740.00119 Control (Japan)/8–348
Memorandum of Conversation, Prepared in the Canadian Department for External Affairs1
memorandum of a conversation with mr. george f. kennan, chief of the division of planning and policy in the united states state department, attended by mr. r. atherton,2 mr. e. reid, mr. r. g. riddell, mr. d. johnson, mr. r. e. collins and mr. a. r. menzies, june 1, 1948
[Here follow numbered paragraphs on the reason for Mr. Kennan’s visit, procedure for the Japanese peace conference, Canadian views on this aspect, objections to a conference without Soviet participation, doubtful value of a treaty at present, and prolongation of the pre-treaty period.]
Reparations
15. Mr. Kennan said they had reviewed the whole levels of industry and reparations programme and had come to the conclusion that current F.E.C. thinking was unrealistic. For instance, they had estimated that at the present rate of removal, it would take the Philippines twenty years to take away its 5% share of the machine tools, etc. in [Page 802] the advanced reparations removal programme. He was doubtful if any great part of these industrial facilities could be effectively used in the Far Eastern countries. People did not realize how obsolete Japanese equipment was and how little value it would have removed from its Japanese context of building, transportation, power supply, labour, technicians and management. Meanwhile, it was costing huge sums to keep these facilities in a proper state of preservation for reparations removal. The cost of packing equipment for removal was also disproportionately high, sometimes equalling the estimated value of the industrial facilities.
16. Mr. Kennan said that the United States wanted to find some way of disposing of the reparations problem in a year or two at the most. It would have to be a realistic programme revised in terms of a new appraisal of Japan’s requirements and the early and effective use to which equipment could be put by the claimant countries. The United States proposals would probably not go quite as far as the Strike Report. (Mr. Kennan would not be more precise than this.)
17. Mr. Collins said that without adopting the extreme position of the Strike Report which contained a lot of doubtful and unpersuasive statistics, it should be possible for the United States Government to make a new calculation of a peaceful level of industry for Japan for say the year 1953 based on the accepted 1930–34 mean. Such a calculation, taking into account two years of occupation experience in the Japanese balance of international payments problem and also an upward revision in population estimates, should fix a peaceful level of industry for Japan that would meet Japanese needs and also have some chance of acceptance by F.E.C. members.
18. Mr. Kennan said that he was not convinced of the soundness of the “peaceful level of industry” method of determining what industrial facilities should be made available for reparations claim.
19. Mr. Menzies asked Mr. Kennan how the United States then proposed to sell their revised reparations proposals in the Far Eastern Commission. Until the members accepted the revised proposals, the United States was bound by the Interim Reparations Removal Policy paper that had already been passed.3 Mr. Kennan recognized the difficulty and said this was one of the reasons for the preliminary exchange of views with us.
20. Mr. Menzies asked if the United States had considered the possibility of calling a regional economic conference of Far Eastern countries either through the Economic Commission for Asia and the Far East or outside it, something like the one that had recently been [Page 803] held by sixteen countries in Paris to consider a European Recovery Plan. Such a conference might consider
- (a)
- the individual economic reconstruction requirements of Far Eastern countries,
- (b)
- how these national plans could be integrated on a regional basis,
- (c)
- where Japan fitted into such a Far Eastern economic reconstruction plan from (i) the point of view of the stimulus Japanese economic recovery would give to commerce throughout the Far East, and (ii) possible use by the Far Eastern countries of industrial facilities removed on reparations account from Japan.
Mr. Menzies thought that perhaps in the context of a positive economic reconstruction plan that might be evolved at such a conference, the possible role of industrial reparations from Japan might be placed in its proper perspective. The United States might also consider the integration of their various plans of economic assistance to Far Eastern countries into such a plan as an added incentive for the Far Eastern countries to cooperate. Mr. Menzies recognized that there would be many difficulties peculiar to the backward state of industrial development in the Far East, the upset political conditions and the lack of integration of the economies of Far Eastern countries that would make difficult the working out of such a regional economic plan for the Far East. However, unless the Far Eastern countries could be induced to view the Japanese reparations problem in this broader and more positive context, Mr. Menzies was afraid it would be difficult for the United States to sell them their revised proposal. Mr. Kennan said that they had given some thought to such a regional conference but he did not elaborate on these views. He welcomed this suggestion from us and recognized that it would be very difficult to sell their programme to the other Far Eastern countries.
