740.00119 FEAC/12–948
Statement by the United States Representative on the Far Eastern Commission (McCoy) on December 91
Excessive Concentration of Economic Power in Japan
united states statement on fec–230
Some months ago, my Government suspended its participation in discussions in the Far Eastern Commission of a United States policy proposal which was then under active consideration in the Commission. This proposal, designated as FEC–230, presented an extremely detailed plan for the implementation of a general policy which already had been stated in existing directives to the Supreme Commander. That policy, which called for the dissolution of certain Japanese combines and a widening in the distribution of the income and ownership of Japanese industry was then and continues to be, in the view of my Government, a fundamental objective of the Occupation.
The action of the United States in suspending consideration of its proposal, however, has led to certain questions among the members of this Commission and among the Japanese people. The purpose of this statement is to clarify the position of the United States with respect to FEC–230.
Since the very first weeks of the Occupation, the Supreme Commander has devoted a considerable part of the time and resources of his staff to the problem of reorganizing the financial and industrial institutions of Japan. This program which has been based upon the Post-Surrender Directive issued December 6, 1945 and on the Far Eastern Commission’s own Basic Post-Surrender Policy for Japan, was designed to make possible the early development of democratic and peacefully-inclined economic institutions in Japan. To bring about that result, plans were immediately developed and put into effect to dissolve the control of Japanese finance and industry which rested in the hands of a few powerful Japanese families.
As a part of this program, the Supreme Commander directed the Japanese Government to adopt various laws and to create certain governmental bodies charged with the responsibility of undertaking a major reorganization of the ownership and control of Japanese [Page 1057] industry. In the brief span of three years substantial progress has been made by these bodies. The assets of the 56 persons who comprised the heads of the 10 major zaibatsu families and the assets of the 83 holding companies controlled by these persons have been acquired by the Government and are in process of being sold to the Japanese public. A much larger number of companies have been compelled to divest themselves of holdings in and control over smaller enterprises. Such control was exercised through intercorporate stockholdings, interlocking directorates and similar devices. Contractual arrangements to which these Japanese enterprises were parties which had the effect of placing the control of production or trade in the hands of such enterprises have been declared void. The innumerable Control Associations through which Japanese enterprises exercised their collective authority are being liquidated. Action is being taken and is well advanced toward reorganization of former savings banks, trust companies and governmental banking institutions, making possible the emergence of a significant number of new commercial banks, to compete with and supplement the few large banking combines which formerly dominated Japanese credit sources. Finally, some scores of Japanese companies whose present state may constitute a threat to competitive enterprise are being scrutinized, one by one. Where necessary, these combines will be subjected to such reorganization as may be required to remove the existing threat.
To insure that the dispersion of economic control which is developing from these measures will not likely be reversed in the years to come, substantial revisions have been effected in the basic economic legislation of Japan. To begin with, an Antitrust Law has been adopted and a Fair Trade Commission set up to enforce the Law. In general, the Law seeks to restrain the development of new combines, excessively large or powerful, by outlawing agreements which restrain production or trade, by placing limitations upon intercorporate stockholdings, interlocking directorates, and similar devices for the concentration of corporate control, and by setting up procedures and penalties for the enforcement of these provisions. Other legislation now requires Japanese corporations to make considerably more information available to their stockholders and the public than heretofore has been the case and generally requires the management of corporations to adhere to much higher standards of public responsibility in the managements of their enterprise.
Moreover, many existing laws which tended to centralize the control of Japanese industry within a small group have been abrogated outright. Others have been modified drastically. The Fair Trade Commission and other Government agencies are analyzing still other Japanese [Page 1058] laws to eliminate provisions which confer special privilege or tend to restrain or eliminate competition. Various laws relating to the conduct of Japanese banking have been placed under particularly careful scrutiny. One of the principal objectives of the revision of Japanese banking laws is to create a climate in which the undesirable prewar concentration of Japanese credit in a few hands could not recur.
In all this, the Japanese Government has demonstrated a commendable ability to comprehend Allied objectives and has cooperatively fulfilled its obligations. The Japanese Fair Trade Commission has prosecuted a significant series of cases against Japanese businessmen who were violating one provision or another of the statutes which seek to prevent new concentrations of Japanese industry. The Japanese Holding Company Liquidation Commission has made a careful study of the structure of the larger Japanese combines and, in close cooperation with the Supreme Commander, is currently developing plans for such reorganization of these combines as may be needed.
As the occupation and the economic situation have developed, there has been a corresponding evolution in the deconcentration program. For example, it has proved possible and desirable to dissolve most of the wartime control associations. As new sources of credit have been created through the conversion of other financial institutions to commercial banks, it has been possible to reconsider the need for the actual dissolution, once believed necessary, of Japan’s biggest banks which under earlier circumstances had dominated the credit structures of Japan. With the daily growth of indication that the Japanese propose to enforce their fair trade laws vigorously and effectively, it has been possible to reconsider the standards to be used in the dissolution of some of the combines still existing. These changes in emphasis have been responsive to changing circumstances and have represented relatively minor alterations in a program which basically remains unchanged. That program, adhering to the broad purposes of the directive of the Far Eastern Commission, seeks to achieve in Japan an economic climate conducive to the development of a democratic society. It seeks to prevent the resurgence of economic power in the hands of a few who recognize no responsibility to the Japanese people or the world at large.
When the United States suspended its participation in the discussion of FEC–230 in the Far Eastern Commission, that decision was based upon the growing realization that the guidance for the Supreme Commander and the Japanese envisaged therein had largely been overtaken by events. The major points of procedure set out in that document already had been implemented in Japan. Other details believed necessary to the accomplishing of the major objectives either had been [Page 1059] faithfully adopted or had become unnecessary or inappropriate. Useful as the paper might have been at an earlier stage of the Occupation, that usefulness no longer appeared to exist.
That the paper has become outmoded in so brief a period is a singular tribute to SCAP and the Japanese Government. Procedures which it was thought would take years to carry out in many cases have been accomplished in a matter of months. Major technical obstacles have been overcome and the demonstrated determination of the Supreme Commander to carry the program through has elicited a gratifying degree of cooperation from the Japanese themselves. Accordingly, upon a careful re-survey of the deconcentration program now well advanced in Japan, the United States now believes that, as a practical matter, there is no need to lay down policies for the guidance of the Supreme Commander with respect to any remaining significant aspect of the program. Indeed, to do so in the outmoded terms in which FEC–230 is cast might well do more harm to the program than good. Hence, the United States has withdrawn its support of FEC–230 as a proposal upon which the Far Eastern Commission could act with benefit to the Occupation.
This does not mean that the deconcentration program has been completed. Considerable amounts of securities still remain in the hands of the Government and must be disposed of. Ingenuity and vigor must be brought to this task. Existing banking legislation will undoubtedly be elaborated and refined in consonance with the objectives of this program. Those remaining Japanese combines whose existence may constitute a threat to competitive enterprise will, where necessary, be reorganized as required to remove such threat. But these programs no longer call for the development of policy. They call largely for a practical application of judgment, energy and enterprise in implementing a program whose philosophy and objectives are clearly understood by the Supreme Commander and the Japanese Government, as they have already convincingly demonstrated.
- Submitted at the 131st meeting of the FEC and circulated as FEC–230/3 for consideration; the statement was then released to the press.↩