Foreign Relations of the United States, 1948, The Far East and Australasia, Volume VI

FE Files (peace treaty)

Analysis of the Japanese Peace Treaty Draft of January 8, 1948¹

January 8, 1948

secret

1. Categories of Problems Studied

The January 8 draft² on the Japanese peace treaty, which has no formal standing in the Department but is drafted in general along the lines of the thinking of the Policy Planning Staff, can be divided roughly into six main categories. These categories are: 1) Territorial Clauses; 2) Extent of Allied Authority; 3) Disarmament and Demilitarization of Japan; 4) General Reform Program; 5) Reparations and Restitution; and 6) Technical Problems Connected with the Liquidation of the War, such as war criminals, claims, property rights, settlement of disputes and final provisions.

2. Territorial Clauses

The territorial clauses (Articles 1–9) are based largely on international agreements made at Cairo, Yalta and Potsdam. The disposition of the Bonin and Volcano Islands and Marcus Island (Article 5) is based on a decision of SWNCC of September 17, 1946 to the effect that these islands be placed under a strategic trusteeship under the administration of the United States. Although the trusteeship agreement for the Trust Territory of the Pacific, the former Japanese Mandated Islands, was approved by the President on July 18, 1947, title to this territory is to be renounced by Japan (Article 6) in order to nullify any possible residual claims that Japan may have to it. The main out standing problems in the territorial clauses concern the southern Kurile Islands and the Ryukyus. In reference to the Kuriles, they are not defined in the Yalta Agreement, which simply states that “The Kurile Islands shall be handed over to the Soviet Union.” If the United States proposes a narrow interpretation of the “Kurile Islands”, the southernmost islands of Kunashiri and Etorofu, the Habomai group and Shikotan would be retained by Japan. In reference to the Ryukyu Islands, the Joint Chiefs of Staff have recommended a U.S. strategic trusteeship for all of the islands south of 29 degrees north latitude but the State Department has not yet concurred with this proposal.

3. Extent of Allied Authority

The sovereign independence and territorial integrity of Japan is recognized by the Allied and associated powers in Article 10 and SCAP, the FEC and the Allied Council for Japan are abolished by Article 11. Such control as the Allies are to exercise over Japan in post-treaty period is to be through the Council of Ambassadors (Chapter 6). While most of this authority is limited to problems of disarmament and demilitarization, Article 32(h) gives the Council authority for a period of 5 years to determine whether Japan has vitiated the provisions concerning limitations on holding public offices (Annex A) and those on economic reform. According to this article, if the Council determines that a violation of these provisions has taken place, it may issue directives to the Japanese Government. If the Council decides the directives have not been carried out, it may recommend to the member governments action which it considers appropriate under the circumstances.

This provision, extending authority of the Council of Ambassadors beyond control over questions of disarmament and demilitarization, has been included because this Government has already certain commitments concerning the economic reform of Japan and because extensive reforms have already been instigated by SCAP within the policies set forth in the initial post-defeat directive issued to him (SWNCC 52/7).³ If Allied control is to continue over any of the reform programs, some provision must be included in the treaty similar to that in Article 32(h).

4. Disarmament and Demilitarization

The provisions for disarmament and demilitarization, contained in Chapter 5, follow the revision of November 1947 of the draft treaty for disarmament and demilitarization of Germany insofar as these provisions are applicable to Japan. On April 29, 1946 the United States circulated to the Governments of China, the Soviet Union and the United Kingdom a draft four-power treaty on the disarmament and demilitarization of Japan.⁴ It was originally intended that this four-power treaty would be separate from the peace treaty and would be binding upon the four contracting powers. The January 8 draft of the Japanese peace treaty does not envisage a separate disarmament and demilitarization treaty. By incorporating the disarmament provisions in the peace treaty, the obligation to carry out these provisions is placed directly on Japan rather than on the four powers. Allied control over these provisions is limited to 25 years and is to be exerted through the Council of Ambassadors for Japan. Revisions of the disarmament and demilitarization provisions of the treaty are possible through the operation of Article 32(c) 4, whereby the governments represented on the Commission of Inspection may agree to the discontinuance of the functions of the Commission prior to the expiration of the 25-year period. These articles may further be revised through the operation of Article 58 which provides that the Allied and associated powers may hold a conference for the purpose of considering revision of the treaty “in the light of the progress of Japan toward the fulfillment of the provisions of the present treaty after its entry into force”, whenever such a recommendation is made by the Council of Ambassadors for Japan or by a majority of the states represented on the Council. The articles on disarmament and demilitarization are also in conformity, in most respects, with the corresponding section in the Far Eastern Commission policy decision on Basic Post-Surrender Policy for Japan, approved on June 19, 1947.⁵

No provision is made in the draft treaty for a permanent level of industry in Japan. Such controls as are to be exercised over Japanese industry are limited to the prohibition of the stockpiling of strategic raw materials in excess of normal requirements for current consumption and the prohibition of any attempt to subsidize war shipping industries directly or indirectly for the purposes of expanding their capacity to produce (Article 26). The levels of industrial capacity specified in Annex D are not intended as establishing a level of industry but are for the purposes of determining availability of facilities for claims reparations.

