Foreign Relations of the United States, 1947, The Far East, Volume VI

740.00119 Control (Korea)/7–2547

Interim Directive to General of the Army Douglas MacArthur, at Tokyo, for Lieutenant General John R. Hodge, at Seoul⁴²

secret
[SWNCC 176/29]

[Washington, July 24, 1947.]

Interim Directive to the Commander-in-Chief, US Army Forces, Far East, and Commander General, US Army Forces in Korea, for Military Government in Those Areas of Korea Occupied by US Forces

1. The Purpose and Scope of this Directive

a. This directive, which supersedes the basic initial directive under which you have been operating, defines the authority which you will possess and the policies which will guide you in your conduct of military government in those areas of Korea occupied by U.S. forces during the period prior to the establishment of a Provisional Korean Government as envisaged in the Moscow Agreement.

b. This directive is divided into Part I: General and Political; Part II: Cultural; Part III: Economic and Civilian Supply; and Part IV: Financial.

c. This directive is based upon policies agreed upon by the State, War and Navy Departments and approved by the President. It is recognized that the financial requirements of this directive may be greater than under preceding directives and that U.S. funds may not now be allocated or otherwise made available to you in sufficient amounts to implement certain features of the directive. To the extent that essential imports and other necessary expenditures contemplated by this directive exceed your budgetary limitations, you will, as soon as practicable, report fully on the nature and extent to which additional U.S. funds will be required, including complete justification for such additional funds so that the War Department may request additional appropriations by Congress. Pending such appropriations or arrangements you will expend funds in implementing this directive only to the extent and for the purposes for which currently such funds are available.

Part I

General and Political

2. The Basis and Scope of Military Authority

a. By virtue of your military occupation of southern Korea, you are vested with the conventional powers of a military occupant of former enemy territory. In addition, and in order to effectuate the Surrender Instrument executed by command of the Emperor of Japan, The Cairo Declaration, the Potsdam Declaration, and the Moscow Agreement, you are authorized to exercise all power necessary to give effect to those instruments.

b. While reporting to the Commander in Chief, Far East,⁴³ for all military matters, you will report to the Joint Chiefs of Staff (the War Department acting as the executive agency for the Joint Chiefs of Staff) for all non-military aspects of the occupation, including political, economic, cultural, social and non-military operational matters.

c. Your administration of military government will be based upon the treatment of Korea as a liberated country. In all your activities you will bear in mind the policy of the United States in regard to Korea which, in accordance with the Moscow Agreement, contemplates a progressive development involving the following successive steps:

(1) The present period of zonal administration by the United States and the USSR;

(2) The establishment of a Provisional Korean Government which will assist the U.S.-Soviet Joint Commission in preparing Korea for self-government;

(3) The creation of some form of trusteeship for Korea under the United States, the United Kingdom, China, and the USSR for a period of up to five years, unless there is general agreement among the four powers that conditions make this unnecessary; and

(4) The complete independence of Korea at the earliest possible date, with subsequent membership in the United Nations.

3. Basic Objectives of Military Occupation

a. The basic objectives of the United States with regard to Korea are:

(1) To establish an independent and sovereign Korea, free from all foreign domination and eligible for membership in the United Nations;

(2) To insure that the national government so established shall be a democratic government fully representative of the freely expressed will of the Korean people; and

(3) To assist the Koreans in establishing the sound economy and adequate educational system necessary for an independent, democratic state.

b. It is the intention of the United States Government to achieve its objectives in Korea within the framework of the Moscow Agreement and to this end to do all in its power to achieve the fulfillment of the terms of the Agreement and in particular the attainment of Korean independence at the earliest possible date.

c. The United States occupation of southern Korea is for the purpose of facilitating the attainment of basic United States objectives, in Korea and shall continue as long as it contributes to this end.

d. You will continue to replace military personnel in Military Government with Korean personnel and U.S. civilian personnel with a view to the complete elimination of U.S. military personnel as soon as practicable.

