794.00/6–1754

No. 768
Memorandum of Conversation, by the Economic Counselor of the Embassy in Japan (Waring) 1

secret

Participants:

  • Messrs. Hayato Ikeda, Minister of Finance, and Kiichi Miyazawa, Member of House of Councillors and
  • Messrs. Frank A. Waring, Economic Counselor, and W. W. Diehl, Treasury Attaché

Political Crisis

Mr. Ikeda 2 stated that he had just come from a long conference with the Prime Minister, who was determined to remain in power even if it became necessary to sacrifice a coalition of all Liberal forces. Ikeda said he had gone to the Prime Minister determined to recommend his retirement, but found him so adamant and confident regarding the retention of power that he dared not broach the subject. He remarked, “If a man of 74, 20 years my senior, has the will to fight and is confident of victory, I could scarcely advise him to surrender.” Although the remark was made as a commonplace observation, it reveals the Japanese respect for age and the degree to which the country is subject to seniority rule.

Mr. Ikeda next commented that he would have to leave the luncheon to attend a meeting of the Conservative forces at 2:00 P.M. The conferees, he explained, had already agreed on a platform. The current meeting would determine the voting procedure by which the President of the new Conservative Party (which it is hoped will be constituted) will be selected. The forces opposed to Mr. Yoshida advocated a ballot in which each member of the party would record his first, second, and third choice; the candidate receiving the largest total number of votes would be designated President. The Yoshida forces favored a single ballot, in the belief that Yoshida would be able to capture a majority of the total vote. The opposition were of the opinion that under their plan Mr. Hatoyama would be the successful candidate; in fact, Mr. Ikeda stated as general [Page 1657] knowledge that Oasa, political advisor to Shigemitsu, had conferred yesterday with Hatoyama and had agreed on a slate of Hatoyama for President and Shigemitsu for Vice-President. Ikeda estimated that among the Conservative forces in the Diet, ⅓ favored Yoshida, ⅓ Hatoyama and Shigemitsu, and ⅓ were undetermined. From this latter group, the Yoshida forces hoped to obtain sufficient votes to give their candidate a majority.3

It is Mr. Yoshida’s desire to unite the Conservative forces in the Diet under his leadership, if that is possible. Should he be unable to accomplish this objective, then he would attempt to attract as many Progressives as would join a revised Liberal Party under his leadership, in the hope of obtaining a firm majority in the Diet. Once this is accomplished, he would feel free to embark upon his delayed world tour, possibly in August. Ikeda remarked that, under such circumstances, he would accompany the Prime Minister, explaining that all of his personal and party transactions had been audited and that as a result he had been completely cleared by the procurator of recent charges. When the Prime Minister returned from his trip, with an anticipated enhancement of prestige, he believed it might be a strategic time to dissolve the Diet and go to the country in an election, with the objective of obtaining an even more solid Conservative base. With this accomplished, he could then, after a brief rule, retire as an elder statesman, feeling that he had made the maximum possible effort toward the constitution of democracy in Japan on a firm foundation.

Foreign Investment and Economic Aid for Japan

Ikeda commented that he had found the Prime Minister severely troubled by the grave economic problems that faced Japan. Yoshida was worried regarding the policy of deflation now being pursued and its ultimate effect upon business and employment. Ikeda advised the Prime Minister that the policy, even though painful, must be pursued; that, while business failures and unemployment might result temporarily, it was essential to check the inflationary forces in the Japanese economy and to bring about an improvement in the competitive position of Japanese goods in world markets, as well as the position of the yen in world trade. He also remarked that the Prime Minister could not expect to receive a sympathetic hearing abroad unless he was pursuing a rigorous fiscal and credit policy at home. In response to a statement that one basic need of Japan appeared to be increased efficiency in production and a reduction in costs, Ikeda replied that modernization in industrial plant would require capital and that this would necessitate [Page 1658] the imposition of credit controls, which he favored and which might be possible if the Yoshida forces obtained a Diet majority.

Ikeda was told that foreign investment, if encouraged, could make a distinct contribution to the strengthening of the Japanese economy and would accelerate the introduction of new industrial plant and modern techniques of both production and management. He replied that he had long favored the introduction of foreign capital; in fact, he had been invited to accompany the Prime Minister on his ill-fated world tour in June, but had refused, stating that he could not visit the United States because he had been unable to keep his promise to liberalize the provisions for the entry of foreign capital. The new and strengthened Conservative forces under Yoshida would, if they materialize, enact appropriate legislation. Ikeda himself proposed a merger of the foreign exchange control law and the foreign investment law with a view to liberalizing the provisions of both.

Mr. Ikeda went on to say that in his conference with the Prime Minister the latter asked how he could most effectively broach the subject of loans in the United States. Ikeda advised against raising the subject, arguing that it was premature until Japan had taken appropriate steps on its own behalf. He urged instead that the Prime Minister should seek to obtain from the United States assurances of continued interest and support in this period of Japan’s economic tribulation. He added that the Prime Minister might seek to obtain a commitment from the United States to extend, should it prove necessary, a line of credit for the purpose of a currency stabilization. This, he argued, would restore confidence in the integrity of the yen, check irresponsible rumors of devaluation, and enhance Japan’s trading position.

Leader-Follower Relationship

In discussing the desire of the Japanese for basic assurances from the United States, Ikeda smiled and said, “You realize that Japan has been a modern state for less than 100 years. It has been traditional in Japanese life for the people to look for guidance, assistance, and support to some wealthy, influential patron. The United States could exploit this attitude to our mutual advantage.” He went on to explain that assumption of the role of protector and advisor need not be costly. What the Japanese so desperately desire is the assurance of someone strong enough to make it meaningful. As a nation they seek the security which such assurance would afford, just as individuals covet the support of an employer, a political mentor, or a wealthy friend. Ikeda observed that perhaps the United States was making a mistake to treat Japan as a sovereign nation equal in strength and importance to itself. Perhaps, he said, [Page 1659] it would be better if the relationship were that of a teacher to his student. We commented that before the war the Japanese had had the advantage of the British alliance and that this had been the focal point for many years in determining their foreign policy. With that relationship no longer in force, Japan was at sea without a rudder and felt the urgent need of a substitute. In a rare burst of confidence, he observed that the Oriental mind, philosophy, and attitude differed from those of the west. He said the Oriental is patient; if something cannot be accomplished immediately, perhaps it can in a hundred years, whereas the American seeks action this minute, this hour, or this day. He characterized Secretary Dulles as an example of a typical American mind. Ikeda went on to say, with a wry expression, that perhaps the British were wiser and more skillful, even though often more insolent and insulting, and observed that the United States appeared frequently to have been used by the British to support their policies and to accept the disapprobation therefrom.

It was obvious that Ikeda was pleading for the understanding of the United States and the continuation (with appropriate modifications) of the role of Shogun so admirably filled during the years of occupation. He probably spoke for a majority of the Japanese who would like to feel the comforting security of the strength of the United States acting in the role of patron and mentor. The traditional need of Japan for such a sponsor offers the United States a unique opportunity.

  1. This memorandum is the enclosure to a covering note from Waring to McClurkin dated June 17. A portion reads: “We in the Embassy are digesting the information it contains, and you may recognize portions of it in future telegrams attempting to interpret the political scene.” (794.00/6–1754) Several undated commentaries, which apparently originated in Washington, are attached to the source text. They are not printed.
  2. Hayato Ikeda held the post of Finance Minister from February 1949 to October 1952.
  3. A single Conservative Party was not formed at this time.