Office of the Historian

740.00119 Control (Japan)/12–1448

Memorandum by the Chief of the Division of Northeast Asian Affairs (Bishop) to the Director of the Office of Far Eastern Affairs (Butterworth)

confidential
[Washington,] December 14, 1948.

The attached draft Part I, to be inserted at the beginning of the banking reform cable prepared by a State–Treasury–Federal Reserve working group, was approved yesterday afternoon at a meeting in my office of representatives of the concerned Divisions of the Department. Mr. Reid in Mr. Draper’s office has been advised that the Department of State cannot concur in the proposed wire unless it is included. I feel that its inclusion is essential, primarily in view of our responsibility under paragraph 12, “Internal Political and Economic Changes” to ensure that SCAP does not “press upon the Japanese Government any further reform legislation”. One of the basic principles behind the policies of NSC 13/2 may be lost if we now under the guise of measures for recovery continue the process of spoon-feeding the Japanese. I expect to prepare shortly a memorandum for you on this general question.

[Annex]

Proposed Part I of Banking Reform Gable to SCAP

confidential

Part I—Pursuant paras 8, 12, and 15 of NSC 13/2 proposed course of action Japanese banking reform has been re-examined since despatch WAR 91507 and following conclusions reached.

In accordance pertinent provisions these paras, detailed instructions regarding banking reform may be issued by you to responsible Japanese authorities only insofar as such instructions, if the Japanese have failed to act of their own volition, are determined to be essential in interest economic recovery and effective use US rehabilitation aid.

Following comments had been prepared by interested Govt Departments here on technical aspects program discussed urads. If, as indicated urad C 65458, Japanese are anxious to receive advice and assistance, we believe following technical advice would be helpful; but in that event it should be made clear to Japanese Govt that these comments represent informal views technicians US Govt agencies for use solely in that light.