e. A political adviser of ambassadorial status will be appointed to advise you on matters concerning the administration of civilian affairs in southern Korea and relations with representatives in Korea of the Soviet Union. At such time as you and the political adviser agree that civilian personnel have effectively replaced military personnel in the administration of civilian affairs and so report to the Joint Chiefs, you will be relieved of your responsibilities for civilian administration and the political adviser will assume them. At such time as this transfer of responsibility takes place, the term “Military Government” will be abolished and a term such as “Interim Civilian Administration in Korea” will be substituted therefor. Until such time as this transfer of authority takes place, and a new directive is issued, you will retain final responsibility for all military and non-military aspects of the occupation. You will, however, gradually delegate to the political adviser the operational exercise of the political authority and functions now exercised by you or by the Military Governor, both with respect to internal civil administration and with respect to relations with the Soviets. The political adviser will report to you, and his reports will be transmitted to the Joint Chiefs through you as prescribed in subparagraph 2 b above. You will assure that there will be appropriate distribution of all communications to and from the political adviser

4. General Administrative Measures

a. You will continue to take all actions necessary to assure the maintenance of law and order.

b. You will continue to utilize local, regional and national agencies of governmental administration subject to the necessary changes implicit in this directive. You will continue to give these agencies maximum responsibility for the administration of government and will, insofar as practicable, charge them with the execution of your policies and directives. At all times, however, and in all circumstances you are empowered yourself to take direct action where required to carry out the objectives of the occupation.

c. Pending the establishment of a Provisional Korean Government, you will continue to strive for the coordination of economic and administrative matters between the U.S. command in southern Korea and the Soviet Command in northern Korea, insofar as this can be done without prejudicing the attainment of basic U.S. objectives.

5. Political Reorganization

a. You will broaden the basis for Korean participation in the administration of southern Korea, pending the establishment of a nationwide Provisional Korean Government. Insofar as the following can be accomplished without impairing the maintenance of the necessary military control, you will:

(1) Utilize qualified Koreans in as many posts of responsibility as possible in the local and provincial administrations and in the administration of the United States zone as a whole by:

(a) Using popular electoral processes wherever appropriate for the selection of Koreans to occupy key posts, and,

(b) For all appointive posts, selecting Koreans insofar as possible from all political groups, having due regard to their proportionate strength; and

(2) You will continue to utilize the Interim Legislative Assembly which shall have the duty of formulating and presenting to you draft laws to be used as a basis for political, economic and social reforms in the southern zone, pending the establishment of a Provisional Korean Government. You shall put into effect such draft laws except when they are inconsistent with basic United States objectives or the Moscow Agreement.

In the implementation of paragraphs (1) (a) and (2) above, you will make every effort to insure that all major political groups participate in elections.

b. You will take steps to institute a broad program of constructive economic and educational reforms for southern Korea looking towards the creation of conditions favorable to the development of a strong and lasting democratic system in Korea. The Interim Legislative Assembly shall be encouraged to assist in formulating this program and to take the lead in initiating draft legislation for its implementation. All major reforms shall, if practicable, be initiated by the advisory legislative body, and normally no major reform should be undertaken without consultation with this body and, preferably, after obtaining its support.

c. In implementing paragraphs a and b above, you will, insofar as consistent with paragraph 7 d below, continue to permit full freedom of expression to all political groups and shall seek the cooperation of representatives of all groups in the administration of southern Korea. No Korean shall be barred from an appointive or elective post because of his political affiliations, except as hereinafter provided. However, as a general policy, you should encourage the selection of leaders who remained in Korea throughout the period of Japanese rule and should in no way oppose the voluntary retirement from politics of Korean leaders who have returned to Korea since the Japanese capitulation.

d. While implementing paragraphs a and b above, you should not lose sight of the intention of this government to establish, as soon as possible, a nationwide Provisional Korean Government, in accordance with the terms of the Moscow Agreement. To this end, while standing firm on the principle that freedom of expression must be safeguarded throughout Korea, you will be prepared to instruct the U.S. representatives on the Joint Commission to resume negotiations with the Soviet representatives at any time and will propose the resumption of negotiations whenever there is reason to believe that there may be a basis for agreement within the Commission without compromising United States principles. In particular, you will be ready to exploit any favorable reaction on the part of the Korean people or the Soviet representatives on the Joint Commission to conditions resulting from the implementation of paragraphs a and b above as the basis for agreement regarding the establishment of a nationwide Provisional Korean Government. When negotiations are resumed, the United States representatives will look to SWNCC 176/18⁴⁴ for guidance and should also consider the following additional suggestions as possible means of resolving the present impasse in the Joint Commission:

