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

794.5 MSP/7–3054: Telegram

No. 782
The Ambassador in Japan (Allison) to the Department of State

secret
priority

Tokyo, July 30, 1954—5 p.m.

235. Department Army (JCS) Washington, D.C. Department Army pass to General Hull. This is a joint FEC–Embassy message.

Part I—Japanese Plans For Defense Cuts and Increased OSP.

1. Vice-Director Defense Agency Masuhara told General Higgins July 21 precarious economic situation necessitating cuts in Japanese fiscal year 1954 budget and probable 90 billion yen ceiling for Japanese fiscal year 1955 defense budget. Masuhara stated as result tentative decision several weeks ago by Finance Minister Japanese fiscal year 1954 defense budget unofficially cut 10 percent forcing curtailment troop maneuvers and reduction stock reserve to only 5 percent as against 16–20 percent considered advisable by MAAG. Further 1954 budget cuts anticipated. Finance Ministry threatening cut in funds for naval personnel if United States fails turn over 17 combatant vessels, since personnel plans for Japanese fiscal year 1954 based on anticipation receipt these vessels. Naval construction under way will be completed but Masuhara doubts that further major construction will be started in immediate future. Funds for essential ground force construction may also be cut.

Japanese fiscal year 1955 budget ceiling expected to result in sharp curtailment plans to add 30,000 men to defense forces. Masuhara suggested that even slight increase in defense budget will be conditional on equivalent reduction yen contribution support US forces in Japan.

2. Yoshida … and submitted MITI plan for reconstruction defense industries which subsequently given Meyer mission¹ and Embassy. Plan requests $49 million in US aid for equipment funds and $350 million in OSP of which 207 million for Japanese defense forces and 143 million for other Far East countries. OSP is projected for planes, arms and ammunition but not naval construction. Timing of OSP not made clear in plan.

In view serious implications of defense budget cuts and evidence of uncoordinated Japanese approaches for US aid, Ambassador called FEC–Embassy–MAAG meeting July 26 to discuss problems raised by above and initiate joint studies looking to recommendations of coordinated defense-economic planning. Meyer agreed to remain over to attend meeting.

Part II—Conclusions FEC-Embassy-MAAG Meeting.

1. Inter-relationship of economic-defense-OSP problem and need for coordinated planning on US side was recognized.

2. Cuts in Japanese fiscal year 1954 defense budget although not yet official represented violation of spirit Japanese commitment in Allison–Okazaki letters April 6, 1954.

3. General prospect for next few years is decreasing US military expenditures in Japan.

4. Recently, Japanese Government has made number of uncoordinated and even contradictory approaches for US aid, such as: joint committee discussion of declining dollar expenditures; Kaihara² visit and presentation Kimura letter to Secretary of Defense;³ above-mentioned Yoshida letter to Hull; road project; request for $130 million in agricultural surplus; request for negotiations on special dollar receipts; IBRD and IMF negotiations, et cetera.

5. Common to all these requests is failure of Japanese to set forth concurrent internal actions to be undertaken on own behalf, despite obvious need for tough, coordinated economic and defense policies. Desirability of insisting on self-help policies prior to giving further US assistance seems required by Japanese attitude.

6. Unwillingness to prosecute realistic austerity program with necessary vigor and determination attributed to weakness of present Japanese Government.

7. Need exists to explore all possibilities for direct defense assistance to Japan including (a) delivery of additional ships and four-five year $50 million OSP program for naval construction suggested in Radford letter to Allison of March 16;⁴ (b) development of government manufacturing arsenals; (c) diversion of Indochina funds to: (1) Japan if valid end item requirements can be established for Japan; or (2) to other Asian countries if valid end item requirements can be established for items which can be produced in Japan.

8. Formation of continuing US-Japanese consultative body to serve as channel for all Japanese requests and main negotiating body considered desirable.…

Part III—Action Assignments.

Meeting decided to continue informal consultations and immediately conduct following studies as basis for joint recommendations:

1. FEC and MAAG estimate of respective OSP requirements for Japanese defense forces in US fiscal year 1955 assuming: (a) 90 billion yen ceiling with 30,000–man increase effected late in Japanese fiscal year 1955; (b) 100–120 billion yen ceiling with 30,000–man increase effected as presently planned. In addition, from long range point of view, estimate of US OSP procurement which would be reasonable for Japanese defense forces in US fiscal year 1956 assuming the implementation of (1) Japanese plan for six divisions plus four RCTs by March of 1957 and (2) JCS forces goals of 15 divisions which under MAAG planning would be reached by March 1959.

2. FEC estimates of OSP for other Far East countries and other dollar expenditures in Japan in light present Far East situation.

3. Embassy estimate of total dollar requirements and calculation of dollar aid required on basis above OSP estimates.

4. Embassy study of capability Japanese Government to enforce tough economic policies and realistic defense program.

It was also decided that (a) Ambassador would informally discuss 10 percent budget cut with Foreign Minister pointing out advisability joint consultation as result of commitment on defense program in April 6 letter; and (b) Ambassador and Meyer would informally point out to Yoshida and Okazaki need for coordination of outstanding requests for US assistance, this coordination to include formulation of a single program relating OSP program and other economic assistance to defense plans and inclusion internal actions Japanese Government will undertake.

Part IV—Recommendations.

1. Immediate discussions with Japanese Government on formation joint US–Japan consultative group as indicated paragraph 8 Part II. On US side, Embassy–FEC–MAAG initially would be represented. If FOA mission established, it would be included.

2. Delay in further commitments to Japanese, including Kaihara, pending completion FEC–Embassy studies and recommendations and formulation by Japanese of coordinated program.

Immediate Washington consideration of possibilities increased OSP through aforementioned naval construction program, diversion of Indochina funds directly to Japan or to OSP in Japan for other Far East countries, or by other methods.

Embassy and FEC finally request guidance on long-range strategic role conceived for Japan. Projected strategic role needed to form basis for Embassy–FEC planning of coordinated economic aid-OSP-Defense program. Discussion of this role with Japanese best method obtaining their cooperation and support. Meyer and MAAG Chief concur.

Allison

1. The FOA Mission headed by Clarence Meyer arrived in Japan during the first week of July.
2. Kaihara of the National Self-Defense Agency was in Washington in July for talks with U.S. officials.
3. Not found in Department of State files. A memorandum dated July 22 of a conversation held in Washington between Kaihara and State and Defense Department officials indicates the content of the Kimura letter and summarizes the oral replies given by a JCS team. The questions concerned the strategic role of Japan and Japanese force levels, equipment, and procurement. (Memorandum by Dunning, 794.5/7–2254)
4. Not found in Department of State files.