[quote=@Mihndar]
Though I'll concede that the population of people reconciled to the government would be small, I still think that the natural resources afforded by Indonesia and whatever other possessions they might have would bolster Japan's economic growth, and considering Japan had a larger economy than China all the way until the 2000s (and that's even with Deng's reforms, which presumably would not happen in this universe) they would still have an industrial capacity to outproduce them in terms of war assets even if they can't match their army in terms of numbers. And that industrial capacity would be primarily geared towards military production, unlike in modern-day Japan.
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Like said, Japan had a larger economy because of US intervention. Also, Hou isn't necessarily Mao so Deng's reforms might not have happened simply because they were never necessary.