Foreign Relations of the United States, 1952–1954, China and Japan, Volume XIV, Part 2

033.9411/9–2953: Telegram

No. 693
The Ambassador in Japan (Allison) to the Department of State

confidential

Tokyo, September 29, 1953—7 p.m.

819. Please pass Commerce. Reference Embassy telegram 645, September 10, 1953.¹ Embassy appreciated opportunity review tentative position papers Ikeda discussions. In view of subjects raised in paper entitled “Foreign Investment”,² Department may wish consider Embassy observations on following topics:

1. Foreign investment in Japanese enterprise. Japanese Foreign Investment Board is currently denying applications investment by Americans who wish control more than 50 percent stock interest (despatch under preparation). Applications by American investors seeking approval 100 percent ownership are being delayed or have been rejected. Embassy understands Cabinet officials concerned have reached informal confidential agreement disapprove such applications on grounds avoid excessive foreign control over domestic industry. In attempt alter this practice, Embassy discussing problem with appropriate officials Japanese Government, including Vice Minister Foreign Affairs Okumura, who was informed that such restrictive policy appears (1) Contrary to government policy repeatedly announced by Prime Minister, and most recently expressed on occasion Knowland visit,³ (2) not supported by Japan’s foreign investment law and related legislation, (3) in violation of spirit and letter United States–Japan FCN Treaty. Vice Minister agreed such restrictive policy also disadvantageous Japan’s economic self-interest and promised close personal attention seeking reconsideration current practice.

2. Fair trade practices. Embassy has observed increasing tendency toward restrictive trade practices including collusive bidding, dual pricing, division of markets, government designation of exclusive importers and trade arrangements at artificially pegged prices. Recently, following continued low level exports and heavy import balance, government has considered legislative and administrative measures involving official production controls over certain industries, preferential treatment in foreign exchange allocations and extension of indirect and direct subsidies. Seeking bureaucratic controls, MITI officials, supported by some political leaders and big business, continue active campaign for more drastic amendment or repeal anti-monopoly and export trading laws.

Comment: Should Japan openly engage in preferential allocation of exchange to importers or markets to exporters, Embassy believes action would be adverse to Japanese best interest as well as American. Dual pricing will stimulate defensive action by other nations to restrict Japanese trade. Japan, however, almost certain encourage certain degree reconcentration industrial and trading firms because of historic pattern and paucity of resources and capable business leaders. Competition is uncongenial concept. Therefore rather than opposing reconcentration per se Embassy suggests representation against those restrictive practices which obviously are detrimental to Japanese economy and American trade.

Allison

1. Not printed. (894.131/9–1053)

2. Draft paper not found in Department of State files. In the final version dated Oct. 1, the section entitled “United States Position” reads as follows:

   • “1. The U.S., with the exceptions noted below, is not in a position to extend direct U.S. loans to Japan;
   • “2. for loans from public lending institutions, Japan should rely primarily on the IBRD; the Bank’s attitude towards loans to Japan, however, is strongly influenced by Japan’s efforts to put its internal economy on a sound footing; the U.S. supports extension of a $40 million IBRD credit for thermal projects, but cannot commit itself on other projects in advance;
   • “3. Japan is generally able to build the necessary plant and equipment to undertake its development, supplemented by relatively minor amounts of imported materials, equipment and services; loans should be sought only to the extent actually needed; unnecessary burdening of Japan’s balance of payments for the future should be avoided;
   • “4. the Export-Import Bank is willing to consider requests for short-term credits for the purchase of agricultural raw materials; action on the $60 million cotton credit (short-term) request is anticipated shortly;
   • “5. the Japanese should give greater attention to removing obstacles to the entry of private foreign capital; the U.S. is concerned that Japan appears to be deliberately discouraging the entry of American capital into equity investment;
   • “6. the U.S. does not, as a general matter, comment on the economic soundness of foreign flotations on the American market; the prospective borrower, however, must comply with the relevant Federal and local regulations.” (FE files, lot 55 D 388, “Japan”)

3. William F. Knowland, Majority Leader of the U.S. Senate, had left Washington on Aug. 23 for a tour of Asian countries. He was in Tokyo for part of the last week in August. He arrived back in Washington on Oct. 3.