794.5/12–3154: Telegram
No. 847
The Ambassador in Japan (Allison) to the Department of State
1555. Subject: Defense Budget, Japan fiscal year 1955. Finance Minister Ichimada invited me and senior staff to lunch yesterday for primary purpose discussing Japanese contribution to local cost [Page 1819] of US security forces Japan in light of country’s economic situation and new government’s financial policy.
After preliminary reaffirmation of his own desire maintain closest most cooperative relations with America Ichimada said that maintenance of austerity program, including 1 trillion yen budget limit, was firm determination of new government. In JFY 1955 policy should result in 5 to 6 percent reduction in price level and small favorable balance-of-payments position. Larger imports would be more than compensated by larger exports and in 56 more substantial favorable position.
As Finance Minister he was faced with severe difficulties in maintaining budget ceiling. Already level of totally unemployed had reached 250,000 with 450,000 estimated next year while partial unemployed now totaled 5 million, many of them on work relief for 40 yen daily dole. Housing situation continued critical and resultant overcrowding was contributory factor to 1,800,000 tubercular cases only 10 percent of which could be isolated in hospitals. Among other social problems mentioned was disaster relief which preoccupied prefectural authorities and while on surface recovery of 1953 flood areas was impressive, nevertheless effects of this disaster would take 10 years to wipe out. Foregoing, he said, was all part of background which government had to consider before deciding defense budget. Popular support obviously essential and if government appeared to bow to US pressure or spent too much money on defense rather than on people’s welfare, adverse feelings of people would be directed against United States and US policies.
Because of foregoing, defense budget would have to be limited although he, Ichimada, wished to build forces and thus enable US to withdraw. In particular he wished to decrease Japanese contribution to local costs of US security forces as this was area in which sizable economies could be realized.
When administrative agreement was negotiated in 1952, first draft presented to Japanese included in Article XXIII, paragraph 2 provision that “certain basic expenses of the US Armed Forces stationed in Japan …1 shall be borne by the US and that the local costs incident to the maintenance of such forces in Japan shall in principle be borne on the basis of parly [parity? ] by the US and Japan.” Ichimada went on to say that Japan had been unable to agree to provision in this form because of uncertainty in amount of its 50 percent share and so agreed instead to $55 million now specified in Article 25. However, this figure had been derived on basis of old termination of war account headings with estimated security forces requirement for JFY 1952. Resultant total of $361.7 million [Page 1820] resulted in $180 million when split 50–50 from which $25 million was deducted for value of rentals, leaving net of $155. Ichimada said that in view of his history he felt Japan could reasonably expect its contribution to be reduced to extent that expenditures under old TOW headings had dropped off and that Japan had right to question whether its contribution was being used for other purposes, particularly by ground forces. It would be equitable, he thought, for departure of one division from Japan as announced in press to result in commensurate reduction in Japanese contribution to US security forces costs, bearing in mind negotiating history administrative agreement. He said that estimates recently received by Ministry of Finance apparently contained items not contemplated in the agreement and asked that US study matter and relate its expected receipt of Japanese funds to costs calculated on foregoing basis.
Ichimada developed at some length thesis that JFY 1955 was most critical for national economy and that if his policies were enabled to succeed, in part by reasonable attitude of US on defense matters, year 1956 would see real improvement and basis for gradual expansion Japanese defense capabilities. In parallel with foregoing, he developed thought that forthcoming election was “last chance” for Japanese conservatives and if they did not succeed with anticipated March mandate, they would not again be in position solve nation’s problems, that is, by implication, on basis consistent with US desires. (Separate telegram will report further on this thesis which has come to me from several sources lately.)2
While Ichimada said that he did not expect any definite answers from me today and wished instead to present foregoing for our serious consideration, I told him that there were several points which I wished to make at outset before we got into serious negotiations over defense program. I said I realized these could only take definitive shape after election but in meantime it was important to lay groundwork and discuss various aspects on exploratory basis. Points I wished to make were as follows:
Just as Finance Minister had stressed Japanese Government problems of domestic support, so in US did we face serious problems in obtaining support for things which Japanese wanted even though in best interests of both countries. Administrative agreement clearly obligated Japan to annual contribution of $155 million and last year, as contribution to assist Japanese in increasing their defense program, we had agreed forego $7 million. However, Japanese had unilaterally cut defense appropriation by 4.5 billion [Page 1821] yen which meant Japanese commitment to US was not being met. Thus Congress could point to disappointing Japanese performance after last year’s negotiations.
Secondly, Japanese Government should realize that US was extending MDA assistance to many friendly governments all over world and government and Congress naturally scrutinized relative performance of our various partners. It would be noted for instance that countries with approximately same level per capita income such as Turkey, were expending much greater percentage this income on their defenses and natural tendency our legislators was to appropriate money for countries which showed desire do utmost contribute to their own defense and relieve us of as much of burden as possible.
As third point, our people back home would be willing to consider reduction of contribution to US forces here only if Japanese were expanding own forces. Administrative agreement contemplated that contribution to US forces would be reduced as Japanese built up and we were prepared consider a formula whereby we would match increase in Japanese defense budget over last year by equivalent reduction in contribution to US forces. Thus in effect US would share 50 percent of cost of increased forces.
Finally, as last point, I said that our consideration of Japanese requests in defense field had been handicapped by unwillingness Japanese to plan ahead more than one year or to discuss with US, without definite commitment on either side, tentative longer-term goals. I said that if we knew Japanese long range plans, figures for any one year would be much more meaningful. Since efficient defense of Japan was of interest to both countries, although of primary interest to Japan, it seemed to me we should jointly develop plans which would be mutually agreeable and yet reach common goal with maximum possible expedition. I knew that neither of us could commit ourselves definitely to future years but we could both accomplish much by establishment of common goals.
In response to last point Ichimada said Yoshida government had never been willing to consider longer term planning because its strict interpretation of Article 9 of Constitution prevented possesion of “war potential”. However, new government had different interpretation, was committed to rearmament, and was therefore free to discuss longer range plans. He suggested that without attribution to him, we stress to Defense Minister Omura, importance of longer-term goals and joint planning.
Both Ichimada and Suzuki who was present, appeared to grasp formula of setting base figure and then sharing increase in Japanese defense program 50 percent by increasing Japanese budget and 50 percent by remission of contribution to US forces. Neither [Page 1822] he nor Suzuki who took careful notes, put forward any base figure but latter said that Budget Bureau analysis of Defense Agency’s draft yen 95.2 billion budget indicated estimated level of performance could be reached with 89 billion.
I did not wish on this first occasion, particularly in talking with Finance rather than Defense and Foreign Ministers, to mention any base figure or be drawn into defense negotiations. However, foregoing was obviously initial Japanese position which appears to be that for reasons set forth herein in addition to those in part 1 Embassy-FEC message of December 15 (Embassy telegram 1403),3 there can be no material increase in Japanese forces next year and that even minimal increases contemplated in draft Defense Agency budget can be accomplished only by reduction in US contribution. Conversation confirms my belief that Department telegram 12714 limiting General Hull and myself to base figure of 85 billion yen is unrealistic. I am of course making this telegram available to General Hull immediately but pending his reaction I suggest Department and Defense review Embassy telegram 1403 and also those portions enclosures to Embassy despatch 516, October 25 which forecast many of reasons why Japanese defense forces expansion JFY 1955 likely be minimal. In reporting our talk press said Ichimada requested yen 18 billion reduction in contribution to USFJ but he did not actually mention a figure to me.
- Ellipsis in the source text.↩
- No telegram answering this description has been found in Department of State files.↩
- Document 839.↩
- See footnote 1, Document 843.↩