894.602/9–3048
Memorandum by Mr. Paul H. Nitze, Deputy to the Assistant Secretary of State for Economic Affairs (Thorp), to the Assistant Secretary of State for Occupied Areas (Saltzman)
Action to formally withdraw FEC 230 from the FEC, as proposed by Mr. Butterworth in his memo to you,1 would present to the U.S. Government four problems of substance:
- 1.
- Preventing other FEC countries from pushing through the FEC a policy on this subject which would be unacceptable to the U.S., without [Page 1025] being prepared to set forth a positive U.S. policy for adoption by the FEC.
- 2.
- Preventing the Japanese, on whom we must rely to an increasing extent, as time goes on, to carry out those aspects of the deconcentration program which are essential to U.S. policy, from receiving the impression that the U.S. is no longer interested in deconcentration and that failure by them to implement legislation now on the books will be not only acceptable to but perhaps even desired by the U.S.
- 3.
- Ensuring that a relatively small but important part of the deconcentration program having to do with such companies as Mitsubishi Heavy Industries and with the four major banks who control 75 percent of Japanese banking resources gets accomplished, a doubtful project unless the present approach of the Deconcentration Review Board is somewhat strengthened by policy advice from Washington, particularly emphasizing the importance of the political influence of such business organizations as opposed to their economic effects on prices and competition.
- 4.
- Providing policy guidance on the difficult but major issue of the way in which the very large volume of securities now in the hands of the Japanese Government is placed on the market.
From a long-term standpoint point 2 seems to me to be of the greatest importance. Point 1 seems to be of much less importance and I am willing to disregard it.
In order to protect essential U.S. policy interests I can agree to the formal withdrawal of FEC 230, subject to agreement with the Department of the Army on the following concurrent measures:
- 1.
- Issuance of a public statement by Secretary Royall, or by Secretary Royall and Acting Secretary Lovett jointly, lauding SCAP and the Japanese Government for the progress made in the deconcentration of Japanese industry, reaffirming the U.S. objective of preventing the recurrence of the highly concentrated structure of Japanese finance and industry, anticipating the early attainment of a Japanese economy in which ownership and control of industry and finance would be widely dispersed among the Japanese people, and asserting that because the policy issues have been so largely resolved by the timely work of SCAP and Japanese it has been possible to withdraw the policy problem from consideration before the FEC.
- 2.
- The dispatch of a message to SCAP from State and Army urging that the final form of the proposed revision of standards recommended by the Deconcentration Review Board be such as would permit designation of a company as an “excessive concentration” for reasons analogous to those which were responsible for the U.S. Public Utility Holding Company Act, e.g., the likelihood that companies dominating particular areas would influence credit, governmental policy, technological progress or labor policy in that area to the detriment not merely of their competitors but also of the optimum development of Japanese political and economic life; and urging, further, that the problem of deconcentration in the field of banking and finance be considered on a priority basis with these considerations in mind.
- 3.
- Initiation of a re-examination by State, Army and SCAP of the problem of disposition of securities, recognizing that it has policy implications requiring Washington advice to SCAP.
For your information in considering this proposal, I am attaching a statement of the status of the deconcentration program in Japan.2