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

No. 729

Sir: I have the honor to forward1 a copy of Scapin 408/2 of November 6, 1948, entitled “Regulations Affecting Restricted Concerns”, as well as a copy of a SCAP press release of November 9, 1948, headlined “Activity of 1000 Restricted Concerns to be Increased”, and in that connection to refer to this Mission’s despatch No. 711 of November 5, [Page 1046] 1948,2 which reported that a relaxation of restrictions was in prospect.

The action announced by SCAP requires the Japanese government to repeal Article 2 of Imperial Ordinance No. 657 of 1945, which article required companies designated by the Ministry of Finance to receive the permission of that Ministry before taking any action beyond the normal course of business. The companies in question, 10 per cent or more of whose stock was owned by holding companies to be liquidated under Imperial Ordinance No. 233 of 1946, were designated on the basis of subsequent SCAP directives.

It will be noted that the present Scapin does not free the concerns from restrictions arising under other pants of Ordinance 657, or under other laws and ordinances. Thus Article 1 of Ordinance 657 still requires the designated concern to receive the permission of the Minister of Finance before dissolution or transfer of business. The SCAP press release further notes that Imperial Ordinance No. 567 of 1946, which provided for the divestiture of securities by companies designated under Ordinance No. 657; Imperial Ordinance No. 233 of 1946, which set up the Holding Company Liquidation Commission and provided for the dissolution of holding companies; and Law No. 207 of 1947, which provided for the elimination of excessive concentrations of economic power, are to remain unchanged in their effect on restricted concerns.

Ordinance No. 567, however, is to be amended to make clear its application to successor companies. This provision of the Scapin, which does not apply specifically to the 1000 restricted concerns, has been made necessary by attempts of Japanese companies to evade the provisions of Ordinance 567 through such devices as change of name. Banks and insurance companies have been particularly frequent offenders.

A final provision of Scapin 408/2 requires the repeal of Law No. 3 of 1944, “Law Concerning Temporary Measures of Companies”, which law granted extraordinary powers to company executives at the expense of stockholders.

Respectfully yours,

W. J. Sebald
  1. Enclosures not printed.
  2. Not printed.