5. General Reform Program

As stated above, the Council of Ambassadors is given limited authority to supervise the carrying out by Japan of the provisions in Annexes A and D (Limitations on Office Holding and Economic Reform). The Council of Ambassadors has no direct authority, however, in reference to the carrying out by Japan of other reform proposals such as those concerning commercial policy (Article 49 and Annex L) and restrictive trade practices (Article 50 and Annex L). The provisions for limitation upon holding of certain public offices allow for the continuation, in exceptional cases, of the purge.

The annex on economic reform is based in part on policy decisions already made by this Government, in part on action already taken in the Far Eastern Commission, and in part on policies now pending before SANACC. The section on public finance follows the principles already approved in SWNCC 362 and 362/1. The section on trade unions is an adaptation of the Far Eastern Commission policy of December 6, 1946 entitled “Principles for Japanese Trade Unions”.⁶ The provisions on agrarian reform follow closely legislation which has already been passed by the Japanese Diet. No definitive position has been taken by SANACC, however, on an agrarian reform paper.

The section of the economic reform annex on excessive concentration of economic power is based on a paper entitled Japanese Economic Reform Program (SWNCC 302/1), approved by SWNCC. This paper is, however, now in the process of being revised.

Before any section on economic reform can be included in a definitive draft of the peace treaty, this Government must decide what economic reform provisions are to be included in the treaty and whether the Council of Ambassadors should have any power over their enforcement.

6. Reparations and Restitution

The present draft of the treaty provides that Japan shall make equitable reparation for the damage caused by it to the Allied and Associated powers (Article 33). This general provision is based on the Potsdam Declaration and on the pertinent section in the FEC Basic Post-Surrender Policy on Japan of June 19, 1947. More detailed provisions concerning reparations are contained in Annex D and are based on FEC policy decisions on interim removals and on agreed U.S. policy decision on determination of the peaceful needs of Japan (SWNCC 236/43). This paper is now under consideration in the Far Eastern Commission and the Department of the Army has requested that no formal approval on such a paper be given by the United States Member in the Far Eastern Commission until after this Government has given consideration to the report of the Overseas Consultants Incorporated, which report Mr. Clarence Strike⁷ expects to present to the Department of the Army on February 15, 1948. The United States reparations proposal does not advocate reparation from current production but it is understood that the Chinese Government will press for adoption of such a policy by the Far Eastern Commission. The Chinese position is based on the fact that our insistence on a prior claim on Japanese assets for payment of the costs of occupation, a principle already approved by the FEC, would result in less reparations to the other Allied [powers?]. The Chinese will formally recommend, therefore, that this discrepancy be met by reparations from current production.

The draft treaty further provides that the supervision of the implementation of the reparation and restitution articles of the treaty shall be by the Council of Ambassadors (Article 33 and Annex F, paragraph 11).

7. Technical Problems Connected with the Liquidation of the War

The remainder of the draft of the treaty and of the Annexes, with the exception of the general political clauses (Articles 13, 14 and 15), is devoted to the settlement of technical questions connected with the liquidation of the war with Japan. Such questions as adherence by Japan to international conventions and treaties, war criminals, claims, United Nations property rights and interests, special economic clauses concerning contracts, decisions of prize courts, industrial and artistic property rights and settlement of disputes are treated in general terms in the body of the treaty and are elaborated in Annexes B, C, G, H, I, J, K and N. In general, these provisions and annexes follow the pattern already established in the Italian Treaty and do not raise any basic issues.

It should be pointed out, however, that there is a provision for revision of the treaty (Article 58). Such a provision is not contained in the Italian or satellite treaties.

8. Summary of Unsettled Issues in Draft Treaty

From the foregoing, it is clear that if a complete draft treaty of peace for Japan is to be prepared, the United States Government must reach a definitive decision on the following points: (a) disposition of the southern Kurile Islands; (b) disposition of the Ryukyu Islands; (c) extent of authority of Council of Ambassadors over economic reform provisions; (d) economic reform program, particularly in reference to the purge, agrarian reform, and excessive concentration of economic power; (e) determination of the peaceful needs of Japan as a basis for availability of reparations; (f) reparations from current production.

1. Submitted on January 30 by Hugh Borton, Special Assistant to the Director of the Office of Far Eastern Affairs (Butterworth), to John P. Davies, Jr., of the Policy Planning Staff.
2. Not printed.
3. November 1, 1945; sent to SCAP on November 3. See Political Reorientation, pp. 428, 429.
4. For text released on June 21, 1946, see Department of State Bulletin, June 30, 1946, p. 1113.
5. Department of State, Activities of the Far Eastern Commission, Report by the Secretary General, February 26, 1946–July 10, 1947 (U.S. Government Printing Office, Washington; 1947) (publication 2888, Far Eastern Series 24), p. 49.
6. ibid., p. 91.
7. Clifford S. Strike, President of F. H. McGraw & Co. and of OCI, New York.