694.0031/3–2348: Telegram

The Acting Political Adviser in Japan (Sebald) to the Secretary of State


70. Cite C–59441. Kennan for Lovett: On this last day of my visit in Tokyo, Under Secretary Draper has brought to my attention the paper SFE 196 of June 20, 1947 of the State–War–Navy Coordinating Subcommittee for the Far East, concerning the “abrogation of restrictive contracts of Japanese firms in international trade”.1

This was the first time that this paper had come to my attention. I strongly urge that we withdraw this paper and do not press for any further action along these lines.2 My reasons are the following:

I personally am not satisfied that these policies of decartelization with respect to ex-enemy countries are sound or desirable. They rest, as far as I can see, on the strong views and convictions of a relatively small group of people who view the respective problems exclusively from the standpoint of economic theory and whose enthusiasm and singleness of purpose have sufficed to get them documented as US Government policy. The concepts behind the decartelization program happen to be ones strongly supported by the Russians for political reasons related to their aggressive foreign policy program. This alone leads me to believe that the extreme decartelization policy should be thoroughly re-examined from the political, as well as the economic, standpoint. I am not aware that this has ever been done.
I distrust all state papers which are so esoteric and complicated that they surpass the comprehension of the ordinary reasonably-informed individual. Such papers may or may not have inner justification; they are seldom effective. The paper under discussion is a paragon of this sort of scholasticism.
Our preoccupation with matters of this sort reflects a serious lack of sense of proportion with regard to the problems of occupation in Japan. The matters treated in this paper are insignificant in comparison with the real problems, political, military and economic, which face us here today. To one in Tokyo, a paper of this sort exudes an atmosphere of unreality. Japanese foreign trade, in the normal sense, is still almost moribund. Japanese cannot travel, they cannot communicate with people abroad, except under SCAP supervision. The international connections of Japanese companies have been thoroughly shattered by the course of events; few legalistic provisions were needed to complete this process. By virtue of the deconcentration [Page 690] program, many of these companies are now in process of being broken up, and their shares are in the hands of the government. What happens to their previous contracts among each other is anybody’s guess, and its significance today is outstandingly theoretical.
This represents the type of interference in Japanese affairs which is no longer justifiable in the light of time and circumstance. We have already given the Japanese a great deal in the way of democratic reform. Our main problem today is to get them to accept the responsibilities implicit in democratic institutions and to strike out on their own in a really democratic way. If their decartelization laws are still not perfect, Japanese society will now have to find within itself the impulse and inspiration to correct the remaining deficiencies. For US to continue to press matters of this sort will not contribute to that spirit of self-reliance which will be essential if the Japanese are to meet the unprecedented strains of the coming period.
This is a good example of the type of paper which I think should not be put through FEC. Its relation to the execution of the terms of surrender is decidedly remote. It commits us to the other Allies on matters in which few of them are likely to take an active or intelligent interest and in which there is no need, either legal or practical, for US to be committed. Above all, it tends to encourage the growth of FEC into a species of super-government for the administration of Japan by remote control when the situation cries out for exactly the opposite.

I have set forth the above considerations at such length because I think them applicable not only to this paper but to many of the ideas still prevalent at home concerning the preparation of directives for SCAP; and I am sending them in this way because this matter illustrates so clearly the sort of problem to which we shall now have to turn our attention and which I shall be prepared to discuss at greater length upon my arrival.

  1. Not printed.
  2. A Department memorandum requesting withdrawal of the paper for further consideration was received by the Secretary of SANACC (Moseley) and the paper was withdrawn on May 11.