(1) To hold nationwide elections of a type consistent with United States concepts of democracy in order to select the group of representative democratic Korean leaders called for in paragraph 4 d (1) of SWNCC 176/18;

(2) To hold nationwide elections of a type consistent with United States concepts of democracy in order to select the key members of a nationwide Provisional Korean Government;

(3) To accept for consultative purposes the advisory legislative body called for in paragraph a (2) above as representative of all democratic parties and social organizations in southern Korea; and

(4) To use members of such an advisory legislative body for key positions in a nationwide Provisional Korean Government.

6. Legal and Police Organization

a. You will continue the substantive and procedural law now existing in Korea only in so far as it is consistent with the objectives of the occupation. You will encourage the Interim Legislative Assembly to initiate and pass laws, subject to your veto, and you will impose laws by decree or ordinance only in so far as other legislation is necessary to achieve the objectives of the occupation. You will take action necessary to annul any laws and practices promulgated or followed by the Japanese authorities which discriminate for or against any person because of race, nationality, creed or political opinion.

b. Ordinary criminal and civil courts in Korea will be permitted to continue to function subject to such regulations, supervision and control as you, or the legislative body with your approval, may provide. Personnel of the courts who are found to be incompetent or objectionable because of Japanese influence will be removed and will be replaced with acceptable and qualified successors. Full power of review will be retained by you over all courts which are allowed to function but will be ordinarily used only to set aside decisions which are inconsistent with the purposes of your mission. You will continue to take all necessary measures to cause the release of persons unjustly held in custody.

c. You will continue or appoint such military courts as may be necessary with jurisdiction over offenses involving U.S. personnel or property and over such other acts as you may declare to be offenses against your military occupation. You will, however, except as otherwise deemed necessary by you, assure that Korean courts exercise an effective jurisdiction over cases not of direct or predominant concern to your military occupation.

d. You will retain appropriate existing police agencies and establish such others as may be necessary. All police agencies will be kept free of undependable and undesirable elements.

e. Existing policies will be continued relative to (1) arrest and internment of war criminals, (2) prisoners of war, United Nations nationals, neutrals, and displaced persons, and (3) personnel objectionable because of Japanese influence.

7. Political Activity

a. The dissemination of Japanese propaganda in any form will be prohibited and completely suppressed, and no revival of Japanese or pro-Japanese nationalistic societies will be allowed.

b. Subject to the necessity of maintaining the security of the occupying forces, the formation and activities of democratic political parties with rights of assembly and public discussion will be encouraged. You will continue your supervision over all political parties and those organizations and societies which participate in political activities.

c. Encouragement will be given to the development of democratic labor organizations in commerce, industry and agriculture.

d. To the extent that the security of your military occupation and the attainment of its objectives are not clearly prejudiced, you will continue to insure freedom of opinion, speech, press and assembly.

e. Freedom of religious worship shall be maintained.

f. You will not extend official recognition to, nor utilize for political purposes, any self-styled “Korean Provisional Government” or similar political organizations.

8. Other Administrative Measures

a. United States military and civilian personnel in Korea should make special efforts to treat the Korean population in such a manner as to develop confidence in and increase the prestige of the United States and the United Nations. You will continue to provide your forces with information concerning the customs of the Korean people in order to contribute to a better understanding between your forces and the Korean people and to avoid friction and undesirable incidents.

b. You will continue, with appropriate publicity, your efforts to ensure the recruiting and training of suitable Koreans to replace at the earliest possible moment Japanese or non-desirable Koreans who have been retained in positions of responsibility by reason of their technical qualifications.

c. You will continue such minimum control and censorship of civilian communications including the mails, wireless, radio, telephone, telegraph and cables, films and press as may be necessary in the interests of military security and the accomplishment of the objectives of the occupation.

