894.50/12–3047
The Acting Political Adviser in Japan (Sebald) to the Secretary of State
for use of the department only
No. 1486
Sir: I have the honor to enclose copy of memorandum of a conversation,14 which is summarized below, between Mr. Shigeto Tsuru, Deputy Director-General of the Economic Stabilization Board and Mr. W. Henry Lawrence, Jr., Second Secretary of this Mission on the subjects of imbalance of exports and imports, balanced budget, note issue, possibilities of economic collapse, controls versus autonomy of local government, tax collection, and ownership of facilities used by the Occupation.
Summary, Mr. Tsuru stated that during 1947 imports exceeded exports by about $300,000,000, mostly covered by American appropriations. The imports have been sold at a lesser cost, thereby subsidizing the populace. Occupation costs are said by Tsuru to be about 70 billion yen for the fiscal year of 1947 with prospects of being slightly less next year. During 1948, aid valued at $400,000,000 is essential, according to Tsuru. Imported goods will be sold at prices closer to reality in an effort to acquire a surplus in the Foreign Trade Budget. Tsuru is of opinion that the danger point in the Japanese economy is the [Page 345] next six months. General Headquarters, Supreme Commander for the Allied Powers has ordered the budget balanced. Supplementary budgets have been balanced, but mainly on paper. Note issue was estimated by Tsuru during the conversation on December 15 at between 200 and 210 billion yen by the end of December. (Official figures from Bank of Japan report the note issue to be nearly 221,000,000,000 as of December 29, 1947). He stated that there are signs that indicate the whole Japanese economy may collapse; one, an allowance of 2.8 months salary has been given government workers; two, the government has succumbed to deficit loans; and three, the Central Labor Relations Commission is to allow a sliding scale wage index for electrical workers already paid far above average wages. Unforeseen requirements of the Occupation, such as the new airfield in Aomori, may also prevent balancing the budget and cause a vicious cycle of shortages, black market activities and demands for increased wages. General Headquarters on one hand desires increased economic controls, but decreased governmental controls. Tsuru cited this as indication of a need for some group to be concerned with the over-all policy for the Occupation. He also expressed concern at the involvement of General Headquarters in operating details rather than supervision. Tsuru indicated that in the first eight months of the fiscal year of 1947 only about one-third of taxes due have been collected. This, he stated, has been caused by the lack of personnel, the loss of experienced tax collectors due to low pay, the influence of communists in tax collectors unions, and the new system of individuals making out their own returns. (Kurusu, Minister of Finance, has said only 45,000 out of 80,000 positions authorized are filled). Tsuru believes that the Japanese Government is missing an opportunity for revenue because it cannot put the customary excise tax on sugar being imported in large quantities. According to Tsuru, titles to homes and buildings used by the Occupation remain with the original owner and titles to housing developments belong to the Japanese Government. End of Summary.
Respectfully yours,
- Not printed.↩