Memorandum by the Commercial Attaché in Japan (Williams) of a Conversation With the Chief of the Commercial Bureau, Japanese Foreign Office (Kurusu)32

On February 15th at 4:30 p.m. at Mr. Kurusu’s invitation, I called on him at the Foreign Office. He stated that he wished to discuss with me the matter of trade reconciliation he had mentioned to Mr. Neville33 last week. The situation worrying the Japanese at the moment centers in South America, particularly in Colombia, Peru, and Cuba, all of which have recently abrogated their commercial treaties with Japan. The balance of visible trade is overwhelmingly in favor of Japan and these countries threatened to further seriously restrict the imports of Japanese goods unless Japan increases her purchases and thereby decreases the unfavorable trade balance. The difficulty arises from the fact that these countries have little to offer on an exchange basis. The Japanese, according to Mr. Kurusu, are perfectly willing to buy goods they can consume, but have no appreciable market for cigars from Cuba or bananas from Colombia. They have made special efforts to increase their imports from these and other South American countries, particularly cotton from Brazil and wool from the Argentine, but there is no possibility of a balance of trade even being approached.

Japan’s unfavorable balance of visible trade with the United States in 1934 was Yen 370,000,000. Kurusu believes and hopes that some way can be found to utilize this balance in counteracting the unfavorable balances prevailing with the South American countries. He quoted Secretary of State Hull as stating in one of his public utterances that he was definitely in favor of trilateral trade agreements. Kurusu feels that the situation as explained above offers an excellent opportunity to put Mr. Hull’s policy into actual operation. He has sent two cables to Ambassador Saito requesting him to see Mr. Hull and find out just what he had in mind when he expounded his ideas about trilateral and bilateral trade agreements, and furthermore sound out the State Department officials as to the feasibility of his proposal. Kurusu admits that he has no definite or concrete plans to suggest as [Page 941] the details of such a scheme would have to be worked out by American and Japanese businessmen and bankers, but he sincerely believes that the inauguration of such a three-cornered trade agreement would not only prove mutually beneficial, but would serve as an excellent example to the world of one means of unravelling the present trade and economic tangle.

I could not at the moment make any concrete suggestion other than that the matter might come within the scope of the Second Import and Export Bank. To date Mr. Kurusu has had no reply from Ambassador Saito. Mr. Kashiwagi, Manager of the Tokyo Branch of the Yokohama Specie Bank, who is now in Europe, visited the United States a short time ago and he was requested by Mr. Kurusu to sound out some of the American bankers on Kurusu’s idea. So far he has made no report to Kurusu.

Our conversation drifted to the visit of the American Economic Mission to Japan and China.34 Kurusu’s feelings, unexpressed but visible, are the same as the Japanese members of the Japan-America Trade Council, namely, that Japan will extend a most cordial welcome to the Mission, show them everything, (which usually means little), and entertain them lavishly. I have had the idea right along that underneath the surface there is a feeling of resentment against the manner in which the proposal first originated. Kurusu told me that “such a Mission was first suggested in the American Club in Shanghai and that Americans in China and Chinese want the Mission to come out as they believe it will be a forerunner of large American investments and probably loans in China”. I thoroughly disagreed with that statement and pointed out to him that I did not think there was the slightest chance of any American cotton, wheat, machinery or other materials being sold to national or provincial governments of China on credit or loans extended by American businessmen. Furthermore I told him that we naturally want all the business we can possibly get in China, but we want it on a sound financial basis. He also mentioned the political significance of the Mission’s visit to China, stating that there would undoubtedly be repercussions in Japan but did not think these would be serious. He also stated that he understood that Dr. Hornbeck, of the State Department, had given his approval of the Mission to China.35 I assured him that the Mission, so far as I knew, had no political significance whatsoever and that the matter was, according to my information, first brought up in the last Annual Meeting of the Foreign Trade Council in New York in November.

(In my opinion it would have been a much wiser move on the part [Page 942] of the American businessmen to have first approached this matter through the State Department and the Embassy here and the Legation in China so that the respective Governments would have had full knowledge of the proposed Mission or Missions, rather than to have the incomplete and somewhat conflicting information come through newspaper reports. I believe the Japanese feel that an attempt is being made to “put something over on them”.)

Mr. Kurusu and I then discussed trade between Japan and Manchuria, with particular reference to capital investment by Japan, increased exports, and whether the enormous volume of Japanese goods going into that territory represented a healthy flow of trade. He pointed out that what is termed “capital investments” does not necessarily mean that so much actual capital has been exported but rather that credit for that amount has been established but still remains in Japanese hands. He seemed to have some doubt regarding the soundness of the heavy export movement to Manchuria, but indicated that a large proportion of goods was being utilized in building and construction work, supplies for the Army, and the South Manchuria Railway.

Some time ago I asked Kurusu for a list of restrictive trade measures that had been imposed against Japanese goods abroad. He was kind enough to give me a complete volume in Japanese prepared by his Department for use in answering interpellations in the Diet on the restriction of Japanese trade abroad.

F[rank] S. W[illiams]
  1. Copy transmitted to the Department by the Ambassador in Japan in his despatch No. 1177, February 20; received March 11.
  2. Edwin L. Neville, Counselor of Embassy in Japan.
  3. See also pp. 526 ff. and pp. 821 ff.
  4. Notation by Mr. Hornbeck, Chief of the Division of Far Eastern Affairs: “The Dep’t, in reply to a formal inquiry, stated that it perceived no objection.”