Foreign Relations of the United States, 1947, The Far East, Volume VI

894.50/11–1247

The Assistant Secretary of State for Occupied Areas (Saltzman) to the Under Secretary of the Army (Draper)

secret

Washington, November 12, 1947.

Dear Mr. Draper: The State Department has given careful consideration to the revision, which you sent me on October 29th, of SWNCC 384, “Economic Recovery of Japan.”

The State Department is in full agreement with the desire of the Department of the Army to make it known to SCAP, to the U.S. public, to Congress, and to the Far Eastern Commission that the United States Government desires to accelerate the processes of economic recovery in Japan. There is agreement also that any statement of U.S. policy on this subject should be formulated in such terms as to make clear the desirability of a “shift in emphasis” toward a more positive attitude, as far as increasing trade and industrial productivity are concerned.

Such a statement, it is believed, should be so worded as to minimize fears that this “shift of emphasis” implies in any way reversal or repudiation of the broad principles and policies which have underlain long term occupation objectives. It should seek to elicit maximum support of allied countries in the Far East for those practical measures and commitments essential to any program of actual economic reconstruction in Japan and in their own countries. At the same time, it should be sufficiently specific and clear in its intent to assist in obtaining Congressional support for the financial assistance required to attain our ends.

With these considerations in mind the State Department has prepared the enclosed statement which, it is believed, includes all the points of substantial importance contained in the latest version by the Department of the Army of SWNCC 384. These points, however, are presented in a manner suitable for delivery as a formal statement by the U.S. Member of the Far Eastern Commission.

In addition to the points taken from SWNCC 384, the enclosure contains a resolution and a proposal to the FEC for policy action designed to impress upon the FEC two facts. The first is that FEC policy decisions already adopted clearly imply the desirability of placing emphasis upon Japan’s economic recovery. The second is that FEC, as such, and the individual countries thereof, are recognized as having effective jurisdiction over policy matters upon which their decision is an essential prerequisite to setting in motion a successful recovery program for Japan and for other Far Eastern countries.

The statement for the U.S. Member of FEC is couched in such terms as to make it suitable for release to the Press, if that should be deemed desirable, and for use in Congress if there should arise in that quarter a desire for evidence demonstrating that the U.S. Government is taking positive steps to assist Japan to become economically self-supporting.⁹¹

Sincerely yours,

Charles E. Saltzman

[Enclosure]

Proposed Statement by General McCoy to the Far Eastern Commission on the Role of Japan’s Economic Recovery in Far Eastern Economic Reconstruction

My Government has instructed me to place before the Far Eastern Commission a resolution and proposals for Far Eastern Commission policy decision on several specific matters.

The U.S. Government has reviewed the accomplishments of the first two years of the occupation of Japan in the light of the Potsdam Declaration and of those ultimate objectives which the Far Eastern Commission has incorporated in its Basic Post-Surrender Policy for Japan. Member countries of the Far Eastern Commission have shown a deep and continuing interest in programs which the Supreme Commander for the Allied Powers has set in motion to accomplish those objectives. There can be little question in your minds, I am sure, that SCAP has taken effective measures to disarm Japan so that Japan’s ability to make war on the land, on the sea and in the air, has been destroyed, and that SCAP has taken vigorous steps to eliminate from positions of prominence and responsibility in Japanese society exponents of Japanese militarism and ultra-nationalism. Under the Allied regime of control Japan cannot menace the peace and security of the world.

A peaceful Japanese government, established in accordance with the freely expressed will of the Japanese people, has begun to put in motion through legislation and executive action processes for development in Japan of democratic institutions and ways of life.

In the economic sphere Japan lacks both the strength and stability to meet its needs or to carry out its responsibilities either to its own people or to the peoples of the Far East.

Many causes contribute to Japan’s economic instability, its lack of industrial productivity and its inadequate commercial operations.

When the Far Eastern Commission can reach decisions on unresolved policy matters in the field of reparations, that action can contribute to reconstruction in Far Eastern countries. It can also lay the basis for healthy recovery of industrial activity within Japan. Nevertheless, pending those decisions, important both to Japan and reparations claimant countries, the Supreme Commander for the Allied Powers, the Japanese Government, the U.S. Government, and each of the other countries members of the Far Eastern Commission, can take certain economic measures which could contribute towards accomplishment of the basic objectives of the occupation. Both Japan and those Far Eastern countries which continue to suffer from the impact or ravages of Japanese aggression can benefit from positive and immediate exploration of all appropriate means and methods whereby economic recovery in Japan and throughout the Far East can be accelerated.

