894.512/40: Telegram

The Ambassador in Japan (Grew) to the Secretary of State

158. Our 154, March 7, 8 p.m.

The following points suggest themselves in considering a rejoinder to the Japanese reply:
Our contention that the taxes are inapplicable to American citizens does not rest on the fact that the proceeds are to be paid into a special fund set up for meeting military expenditures but on the fact that the revenues are to be applied to military expenditures. The reference in our representations to the special fund was designed to establish that fact.
The hostilities with China created the need for the additional revenues now being provided by these taxes.
There is no basis for the Japanese contention that as the taxes were created by normal legislative processes and assessed and collected by the regularly established agencies of the Government they cannot be regarded as military exactions or contributions. If such interpretation were valid, the provision of the relevant treaty provision which was obviously intended to be a safeguard against levies for military purposes could be readily circumvented.
The British Ambassador is about to make representations similar to ours. I understand that he will call attention to the exemption enjoyed by Japanese residents in Great Britain from taxes the revenues of which are being applied to the British rearmament program. Comment along the following lines might be added:

The American Government firmly believes in the justice of the assertion that the taxes are not applicable to American citizens and its position is not in any way susceptible of alteration by the statement of the Japanese Government that the British Government in a previous instance took a different position. As the Japanese Government however appears to believe that the views of the British Government [Page 617] afford grounds for the contention that American citizens are liable to these taxes, the Japanese Government will no doubt be disposed to withdraw that contention in the light of the fact that the views of the British Government in the instant case coincide with those of the American Government in taking exception to the application of the taxes to their respective nationals.