was achieved by the Paris Peace Settlement (1919) which mandated to Japan all of the Caroline, Marshall, and Mariana islands except Guam. The Japanese were, however, forced to give the Shantung Peninsula to China.,, ,Japan?s military thrust against mainland China began in earnest on Sept. 18, 1931, when with a contrived incident for an excuse, the Japanese army seized the strategic centers in Manchuria and set up (1932) the puppet nation of Manchukuo with Henry Pu-Yi, ex-emperor of China, as emperor under the protection and control of the Japanese army. Not content with seizure of Manchuria, the Japanese army then invaded the Chinese province of Jehol and annexed it to Manchukuo (1933). In 1934, Japan proclaimed Manchukuo an independent nation and the Japanese army penetrated into Inner Mongolia and some of China?s northern provinces, and established a garrison near Peiping. Although determined to resist the invasion of their country, the Chinese were able to do little more than initiate a boycott of Japanese goods.,, ,War between the two powers quickened in July 1937, when Japanese and Chinese troops clashed at the Marco Polo Bridge near Peiping, an incident Japanese leaders used as an excuse to launch a full-fledged invasion of China without a declaration of war. Peiping and Tientsin were taken in a month. Shanghai fell in Nov. 1937. Nanking fell in Dec. 1937 and was established as a puppet state under a Chinese president. Canton fell in 1938.,, ,Though badly mauled and weakened by repeated Japanese blows, the Chinese continued to fight, and to meet defeat, while Japanese armies overran large sections of Eastern China and occupied the essential seaports. Trading space for time, Chinag Kai-shek kept his army intact and moved his capital from Nanking to Chungking behind the mountains in western China. Factory machinery, schools and colleges were moved to the west. With the aid of the Flying Tigers, a volunteer force of American aviators commanded by General Claire Chennault, and military supplies from the United States and Great Britain moved slowly over the dangerous Burma Road, the Chinese continued to resist the hated invader. The war came to a stale mate. The Japanese made no attempt to take Chungking. The Chinese could not drive the Japanese armies from the provinces they had conquered. ,The defeat of Japan brought about by the Japanese government to execute their plan to drive the United States, France, Great Britain, and the Netherlands out of the East. A plan initiated by an air attack on U.S. military installations at Pearl Harbor, Hawaii. Japan?s dream of dominance in east Asia began to fade with the defeat of a powerful Japanese fleet at the Battle of Midway (June 3, 1942), and flickered out at Hiroshima and Nagasaki in Aug. 1945 in the wake of ?a rain of ruin from the air, the like of which had never been seen on this earth.? Upon the defeat of Japan by the Allies, control of the China-Japanese puppet states reverted to Chinese factions. ,During the existence of the China-Japanese puppet states, Japanese occupation authorities issued currency through Japanese puppet banks, the most important of which were the Central Reserve Bank of China, Federal Reserve Bank of China, Hua-Hsing Commercial Bank, and Chi Tung Bank. ,Operations of the Central Reserve Bank of China, the state bank of the puppet Republic of China government at Nanking, began sometime in 1940, although the official inauguration date is Jan. 1, 1941. To encourage public acceptance, the notes of this puppet bank carried, where size permitted, the portrait of Sun Yat-sen, Chinese nationalist revolutionary leader and founder of the Chinese Republic, on the face, and his mausoleum on the back. The number of notes issued by the Central Reserve Bank of China exceeds the total number issued by all other Japanese puppet banks in China. ,An interesting feature of the issues of the Central Reserve Bank of China is the presence of clandestine propaganda messages engraved on some of the plants by patriotic Chinese engravers. The 50-cent notes of 1940 carry a concealed propaganda message in Chinese. The initials ?USAC? and the date 1945 (?U.S. Army Coming 1945?) appear on the 1944 200-yuan note. Two varieties of the 1940-yuan note include in the face border design devices resembling bisected turtles, an animal held in low esteem in China. ,A small number of notes issued by the Central Reserve Bank of China carry overprints, the exact purpose of which is unclear, with exception of those which indicate a circulation area. Others are thought to be codes referring to branch offices or Japanese military units. ,The Federal Reserve Bank of China, located in Peiping, was the puppet financial agency of the Japanese in northeast china. This puppet bank issued both coins and currency, but in modest amounts. The first series of notes has a curious precedent. The original plates were prepared by two American engravers who journeyed to China in 1909 to advise officials of the Bureau of Engraving and Printing, Peking (BEPP) on engraving techniques of the Western World. The Chinese gentlemen appearing on the 1-yuan notes of 1938 is said to be making an obscene gesture to indicate Chinese displeasure with the presence of the Japanese. ,The Hua Hsing Commercial Bank was a financial agency created and established by the government of Japan and its puppet authorities in Nanking. Notes and coins were issued until sometime in 1941, with the quantities restricted by Chinese aversion to accepting them. ,The Chi Tung Bank was the baking institution of the ?East Hopei Autonomous Government? established by the Japanese in 1938 to undermine the political position of China in the northwest provinces. It issued both coins and notes between 1937 and 1939 with a restraint uncharacteristic of the puppet banks of the China-Japanese puppet states. The issues were replaced in 1940 by those of the Federal Reserve Bank of China.,,