d. You will assist and cooperate with civilian agencies of the U.S. Government or of other United Nations Governments functioning in southern Korea in accordance with decisions communicated to you by the Joint Chiefs of Staff. The activities of such agencies will be subject to your control and authority.

e. For the purpose of attracting the well qualified civilian personnel essential to the effective operation of the U.S. occupation of southern Korea, and for properly maintaining the occupation forces, you will initiate a program to provide acceptable living accommodations for United States personnel and their families. While immediately taking all practicable steps to provide living accommodations by utilizing and remodeling former Japanese and foreign-owned property, you will initiate plans to undertake such new construction as is necessary, submitting estimated requirements to finance such new construction in accordance with the provisions of paragraph 1 c above.

f. In view of the limited facilities and services existing in Korea, the provisions of War Department policy contained in War 80429 (12 March 1946) will not apply to War Department civilian employees or to other civilian personnel, employed by other agencies of the U.S. Government, who are operating under your command in connection with military government in Korea. While not committing U.S. funds beyond budgetary limitations, you will take all practicable steps to make available to U.S. personnel and their families facilities such as schools, hospitals, and household supplies and to assist them in maintaining a suitable community.

Part II

Cultural

9. Objectives

The basic cultural objectives of the United States with regard to Korea are:

a. To further the attainment of the over-all objectives of the occupation,

b. To encourage and assist the Koreans in freeing their cultural institutions, and the educational system in particular, from all Japanese nationalistic influences which have been forced upon the country in the past, in establishing a free and revitalized educational system and media of information, and in preserving and developing their own traditional national culture along liberal and democratic lines, and

c. To encourage and assist the Korean people through an education and information program to rehabilitate their economy, and develop scientific research and technological skills,

d. To encourage and assist the Koreans to prepare for and, to the extent that conditions permit, to participate in international cultural organizations and in international cultural exchange, so long as these are consistent with the purposes and objectives of the United Nations.

e. To foster among the Korean people a knowledge and understanding of the history, institutions, culture and accomplishments of the United States to the end that U.S. occupation policy may achieve its objective.

10. Education

a. You will permit all bona fide educational institutions including libraries, museums and art galleries, to remain open or to reopen as soon as possible. In order that the educational processes may continue with the least possible interruption, you will undertake to preserve the use of these institutions for educational purposes. Where temporary use for other purposes is deemed imperative, they shall be returned to their normal uses as soon as possible and in as nearly their original condition as practicable.

b. In order that Koreans may eventually achieve the level of literacy and educational standards necessary for the people of a democratic and independent state, you will permit, encourage, and assist in: (1) the expansion of existing educational facilities, including facilities for technical and in-plant training, (2) the opening of appropriate new educational institutions, and (3) the expansion of existing adult education programs, making use of schools, lectures, displays and mobile educational units. To the extent that such assistance involves the expenditure of U.S. funds, you will be limited by the amounts of U.S. funds available to you.

c. You will continue to insure that all teachers who have been exponents of Japanese militant nationalism and aggression and those who actively oppose the purposes of the military occupation are removed, and, wherever possible, replaced by acceptable and qualified successors.

d. Proper training will be provided to insure that qualified Koreans are available for governmental, educational, and other essential positions.

e. You will permit, encourage, and within the means at your disposal assist the Koreans in programs for:

(1) the organization and administration of a democratic educational system;

(2) the general training of an adequate number of teachers at all levels;

(3) inservice training of teachers for an educational system consistent with democratic, independent statehood;

(4) the reorientation and retraining of teachers who have been deprived of an adequate knowledge of their own culture, language and institutions;

(5) The development of the vocational and technical training of the Koreans through in-plant training and adult education techniques;

(6) The training of farmers through an agricultural extension system.

f. You will continue to remove and prohibit the use of text books and curricula containing Japanese nationalistic propaganda and see that new text books and curricula of a liberal and democratic character suitable to the Korean people are provided as soon as practicable.

g. So far as consistent with the purposes and objectives of the occupation and the security of the occupying forces:

(1) You will permit and wherever feasible assist suitable Koreans to travel abroad for purposes of study and observation in all fields of knowledge and in all skills;

