794.0221/1–2251

Memorandum by the Assistant Secretary of State for Far Eastern Affairs ( Rusk ) to the Secretary of State

secret

Subject: Pay-As-You-Go Arrangements for Japan

At the Wake Island conference,1 agreement was reached in principle that U.S. forces in Japan should be put on a pay-as-you-go basis, and the President directed the Secretary of the Army to work out recommendations with the Department of State and submit them to the President for his approval.

Representatives of the State Department have reached agreement with representatives of the Department of the Army and the Treasury Department that a partial pay-as-you-go policy, effective July 1, 1951, should be adopted for all U.S. occupation forces in Japan. The policy should provide for the payment of approximately 50% of the yen cost of the maintenance of all U.S. occupation troops in Japan, the remaining yen costs to be met by the Japanese Government. This policy will apply during U.S. fiscal year 1952, it being understood that future policy will be covered in a bilateral agreement to be effective simultaneously with the Japanese peace settlement, and that the whole question will be carefully reviewed before the 1952 arrangement is continued or extended to other areas.

A 50% arrangement is considered politically advantageous and for the fiscal year 1952 will involve dollar earnings for Japan approximately equal to the estimated deficit in Japan’s international payments, which it had been proposed to defray by a GARIOA appropriation of $140 million. The partial pay-as-you-go arrangement will eliminate the GARIOA appropriation request.

Recommendation

It is recommended that you sign the attached letter to Secretary Marshall,2 enclosing the draft of a letter to be addressed by him to the President.3

  1. For documentation on the conference held at Wake Island on October 15, 1950, see Foreign Relations, 1950, vol. vii, pp. 946 ff.
  2. Not printed. The letter was sent January 30.
  3. Not printed. This memorandum and its enclosures had been cleared by, among others, the Bureau of German Affairs.

    In a memorandum of March 2 to Clement E. Conger, Staff Assistant in the Bureau of German Affairs, Mr. Fearey stated in part: “Institution of a 50% pay-as-you-go plan for the remainder of the occupation [of Japan] was finally approved by the President a few days ago.” (694.001/3–251)