91. Memorandum of Conversation0
PARTICIPANTS
- Eisaku Sato, Finance Minister
- Ambassador MacArthur
- Albert L. Seligmann, Second Secretary of Embassy
SUBJECT
- Japanese restrictions on United States imports, technological agreements and automobiles; Japanese development in Latin America and Southeast Asia; support for revision of the Security Treaty; plans of Mr. Kono to travel abroad
The Ambassador had told Minister Sato he would like to call on him following the reorganization of the Cabinet, but at the Minister’s request the meeting was held at the Residence in order to avoid the press. At the outset Minister Sato indicated that he would like to speak confidentially, as always, to the Ambassador and he dismissed his interpreter.
The Ambassador told Mr. Sato that he would like to talk to him as a friend regarding a number of problems which were troubling him. He then discussed Japanese restrictions against 1) imports of American capital, 2) technological agreements and 3) imports of automobiles for American businessmen. The Ambassador stressed that it was not just simply a matter of protecting American interests, which it was his duty to do, but that the restrictionist attitudes of Japanese bureaucrats on these matters made it difficult for the United States to cooperate in fighting the proponents of protectionism in the United States.
Mr. Sato replied that while he understood the Ambassador’s viewpoint, one of the problems that he faced was the large imbalance between imports from the United States and exports to the United States. The Minister said that he would be going to Washington on September 24 to attend the IMF meeting and he had a number of problems that he would discuss at that time. One of them was this problem. It was not his intention to see imports and exports with the United States in balance, since they had never been so from Meiji times on, but he wished to see a closer balance achieved, especially since Japan must think in the long term when it might not have large special dollar earnings from United States military sources etc. In respect to restrictions on cars, the amount involved was small, the Minister noted, but he hoped that Japan would move in the direction of free convertibility when its foreign exchange position improved. Japan now has $1,100,000,000 in foreign exchange but cannot convert it at will. Recently there have been moves to unblock some of the earnings of foreign motion picture companies as well as to relax restrictions on remittances from Japanese emigrants abroad. He hoped the day would soon come when Japan would be able to have a freer foreign exchange as exists in Western Europe. The Ambassador explained that the dollars for the import of cars by the American business community were not Japanese dollars but dollars held in the United States by the American businessmen.
The Ambassador told Mr. Sato that the United States is doing its best to help Japan expand its markets abroad to carry on the trade that is the nation’s life blood. But cooperation must be a two-way street. If the [Page 208] problems the Ambassador had raised seemed minor, they nonetheless were aggravating some of Japan’s best friends in America and in the American business community in Japan.
The Minister said that he was grateful for the assistance the United States had given Japan through its financing of the World Bank and in helping Japan to float its dollar bond issue in the United States. However, a limit was being approached in the amount of capital available for investment in Southeast Asia and Latin America. Leaving aside Southeast Asia, the problem is particularly acute in Latin America. Mr. Sato inquired as to what policies the United States had in mind to extend credit in Latin America and hoped that Japan could take, advantage of such credit. He said that he would make this point when he visited Washington.
Mr. Sato thoroughly agreed with the Ambassador that cooperation with the United States must be a two-way street. He said that as a result of the reorganization of the Cabinet the United States could rely 100% on Japan and that especially he and Mr. Ikeda were of the same opinion as his “boss,” former Prime Minister Yoshida, that the United States should regard Japan as its “follower” and should lead Japan.
For example, before his departure Prime Minister Kishi had talked to the Cabinet about the Korean repatriation problem. He pointed out in clear-cut terms that without the cooperation of the United States and the Ambassador, Japan would never be able to solve its problems with the ROK. From time to time, Japan’s policies might seem to change somewhat, but the Ambassador should understand that Japan will never deviate from its basic alignment with the United States.
The Ambassador said that the United States needs Japan and Japan needs the United States. He was glad to see that exports from Japan to the United States had increased 50% over last year in the first five months of 1959, but he hoped that the increase would not proceed at too swift a rate lest it invite restrictionist measures by United States industries. Japan should be thinking about protecting the 30% of Japan’s total exports that now go to the United States and work for a gradual rather than spectacular and immediate increase in exports to the United States. Moreover these exports were consumer goods, many of them in the luxury class, that would find no ready market in Southeast Asia or the Communist Bloc. The important thing was not to let small matters stand in the way of cooperation on big problems. It was with this thought in mind that the Ambassador had spoken so frankly on the question of restrictions.
