740.00119 PW/12–645: Telegram

Mr. Edwin W. Pauley, Personal Representative of the President on Reparations, to President Truman 63

The following letter was delivered to General MacArthur, 1800, 6 December, Tokyo time:

Tokyo, Japan, 6 December, 1945.

General of the Army Douglas MacArthur

Supreme Commander for the Allied Powers

Dear General: 1. On the basis of all the material available, including the Japanese figures assembled for me by the Economic and Scientific Section of your Headquarters, I have now been able to come to some decisions on interim reparations policy and interim removals from Japan on reparations account.

2. My decisions fall within the following very simple framework:

In preparation for war, in aggression in China, and in war against the United Nations, Japan built up the most diversified and over expanded industrial economy in Asia.
In spite of extensive destruction, especially in the closing phases of the war, Japan retains more industrial capacity than she needs or has ever used for her civilian economy.
The removal of the surplus, especially to neighboring Asiatic countries, will help to raise their industrial standards [Page 1005] and all living standards without depressing the standards of Japan, since only excess capacities are at the moment in question.
Interim removals will, in most cases, be below the total quantities that may eventually be allocated to reparations.
A program of interim removals should be announced to other claimant nations immediately, and the successive actions of seizure, inventory, packing and shipment should follow in the shortest possible time, in order to make both the framework of policy and the course of action uncompromisingly clear.

3. Accordingly, I am recommending to our Government that plants and equipment be made available as soon as possible under a program of interim deliveries as follows:

Half of the capacity for the manufacture of machine tools. I believe that this could most conveniently be done by seizing the 27 most important machine-tool manufacturing plants, which produce almost exactly half of Japan’s total. The list of these plants, which you may wish to examine before making your own decision on plants to be seized, is attached to this letter on a separate sheet.64
All tools and equipment located as follows:
In army and navy arsenals, except for equipment useful solely for making arms, ammunition, and implements of war, which will be destroyed. It is estimated that these seizures should bring in not less than 70,000 machine tools, as well as other kinds of equipment.
In the entire aircraft industry of Japan. It is estimated that this should bring in 220,000 machine tools.
In all plants manufacturing ball and roller bearings.
In all plants manufacturing aircraft engines.
All equipment and accessories in 20 shipyards, to the extent that it is not needed for the repair of shipping essential to the occupation. (A list of 29 leading strategic shipyards is separately attached.65)
All steel making capacity in excess of 2,500,000 tons per year. Japan’s admitted present steel capacity is in excess of 11,000,000 tons, as compared with 1930, when Japan produced 2,300,000 tons of ingot and consumed only 1,700,000 tons of finished steel.
A recommendation on pig iron will be sent to you later.
All facilities for the production of magnesium, for the preparation of alumina and reduction to aluminum, other than those required for processing scrap, and all machinery and equipment used exclusively for finishing magnesium and aluminum such as strip mills, rolling mills and extrusion presses.
Half of the thermal (coal [)] electric generating plants of Japan. In selecting the half of the plants of this character which [Page 1006] are to be left, I suggest that the thermal electric generating plants left to Japan should be selected primarily for their value as standby plants to supplement hydro-electric energy in areas of high consumption.
All contact process sulfuric acid plants, except those necessary to recover waste gases from zinc, lead, copper, and other heavy metal smelters.
The most modern large Solvay process soda-ash plant in Japan. (According to Japanese information made available by the Economic and Scientific Section, there are four of these from which to choose.)
Twenty of the most modern large plants for the production of caustic soda and chlorine, either in diaphragm or in mercury cells. (According to the Japanese information relayed to me by your Headquarters, there are 41 plants under this classification.)

4. In view of the bearing that these recommendations may have on the formulation of policy in Washington, I am passing on my conclusions to you at this stage in order to keep you fully informed, and in expectation that you may wish to take them into consideration in carrying out your responsibilities as Supreme Commander. I am aware that the steps I am recommending may bring up for reconsideration the process, which is at present rapidly going on, of conversion from war production throughout Japan, the trend of which would logically result eventually in a strong Japanese export economy. Reports from your office, confirmed by recent observations of my staff in various parts of Japan, indicate that not only conversion by the rebuilding of heavy industries is going forward with an apparent expectation of [on] the part of the Japanese that they will be given an opportunity to maintain a level of industrial capacity far beyond that which the Allied Governments will in fact be willing to permit.

5. I am sure that you will agree with me that, in the interest of disarming and demilitarizing Japan, as well as in order to avoid unnecessarily dislocating the Japanese economy when later removals become necessary—a situation which could easily be exploited to make Japanese workers feel that we are destroying peaceful industry—the sooner the reconversion program is geared into what may reasonably be anticipated as definitive reparations policy, the better will be our chances of successfully attaining all our objectives.

6. Under the policy now being pursued by the Japanese, I am inclined to think that the giant corporations will take over the country in spite of our program of breaking up the Zaibatsu, and that it will be next to impossible to pry loose those machine tools which should be removed as a disarmament measure. If this happens, a most important sector of the Japanese war potential will remain functioning, integrated, and in the hands of those who ran it during the war.

7. The foregoing program of interim removals is, of course, well below that [what] we can anticipate will eventually be removed from Japan. However, once this program gets under way we can feel that a good start has been made. Further interim deliveries and the setting of ultimate limits will thus be much easier to determine.

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8. As you know already, I am planning to leave on December 10 in order to make my interim report to President Truman. Mr. H. D. Maxwell will be in charge of the mission which I am leaving in Tokyo for the time being. I need hardly assure you that he and his staff will be at your service after my departure, in case any discussion or clarification of details should be needed.

9. In departing may I thank you again, not only for the many courtesies which have been extended to me personally, but also for the assistance which has already been extended to my entire mission.

Sincerely yours,

Edwin W. Pauley
  1. Copy transmitted to the Department by the White House on December 6, 1945.
  2. Not transmitted with telegram: for list, see Edwin W. Pauley, Report on Japanese Reparations to the President of the United States, Schedule A, Reference 3–c.
  3. Not transmitted with telegram.