(2) You will permit and encourage suitable citizens of Allied countries to teach and aid in educational, scientific, technical and related institutions; to carry out activities of a philanthropic and eleemosynary character; and to engage in religious instruction;

(3) You will permit, and within the means at your disposal, assist the flow into Korea of suitable educational materials including books and other publications, aural and visual aids, technical and scientific supplies, specimens and other educational aids essential to the development of education and training; and, wherever conditions permit, you will also make available other suitable material from local sources at your disposal, including confiscated Japanese material.

h. In order that the progress of the Korean people in matters relating to the appreciation, protection and development of their traditional and historical national culture may proceed in an orderly fashion, you will permit and encourage the Koreans in the creation of societies and organizations for these purposes and for the general advancement of learning.

i. You should encourage the Koreans to make appropriate use of the museums, libraries, monuments, and related institutions for educational purposes.

j. You may request the services of competent educational, scientific and technical advisers whenever desirable.

k. In the event that the funds and other collective resources at your disposal or at the disposal of the Koreans are not adequate to insure the carrying out of programs based upon the above paragraphs, you should, under the provisions of paragraph 18 below, submit such requests and justifications for additional resources as you deem necessary for their fulfillment.

11. Media of Information

a. You will encourage the Korean people to develop all media of information and to enjoy freedom of speech and of the press, subject to the necessity of maintaining such minimum control and censorship as may be necessary for military security.

b. All available media of public information will be utilized for the guidance of the Korean people in the attainment of the objectives set forth in paragraph 3 a through the dissemination of American ideals and principles of democracy.

c. You will develop and maintain organizations and facilities for the operation of media of information designed to further the objectives of your government.

12. Arts and Archives

a. You will continue to take adequate measures for the protection and preservation of all historical, cultural and religious monuments and objects, and archaeological sites against deterioration and depredation.

b. You will maintain jurisdiction over designated national treasures, monuments and archaeological antiquities and prohibit their sale and export.

c. You will prohibit archaeological excavations and the undertaking of any extensive restoration, repairs or remodeling of monuments or other cultural objects except as may be necessary for their preservation, and then only under the guidance of competent experts.

d. You will take such measures as appear appropriate to encourage and, within the means at your disposal, to assist the training of competent Korean scholars and experts so that they may be prepared to assume full responsibility for the administration, technical care, and utilization of their historical and cultural property.

e. You will cause to be preserved the records and reports prepared during the period of Japanese control, (including those of the Government General, government departments and bureaus and all government-administered institutions and organizations), the records of important Japanese or Japanese-controlled private, financial, industrial, manufacturing, and business concerns, the archives of the former kingdom of Korea and all other historical archives.

f. You will prepare reports, as necessary, on the overall status of Korean art collections, museums, historic monuments and archeological sites.

Part III

Economic

13. Objectives

The basic economic objectives of the United States with regard to Korea are:

a. To further the attainment of the over-all objectives of the occupation.

b. To establish a strong independent Korean economy free from domination by Japan or any foreign power as a necessary foundation for political independence.

c. To assist the Koreans in developing an economy which will provide them with as high a standard of living and as great economic security as their resources and technological development will permit.

d. To assist the Koreans in initiating a broad program of domestic economic reforms which will encourage stable democratic institutions.

e. To assist the Koreans in encouraging and developing scientific research and technology adaptable to their country.

14. General Policy for Attainment of Objectives

While at all times and in all circumstances you are empowered to take such direct action as necessary, insofar as possible, you will accomplish these objectives as follows:

a. By encouraging maximum local production and equitable distribution of needed goods.

b. By encouraging Korean participation in world trade particularly with a view to stimulating exports, procuring imports essential to the attainment of the objectives of the occupation and keeping to a minimum the quantity of imports which must be financed by the U.S.

c. By encouraging in the United States zone Korean responsibility, initiative and participation in economic activities in all ways which are not inconsistent with the maintenance of necessary military control, by

(1) utilizing for this purpose the advisory legislative body as provided for in paragraph 5 d (2) above, and

(2) encouraging Koreans to assume responsibility insofar as possible for administration of economic programs, with participation of U.S. personnel directed primarily to high level advice, guidance, technical assistance and training in fields where skilled Korean personnel is limited.

d. U.S. occupation costs in Korea, including both won and non-won expenditures for purposes of the occupation, will be covered by separate directive.