The Ambassador said that he would look into the question of financing in Latin America and Southeast Asia. He said he understood the United States would contribute to Latin American economic development through the Inter-American Bank. The United States will put [Page 209] money into the bank but it will not control it. The United States Export-Import Bank in turn is limited in scope and intended to finance United States exports.
The Ambassador said that in Southeast Asia the United States cannot just give Japan capital but is prepared to assist when a good project is presented for consideration such as the Orissa Iron ore project in India or give sympathetic consideration as in the case of the Bailadila project. For the next few years the best thing for Japan and another Asian country or countries to do will be to propose specific sound projects in which case the United States will sympathetically consider the possibility of assisting in the financing, perhaps from the Development Loan Fund. The United States does not look favorably on a blanket loan to Japan or an Asian country simply to finance the export of Japanese capital goods and equipment.
Minister Sato said that in Indonesia the Japanese are able to take advantage of the reparations agreement as a means of facilitating investment. In Brazil, however, where $200,000,000 has already been committed/a limit has been reached in available capital. Japan is already involved in the Minas Gerais steel mill project and a dockyard, but is trying to enter into an electric power development project. He hoped that the Second World Bank would set up with Latin America in mind but was convinced that the bank would not be of much help in Southeast Asia where Japan must think of another system.
The Ambassador thought that the reparations agreements which now call for about $1,200,000,000 in direct aid and sympathetic consideration for another $700 million in loans would be of great help. There is no conflict between Japan and the United States, but rather it is in the interests of each country to work with the other.
Minister Sato then mentioned the Security Treaty negotiations and expressed concern over the lack of progress with the Treaty despite the Ambassador’s good will and hard work. Before Prime Minister Kishi had left on his trip the latter had made it clear that the Treaty was to be put through. Starting next week there will be full discussions regarding the Treaty under the guidance of Fujiyama among the Cabinet ministers in Tokyo. Moreover, thought will be given to the countermeasures that must be taken to overcome the opposition campaign by Sohyo.
Because the fall Emergency Diet Session will be concerned with the Vietnamese reparations question, Sato said it will be difficult to present the Security Treaty for ratification at that time. Therefore, the Regular Diet Session will concentrate on the budget and the Security Treaty. The government is firmly resolved to put the Treaty through, if necessary taking advantage of the provision for automatic ratification once the Treaty is approved by the Lower House. In the meantime, an extensive public relations campaign will be undertaken to explain the Treaty. The [Page 210] Ambassador should have confidence that his efforts on behalf of the Treaty will not be undermined.
The Ambassador said that it was not the United States that had proposed the revision of the Treaty and now that Japan had entered into negotiations the issue was much more than the contents of the Treaty itself. The communists were determined to make the Treaty a basic issue as to Japan’s future policy and to use it to push neutralism and shake Japan’s basic Western alignment. Recently, Ambassador Fedorenko1 had told the Ambassador that he had given up his plans to leave on vacation in early July and return in September. Now he was going to go home for a few weeks in August and come back quickly because “he had work to do”. By this, of course, he means to help those who are opposing the Treaty. Thus, the question of approval of the Treaty is a test of the future international course that Japan plans to take.
Minister Sato said that some people thought that the movement against the Treaty would reach greater proportions than that against the Police Bill. He did not agree and was convinced that it would not go beyond the communists and their friends. There was no chance that it would develop into a genuine “people’s movement.” He realized, however, that a public relations campaign was necessary and the GOJ and LDP were thinking in these terms. Minister Sato pointed out that however hard the left-wingers worked on the theme of neutralism it has no appeal to the Japanese people. This would be clear in any general election. For one thing, the question of the Security Treaty is not related by the average Japanese to his daily life. For this very reason, however, a positive approach is necessary to explain the Treaty.
