740.00119 PW/9–1548
Memorandum by the Assistant Secretary of State for Occupied Areas (Saltzman) to the Secretary of State
Subject: Japanese Reparations
Discussion:
In the meeting yesterday Secretary Royall stated that the Overseas Consultants, Inc. had considered and agreed to the level of industry conclusions of the Johnston report. According to Mr. Royall’s representatives, the statement of the OCI, to which he refers, is the letter1 attached at Tab B. This letter was sent you by Mr. Royall with his letter of 26 May2 on Japanese reparations in which he requested the meeting which you held with him early in June.
As you will see from the second and last paragraphs of the letter, the OCI feels that, with certain exceptions, the “philosophy and conclusions” of the Johnston report and of the OCI report are in agreement and suggests the adoption of both of them. Although it might be true that their “philosophy” is similar, paragraph 2 of the OCI [Page 1015] letter points out three specific differences in the recommendations made by the Johnston and OCI reports as to facilities that should be made available for reparations. Two of these—shipbuilding and primary war facilities—are among the three exceptions which the Department of State wishes to have made in accepting the Johnston levels:
- 1.
- Shipbuilding: The OCI letter refers to the previous OCI recommendation that only 400,000 tons of annual capacity be retained in Japan because steel could not be produced in Japan to permit the utilization of more capacity and because in view of the world shortage of steel the probability of the Japanese being able to import steel for shipbuilding in the next several years was remote. The OCI letter states “We know of no reason to change this opinion”. It adds that if steel can be provided to utilize the capacity and if additional shipping can be produced, then it would be important to the economic recovery of Japan. The OCI letter does not indicate, however, that in its opinion these assumptions are well founded. We are in agreement with the OCI’s earlier conclusion that steel will not be available to Japan for this purpose and that, therefore, not more than 400,000 tons of annual capacity can be effectively used in Japan. The surplus should be made available for removal to countries which need and can use it.
- 2.
- Primary War Facilities: The OCI letter states that OCI now agrees with the Johnston report that such primary war facilities as can be effectively used in the peacetime economy of Japan should be retained. The letter also states that Japan will need more rather than less industrial equipment than she now has to achieve self-support. The letter does not say, however, that the primary war facilities which OCI had recommended for removal can be effectively used in the peacetime economy of Japan.