15. Reintegration of Economy of Northern Korea with that of Southern Korea

Early reintegration of the economy of northern Korea with that of southern Korea continues to be an important aim of U.S. policy. You will be prepared to instruct the U.S. representatives on the Joint Commission to resume negotiations with the Soviet representatives to effect economic reintegration at any time. Meanwhile, you will continue your efforts to arrange with the Soviet Commander of Northern Korea for the exchange of goods between the northern and southern zones.

16. Domestic Economic Program

a. In order to control inflation, maximize production of needed goods, ensure equitable distribution of such supplies are are available, and introduce greater stability into the economy of southern Korea, you will establish such measures for rationing, price control, allocation of materials, production control, and such other appropriate fiscal and administrative measures as you deem necessary. You will encourage Korean participation in the formulation and administration of these measures. You will guide the establishment of such controls so that, insofar as possible, they will be developed only as temporary measures to revive the economy following a period of disruption caused by war and will be administered to bring about such balance and stability as would permit their elimination as soon as possible.

b. Safeguards should be taken to assure to the Koreans adequate opportunity to determine for themselves the ultimate character of economic institutions and activities within Korea. You will assist them in every way possible to develop an economy so organized as to facilitate the growth of peaceful and democratic, political, social and economic institutions. Such an economy in Korea might well be of the “mixed” type including various arrangements for industrial organization such as public, private and cooperative ownership, and an agriculture based firmly on a large number of small farmer proprietors. You will encourage popular discussion of economic reforms such as redistribution of land ownership or development of credit cooperatives and promote active Korean participation in the formulation and administration of measures to accomplish these reforms along the lines indicated in paragraph 14 c.

17. Foreign Trade

Subject to your control, participation of Koreans in world trade will be encouraged. You will establish measures to stimulate exports from Korea, to limit imports and other expenditures requiring foreign exchange to items essential for the achievement of all the objectives of the occupation, and to establish control over all Korean foreign exchange in order to pay for a maximum proportion of such necessary imports and reduce U.S. commitments for this purpose to a minimum. As in the case of domestic economic controls, such measures should be of temporary duration for the purpose of dealing with the present abnormal situation.

18. Civilian Supply

a. You will assure that all practicable measures are taken to achieve the maximum utilization of Korean resources in order to limit U.S. responsibility for imports into Korea. Such measures will include the controls discussed in paragraph 16 a above.

b. Insofar as essential goods necessary to accomplish the objectives set forth in paragraph 13 cannot be furnished through local Korean production or through imports financed by relief and charitable agencies such as UNRRA, it is the policy of the United States Government to provide such imports, subject to the following procedures and to budgetary limitations:

(1) You will submit periodically to the Joint Chiefs of Staff statements of over-all import requirements essential to attain these objectives, setting forth specific justifications of items and quantities.

(2) You will indicate proposed sources of supply and methods of financing for these import programs according to the following categories:

(a) Surplus or Excess U.S. Government Stocks in Asia and the Pacific

As high a proportion of your import requirements as possible should be obtained from excess U.S. government stocks. Additional goods, suitable in type and cost to Korea’s economy and available in surplus property stocks, should be obtained within the limits of Foreign Liquidation Commission credits made available to you.

(b) Imports from Japan

Such essential imports as Korea can most easily and economically obtain from Japan should, during the period of rehabilitation, be supplied from that country to the extent that they are available. Imports into Korea from Japan will provisionally be considered as deductions from Japanese obligations to the United States for repayment of Japanese imports.

(c) Imports Financed by Korean Foreign Exchange and Exports.

Other essential imports should be financed to the maximum extent through Korean foreign exchange or exports.

(d) Imports Financed by U.S.

All other sources should be fully exploited before establishing import requirements which must be financed by the U.S. Government.