21. Mr. Kennan said that in addition to trying to get a realistic settlement of the reparations problem the United States was going ahead with plans to give financial assistance to the Japanese in their industrial rehabilitation. He mentioned a figure of $500,000,000 the first year, tapering off in five years. The United States would not stand for irresponsible meddling in Japanese industrial recovery through some “frivolous” reparations programme while she was paying out $500,000,000 a year to get Japan on her feet again.
Internal Reform Measures in Japan
22. Mr. Kennan gave it as his opinion that a good number of the internal reform measures in Japan had gone much too far. He doubted the wisdom of trying to make the Japanese over like ourselves. He [Page 804] didn’t think we could succeed. All we were doing was tearing apart the closely woven fabric of Japanese society. Some of the young officers in G.H.Q. SCAP were out-doing the Russians in their enthusiasm for uprooting traditional structures. It was in the power of SCAP to modify some of these programmes. The F.E.C. was also implicated.
23. The new Japanese constitution was a pretty good one, Mr. Kennan thought, but some of its flaws were becoming apparent. He preferred specifically to the abolition of the Ministry of the Interior and the decentralization of the police forces. It was now possible for Communists to infiltrate local elected governments and local police forces and for the central government in Tokyo to know nothing about it. It was also difficult to tell whether local governments were adhering to policies formulated by the central government. (Mr. Kennan did not say what they thought should be done about this but left the impression that the Japanese Government itself would probably take steps to strengthen its control over local administrations and he hoped F.E.C. countries would not make a fuss about it.)
24. Mr. Kennan thought the land reform programme had been pretty successful, although it had gone too far in certain respects.
25. The directives purging from public positions senior Armed Forces officers, individuals who had played a prominent part in ultra-nationalistic societies, key figures in the war-supporting industries, strongly nationalistic teachers, senior officers of the police force and all members of the gendarmerie came under an especially heavy attack from Mr. Kennan. He thought that it had been particularly shortsighted to say to some tens of thousands of these former leaders of Japanese society that they could no longer occupy positions of any importance. It was a sure way of creating an underground and dissident element in Japanese society, an element whose dissatisfactions might be taken advantage of by the Communists. Mr. Reid interjected here that he thought it was this very element which would be the least susceptible to influence by the Communists since under a Communist government they would be even worse off than they are today. Mr. Kennan explained that what he really meant was that this group would be a source of weakness and discontent in Japan and that this would play into Communist hands. He referred, however, to the experience in Germany where the grandson of Bismarck and other important Army officers and Nazi officials had linked a revival of their fortunes with the Communists. He said that by removing the whole leader class from Japan, we left industry without efficient management, commerce without experienced promoters and government without its more adept officials. He thought that we should permit the Japanese Government to relax the effect of these purge directives now and permit these [Page 805] purgees to resume a modest but constructive role in Japanese Society once more.
26. Mr. Kennan also criticized the decentralization of industry—the dissolution of the Zaibatsu—through the working of the Holding Companies’ Liquidation Commission. He said that nearly 80% of the corporate assets of Japan were now held by the Liquidation Commission. This was stifling initiative and he hoped that something could be done pretty quickly to right this situation in order that Japanese industrial recovery might not be further retarded.
27. Mr. Menzies said that without wishing to take issue with Mr. Kennan on the soundness of individual reform directives, he personally thought it would be a serious mistake to give the Japanese people and people of other Far Eastern countries the impression, as a certain number of American newspapermen were now doing, that we propose to scrap the whole reform programme. If the Japanese wished to be accepted back into the comity of nations, then Mr. Menzies thought that they would have to give pretty strong evidence of their honourable intentions. The ordinary people in Canada were still highly mistrustful of the Japanese. The Japanese had created this reputation for themselves through abuse of patent agreements, unethical trade practices, interference in fish conservation programmes and many other things. He thought that if there was to be any relaxation of the reform measures in Japan, the Japanese Government should be urged to make it quite clear at the same time that they intended to adhere to the spirit of the Potsdam Declaration. Mr. Menzies said that it was not the letter of the reforms that he cared about, it was the general spirit of the reforms.
