894.6363/51
The Ambassador in Japan (Grew) to the Secretary of State
[Received October 2.]
Sir: I wish to refer to my previous despatches on the above subject and particularly to my despatch No. 507 of August 31, 193352 in which I described the effect produced on the gasoline trade in Japan by the importation of gasoline from Russia and the position of the Socony-Vacuum Corporation under the new sales agreement.
Mr. Matsukata and his principals, whose spokesman appears to be the Soviet Trade Commissioner in Tokyo, continue to be reticent about their plans and at the time of writing have not agreed to enter into any understanding with the established gasoline companies. Russian gasoline is being sold freely in the Tokyo market at 36 to 38 sen a gallon retail and Mr. Matsukata has signed several contracts with large consumers to supply them with gasoline at prices as low as 35 sen. The Japanese companies estimate that the cost of the Russian gasoline delivered in Japan after duty is paid is 30 sen. They believe that Mr. Matsukata is selling on commission with his stocks on partial consignment.
Against the advice of the two foreign companies—American and British—, the Japanese companies have lowered their prices to the level of the Russian gasoline. If they continue to sell at these prices it would seem difficult for them to avoid losing money. They may wish to bring about a deficit in their accounts and thereby force the government to intervene. They have undoubtedly been trying to negotiate with Soviet Russia for a supply of crude oil at prices lower than the price of the American crude, and they may have hopes of using this to manufacture gasoline at lower prices. However, it is believed by many authorities that the Soviet will never agree to the sale of large quantities of crude oil and the officials of the two foreign gasoline companies attribute other intentions to the Japanese companies.
[Page 740]The Japanese newspapers have been hailing Mr. Matsukata as a friend of the people and have been stressing the amount which will be saved by the consumers if he succeeds in lowering the general level of gasoline prices. Furthermore, he has signed definite contracts with certain consumers who are well organized to bring political pressure. For this reason, the Government has feared to intervene and force him to cooperate with the previously established companies. However, the argument that a Japanese industry is on the verge of being ruined may bring about government intervention. The foreign companies fear that this will be an excuse, which the Japanese have been waiting for, to set a gasoline price which will ensure a profit to the Japanese companies—Mitsubishi, Nippon, and Ogura—but cause the two foreign companies to lose money. If the Government does not feel that it can force prices up, it may take other steps to ease the situation of the Japanese companies. In either case the foreign companies would be forced out.
Although the Government has so far taken no action, yet there are signs that some definite decision regarding the future oil policy for the country is being arrived at. On September 11 the Japanese press published an announcement by the Ministry of Commerce and Industry that officials of the Government departments concerned had agreed on three national policies to govern the oil industry. The first concerns intensified control of the existing oil distribution and refining organizations in Japan. The second policy concerns developing and perfecting substitute fuels. The third has to do with the acquisition and exploitation of oil resources, including a Government subsidy for increased experimental drilling in North Saghalien.
On September 13, Mr. Kurusu, Director of the Commercial Bureau of the Japanese Foreign Office, informed a member of my staff that no definite policy, or policies, had been decided upon as this could be done only by the Cabinet. He stated, however, that a greater degree of control of oil companies would very probably be instituted in the near future. He intimated that this was due to the recent actions of Mr. Matsukata. He said that some sort of licensing system would likely be formed, the exact nature of which he did not know. He said that he understood the position of the foreign companies in not knowing whether to invest more capital in Japan; that, while he would not venture to advise them how to run their businesses, he would say that if he were in their place he would hesitate to increase their existing investments here. This would seem to be a very strong hint that the Government would not look with favor upon the building of refineries by the Rising Sun and Socony-Vacuum companies. Such a statement of policy has been very much sought after by these [Page 741] companies for some time and it has been informally communicated to the local manager of the Socony-Vacuum Corporation by a member of my staff.
Respectfully yours,
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