No. 572
The Assistant Secretary of State for Far Eastern Affairs (Allison) to the Ambassador in Japan (Murphy)1


Dear Bob: This is a brief note on our reply of this date2 to your telegram No. 421 of June 8, referring to Ikeda’s interest in a 100–200 million dollar line of credit.

I am sorry that our reply is somewhat pedantic. Your telegram received such wide circulation within the United States Government that it was impossible to frame an answer which did not take full account of United States financial policies.

I assume you have seen Ken Young’s letter of May 19 to Niles Bond,3 in which he asked the Mission for a combined political-economic analysis of loans to Japan. My own view is that at the moment the Japanese have not made either an economic or a political case for loans, but that a line of credit some time in the future is not altogether out of the question. I am particularly mindful of the possibility that a loan for political purposes could have some harmful results, as well as helpful, in connection with the coming elections. It would be extremely difficult to obtain a line of credit for Japan this summer. We would have, first, to show that it was politically extremely important, and second, to give some respectable economic justification.

It is generally conceded that loans have been made in the past for political purposes, but officially the officers concerned with financial policy can not afford to admit it. And, in most, if not all cases, there has been genuine need. For this reason, you might want to submit some of your further observations, which we are anxious to have, by letter rather than by telegram or despatch.

Sincerely yours,

  1. Drafted by Hemmendinger on June 13.
  2. Telegram 512 to Tokyo, June 14. In it the Department reviewed its general policies on lending, mentioning that it preferred project requests to lines of credit and stating that it was established U.S. policy to refer applicants to IBRD in cases where financing long-range development programs was contemplated, although this policy did not exclude the possibility of Export-Import Bank loans for special purposes. “Under these circumstances and pending Dept consideration Emb’s views loan question wld advise Emb not encourage Ikeda.” (894.10/6–852)
  3. Not printed. (894.10/5–1952)