Foreign Relations of the United States, 1964–1968, Volume VIII, International Monetary and Trade Policy

42. Telegram From the Embassy in Japan to the Department of State¹

Tokyo, February 10, 1965, 9 p.m.

2508. Pass Treasury. Subject: IET talks.

1. Understanding reached with GOJ, subject Washington approval, as follows:

(A) U.S. will give exemption on $100 million per annum of GOJ and GOJ guaranteed securities.

(B) IET will be paid on all other securities and loans.

(C) On private issues, GOJ will permit payment of IET. However, will limit issues within overall limit of Japanese borrowing existing in December 1964.

(D) GOJ will control term loans within December 1964 limit.

(E) On short-term and other capital flows, where GOJ has no direct controls, U.S. and Japan will consult closely, especially if any untoward flows occur, and GOJ will cooperate through indirect controls.

(F) Ad hoc task force will provide basis for reconciling divergencies in B/P data and for continuing consultation looking to cooperation in U.S.-Japan financial relationship.

2. Discussions conducted in friendly, relaxed atmosphere. GOJ officials obviously greatly relieved, pleased at U.S. willingness consider Japanese problem in sympathetic light. Proposed MOF publicity release (separate Embtel)² stresses U.S.-Japan friendship, close U.S.G.-GOJ consultative relationship, GOJ understanding of importance U.S. achieving B/P equilibrium.

3. Ambassador wishes express appreciation to Treasury for despatch Ass’t Secretary Trued to Tokyo at this critical point, with helpful U.S. position.³ Believe outcome these talks will be positive contribution to U.S.-Japan partnership and to stability Sato government. Instead of being severe liability it seemed at first, this necessarily unpopular action because of wise handling, has strengthened Japanese confidence in partnership and value of U.S.-Japan consultative arrangements.

Reischauer

1. Source: Department of State, Central Files, FN 16 US. Confidential.
2. Neither this Ministry of Finance press release nor the telegram has been found.
3. Acting Assistant Secretary of the Treasury Merlyn Trued and Deputy Assistant Secretary of State for Economic Affairs Philip Trezise traveled to Tokyo February 6–7 to meet with economic leaders in Japan to discuss the Interest Equalization Tax. No documentation on their discussions has been found.