694.0031/8–248: Airgram

The Secretary of State to Diplomatic and Consular Officers

Subject: Revival of Japanese Foreign Trade.

Reference is Department’s Circular Airgram, February 18, 1948.

Regulations Governing Private Trade with Japan.

US Govt policy is to foster and encourage the revival of Japan’s foreign trade in order (a) that such revival shall contribute to world economic recovery, particularly in Asia and Southeast Asia; and (b) that such recovery may enable Japan to reach a self-support status and make unnecessary annual Congressional appropriations to sustain Japan. Trade revival can only with difficulty achieve levels necessary for peaceful needs Japanese people as defined by FEC.

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In furtherance above policy: (1) Supreme Commander for Allied Powers is facilitating restoration of normal commercial practices as rapidly as conditions and policies permit; (2) US has informed Par Eastern Commission of US intent to assist Japan to regain self-support status as rapidly as possible, and has requested support of FEC countries; (3) US Congress has appropriated funds for FY 1949 usable both to prevent disease and unrest, and to provide economic rehabilitation. It is anticipated considerable portion of these funds will be spent outside US; (4) US Congress established revolving fund of $150,000,000 to be used to purchase textile fibers in US for use in occupied areas (mainly Japan). Textiles made from fibers so acquired may be sold for any currency acceptable to SCAP but SCAP required ultimately return dollars to fund; (5) SCAP has available $60,000,000 line of credit, provided by US private banks and Export-Import Bank, for purchase of US cotton; (6) There exists a sterling payments agreement between Japan and the sterling area (United Kingdom and Colonies, with the present exception of Hong Kong, Australia, New Zealand, and Ceylon; South Africa, India, and Pakistan may later participate). Under this agreement trade between SCAP and sterling area (except for cotton textiles produced from cotton procured in US requiring dollar payment) may be conducted in sterling.

Japan needs to import wide range and large quantities raw materials to be fabricated and sold as manufactured items. Dept is mindful of economic and political resentment against Japan in some countries but requests missions abroad facilitate in every way possible revival Japanese foreign trade, within limitations imposed by local circumstances.

Marshall