The fires had long been doused, the smoke gone- yet the sight and smell of death and destruction lingered. America had been attacked, and her once mighty Pacific Fleet lay in ruins on the silty bed of Pearl Harbor. A few ships managed to survive, and those would be the nucleus of the forces which would inevitably win the war. But at this point the outcome was much in doubt.
On the ground in Hawaii martial law had been declared. No one knew when or if there would be another strike at our massive military bases there. Invasion by the Japanese was a distinct possibility.
In all wars, since time immemorial, invaders will strike not only at their enemy’s military forces, but will seize or disrupt their ability to wage war. One of those targets would be the wealth of a nation. In Hawaii that wealth was centered on Oahu, and most precisely in the banks, and other financial institutions in Honolulu. If Japanese forces were to take Hawaii they would have methodically looted the wealth and transferred it to where it would benefit them- most likely Switzerland, a neutral country, well known for its banking with anyone policies.
What wealth would have been seized? The obvious answers were the silver coins (gold having been withdrawn from circulation in 1933, with little in the hands of the populace), paper money and any ownership types of documents (deeds, stock certificates, etc.) These would all find their way to support the Japanese war effort! What better way to fund your needs for ammunition and supplies that to have your enemy’s seized assets pay for them! When the Japanese invaded Manila, in the Philippines they seized over $20,000,000 in US currency alone!
In Washington they realized the ramifications of a Japanese invasion and occupation of Hawaii. Besides beefing up the defenses they also planned for a “worst case” scenario, where the Japanese successfully invaded the island chain. What could the US government possibly do to lessen the impact of the Japanese confiscating tens (or hundreds) of millions of dollars in funds?
The obvious answer was to remove those funds, and in some instances this was probably accomplished. Some items of value were no doubt removed to the relative safety of the mainland. But there still existed a need for normalcy for the inhabitants of Hawaii. If the currency was evacuated to the mainland how could normal commerce survive? The answer proved to be elegant in its simplicity- print a special issue of US paper money, which would only be usable in the Pacific region, and in case of invasion could be repudiated by the US government!
By July of 1942 the Bureau of Engraving and Printing had printed distinctive currency for the task. While using normal Federal Reserve Note and Silver Certificate plates on hand from previous printings, these notes were distinguishable by their brown seals and serial numbers, and the prominent “HAWAII” overprints- two small bold “HAWAII” on the front, and one large, outlined “HAWAII” on the back. These notes proved to be readily identifiable, and would serve the purpose. These notes were issued in the most commonly used denominations of the day, $1, $5, $10 and $20.
Orders were issued by the military governor of Hawaii (the territory being under martial law during this period) for everyone to turn in their old currency for a one for one exchange with the newly issued currency. Most people and businesses willingly complied, but as in all things there were a few hold-outs. Some folks felt that the new currency might become worthless itself, and did not want to trade in their notes “of known value” for something new and unusual.
The major banks cooperated by reminding safety deposit box holders of the requirement to exchange their currency by a given date. As the final redemption date neared one of the banks’ final letters informed their depositors that if they hadn’t accessed their boxes to remove and redeem the currency in it by a certain date the military authorities would forcibly enter their box and do it for them!
These “HAWAII” overprints circulated throughout the Pacific theatre of operations for the duration of the war. During this period it was illegal to use anything other than the “overprints” in the region. Servicemen returning to the US were allowed to spend the overprints on the mainland, where they were treated just like any other US currency.
Once the tide of war had turned, and the danger of invasion had passed the government (in 1944) announced the resumption of normal monetary policies, and any US currency could be used in commerce once again in Hawaii.
Vincent Vento, Ali’i Coins & Currency