Office of the Historian

894.50/12–1048

Statement of the United States Government1

confidential

Economic Stabilization in Japan

The United States Government considers it a matter of urgency that the Supreme Commander for the Allied Powers require the Japanese [Page 1060] Government immediately to put into effect a program of domestic economic stabilization, including measures leading to fiscal, monetary, price, and wage stability, and maximum production for export. The United States Government further believes that in this connection the Japanese Government should be required to adopt measures designed to:

a.
Achieve a true balance in the consolidated budget at the earliest possible date by stringent curtailing of expenditures and maximum expansion in total governmental revenues, including such new revenue measures as may be necessary and appropriate.
b.
Accelerate and strengthen the program of tax collection and insure prompt, widespread and vigorous criminal prosecution of tax evaders.
c.
Assure rigorous limitation of credit extension to projects contributing to economic recovery of Japan.
d.
Establish an effective program to achieve wage stability.
e.
Strengthen and, if necessary, expand the coverage of existing price control programs.
f.
Improve the operation of foreign trade controls. Tighten existing foreign exchange controls, to the extent that such measures can appropriately be delegated to Japanese agencies.
g.
Improve the effectiveness of the present allocation and rationing system, particularly to the end of maximizing exports.
h.
Increase production of all essential indigenous raw material and manufactured products.
i.
Improve efficiency of the food collection program.

It is to be expected that the Japanese Government would develop these measures to meet a target date for the establishment of a single exchange rate not later than three months after the initiation of the stabilization program.

Conscious of its responsibilities under the terms of reference of the Far Eastern Commission and in view of the urgency of this matter, the United States Government intends to take appropriate action immediately.2

[Washington,] December 10, 1948.
  1. Sent to General McCoy on December 10 for immediate presentation to the Far Eastern Commission as “the views of your Government”.↩
  2. In a letter of December 13, the Acting Secretary of the Army (Draper) reported to the Acting Secretary of State on the difficulties in carrying out this program and invited him to accompany the Secretary of the Army (Royall) and the President of the Detroit Bank, Joseph M. Dodge, on a mission to Japan “to appraise the problem on the spot”. (894.50/12–1348) Mr. Lovett on December 14 telegraphed Mr. Dodge to urge him to accept President Truman’s request to undertake responsibilities of this mission and promised the Department’s “full support” in carrying out “a sound program of economic stabilization in Japan.” (894.50/12–1448)↩