Second Philippine Republic The Second Philippine Republic , officially known as the Republic of the Philippines ( ) , or known in the Philippines as Japanese - sponsored Philippine Republic , was a puppet state established on October 14 , 1943 , during the Japanese occupation . President Manuel L . Quezon declared Manila , the capital city , an " open city " and left it under the rule of Jorge B . Vargas , as mayor . The Japanese entered the city on January 2 , 1942 , and established it as the capital . Japan fully captured the Philippines on May 6 , 1942 , after the Battle of Corregidor . General Masaharu Homma dissolved the Commonwealth of the Philippines and established the Philippine Executive Commission , a caretaker government , with Vargas as its first chairman in January 1942 . KALIBAPI – " Kapisanan sa Paglilingkod sa Bagong Pilipinas " ( Tagalog for the " Organization in the Service of the New Philippines " ) was formed by Proclamation No . 109 of the Philippine Executive Commission ( Komisyong Tagapagpaganap ng Pilipinas ) , a piece of legislation passed on December 8 , 1942 , banning all existing political parties and creating the new governing alliance . The pro - Japanese Ganap Party , which saw the Japanese as the savior of the archipelago , was absorbed into the KALIBAPI . KALIBAPI ' s first director - general was Benigno S . Aquino . Background . Independence . Before the formation of the Preparatory Commission , the Japanese gave an option to put the Philippines under the dictatorship of Artemio Ricarte , who the Japanese returned from Yokohama to help bolster their propaganda movement . However , the Philippine Executive Commission refused this option and chose to make the Philippines a republic instead . During his first visit to the Philippines on May 6 , 1943 , Prime Minister Hideki Tōjō promised to return independence to the Philippines as part of its propaganda of Pan - Asianism ( " Asia for the Asians " ) . This prompted the KALIBAPI to create the Preparatory Committee for Philippine Independence on June 19 , 1943 . A draft constitution was formed by the Preparatory Commission for Independence , consisting of 20 members from the KALIBAPI . The Preparatory Commission , led by José P . Laurel , presented its draft Constitution on September 4 , 1943 and three days later , the KALIBAPI general assembly ratified the draft Constitution . By September 20 , 1943 , the KALIBAPI ' s representative groups in the country ' s provinces and cities elected from among themselves fifty - four members of the Philippine National Assembly , the legislature of the country , with fifty - four governors and city mayors as ex - officio members . Three days after establishing the National Assembly , its inaugural session was held at the pre - war Legislative Building and it elected by majority Benigno S . Aquino as its first Speaker and José P . Laurel as President of the Republic of the Philippines , who was inaugurated on October 14 , 1943 , at the foundation of the Republic , the Legislative Building . Former President Emilio Aguinaldo and General Artemio Ricarte raised the Philippine flag , the same one used during the Philippine – American War , during the inauguration . On the same day , a " Pact of Alliance " was signed between the new Republic and the Japanese government that was ratified two days later by the National Assembly . The Republic . Greater East Asia Conference . was an international summit held in Tokyo from 5 to 6 November 1943 , in which Japan hosted the heads of state of various component members of the Greater East Asia Co - Prosperity Sphere . The event was also referred to as the " Tokyo Conference " . The Conference addressed few issues of any substance , but was intended from the start as a propaganda show piece , to illustrate the Empire of Japan ' s commitments to the Pan - Asianism ideal and to emphasize its role as the " liberator " of Asia from Western colonialism . The conference and the formal declaration adhered to on November 6 was little more than a propaganda gesture designed to rally regional support for the next stage of the war , outlining the ideals of which it was fought . However , the Conference marked a turning point in Japanese foreign policy and relations with other Asian nations . The defeat of Japanese forces on Guadalcanal and an increasing awareness of the limitations to Japanese military strength led the Japanese civilian leadership to realize that a framework based on cooperation , rather than colonial domination would enable a greater mobilization of manpower and resources against the resurgent Allied forces . It was also the start of efforts to create a framework that would allow for some form of diplomatic compromise should the military solution fail altogether . However these moves came too late to save the Empire , which surrendered to the Allies less than two years after the conference . Problems of the Republic . During his term in office , Laurel was faced with various problems that the country was experiencing , such as the following : Laurel attempted to show that the independence of the republic was genuine by rectifying these problems . Food shortages . Prioritizing the shortages of food , he organized an agency to distribute rice , even though most of the rice was confiscated by Japanese soldiers . Manila was one of the many places in the country that suffered from severe shortages , due mainly to a typhoon that struck the country in November 1943 . The people were forced to cultivate private plots which produced root crops like kangkong . The Japanese , in order to raise rice production in the country , brought a quick - maturing " horai " rice , which was first used in Taiwan . Horai rice was expected to make the Philippines self - sufficient in rice by 1943 , but rains during 1942 prevented this to happen . Japanese money . The first issue in 1942 consisted of denominations of 1 , 5 , 10 and 50 centavos and 1 , 5 , and 10 Pesos . The next year brought " " replacement notes " " of the 1 , 5 and 10 Pesos while 1944 ushered in a 100 Peso note and soon after an inflationary 500 Pesos note . In 1945 , the Japanese issued a 1 , 000 Pesos note . This set of new money , which was printed even before the war , became known in the Philippines as Mickey Mouse money due to its very low value caused by severe inflation . Anti - Japanese newspapers portrayed stories of going to the market laden with suitcases or " " bayong " " ( native bags made of woven coconut or " buri " leaf strips ) overflowing with the Japanese - issued bills . In 1944 , a box of matches cost more than 100 " Mickey Mouse " pesos . In 1945 , a kilogram of camote cost around 1000 " Mickey Mouse " pesos . Inflation plagued the country with the devaluation of the Japanese money , evidenced by a 60 % inflation experienced in January 1944 . Education . The Japanese allowed Tagalog be the national language of the Philippines . To this end a pared - down , 1000 word version of the language was promoted to be learned rapidly by those not yet versed in the language . Love for labor was encouraged , as seen by the massive labor recruitment programs by the KALIBAPI by mid - 1943 . Propagation of both Filipino and Japanese cultures were conducted . Schools were reopened , which had an overall number of 300 , 000 students at its peak . Electricity . The Japanese finished two of the four units of the Caliraya Dam , which was still under construction when the Second World War began in the Pacific Theater on December 7 , 1941 . The dam , in operation by August 1942 , provided electricity for Manila and its nearby provinces at the time . Also , the Japanese transferred the assets of the Manila Electric Company to the Taiwan Power Company . End of the Republic . On September 22 , 1944 , Laurel put the Republic under Martial Law . On September 23 , 1944 , Laurel , who refused at first , officially declared war against the United States and United Kingdom . Following the return of American - led Allied forces , the government of the Second Republic evacuated Manila to Baguio . The republic was formally dissolved by Laurel in Tokyo on August 17 , 1945 .