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

794.00/8–1154: Telegram

No. 786
The Ambassador in Japan (Allison) to the Department of State

secret
priority

Tokyo, August 11, 1954—2 p.m.

318. For the Secretary from Ambassador.

1. Since his appointment as Secretary General of Liberal Party two weeks ago, Ikeda has rapidly emerged as dominating figure second only to Yoshida in power arid influence. Yesterday at meeting of Liberal Party leaders, he followed Yoshida to rostrum and made statements which in substance were reported as follows:

a. United States failed in its “roll-back policy” when Indochina truce signed.

b. Truce proved increasing initiative of Communist China amid “fast-rising racial consciousness in Southeast Asia.”

c. “This is not time for Japan to chose outright between west and east …¹ but is time to decide its own action in full analysis of action either west or east will take politically and economically.”

d. Japanese attitude should be characterized by greater flexibility in foreign and economic policy.

e. Chief objective of new policy would be promotion of trade, which would necessitate drastic revision of current policies, rationalization of nation’s industries and safeguards against extreme activities by labor unions.

f. Retrenchment (austerity) policies should be continued for several years more.

2. Ikeda’s assumption, with full support from Yoshida, of more dynamic leadership than government has exhibited over past year or so is most important development from standpoint of Japan’s role in Far East and our relations with Japan. At his request, I am to see Ikeda August 13, 2:30 p.m. Tokyo time. Subjects forecast by Suzuki of Finance Ministry are: (a) GARIOA, (b) Mr. Yoshida’s visit to Washington, and (c) internal political developments. I believe this gives us timely opportunity to comment on Ikeda’s views as quoted in press and to correct obvious misapprehensions regarding US position, particularly with respect to his appraisal of strategic situation in Southeast Asia and basis for US economic assistance. Press has repeatedly headlined in last several days all manner of reports on alleged directive by President to prepare program of economic aid for Japan, on impact of Meyer report outlining seriousness Japanese economic position, and US Cabinet discussions regarding Japan, et cetera, et cetera. Your statement at yesterday’s press conference² that direct economic aid is not being considered at present has helped to restore balance. However, US press stories still give impression US needs Japan more than vice versa. No doubt expectations of help are running high and entering into Ikeda’s own calculations.

3. Regardless of future prospects for Yoshida government and degree of support it may be in our interest to give it, we shall have to reckon with Ikeda increasingly to be ahead and I therefore think it would be most helpful if I could have statement directly from you to give him on Friday. This would, I hope, be preliminary to statements which I hope you will be able to make en route to Baguio or at least on way back, at which time I will have further recommendations for talks with Yoshida, Ikeda and others. At this time, however, in addition to whatever you may consider it useful to say, I would propose that message from you include following points:

a. Indochina truce was not failure of roll-back policy of United States. French never asked United States to intervene in Indochina and truce was in essence recognition of facts of situation there. There has therefore been no major change in strategic situation in Southeast Asia except that necessity for greater sense of mutual in terdependence in area is now more widely recognized. United States moving to achieve greater strategic flexibility by withdrawal of all but two divisions from Korea, and re-positioning elsewhere in Far East outside Japan.

b. United States pleased to note Ikeda’s emphasis on measures to rationalize nation’s industries as in last analysis Japan must restore her competitive position in world’s markets if she is to achieve independence and self-reliance which we, too, desire to see. However, it imperative for Ikeda and other Japanese leaders to make clear to all that United States assistance to Japan could only provide extra margin where needed to assure success over and above Japan’s own efforts to rationalize the economy. The United States has been deeply disappointed in failure Japan to make wise use of special dollar receipts of past few years and must insist in connection with any future aid requests from Japan on prerequisite of such measures as selective controls, modernization plant, land reclamation, et cetera, et cetera.

United States particularly fearful that spate of publicity on expected American assistance will cause certain elements in Japan relax efforts and expect that Japan will be bailed out of any crisis by United States because of United States conviction of importance of Japan as anti-Communist bastion. Ikeda should know United States Congress, which has drastically cut FOA appropriations this year, would not countenance assistance to country which after three years of decreasing taxation again failed to tackle its problems with real determination. Might also add, as has been pointed out in FEC–Embassy discussions that shift toward neutrality, while not affecting economic aid or OSP from existing production facilities, nevertheless, when added to an unwillingness to rearm rapidly, might have a determining effect on US plans to build any industrial mobilization base in Japan. Discussions suggested it would not be sound judgment to build a mobilization production base in a country which is exposed to enemy attack yet which has not shown resolution in preparing for its own defense. The protection of such a production base would tie down United States forces required elsewhere.

Allison

1. Ellipsis in the source text.

2. When questioned concerning U.S. direct assistance to Japan at his news conference held in Washington on Aug. 10, the Secretary replied as follows:

   “It is possible, but we do not think that that will be necessary. It may be desirable to make available some foodstuffs to Japan out of our surplus food crops and to do so on terms which would be liberal from the standpoint of payment—possibly in terms of local currency. But we do not anticipate the necessity for any economic aid to Japan, on the assumption that the Japanese handle their own fiscal and commercial affairs with prudence and firmness. It seems to us the situation can be dealt with without any direct economic aid. There is of course a certain amount of assistance that goes to Japan through our contribution to their enlarged security program and there are still a substantial number of U.S. troops in Japan which are spending money there. In that way there is a considerable amount of what you might call invisible exports to Japan which runs up into terms of several hundred million dollars, though not nearly as big as it was at the height of the Korean war when there were heavy purchases in Japan for use in Korea. There is a decline, but the figure is still quite a substantial one.”

   Full text of the news conference, which includes additional references to Japan, is in Department of State, News Division, “News Conferences of the Secretary: Verbatim Reports”, vol. XXIV, 1953–1955, under date.