I must mention here that it is well known that the American people have borne the costs of importing into a Japan, at first prostrate and subsequently unstable and inadequately productive, those foods and materials required to prevent widespread disease and unrest. The load of those costs is one which the American people will not willingly carry indefinitely. For a temporary period continued assistance can be expected, but through greater efforts by the Japanese people and through early restoration of mutually profitable commercial relations between Japan and the rest of the world, Japan should move towards that self-support which can remove this burden on the U.S. taxpayer. Existing Far Eastern Commission policies, the economic interests of all of the Far Eastern Commission countries, and the immediate requirements of Japan combine to emphasize the great need for recognizing the importance of taking all appropriate measures which can contribute to self-support in Japan and maximum trade between a peaceful and increasingly democratic Japan and those countries of the Far East and of the world which can benefit from early and broad expansion of commerce.

My Government therefore has instructed me to put before the Far Eastern Commission the following resolution and the following proposals for Far Eastern Commission as a recommended policy decision:

“Whereas the Supreme Commander for the Allied Powers has disarmed Japan and has taken vigorous and effective steps to suppress or eliminate from Japanese life institutions and persons expressive of the spirit of militarism and aggression;

“Whereas the Supreme Commander for the Allied Powers has encouraged the Japanese people to desire individual liberties, respect fundamental human rights and form democratic and representative organizations;

“Whereas the Far Eastern Commission has declared that Japan should be permitted eventual participation in world trade relations and access to raw materials necessary for a peaceful economy;

“Whereas the Far Eastern Commission has authorized the Supreme Commander for the Allied Powers to designate for assured retention under Japanese ownership industrial capacity capable of practical use to meet current needs;

“Whereas the Far Eastern Commission has determined that the peaceful needs of the Japanese people should be defined as being substantially the standard of living prevailing in Japan during the period of 1930–34;

“Whereas the Far Eastern Commission has declared that reparations shall be in such a form as would not endanger the fulfillment of the program of demilitarization of Japan and which would not prejudice defraying of the costs of occupation and the maintenance of a minimum civilian standard of living;

“Whereas the Far Eastern Commission has declared that measures should be continued or taken to stimulate Japan’s production of goods required for export and to insure that goods produced are those in demand in countries requiring supplies from Japan;

“Whereas the Far Eastern Commission has directed the Supreme Commander for the Allied Powers to be responsible for ascertaining the types and amounts of goods in Japan available for export and for recommending the types and amounts of goods to be imported and to develop a trade program;

“Whereas the Far Eastern Commission has established an Inter-Allied Trade Board for Japan to recommend to the U. S. Government on the best arrangements for facilitating Japanese exports and imports generally;

“Whereas the Far Eastern Commission has authorized the Supreme Commander for the Allied Powers to establish a revolving fund to aid in financing production designed to contribute to the revival of productivity in a Japanese peace economy;

“Whereas the Far Eastern Commission is conscious that the development of a sound and self-supporting economy is essential to the establishment of a democratic and peaceful government which will carry out its international responsibilities, respect the rights of other states and support the objectives of the United Nations;

“Whereas the Far Eastern Commission is conscious that the fulfillment of Japanese obligations to the Allied Powers requires help to the people of Japan in their own interest as well as that of the world at large in finding means whereby they may develop within the framework of a democratic society an intercourse among themselves and with other countries along economic lines that will enable them to satisfy their reasonable individual and national needs and bring them into permanently peaceful relationship with all nations;

“The Far Eastern Commission, therefore, resolves that the U. S. Government, the Supreme Commander for the Allied Powers, the Far Eastern Commission and its Member states, should each and collectively take such positive measures as are appropriate within their respective jurisdictions as will contribute to prompt and healthy economic reconstruction in Japan and throughout the Far East as a whole, and to this end approves the following proposals as matters of policy:

• “I. The Supreme Commander for the Allied Powers should take steps, as soon as practical, to remove restrictions upon the entry in Japan of Allied personnel for business purposes;
• “II. The Supreme Commander for the Allied Powers should permit the movement from Japan of Japanese business men to any Allied country; Providing arrangements for such movement are supervised by the Supreme Commander for the Allied Powers in accordance with such standards on types of business men and restrictions on numbers of business men as may be laid down by such particular Allied countries as may permit Japanese business men to enter.
• “III. The Supreme Commander for the Allied Powers should prepare long-range import-export plans, for appropriate consideration by the Far Eastern Commission and the Inter-Allied Trade Board in accordance with their respective terms of reference, in such a way as to assure that authorized amounts of imports, in excess of requirements for the prevention of disease and unrest, can contribute effectively towards Japan’s self-support and economic reconstruction throughout the Far East as a whole.”

91. In a letter dated December 19, General Draper wrote Mr. Wisner, Deputy to the Assistant Secretary of State for Occupied Areas, offering a revision of the paper on “The Economic Recovery of Japan” to be sent to SCAP, and requested early approval of its recommendations (894.50/12–1947).