The Ambassador added that he thoroughly agreed in the need for adequate explanation of the Treaty to the public.
In response to a question by the Ambassador regarding Mr. Kono’s plans to go abroad, the Minister said that he does not know whether or not he is going to the United States but that he would probably not go to the USSR. Just before coming to the Residence, Minister Sato said he heard that Mr. and Mrs. Kono, together with about 30 persons have been invited to Hawaii by the Hawaiian Dredging Company. He said that the Finance Ministry was concerned over the number of people invited who all had asked for substantial dollar exchange and was debating whether or nor to give them the dollars. The Minister had recently talked to a commentator about Mr. Kono’s attitude toward the United States. The commentator thought that he is lacking in moral courage, and that his attitude toward the United States was shaped during the Occupation when he was held as a war criminal and when he was purged and lost [Page 211] his job. The Minister added that he did not see much of Mr. Kono these days.
The Ambassador said that he was aware that there was a general impression that he was unfriendly to Mr. Kono. When Mr. Kono had gone to the United States two years ago, he had simply warned him that he would not be able to negotiate foreign policy problems outside of the usual channels. Mr. Sato said that this was the “Kono method” of working outside the usual channels.
According to Mr. Sato, Mr. Yoshida had originally thought that the Security Treaty should receive long and careful study. Now he felt that if it is a Treaty that will deepen friendship with the United States then it is a good Treaty. If it is not such a Treaty, it will be a bad Treaty. The Ambassador mentioned that recently a Japanese friend had suggested that perhaps it had been wrong for the Japanese Government to have asked for a change in the Treaty. The Ambassador replied that even if this were the case, if he did not support the Treaty now, he would be supporting the communists whose objective is to defeat the Treaty. His friend acknowledged that he had not thought of the matter in this way.
The Ambassador pointed out the great change that has taken place in the power ratio in the Pacific area compared to before the war when the United States and Japan were the only two major powers in the area. Now, both Japan and Germany had disappeared from the scene as powers to check the USSR. Moreover, Communist China had developed as a Pacific Power. Japan by itself lacks the resources to combat these two great powers. This is an argument for the Security Treaty that many Japanese have made to the Ambassador. If those who would use force to achieve their ends know that they will face the deterrent force, not only of Japan, but of the United States, they will hesitate to attack Japan. Moreover the other Free World nations in Asia will thereby benefit.
Minister Sato said he would like to speak briefly about the political situation, which is quiet at the moment. He is personally friendly with Messrs. Kono and Ohno but their ideology is totally different from that of himself and Mr. Ikeda. A cold war consequently exists between the two sides. Kono and Ohno have indicated that they believe that the new Security Treaty is necessary for Japan and have said that they will cooperate to see that it is approved. What form their cooperation will take is a dubious question.
Sato said the press has noted the plans of the ultra-rightists to counter the attacks on the Treaty of the left wing. He added that the ultra-rightists have no ideals of their own and hope only to upset law and order. In so doing the onus will be placed on the Government. He is doing his best to discourage such efforts but suspects that they are inspired behind the scenes by Kono and Kodama.
[Page 212]Returning to the question of the import of automobiles, Mr. Sato pointed out that even Prime Minister Yoshida had been unable to purchase a Benz from Germany as he said he had intended to do when he visited there. Since that time MITI has refused to give him permission. (Mr. Sato said there is now talk that he will receive one as a present from Mr. Adenauer.) He was, however, under the impression that there was no problem for American businessmen.
The Ambassador reiterated that the cars in question were for responsible American businessmen and would be imported with American dollars, thereby incurring no drain on Japanese foreign exchange, and that the businessmen would abide by any reasonable rules regarding their resale. It was now impossible to bring in a car because the Japanese Government requires that the owner have had previous possession for one year and has attached other unreasonable conditions. Obviously an American in Japan has no opportunity to exercise such ownership. Minister Sato said that he did not realize that this was the situation and did not know that the dollars were not Japanese dollars. He would look into the matter and hoped that the regulations would be changed.
The Ambassador said that he hoped to be able to have another friendly exchange of views with Mr. Sato, perhaps at the end of August.