19. Resumption of Foreign Business Operations

U.S. policy calls for the resumption of normal foreign business operations in Korea as soon as possible. You may, subject to the controls established in implementing paragraph 17 above, authorize travel of Allied businessmen to southern Korea and of Korean businessmen to Allied countries when you consider such travel desirable. When authorizing such travel you will consider the needs of the Korean economy for industrial development and technical assistance, the necessity of preventing foreign enterprises from obtaining control over any part of the Korean economy, the availability of living facilities and any other relevant considerations. Opportunities for such travel will be open on equal terms to businessmen of all Allied countries which practice no discrimination against U.S. interests. The detailed terms and limitations under which Allied businessmen will be permitted to enter southern Korea will be determined by the United States Government upon receiving your recommendations. To the extent that such a program will improve the Korean economy, you will enlist the aid of U.S. and other Allied technicians and experts in training Koreans to carry out necessary economic activities.

Part IV

Financial

20. In the administration of financial matters, you will continue to use Korean personnel and existing agencies and financial institutions in Korea to the maximum extent consistent with the objectives of the occupation. You should establish new agencies, or reorganize existing ones, to the extent necessary to assure the effective execution of the policies and programs of this directive. You will continue to remove and exclude from positions of responsibility or influence all personnel objectionable because of Japanese influence. You may establish administrative machinery not dependent upon Korean authorities and agencies to the extent necessary to execute or assure the effective execution of the policies and programs in this directive. Such machinery will be integrated with other Korean agencies as early as practicable to insure maximum efficient and economical administration of Korean financial affairs.

21. You will continue to take all steps necessary to terminate Japanese influence over financial institutions in Korea. You will not permit communication or other contact involving business, commercial, or financial matters between Japanese nationals in Japan and persons within Korea.

22. The legal tender in Korea will be Bank of Chosen notes. Until further directed you will not permit any other currency to circulate except as follows:

a. United States Military Payment Certificates will be a medium of exchange for authorized personnel under regulations approved by you.

b. As a temporary measure, Japanese currency now in circulation of less than one yen denomination may be continued in use. You will not announce, establish or permit the use or publication of any general rate of exchange between Bank of Chosen notes and the United States dollar and/or other currencies, except for a military conversion rate to be governed by separate directives.

23. a. The Bank of Chosen will continue to perform central banking functions under your direction. The central banking functions of the institution will, for the purposes of accurate accounting and the training of specialized personnel, be segregated from its commercial banking activities and handled by a separate department of the bank. You may if you deem appropriate change the English translation of the name of the bank to “Bank of Korea”.

b. Adequate funds in Korean legal tender may be made available to financial and business institutions in Korea to finance activities which you consider essential to the Korean economy. You will receive a separate directive dealing with revised procedures regarding the financing of local currency expenditures (see paragraph 14 d).

c. Your Military Government in Korea, either directly or through the central banking department of the Bank of Chosen, should maintain strict control of bank credit in Korea, regulate rates of interest, conduct periodic bank examinations, require banks to maintain reserves against deposits, and take such other measures as may be required to assure adequate supervision and control of the Korean financial and credit structure.

24. You will continue to maintain such accounts and records as may be necessary to reflect the financial operations of your military occupation and you will provide the Joint Chiefs of Staff with such information as they may require. Separate accounts will be kept of all receipts and expenditures in United States dollars and all receipts and expenditures in Korean legal tender currency arising from (1) the normal functions of government in Korea and (2) the military occupation of Korea.

25. You will continue to take action necessary to ensure that all laws and practices promulgated by the Japanese authorities relating to taxation or other fields of finance in Korea which discriminate for or against any person because of race, nationality, creed or political opinion, will be amended, suspended or abrogated to the extent necessary to eliminate such discrimination. The military government in Korea should take all steps necessary to revise the tax structure and to take such other measures as may be required to assure the adequate inflow of revenues, and should exercise control and supervision over the expenditures of public funds to the extent necessary to achieve the purposes of the occupation. Funds in excess of normal government revenues necessary to finance essential government activities and programs necessary for the accomplishment of the objectives of the occupation may be borrowed by the military government from the Bank of Chosen in accordance with the provisions of paragraph 23 of this directive; however, such expenditures in excess of revenues should be kept to a minimum. Furthermore, you will operate on the assumption that any such loans or expenditures authorized by Military Government will be honored by the Provisional Korean Government or other Korean Government when established. You will make no commitment beyond the purview of Congressional appropriations for approved War Department civil affairs/military government operations that might be construed as an obligation of the dollar funds of the United States Government.

