811.05194/7–1954
No. 778
The Ambassador in Japan (Allison) to the
Japanese Minister of Foreign Affairs (Okazaki)1
My Dear Mr. Minister: May I take this opportunity of expressing appreciation for your letter of May 31, 1954,2 on the subject of American investment in Japan, and the offer of your Government to discuss with the Embassy specific proposals for investment.
Your letter reiterates your Government’s long-standing position that it generally welcomes foreign investments. This statement is appreciated for, as you know, it is the belief of the United States Government that foreign investment can make a significant contribution in strengthening Japan’s economy. The Government of the United States believes strongly that Japan should encourage those American investments which will assist Japan in augmenting its foreign exchange reserves. The application of any other policy would not only deprive Japan of assistance it might otherwise obtain, but would also be in contravention of the provisions of the Treaty of Friendship, Commerce and Navigation between our two countries.
It is with this in mind that I take the liberty of commenting on the criteria which you state in your letter will be used by the Japanese Government in evaluating applications for American investment. In the opinion of my Government, the FCN Treaty recognizes only one qualification as modifying Japan’s obligation to grant national treatment to American businessmen seeking to make investments in Japan, with the exception of public utilities and other enterprises specified in paragraph 2 of Article 7. The sole qualification to which I refer is contained in paragraph 6 of the Protocol to the Treaty which recognizes that either party may impose such restrictions on the introduction of foreign capital as may be necessary to protect its monetary reserves. In view of this provision, I regret to note that the Japanese Government intends to apply additional restrictions in screening investments. You indicate [Page 1683] that “it is the policy of the Japanese Government to welcome foreign investments which contribute to the development of our essential industries and public enterprises,” and that the Japanese Government will “consider favorably any application for such investments even if they compete to a certain extent with the domestic industries.” As an overall consideration you point out that careful study must be given to any investment “which would result in an increase of luxury items or purely nonessential commodities in the domestic market.”
My Government believes that the FCN Treaty contains no provision which would permit the exclusion of an American investment on the basis of either the competition it affords to domestic industries, or the degree of essentiality of the investment. The sole criterion recognized by the Treaty is the effect of the investment on Japan’s balance of payments. In view of the recent deterioration in this aspect of Japan’s economy, it would appear that any foreign investment which does not violate Japanese law should be welcome, provided such investment serves to strengthen Japan’s foreign exchange reserves by either expanding exports or reducing dependence upon imports.
In addition to contributing to the strength of Japan’s foreign exchange position, private American capital can provide increased employment, new markets for Japanese products, modern equipment and technology, and new sources of tax revenue. Thus, through increased efficiency and reduction in cost, not only will the competitive position of Japanese products be improved abroad, but also the domestic economy will be strengthened.
The United States has been assisting Japan in a number of ways to cope with its foreign exchange problem. It has been making a substantial portion of its offshore procurement in Japan and promoting arrangements for expanding Japan’s export markets. It has undertaken to provide military assistance to Japan and to pay all dollar costs and part of the yen costs of maintaining United States forces in Japan. To reduce the burden which the United States has assumed principally because of Japan’s foreign exchange difficulties, the United States has a strong interest in assuring that the Japanese Government does not reject such American investments as can be expected to improve Japan’s foreign exchange position. This interest adds to the concern which the United States Government always feels to assure that the treaty rights of individual American investors are respected.
It is my hope that Japan will not deny itself the simple and profitable avenue of self-help which the encouragement of the investment of private foreign capital can afford. I trust further that your Government will re-examine its policies and practices regarding [Page 1684] foreign investment with the objective of modifying them in accordance with the provisions of the FCN Treaty between our two countries. May I request that the subject raised in this letter receive the thoughtful consideration of your Government. I shall hold myself in readiness further to discuss this problem at your early convenience.
Sincerely yours,
-
An unsigned copy of this letter is attached to a letter of July 19 from Waring to Thayer White, Acting Officer in Charge of Economic Affairs in NA. It is the opinion of the editors, since Allison’s letter is not specifically mentioned in Waring’s letter, that it was attached later and represents a true copy of Allison’s letter as sent.
Allison’s letter is based on instruction A–933 to Tokyo, June 21, which was drafted in the Commercial Policy Staff of the Office of Economic Defense and Trade Policy and in NA. (811.05194/6–2154)
↩ - Transmitted in telegram 2984 from Tokyo, June 3, not printed. (811.05194/6–354)↩