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

794.5/12–1554: Telegram

No. 839
The Ambassador in Japan (Allison) to the Department of State

secret

Tokyo, December 15, 1954—4 p.m.

1403. Joint Embassy-FEC message. Subject: JFY 1955 defense budget.

Part I. Estimated Japanese plans.

1. Tentative Japanese Government budget plans for JFY 1955 have been to keep within 1 trillion yen ceiling for total budget, with priority to unemployment and disaster relief measures, maintenance defense expenditures at JFY 1954 level of 137.3 billion yen. Defense agency has requested 95.2 billion yen, including 67.4 billion yen for maintenance present forces and 27.8 for increased forces. Request for 15–17 billion yen reduction support costs likely in order keep within 137.3 billion budget ceiling.

2. More than last year, defense budget decisions will probably be made on political grounds with little regard for Japan’s defense requirements. Hatoyama or successor government will be under strong political pressures to provide in JFY 1955 budget relief to distressed areas hurt by austerity program. Government would require broad conservative backing to push through defense increases rather than larger appropriations for economic relief. In view current political situation, government with requisite positive support for defense not likely to emerge prior to Diet consideration of JFY 1955 budget next year.

Part II. Recommended US position.

1. US should seek Japanese agreement on the following points:

a. Restoration of 4.5 billion yen cut from 1954 defense budget.¹

b. Japanese defense force budget for JFY 1955 95.2 billion yen.

c. Of 95.2 billion appropriated for JFY 1955, US contribute 2.6 billion yen by accepting a reduction of that amount in Japanese contribution to support of US Forces in Japan. US would thus accept a base figure of 90 billion yen for calculating JFY 1955 defense budget; Japanese would provide 2.6 billion yen by further increase in total Japanese defense appropriation and the US would provide 2.6 billion yen through reduction in Japanese contribution to support US Forces Japan. Under this proposal, support costs would be 53.2 billion yen and defense budget 152.4 billion yen.

d. Extension of runways required by FEAF.

e. Commitment to a specified force level and defense program.

f. Phased induction throughout year of personnel added to Japanese Forces.

g. Carry-over into JFY 1955 of all unobligated defense funds.

h. Obligation of all defense funds including those carried over and those appropriated in JFY 1955 budget by March 31, 1956.

With respect to II (1.,a.) we recognize that reappropriation of 4.5 billion yen probably unfeasible for political reasons but it is essential that Japanese recognize in some way their derogation from April 6, 1954 commitment to specified budgetary appropriation and negotiate compensating arrangement acceptable to us.

2. If above proposal, particularly paragraph c., unacceptable Japanese Government in view considerable increase in defense budget, request authority to negotiate on following basis:

a. Japanese agreement to points a., b. and d. through h. as above (in particular 95.2 billion yen defense force budget) with US agreement to accept reduction of Japanese contribution support costs to USFJ equal to 50 percent of amount appropriated by Japanese Government for its defense forces above base figure of 73.8 billion yen. (73.8 represents base figure had 50–50 matching formula been applied last year.) Prior to negotiating on basis of 73.8 billion yen base figure, would propose Japanese agreement to 50–50 sharing of Japanese defense costs using base figure of 78.8 billion yen.

b. If above formula applied to Japanese defense budget of 95.2 billion yen, total defense budget and contribution to support costs would be as follows:

(1) Base figure 78.8 billion yen, support costs 47.6 billion yen, total budget 146.8 billion yen (reduction support costs 8.2 billion yen).

(2) Base figure 73.8 billion yen, support costs 45.1 billion yen, total budget 144.3 billion yen (reduction support costs 10.7 billion yen).

(For purposes above estimates, cost for private rentals under paragraph 2 (a), Article XXV, administrative agreement, assumed to be 4 billion yen.)

3. Determined effort will be made seek Japanese agreement on sharing equally costs above base figure of 73.8 billion yen. However, in view present indications Japanese intentions with respect defense budget, not optimistic about Japanese agreement to arrangement involving approximately 7 billion yen increase in defense costs over JFY 1954 level of 137.3 billion yen (4.5 billion yen cut reduced total to 132.8). Therefore, if during course negotiations General Hull and I conclude impossible to obtain agreement with Japanese even after prolonged discussions, we will propose additional negotiating positions for your consideration.

4. Agreement with Japanese on defense program to be through formal exchange of notes defining precisely commitments of both parties in order to avoid recurrence of 1954 budget cut problem.

5. At present it is practically certain that Diet will be dissolved in late January prior to consideration JFY 1955 budget. Despite uncertainty political situation, believe preliminary discussions below Cabinet level will be necessary prior to next elections and installation new Cabinet in order to avoid Finance Ministry freezing defense budget at unsatisfactory level. However, agreement on defense program will be finalized only following elections, presumably sometime in late March.

Allison

1. On Dec. 9, Ambassador Allison handed Vice Minister Okamura a note which he summarized in telegram 1364 from Tokyo, also Dec. 9. “Note refers to Diet passage supplementary budget confirming defense budget cut in contravention confidential exchange letters April 6 committing Japan to 78.8 billion yen budget. Japanese Government requested to inform Embassy on intentions to carry out above budget commitment. With view to JFY 1955 negotiations, note concludes with suggestion that budget cut problem be settled prior to discussions JFY 1955 defense program and with pointed reference to Japanese commitment provide $155 million support costs annually. FEC concurred in text which air pouched.” (794.5/12–954)

   Full text of the note, No. 1030, is attached to a covering letter from Parsons to McClurkin dated Dec. 10. (794.5/12–1054)