894.50/12–1448
The Acting Secretary of the Army (Draper) to the Acting Secretary of State
Dear Mr. Secretary: The program of SCAP for a self-supporting Japanese economy, of which a proposed appropriation this year of $165 million is an essential component, is based according to General Mac Arthur on the following seven assumptions:
- (1)
- There will be an integrated and expanding program of American aid for Asia,
- (2)
- Political and economic conditions in the Far East will permit the necessary expansion of trade,
- (3)
- Japan will be increasingly free to conduct its own foreign commerce and engage in merchant shipping,
- (4)
- The Japanese government and people will take the necessary steps in internal policy to accelerate production and maximize exports,
- (5)
- Japan’s internal economy will be effectively stabilized,
- (6)
- There will be a speedy and acceptable solution of the reparations problem,
- (7)
- There will be no international trade discrimination against Japan or opposition to her freedom to engage in world trade.
The directive on economic stabilization which has been concurred in by the National Security Council and The President addresses itself particularly to the 4th and 5th assumptions. As to the 6th assumption, we have reasonable hope that the reparations problem will be speedily resolved. As to the 7th assumption, energetic action in the coming months, coupled with the establishment of a single exchange rate, should obtain most favored nation treatment for Japan. Concerning the 3rd assumption, I believe that SCAP should be able to achieve a firm and satisfactory solution on the matter of Japanese merchant shipping.
The degree of validity of General MacArthur’s first two assumptions appears to be a very basic determinant in assessing his conclusion that his program for a self-supporting Japanese economy will result by 1953 in achieving a balance between imports and exports, thereby lifting from the shoulders of the U.S. taxpayer the burden of support of the Japanese economy. These assumptions would normally be presented in connection with the defense of the proposed appropriation to the Congressional committees concerned. Whether they are presented initially or not, it is certain that their substance will be raised by the [Page 1063] committees concerned, and that it will be necessary to express a definitive view concerning the subject matter of these two points, and concerning their impact on SCAP’s current plan or any other plan for achieving a self-supporting Japan.
Your views on the problem raised in the preceding paragraph are requested at your earliest convenience for the purpose of providing guidance for use in the defense before Congress of the economic rehabilitation program for Japan and also for use in providing General Mac Arthur with necessary advice for further planning. It would be particularly appreciated if they might be forwarded within a week, since the concepts involved are of such fundamental importance that the completion of materials for distribution to Congressional committees in early January must necessarily await such guidance.
Sincerely yours,