Hiroshima, Nagasaki, and Postwar Finance: The Markets' Response

When we think of the atomic bombings of Hiroshima and Nagasaki, our imagination immediately turns to the human tragedy and the geopolitical turning point that marked the end of World War II. But financial markets were also affected, albeit in very different ways in the United States and Japan.

🇺🇸 Wall Street: The wait for peace turns into a rally

After Hiroshima (August 6, 1945) and Nagasaki (August 9), investors' immediate expectation was that the war in the Pacific was over. The American stock market reacted enthusiastically:

• On August 8, 1945, the Dow Jones gained about 1.6% , buoyed by the idea that Japan was close to surrender.

• Even on August 9, while the second bomb was dropped on Nagasaki, the Dow closed higher again, reaching 164.55 points.

• In the following days, until VJ Day on August 15, 1945 , the climate remained positive: the end of the war meant industrial reconversion, expanding domestic consumption and the start of what would later become the American economic boom.

The market was already discounting the “new cycle”: from the low of 93 points reached in 1942, the Dow Jones had now risen by more than 20% in the following three years , anticipating the new phase of post-war growth.

🇯🇵 Tokyo: Markets closed, economy collapsing

In Japan, the situation was completely different. The Tokyo Stock Exchange had been closed in 1944 by order of the imperial government. With the economy now in shambles and the financial system under military control, there was no longer a truly functioning stock market.

After Japan's surrender and the Allied occupation, the stock market did not reopen immediately: profound reforms and a restructuring of the financial system were needed. Only in 1949 did the Japanese stock market reopen. At the opening, prices reflected a devastated country, but over the following decade it began a long recovery, a prelude to the so-called "Japanese economic miracle" of the 1950s and 1960s.

🌍 The world economy in the balance (1945–1946)

The atomic bombings were also the prelude to a radical change in global markets.

• In Europe , the stock markets were devastated by years of closures and wartime hyperinflation. London returned to trading with reduced volumes and depressed prices, far from pre-war levels.

• Raw materials , which had been restricted or rationed throughout the war, began to rise. In 1946, demand for reconstruction pushed up agricultural prices, while American inflation hit a peak of 18% in a single year , eroding real bond yields.

• Gold remained pegged at $35 an ounce, but behind that apparent stability lay a crucial fact: the United States was accumulating approximately two-thirds of the world's reserves . That hoard served as the foundation for the Bretton Woods system, agreed upon in 1944 and operational since 1946, which established the dollar as the global benchmark currency.

In this context, the divergence between Wall Street and Tokyo becomes clearer: the former was already riding the wave of post-war growth and a new international economic order, while the latter was left crushed by physical and institutional rubble.

Wall Street always open

The New York Stock Exchange (NYSE) never closed during World War II , not even in the days immediately following Pearl Harbor (December 1941) nor after Hiroshima and Nagasaki (August 1945).

At most there were:

• reductions in working hours due to electricity rationing and war needs;

• days of strong volatility , such as December 7, 1941 with the attack on Pearl Harbor, when the Dow lost about –3%.

But a total shutdown never happened, unlike other markets in Europe and Asia that suspended trading due to bombings or military occupation.

In practice, Wall Street always remained open also as a political signal: to demonstrate that the American economy was continuing to function despite the war.