No. 577
The Assistant Secretary of State for Far Eastern Affairs (Allison) to the Ambassador in Japan (Murphy)


Dear Bob: I think my letter of June 16, 1952, commenting on our telegram No. 512 of June 14,1 answers your letter of June 162 on [Page 1282] the problem of a loan to Japan. I want, however, to be sure to give you all the help I can.

I gather that before making up your mind whether we should seek to support Yoshida by a loan or line of credit, you would like to know whether there is any possibility that it could be accomplished. It is difficult to reach a conclusion on this question without knowing how positively we may want it. My impression is that there is a possibility that the Eximbank could be induced to do something along the lines of a $100 million line of credit, but success would depend largely on the political importance which we could assert and on the objects of the expenditures. Probably the easiest objects to justify would be the financing of short-term commodity exports comparable to the cotton credit. Perhaps short-term commodity credits could be combined with modest long-term projects for industrial expansion or development, the loans to be used for acquisition of machinery and technology in the United States. The Eximbank has had a number of feelers on such small projects which have appeared bankable, but the Japanese have not followed them up, perhaps because they prefer to press more grandiose ideas. Credits of the kind just described are not now needed by Japan but would be relatively harmless and in terms of the actual loans are well within the Eximbank’s practice. The main difficulty would not be with the loans themselves but with the extension of a line of credit. The Board of the Eximbank is said to be sour on this device, and would want really compelling arguments to consider it seriously.

I have kept an open mind on the desirability of trying to get Japan a line of credit pending full consideration of your recommendations. My personal slant, however, is that we could not in the near future present the kind of compelling political case that would be required. So far as I can judge, there is no danger that the forthcoming elections in Japan will bring into power elements hostile to the United States. I am not convinced that we should take steps that are within our power to give personal support to Yoshida, as distinguished from other leaders representing roughly the same policies, nor is it clear to me that such a gesture on the part of the United States, which would be regarded as aimed at the Japanese elections, would be well received in Japan, since Yoshida is already under attack for too-willing cooperation with the United States. In addition, he has the disadvantage of having been Prime Minister under the Occupation. On the whole, therefore, I wonder whether any such gesture of support would have any practical effect politically in Japan, and indeed whether it would have beneficial propaganda or psychological results if it came at a time when [Page 1283] it could be interpreted simply as an attempt to shore up an unpopular government.

Unless you think that the Department can make a compelling argument that a gesture is necessary to serve United States interests in Japan, I think you should tell Yoshida that it is quite unlikely the proposal could be favorably considered at this time. If you do think there is compelling reason, let me have your full views and I will see whether anything can be done. Meantime, do not give him too much encouragement.

If you do take a completely discouraging line with Yoshida, I think you should indicate that, apart from loans properly supported on a project basis, the kind of United States financial assistance Japan can anticipate is assistance directly connected with Japan’s rearmament. We are now discussing with Defense the use of funds which are available to Defense for equipping Japanese forces, and what part of such funds should be spent for equipment in Japan. We are also beginning to examine the military assistance to be sought for Japan as part of the United States FY 1954 Mutual Security Program. By reason of cuts made by the Congress, Defense may be under considerable pressure to reduce the $300 million which has been tentatively allocated for the JNPR in United States FY 1953. You might point out to Yoshida that such expenditures by the United States can have considerable balance of payments significance for Japan as well as military significance, and that the availability of United States funds will depend in considerable part upon the size of the forces which Japan itself is willing to establish.

In short, I am inclined to think that we should move as rapidly as possible toward a consideration of assistance to Japan on our terms rather than on Japanese terms, and toward the direct link between such assistance and security which is required by our policy and by the views of the Congress.

Please continue to keep me fully informed of your discussions with the Japanese, to insure that we do not take a different line with Araki. We will await your further comments before giving you instructions on a definite reply to the Japanese.3

Sincerely yours,

  1. See footnote 2, Document 572.
  2. In this letter Murphy had mentioned that the Embassy had not found telegram 512 to be helpful. (894.10/6–1952)
  3. In his reply dated July 19, Murphy stated that Allison’s letter arrived as the Embassy was completing an extensive analysis of the loan question (see the letter by Bond, infra) in response to a Departmental inquiry. The Ambassador agreed, pending reply to this study, to defer any definite reply to Yoshida, but concluded: “With the time for elections approaching, however, he will undoubtedly be pressing me for a reply, so that any early indication which you may be able to give of what our decision is to be will be most helpful to me.” (894.10/7–1952)