894.5034/23: Telegram
The Ambassador in Japan (Grew) to the Secretary of State
[Received March 10—10:05 a.m.]
383. In view of recently enacted legislation extending rigid government control over all industrial production, American owned corporations engaged in manufacturing are extremely apprehensive over their investments in Japan. Such legislation prescribes a license system for the manufacture of designated important machines and machine tools and for raw materials. It provides for expropriation of lands, materials, labor, plants and equipment, for compulsory amalgamation of factories and changes in types of machinery produced. It further provides for inspection and supervision of business offices, factories, warehouses and accounting books and for the fixing of prices. Moreover, it is anticipated that under the broad provisions of the revised general mobilization and foreign exchange control laws the enforcing regulations will stipulate a Japanese majority of share holdings and membership of boards of directors together with complete Japanese control of management.
Under such strong pressure American firms here are almost certain to be squeezed out entirely through refusals of permits for raw materials, the sale of their property and the transfer of funds to the United States. This applies particularly to General Motors, Ford, Otis Elevator and other industrial companies together with others who have large frozen cash balances.
This matter is of extreme importance at the moment when extensive rationalization of industrial production and more rigid foreign exchange control are contemplated under the new legislation. Many Americans have recently approached me and members of my staff for advice and assistance. They feel that the situation has gone far beyond the state of “embarrassment” from having their funds tied up and that they are now faced with the strong probability of losing the entire or better part of these investments and cash holdings from being squeezed out of business and the likelihood of heavy exchange depreciation.
[Page 795]The same situation has existed to a lesser extent for the past three years and representations have been made to the Foreign Office on specific cases in compliance with the Department’s instructions No. 1345, October 4, 1937,32 and No. 1359, October 29, 1937,33 but without satisfactory results. It therefore appears not only justifiable but essential that some steps be taken immediately to permit of exercising control whenever deemed advisable over the liquidation of Japanese assets in the United States and the transfer of the proceeds to Japan, such control to be utilized in effecting the liquidation and transfer pari passu of American holdings in Japan to the United States.
I am convinced that any assistance which this Embassy will be in a position hereafter to render Americans in this particular dilemma will depend on our Government’s frankly informing the Japanese Government that the treatment of Japanese holdings in the United States will rest entirely upon that accorded American holdings in Japan. I recommend that I be authorized to so inform the Foreign Office.
- Foreign Relations, 1937, vol. iv, p. 804.↩
- Not printed.↩