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

033.9411/10–2253: Telegram

No. 706
The Secretary of State to the Embassy in Japan

secret

Washington, October 22, 1953—6:34 p.m.

958. Our 937. October 21 Ikeda meeting cancelled. Following proposals made Japanese as package by memorandum October 22.¹

1. US opinion that for JFY 54 US military assistance cannot be defended to Congress unless Japan’s budget for defense expenditures of order of 200 billion yen and for JFY 55 235 billion.

2. Suggest conferees tentatively accept ground force objective approximately 325,000 to 350,000. Exact composition and time-phasing Japanese forces to be worked out Tokyo including most appropriate division available yen funds and US military assistance among three forces. US recommends Japan consider ground force increase of 24,000 during JFY 53 and 46,000 during JFY 54, thus reaching 180,000 by end JFY 54.

3. Suggest Japan construct smaller and lighter naval vessels. US willing consider supplying destroyers, destroyer escorts on loan basis.

4. US thinks proper Japan’s contribution support US forces diminish as justified by development Japan’s forces.

5. Contemplated given Japanese program such as above US would be able withdraw forces as Japanese forces develop capability defend Japan.

6. Although Japan eligible for economic assistance under US legislation emphasize economic assistance given only basis need, US policy encourage countries develop only such forces as can support, no funds requested or appropriated for economic assistance Japan and could be made available only sacrifice other programs and Japan presently favorable balance of payments position. Therefore no justification economic assistance.

7. OSP under MSP for current USFY depends Japanese buildup, military assistance program to be agreed and ability procure on proper terms. US agencies have tentative target figure $100 million.²

8. $50 million reasonable target figure under Section 550. Minimum $40 million local currency proceeds used for military OSP. This $40 million included in $100 million OSP. Possibility portion $40 million local currency could be used develop munitions production by advance against deliveries requires further study. US willing make available up to $10 million local currency help develop industrial mobilization base Japan. Special agreement necessary cover requirements Section 550 and related defense support activities.

9. US prepared help reparations settlements through diplomatic offices if useful and consider any role can properly play connection relating reparations economic development. US recognizes importance increase trade Japan and Southeast Asia, prepared discuss specific ideas Japan may develop re role of Japan in increasing trade and economic development. This subject should not delay understandings on agenda items.

10. US understands Japanese desire maintain no stricter export controls than European, but considers important maintain high level of control until can be relaxed with impunity. Have agreed number deletions embargo list but will appreciate continued Japanese cooperation.

11. Propose general agreement during present discussions for GARIOA settlement whereby Japan would repay $750 million with 22½ percent interest 35 equal annual installments approximately $43 million of $750 million to be settled surplus property terms. Proposed meeting Tokyo about November 15 finalizes and sign necessary documents.

12. US regards more vigorous measures resist inflation and maintain Japanese competitive position as essential to effective cooperation between two countries.

End summary memorandum.

Nothing said re precise timing US force withdrawal or rate and scheduling diminution Japanese contribution US forces.

Dulles

1. The memorandum is dated Oct. 21. The introduction states that the proposals “are conceived as a whole and do not stand independently of one another.” (FE files, lot 55 D 388, “Ikeda Talks”)
2. The pertinent sentences in the memorandum of Oct. 21 read: “The actual amount of offshore procurement in Japan under the Mutual Security Program for the current United States fiscal year depends upon the scope and rate of the Japanese defense buildup, upon the military assistance program for Japan which may be agreed upon, and upon the ability to procure the desired end-items upon proper terms. The United States agencies involved have a tentative target figure of $100 million in mind.”