28. Mr. Kennan said that while we were worrying about Japanese reforms, we were giving the Russians an opportunity to extend their influence in Japan. The United States felt strongly its responsibility for preventing Japan from falling under Soviet influence and did not propose to permit the rupture of the Japanese traditional social fabric by these various reform measures to give the Russians any opportunities to infiltrate their insidious influence into the country.
Security
29. General MacArthur had given it as his opinion that even with considerable assistance from us, Japanese war potential could not be built up to any threatening strength in less than twenty-five years. Mr. Kennan thought that everyone would agree that in the physical sense Japan had been pretty effectively demilitarized. At the time of the Potsdam Declaration a totally demilitarized Japan had been envisaged. This provision had been written into the Japanese constitution. It also appeared in various Far Eastern Commission policy [Page 806] statements to which the United States had adhered. However, the world situation had changed considerably from that time through our seeing more clearly Soviet aggressive intentions. There was now a serious problem of defending Japan against Russian domination. Soviet forces were stationed in the Kurile Islands and South Sakhalin, only a few miles away from Japan. They also had a powerful base at Vladivostok and it would probably not be many months before they had overrun the whole Korean peninsula. If a peace treaty were to be signed now and the Japanese cast adrift, Mr. Kennan felt it was obvious that the Russians would exercise a good deal of military pressure against demilitarized Japan. The United States did not intend to permit that and it was largely for this reason to quite an extent that they proposed to prolong the occupation period. Certain responsibilities, however, had to be taken over by the Japanese themselves. He referred to the fact that the police force and the local gendarmerie were inadequate in numbers and had only one pistol for every fourth man. The most urgent need at present was for a coast guard to prevent the Russians from infiltrating agents into Japan. Numbers of them were already landing, on Kyushu. Mr. Menzies said that we had acquired a certain amount of notoriety in the Far Eastern Commission for giving strong support to the United States in the recent discussion of the Maritime Authorities Bill. Mr. Menzies thought that this was a very good instance of bad American tactics. SCAP had permitted this Bill to be introduced into the Japanese Diet and newspaper reports about it had come out of Tokyo before the United States had mentioned it even informally to any of the F.E.C. members that they could expect to sympathize with their viewpoint. He thought that if the Americans had bothered to explain confidentially to their friends ahead of time what their problem was, they might have got a good deal more support. Mr. Menzies envisaged similar difficulties arising in connection with all the other changes in policy which the Americans were contemplating in Japan and thought that they should give very careful thought to the question of talking their proposals over with their friends before introducing them into the Far Eastern Commission.
30. Mr. Collins elaborated further on the need for the United States to give careful thought to their strategy and tactics in presenting their revised proposals to the Far Eastern Commission countries. He pointed out that there was a provision in the Terms of Reference for the United States to issue interim directives on urgent matters if agreement had not yet been reached in the Far Eastern Commission. He said that he thought that the United States ought first to discuss its proposals outside the Commission informally with its friends, then introduce the [Page 807] proposals in the Commission, get as wide a measure of agreement for them as possible, press them to a vote and, in the event that the Soviet Union vetoed the proposals, the United States should then go ahead and issue an interim directive. Mr. Menzies said that as we and most of the other F.E.C. members had supported a two-thirds voting procedure for the Japanese Peace Conference, there was no reason why we would not accept such an arrangement in the Far Eastern Commission. It was important, he thought, that the United States should not move unilaterally in Japan. He thought that as the Japanese would have to build up most of their trade with Far Eastern countries, it was important for the Japanese that they should feel that any revised occupation policy was not based solely on a bilateral agreement between the Americans and themselves, but had a pretty wide measure of support in other interested countries. Without this broad measure of support there was no guarantee that an atmosphere of resentment would not be created in Far Eastern countries which would in the long run considerably detract from the advantages that the United States saw in arriving at a suitable settlement of Japanese economic and security problems.
31. Mr. Kennan concluded by saying that as we could not really count on very extensive reforms in the outlook of the Japanese, it would be necessary to maintain certain minimum security controls for quite a time. He thought that these would be most effective if kept to a bare minimum. He pointed to the fact that the financial assistance which they propose to give the Japanese now and which would be continued for five years would have a considerable influence on making it seem profitable to the Japanese to behave themselves.