711.94/4–648
Memorandum by the Assistant Secretary of State for Economic Affairs ( Thorp ) to Director of the Office of Far Eastern Affairs ( Butterworth )
Subject: Recommendation with Respect to U.S. Policy Toward Japan.
In my absence, several members of my staff have studied Mr. Kennan’s report1 and I am forwarding their comments without change.2 I have also read the report myself and wish to say it is a most valuable analysis, and should provide the basis for a rapid and constructive reformulation of our policy in Japan.
I cannot underline sufficiently the section on economic recovery needs. This is in large part a matter of reviving trade between Japan and other Eastern countries. One point which might be worth study in this connection is a gradual restoration of direct relations between the Japanese Government and foreign governments, especially with respect to economic matters, a matter not discussed by Mr. Kennan.
With regard to the recommendations on the reform program, I believe some modification of the language or clarification of meaning would be desirable. I believe that although the general principles on which the reform recommendation is based are sound, it is clear that a premature relaxation of all SCAP’s pressure might make the achievement of minimum essentials of the program in certain important areas impossible.
The attached comments relating to reparations are particularly detailed. The facts presented do not appear to correspond with the basic assumptions of Mr. Kennan’s reports, either in terms of the burden on the Japanese economy or the advantages to receiving countries. The specific facts seem to refute the general allegations on the economic aspects of the problem.
Whether or not to have reparations is essentially a political problem, the form which they are to take is an economic one. A decision to reduce reparations will have major political repercussions. All Far Eastern countries feel deeply that simple justice requires that Japan make reparation in some form. They have also associated intimately in their minds the reparations and security problems. The objections which General MacArthur raises to remilitarization of Japan are objections which they would level against Mr. Kennan’s views on reparations. The ERP countries with colonies in Asia, notably the [Page 965] U.K. and France, have found it necessary to consider the prestige as well as the economic implications of demands upon them for Japanese industrial reparations which have arisen in their colonies. As a country which built up its plant during the War, it is difficult for us to understand the pressures from other countries for reparations but it is a strong political fact.
These political considerations which would justify standing on present policy may not outweigh others which justify its abandonment. We should be aware, however, of what is involved in adopting Mr. Kennan’s recommendation. The FEC would not agree to a reparations program going no further than—and perhaps not as far as—the existing 30% project. The U.S. Government could not take unilateral action without exciting the deepest resentment and inviting the antagonism of the FEC countries. They would certainly regard such a move as violating both existing international reparations commitments and the terms of reference of the Commission; they might regard it as requiring break-up of the Commission itself.
In the meantime, it seems only natural to expect the Far Eastern countries, if their views have been disregarded on this question, to be reluctant, to say the least, about cooperating in the program of economic recovery for Japan which is a prime objective of present U.S. policy. It is, I believe, generally recognized that the active cooperation of these countries is a sine qua non of Japanese recovery. I may add that if this issue were to cause the break-up of the FEC, we should lose a useful negotiating mechanism for securing the support of these countries for measures essential to Japanese recovery.
If one assumes that reparations are politically necessary, the present 30% plan cannot be regarded as a solution since it relates to only four countries. There may be room for some adjustment, but the present program is probably, from an economic point of view, as good as any. I am not convinced either that it imposes a heavy burden on the Japanese economy or that it will seriously hamper recovery. No reparation formula can meet the tests suggested by Mr. Kennan—it necessarily constitutes a loss and cost to the paying country. However, it seems to me that the form of reparations is a less crucial problem than the more fundamental one of the attitude of the other countries on this matter, and our commitments to them. It is obvious that the U.S. interest and approach differs from that of other countries, just as it did in the negotiations of the Paris Peace treaties.
Most important of all, it is urgent that some definite and final settlement of the reparations problem be reached promptly. Further delay, review, or restudy of details would reflect a type of vacillation which is more damaging to Japan than almost any kind of concrete program, [Page 966] not to mention the damage it does to the standing and purposes of the U.S. in the rest of the world.