Foreign Relations of the United States, 1952–1954, China and Japan, Volume XIV, Part 2

Eisenhower Library, Eisenhower papers, Whitman file

No. 835
Memorandum of Discussion at the 228th Meeting of the National Security Council, Washington, December 9, 1954¹

top secret
eyes only

Washington, December 9, 1954

[Extracts]

Present at the 228th Council meeting were the President of the United States, presiding; the Vice President of the United States; the Secretary of State; the Secretary of Defense; the Director, Foreign Operations Administration; the Director, Office of Defense Mobilization; the Secretary of the Treasury; the Attorney General (for Item 1); the Director, Bureau of the Budget; the Chairman, U.S. Civil Service Commission (for Item 1); the Chairman, U.S. Information Agency (for Item 2); the Deputy Secretary of Defense; the Chairman, Joint Chiefs of Staff; the Director of Central Intelligence; the Assistant to the President; Robert Cutler, Special Assistant to the President; the NSC Representative on Internal Security (for Item 1); the White House Staff Secretary; and the Acting Executive Secretary, NSC.

There follows a summary of the discussion at the meeting and the main points taken.

. . . . . . .

3. Significant World Developments Affecting U.S. Security

The Director of Central Intelligence² first discussed the political situation in Japan occasioned by the fall of Premier Yoshida and his replacement by Hatoyama. Hatoyama had solicited Socialist support and had secured it by a commitment to hold general elections in Japan in March 1955. This, said Mr. Dulles, was a matter of anxiety for the United States because in such elections a sufficient number of Socialist members might be returned to the Diet to make it difficult or impossible for the Hatoyama government to secure the two-thirds majority necessary to amend the constitution in order to permit the rearmament of Japan. While pro-American, Hatoyama was known to favor increased trade between Japan and Communist China, on the one hand, and between Japan and the Soviet Union on the other.

The President inquired of Mr. Dulles whether he had in his agency personnel who were competent to give him an answer to this question: What would be the net effect on China of encouraging Japan to export a variety of consumer goods for use in North China and Manchuria? The intelligence analysis which the President desired was of very great importance. Might not such trade result in an infiltration of democratic ideas into Manchuria and North China? While the President said he was ready to admit that, given the current political temper here in the United States, the U.S. itself must keep up its embargo on trade with Communist China, did this, however, also apply to Japan? Mr. Dulles replied that Premier Yoshida had himself proposed a study similar to the one suggested by the President, but that apparently nothing had really come of it.

The President again urged Mr. Dulles to undertake the study, even though there were risks in any policy of encouraging Japanese trade with Communist China. On the other hand, it would be advantageous if we could make the American people realize the vital necessity for Japan to resume its traditional trade with China. Trade, repeated the President, is after all the greatest weapon in the hands of the diplomat, and he would like to have our own State Department make use of such weapons. Mr. Dulles said that he could prepare an estimate such as the President desired on the probable results of the resumption of the trade in question.

Governor Stassen counseled the desirability of reaching agreement on United States trade policy vis-à-vis Communist China prior to March, if that was the date for the holding of general elections in Japan.

Secretary Dulles said that there was no doubt that the fall of the Yoshida government would bring the question of Japanese trade with the Communist bloc to the fore. Actually it was more a political than an economic issue in Japan. The Japanese were not really likely to get very much by way of an increase in trade with Communist China, even if the current controls were reduced or eliminated. On the other hand, they resented the fact that these controls were the result of American pressure.³

. . . . . . .

The National Security Council:⁴

a. Noted and discussed the subject in the light of an oral briefing by the Director of Central Intelligence on the implications for the U.S. of the fall of the Yoshida Government in Japan; Chinese Communist reaction to the signature of the mutual security treaty between the United States and the National Government of China; and developments in Communist China respecting the imprisonment of U.S. military personnel.

b. Noted the President’s desire that a Special National Intelligence Estimate be prepared,⁵ as a matter of urgency, analyzing the net effect on Japan and on North China and Manchuria of an increased flow of consumer goods from Japan to Communist China in return for products from Communist China required by the Japanese economy.

Note: The action in b above, as approved by the President, subsequently transmitted to the Director of Central Intelligence for appropriate implementation.

. . . . . . .

5. U.S. Objectives and Courses of Action With Respect to Japan (Progress Report, dated October 28, 1954, by the OCB on NSC 125/2 and NSC 125/6)⁶

Mr. Cutler briefed the Council on the subject report, noted that it recommended a revision of existing policy toward Japan, and promised that the Planning Board would have a new policy statement on Japan for consideration by the Council some time in January.

Secretary Dulles said that he had one point on which he wished to make an observation—namely, the percentage of Japan’s total budget which was allocated for military purposes. He did not think it fair to compare Japan and the United States percentage-wise in the matter of the size of their military establishments. Japan was a desperately poor country and it should not be pressed too hard to reestablish a large military force until its economy had grown more healthy. Let us try, therefore, to get the Japanese economy on a sounder base first.

Secretary Humphrey said that there had been no real intention to make the comparison to which Secretary Dulles had objected. He added that the Japanese had made notable progress during the last twelve to fourteen months in rehabilitating their financial health. Their economy on the whole, however, was still in a precarious state.

Mr. Allen Dulles said that it would not come as cheering news to Secretary Humphrey that the new Prime Minister, Hatoyama, was supposed to be an inflationist.

Governor Stassen said that the basic necessities for reestablishing Japanese economic health were (1) provision of sources of raw materials and markets for Japan in Southeast Asia, and (2) some increase in trade between Japan and Communist China. The President commented with a smile that this was what the warlords of the thirties had said.

Dr. Flemming said that he understood that a sharp reduction was being proposed in military end items to be sent to Japan. He questioned the wisdom of so sharp a reduction. Governor Stassen indicated that Dr. Flemming’s information was somewhat out of date. The Progress Report covered the period up through September 15, 1954. Since that date—indeed, last week—$120 million had been allocated for offshore production in Japan.

The National Security Council:⁷

a. Noted and discussed the reference Progress Report by the Operations Coordinating Board on the subject.

b. Noted that the NSC Planning Board would prepare a revised policy statement on the subject for Council consideration in January 1955.

. . . . . . .

S. Everett Gleason

1. Drafted by Gleason on Dec. 10.
2. Allen W. Dulles.
3. For the section of the memorandum omitted here, see Document 434.
4. The lettered paragraphs constitute NSC Action No. 1283. (S/S–NSC (Miscellaneous) files, lot 66 D 95 “National Security Council Record of Actions, 1954”)
5. A study entitled “Japanese Trade with Communist China” is the Appendix to National Intelligence Estimate (NIE) 100–55, “Controls on Trade with Communist China”, dated Jan. 11, 1955. (Bureau of Intelligence Research files) For an earlier version of the paper printed in the Appendix, see the memorandum by Sherman Kent to Allen W. Dulles, Document 840.
6. Documents 588 and 657.
7. The lettered paragraphs constitute NSC Action No. 1285. (S/S–NSC (Miscellaneous) files, lot 66 D 95 “National Security Council Record of Actions, 1954”)