[Enclosure]
Memorandum Prepared in the Department of
State
secret
Dissolution of Excessive Concentrations of
Economic Power in Japan (Zaibatsu
Program)
The purpose of this memorandum is to outline briefly the steps taken
to date in the Zaibatsu Program and the current position of the
Department of State with respect to such Program.
The Zaibatsu Program originated with the President’s Policy Statement
on Japan of August 29, 1945 and with the Joint Chiefs of Staff
Post-Surrender Directive to SCAP96 in which he was directed to require the Japanese to
dissolve large industrial and banking combines or other
concentrations of private business control and to take other action
to encourage a wide distribution of income and ownership of the
means of production and trade. This policy has since been adopted by
the Far Eastern Commission.97 The means for executing the
program were developed two years ago by a combined State-Army
Mission to Japan, and a policy paper embodying its report was
approved by SCAP and SWNCC, and after being considered by
Assistant Secretary Petersen and by General Hilldring. This paper is
currently being considered by Far Eastern Commission. Implementation
has been proceeding in Japan for the past two years on the basis of
the original Joint Chiefs of Staff Directive and is now well
advanced.
Essentially, the program seeks to establish a system of competitive
enterprise in Japan with substantial diffusion of ownership and
control. To this end, certain laws and ordinances have been passed
and others are currently being considered. The major Zaibatsu
holding companies have been liquidated. The securities held by such
companies have been turned over to a Holding Company Liquidation
Commission which is now in the process of disposing of the
securities to Japanese buyers. An anti-trust law designed to prevent
future development of excessive concentrations of economic power has
also been passed. The Japanese Diet has before it an Ordinance which
sets up the standards and procedures for dissolution of excessive
concentrations of power not effected by the holding company
liquidation, such as single corporations holding monopoly or
near-monopoly positions in an industry and large corporations with
many technologically
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unrelated lines. Japanese corporations likely to be affected by the
Ordinance are now preparing reorganization plans. These measures
necessarily place substantial administrative discretion in the hands
of SCAP and the Japanese
Government. Analogous laws in the U.S. and Canada are similarly
constructed and the Department believes that no adequate program can
be drafted without placing such discretion in the administrator.
Until recently there has been general agreement in the government on
the Zaibatsu Program. Several weeks ago, however, the Department of
the Army raised certain questions concerning the policy paper now
before the Far Eastern Commission and the Ordinance now before the
Japanese Diet, referred to above. By agreement between officials in
the two Departments, a cable (Tab A)98 was sent to SCAP suggesting that the
administrative powers given by the Ordinance to the liquidating
agency be restricted in certain added respects. SCAP was also informed that the Far
Eastern Commission policy paper was under review by the two
Departments and was requested to delay adoption of the Ordinance.
The Secretary of the Army followed this cable with a personal
message from himself to General Mac Arthur (Tab B) also requesting
delay on the Ordinance. General MacArthur replied (Tab C) that the
procedures of the Ordinance are designed to accomplish most
effectively the implementation of existing policy and detailed his
reasons for giving the Japanese authorities, under his supervision,
the maximum of direct responsibility in carrying out Allied
decisions. Shortly thereafter a more up-to-date draft of the
Ordinance became available in Washington and was found by working
levels in both Departments to satisfy most of the questions which
had been raised.
The exchanges of views between the Army and State Departments and
between Washington and Tokyo have not answered, to the satisfaction
of the Army Department, a number of questions which have been raised
by the program. These questions seem to arise from a number of
general apprehensions. The first of these is, apparently, that the
program is “un-American”. The specific objection is thought to be
the fact that the compensation to be paid to former Zaibatsu owners
for their divested property is inadequate. It is inadequate and
inevitably must be, for if full compensation were paid the former
owners would retain the financial power to resume their former
positions of economic domination. Certainly the objective of the
program—the breaking of the identity of interest between
monopolistic business and
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the totalitarian state by encouraging a system of free enterprise—is
soundly American. As General MacArthur has pointed out, (Tab C),
“this program, if successful in transforming a small number of
monopolistic combines into numerous competing units and in bringing
about widespread ownership of the instruments of production and
trade, will erect a solid bulwark against the spread of ideologies
or systems destructive of both free enterprise and political freedom
under democratic capitalism.”
Another fear appears to be that the program has been or may be
carried too far. The basic directives, however, contain no
instructions to SCAP to take
extreme action. Criticism of the Ordinance is apparently based on
the fear that it might, however, be administered in too drastic
manner. It seems doubtful that General MacArthur, who as Theater
Commander is responsible for implementation, would permit this.
The third fear is that the Program may interfere with economic
recovery. It is SCAP’s conclusion,
with which the Department of State agrees, that Japanese recovery
would on the contrary be seriously jeopardized by delay in carrying
out the Program. As long as the divested securities of former
Zaibatsu concerns remain in the hands of the Japanese Government,
where they now are, opportunity for free enterprise is restricted
and recovery is consequently hampered. A further important
consideration is that delay would create uncertainty among Japanese
businessmen and others as to whether we really intend to free them
from the domination of the Zaibatsu, and whether they may now assume
positions of responsibility in the Japanese economy without fear of
reprisal at the hands of resurgent Zaibatsu interests. Finally,
delay would prevent the reorganization of many technologically
incongruous combines which, under their existing sprawling
organization, cannot obtain intelligent guidance from this top
management.
It has been suggested that, in view of these apprehensions, the
Program be re-examined by prominent persons not now in government
positions. A primary disadvantage of this proposal is that a review
by prominent citizens could not possibly be kept secret, and the
knowledge in Japan that the United States was uncertain about the
program would greatly endanger its successful implementation. The
Program’s success depends on encouraging Japanese businessmen to
take independent measures towards Japanese recovery, and upon
minimizing their fear of taking action inimical to Zaibatsu
interests.
Since the program would inevitably have to be held up pending
reexamination, the success of the program and economic recovery
would
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both be imperiled in
the interval. Also, the continued retention by the Japanese
Government of the divested securities for any longer period than
necessary would strengthen the groups in Japan and those countries
of the Far Eastern Commission who prefer that ownership and control
of enterprises remain permanently in the hands of the Japanese
Government. General MacArthur has pointed out (Tab A) that “involved
in the failure or success of the program is the choice between a
system of free competitive enterprise which goes hand in hand with
political freedom and a socialism of one kind or another under which
political freedom is a myth”, and that “reopening the policy for
discussion at this time might well result in altering not only
procedural or policy matters but in sacrificing the essential
objective.”
