After World War II had ended, Japan was devastated. All the large cities (with the exception of Kyoto), the industries and the transportation networks were severely damaged. A severe shortage of food continued for several years.
The occupation of Japan by the Allied Powers started in August 1945 and ended in April 1952. General MacArthur was its first Supreme Commander. The whole operation was mainly carried out by the United States.
Japan basically lost all the territory acquired after 1894. In addition, the Kurile islands were occupied by the Soviet Union, and the Ryukyu Islands, including Okinawa, were controlled by the USA. Okinawa was returned to Japan in 1972, however a territorial dispute with Russia concerning the Kurile Islands has not been resolved yet.
The remains of Japan's war machine were destroyed, and war crime trials were held. Over 500 military officers committed suicide right after Japan surrendered, and many hundreds more were executed for committing war crimes. Emperor Showa was not declared a war criminal.
A new constitution went into effect in 1947: The emperor lost all political and military power, and was solely made the symbol of the state. Universal suffrage was introduced and human rights were guaranteed. Japan was also forbidden to ever lead a war again or to maintain an army. Furthermore, Shinto and the state were clearly separated.
MacArthur also intended to break up power concentrations by dissolving the zaibatsu and other large companies, and by decentralizing the education system and the police. In a land reform, concentrations in land ownership were removed.
Especially during the first half of the occupation, Japan's media was subject to a rigid censorship of any anti-American statements and controversial topics such as the race issue.
The co-operation between the Japanese and the Allied powers worked relatively smooth. Critics started to grow when the United States acted increasingly according to her self interests in the Cold War, reintroduced the persecution of communists, stationed more troops in Japan, and wanted Japan to establish an own self defence force despite the anti-war article in the constitution. Many aspects of the occupation's so called "reverse course" were welcomed by conservative Japanese politicians.
With the peace treaty that went into effect in 1952, the occupation ended. Japan's Self Defence Force was established in 1954, accompanied by large public demonstrations. Great public unrest was also caused by the renewal of the US-Japan Security Treaty of 1960.
After the Korean War, and accelerated by it, the recovery of Japan's economy flourished. The economic growth resulted in a quick rise of the living standards, changes in society and the stabilization of the ruling position of the Liberal Democratic Party (LDP), but also in severe pollution.
Japan's relations to the Soviet Union were normalized in 1956, the ones to China in 1972.
The 1973 oil crisis shocked the Japanese economy which was heavily depended on oil. The reaction was a shift to high technology industries.