The Ambassador in Japan (Allison) to the Department of State
2837. This afternoon’s Asahi Evening News reports that government has “tentatively decided to submit request to US Government for $120 million loan when Prime Minister Yoshida visits that country on his global tour”.1[Page 1641]
When Howard Sheperd, Chairman of Board of National City Bank, was in Tokyo last week, he told me bank was being informally approached by Japanese with view to opening line of credit in US during Yoshida’s visit. In response to his query I said my initial reaction was unfavorable for two reasons:
In the first place, I felt timing was wrong and that if Japanese believed they could get substantial loan or line of credit from United States it would delay their taking necessary steps on their part to shore up present precarious economic situation. I admitted that even if Japanese should take all possible steps of their own it would probably still be necessary for them to receive some economic and financial aid from US but my present opinion was that in Japan’s own long-run interest America should at this time be hard boiled.
In second place, I expressed opinion that grant of loan to Yoshida at this time when he has just surmounted one political crisis and while political situation still unstable might well backfire. If loan granted, opposition could claim Yoshida was being “bought” by America and that under such circumstances, retention of Yoshida in power would only mean continued servile subservience of Japanese Government to United States.
Sheperd told me he thought my points were well taken and he would caution his people to be careful in any talks that might take place. Japanese Vice President Johnson of National City Bank has just come in to tell me that on afternoon prior to Sheperd’s departure, he had had interview with Ikeda and Suzuki of Finance Ministry in which Japanese put forward request for line of credit in neighborhood of $150 million. According to Johnson, Mr. Sheperd advanced as his own two opinions given above and asked specifically whether Ikeda did not agree that grant of loan to Yoshida at this time might backfire. Ikeda is reported to have replied that on contrary, if Yoshida did not come back with something it would be final and fatal blow to him and Liberal Party. Everyone would say that in spite of all Yoshida had done to cooperate with United States he could not even obtain any sort of loan. I pointed out to Johnson that in many respects Japanese cooperation with United States, in economic as well as other matters, left considerable to be desired and that I still was of the opinion timing was not ripe for grant of such line of credit. Johnson said Ikeda indicated that Japanese would be satisfied with strict conditions being placed on line of credit and would expect to have to justify thoroughly individual projects before money would be forthcoming. Ikeda claimed that for every million dollars Japan received it would be necessary to use 25 to 50 million yen and that therefore it was not likely that there would be any sudden influx of dollars into Japanese economy. Sheperd told Ikeda that he did not wish to make any decision at that [Page 1642] time as to whether or not private American banks would look with favor in granting credit to Japan but said that in any case this would not be done unless the banks knew they had approval of American Embassy in Tokyo and United States Government. Ikeda stated that Japanese did not wish to approach Embassy at this time but rather desired to obtain informal reaction of American bankers. If this was negative, Japanese would then drop matter and would endeavor to make clear that Yoshida’s trip was only “good will” tour without any expectation of conducting important negotiations. Sheperd reserved comment but, according to Johnson, cabled factual report of meeting to his head office.
In addition to what I had previously said, I told Johnson confidentially that I was reinforced in my opinions as result of conversations with Italian Ambassador here who has just recently returned from Rome. Ambassador told me that American aid to Italy, in his opinion, had effect of “dope” on Italians and because it had been given too freely and without sufficient conditions attached prevented Italians themselves from getting down to business and doing what they should have done to improve their own situation. This had played into hands of left wing and Communists in Italy according to D’Ajeta. Johnson agreed that there was danger in giving too much too soon but pointed out that if we waited too long Japan might get into such critical economic situation that it would cost far more to bring her back.
Do not yet have any final recommendations on this matter but in view of fact that Yoshida has said he wants to see me before his trip (see Embtel 2814)2 I should appreciate Department’s reaction to above.3
- Prime Minister Yoshida was scheduled to arrive in Washington on June 7 on the first leg of a world tour.↩
- Dated May 17, not printed. (033.9411/5–1754)↩
In telegram 2591 to Tokyo, May 21, drafted in NA and cleared with OFD and the Department of the Treasury, the Department replied:
“Agree undesirable give any encouragement line of credit sought for political reasons connection Yoshida’s visit.
“Do not desire discourage consideration on merits by private US banks of loans for specific projects tending improve Japanese economic position although implications for IBRD lending would have to be considered. Have no indication private banks prepared consider in major amounts.” (894.10/5–1854)