384. Telegram From the Embassy in Japan to the Department of State0
1567. Joint ECONCOM. On Nov 19 senior MITI officials took initiative with EmbOffs to request that questions relating to liberalization of US investment in Japan not be raised by Cabinet members in joint ECONCOM to the extent of involving the FCN Treaty. MITI officials said that approach to Emb being made quite independently of FonOff and Ministry of Finance. Confidential and sensitive nature of subject was emphasized. MITI officials stated that basic policy of GOJ with respect to foreign investment is to offer treatment as liberal as possible. To raise the question of the treaty in the Joint Committee could very well, it was asserted, lead to political consequences domestically and to complications in US-Japanese relations. Reference was also made to new legislation governing Japan’s trade, invisible, and capital transactions now being drafted by MITI. This legislation accepts, according to MITI officials, the principle that all external economic transactions are to be “free.” The proposed law would introduce the so-called “automatic [Page 804] authorization system” in which an application for investment will be considered approved if a certain period has passed without any decision having been taken. Restrictions would be limited to exceptional cases specified by law.
EmbOffs responded that MITI’s request would be discussed within the Embassy and with Dept, but no hope was held out that MITI’s suggestion would be accepted.
Emb feels that MITI’s approach, far from suggesting that we should refrain from any initiative, underscores the importance of having the subject (i.e., the problems facing American investors in Japan and their difficulties in obtaining national treatment under the FCN Treaty) raised by U.S. Cabinet officers in the Joint Committee. The Emb has reliable information to the effect that the FonOff and the Ministry of Finance are opposed to the draft legislation proposed by MITI and instead wish to see a regime which would be more beneficial and attractive to foreign investors (the proposed legislation will not, insofar as the Emb has been able to ascertain, be a liberalization helpful to U.S. business). Moreover the fact that MITI officials raised this subject with the Emb without the knowledge of other govt ministries (MITI officials insisted on a discreet meeting with EmbOffs in a private club) indicates that MITI is in a very weak position on this subject within the GOJ. The difficulties which American business has encountered with respect to investment in Japan may to a great extent be laid at the door of the bureaucrats in MITI. If we wish to achieve any progress in this field, either on behalf of American business or in the interests of a further opening up and a liberalizing of Japanese economy, action on our part at the highest levels is required. In economic terms further liberalization of foreign investment in Japan would benefit the Japanese economy by serving to break down emerging old and traditional oligopolistic forms and draw the Japanese business community closer to its Western counterparts. Emb believes that suggestions by the Japanese (essentially MITI officials on this and previous occasions) that pressure on this subject from the U.S. side would force Japan into the position of being obliged to request a revision of the FCN Treaty should be taken with a grain of salt. Such action on the part of Japan would have such far-reaching consequences for the U.S.-Japanese partnership that it is doubtful the step would be taken only on the issue of the terms of U.S. investment.
Emb accordingly urges that the entire subject in terms of the FCN Treaty be raised by the U.S. side (in line with existing briefing papers) in Joint ECONCOM.1 Significantly, senior FonOff official without prompting took same line with Emb officer very recently.
- Source: Department of State, Central Files, E 1 JAPAN-US. Confidential. Repeated to CINCPAC for POLAD.↩
- See Document 385.↩