26. No transaction with respect to any impounded or blocked assets will be effected except pursuant to licenses or other authorizations issued by your Military Government in Korea. You will impound or block all gold, silver, platinum, currencies, securities, accounts in financial institutions, credits, valuable papers, and all other property falling within the following categories:

a. Property owned or controlled, directly or indirectly, in whole or in part, by any of the following:

(1) The governments, nationals or residents of Germany, Italy, Bulgaria, Rumania and Hungary;

(2) Any persons specified by Military Government by inclusion in lists or otherwise.

b. Property in Korea which is, or has been since 6 December 1941, owned or controlled directly or indirectly, in whole or in part, by any person outside Korea or Japan.

c. Identifiable looted property.

Identifiable looted property in Korea and property of Allied nationals which was vested by the Japanese Government should be restored as promptly as possible.

27. All transactions in foreign exchange and foreign exchange assets, including those arising out of exports and imports, shall be controlled for the purpose of achieving the objectives of the occupation. To effectuate such objectives you will:

a. prohibit, except as specifically authorized by your Military Government in Korea, all dealings in foreign exchange assets and all foreign exchange transactions.

b. establish effective controls over the import and export of

(1) gold, silver, whether in coin or bullion form, platinum and other precious metals;

(2) currency;

(3) securities;

(4) checks, drafts, bills of exchange, promissory notes, payment instructions, transfer orders and other financial instruments;

(5) powers of attorney or other authorizations or instructions to effect financial or property transactions; and

(6) other evidences of indebtedness or ownership of property.

c. make available any foreign exchange only for the payment of imports necessary to the accomplishment of the objectives of the occupation. No other outlay of foreign exchange assets will be made without specific approval by your government through the Joint Chiefs of Staff.

d. As used herein, the term “foreign exchange asset” shall include, but not by way of limitation, gold, silver, whether in coin or bullion form, platinum; any foreign currency, property physically situated outside of Korea; claims, demands, bank deposits, credits, securities, checks, drafts, insurance policies, or other evidences of ownership or indebtedness issued by or which are obligations of any person outside of Korea; copyrights, patents or trade-marks, issued by any country other than Japan, and any contracts or licenses relating thereto.

e. As used herein the term “transactions in foreign exchange” shall include, but not by way of limitation, any transaction involving any foreign currency, any payment or transfer to or from any foreign country, any transfer of credit, or payment of an obligation, expressed in terms of a foreign currency, any purchase sale, transfer or other dealing in any foreign currency; any financial or property transaction between a person in Korea and a person outside Korea, whether or not expressed in terms of any foreign currency, and any transaction involving any obligation owed by any person in Korea to any person outside of Korea or owed by any person outside of Korea to any person in Korea.

28. You should seek out, reduce to actual possession and, when title is a matter of record, effect transfer of record title to Military Government of all Japanese public and private property interests title to which was vested in the Military Government of Korea by its Ordinance No. 33 of 6 December 1945. In the case of juridical persons chartered in Korea steps may be taken to make the ordinance applicable only to the Japanese interests of such juridical persons. The Military Government in Korea will hold vested property for ultimate disposition in accordance with instructions to be forwarded to you.

42. Copy transmitted to the Department by SWNCC with its SWN–5583, July 25; approved by SWNCC on July 23 after revision of SWNCC 176/23, August 14, 1946, and sent to the Joint Chiefs of Staff to forward. The JCS did so in telegram War 82886, July 26 (SWNCC 176 series). A copy was sent by the Department in instruction 84, July 30, to Seoul for the Political Adviser in Korea (Jacobs).
43. General of the Army Douglas MacArthur.
44. January 28, 1946, Foreign Relations, 1946, vol. viii, p. 623.