Factories are still running if they are making supplies like ammo and boots instead of equipment for a new division or cruiser.....
Why would you want to reduce your economic strength? In either case the end result would be you being weaker. And whats the point of that in a game based around one of the larger conflicts of the 20th century.
And yes it makes sense that your production goes haywire. The reason the Japanese attacked was that they were running out of resources.
Think of it this way: if you idled them then the workers wander off, the factories would fall into disrepair and those said workers would be unemployed thus increasing dissent. You'd have to start over from scratch(ie rebuild your IC).
Also, its REALLY easy to build up a massive prewar stockpile of resources from trade, so large that you can last the entire war on it.
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