No. 798
Memorandum by the Ambassador in Japan (Allison) to the Secretary of State1

The negotiation of next year’s Japanese defense budget (and Japan’s share of USFJ local costs) will bring to the fore perhaps the most important decision the US has had to make in Japan since the peace treaty went into effect.
Last year we succeeded in obtaining a moderate increase in defense spending and the Japanese force goals after a major strain in our relations, the exercise of strong persuasion at the highest level, and the inducements of expanded OSP and the prospects of additional economic aid. In June, two months after our mutual understanding had been recorded in an exchange of letters with the Foreign Minister, the budget (including the defense budget) was cut 10% without notice to the U.S.
This year we are already on notice that the Japanese intend to cut their defense budget and to reduce their support for USFJ. This planning decision results from:
declining OSP and special dollar earnings
Japan’s determination to maintain the outer limit of its one trillion yen austerity budget;
Japan’s prospective assumption of GARIOA and reparations payments;
a growing feeling in Japan that the world situation has shifted to a period of relaxation;
a gathering force of neutralism in Japan, which has increased greatly in the past year and is now probably the dominant opinion in the country.
The force of Japanese neutralism should not be underrated. It is fed by military considerations (participation in war on either side in a thermonuclear age would mean the extinction of the Japanese people); by economic (Japan suffered greatly in the last war, while neutrals such as Sweden, Switzerland, and India profited; Japan itself profited hugely from the Korean War); by political (a deep racial sentiment that Japan should not fight against Asians on the side of Western powers); and by social (the effort to prepare for war is too great; it would bring back a military ascendancy; it would [Page 1718] entrain severer domestic consequences than accommodations and compromises with any potential enemy).
It is possible that, by a major effort which would shake US–Japan cooperation to its foundations, we could off-set these considerations and obtain the same, or a slightly higher, level of military expenditure by Japan—for another year at least. This would involve the exertion of great persuasion and unquestionably a substantial increase in economic aid. And the amount of persuasion and the close link between a military build-up and economic aid would largely nullify the friendly benefits we should expect from expanded assistance.
Before we make this effort which will wrench our cooperation and alienate increasing numbers of Japanese—and before we decide to foot the bill, one way or another, for whatever slight military increases we can obtain—we should take a hard look at the practical gains and losses involved. This will involve a searching examination of a number of our assumptions about Japan and the Far East. Among the most important questions to be asked are:
Do we expect war with the Soviets or Chinese Communists so soon as to compel the most rapid accumulation of military power at any cost, economic or political? If we do, this controls the case. If we think however we are in for a longer pull in which the cold war may continue for decades—unless there is an accident of miscalculation—then our effort should be directed more toward the development of durable relationships within the non-communist world. Is not our basic objective a strong, independent Japan living within the diversity the free world permits?
To what extent have our strategic concepts for Japan been refined by special weapons developments? From the strategic point of view, how useful is Japan as a base for military operations? There are more than fifty bases in the Soviet-Chinese–North Korean air complex which can cover every industrial area in Japan with light bombers. They similarly cover our own eight air bases and three navy stations. Reduction of all these Japanese areas could be accomplished with nuclear weapons in a matter of minutes, not months. In the event of war, Japan as a defensive base would be burdensome; as an offensive base it could quickly be nullified.
If these conditions obtain for existing plant, what is the justification for our insistence that US economic aid, OSP, and surplus agricultural counterpart should be directed exclusively toward the expansion of defense industries? Does not this commit our forces to their protection, reduce our flexibility, and increase our burden of protecting a virtually indefensible area against enemy capture or interference? If the Japanese were in position to make a more substantial contribution to their own defense, the affirmative case for the development of a defense industrial base in Japan would be stronger. In present circumstances, and in a situation in which we are inactivating defense industries in the US, the present dedication [Page 1719] of economic aid in Japan to defense industry seems to require re-examination.
How feasible economically and over what period of time, are our force goals for the Japanese? So far as the Embassy is aware, no accurate projections of the ultimate costs of the Japanese defense establishment have ever been compiled. What share of Japanese national revenues will have to be devoted to the support, maintenance, and renewal of Japanese ground, sea, and air forces? Over the longer run, what are the assumptions of US contributions to this establishment? What are the prospects for expanding Japanese exports—from their present billion dollar a year deficit—sufficiently to pay these costs plus: a) servicing Japan’s foreign exchange obligations; b) modernizing its largely obsolescent industrial plant; c) contributing to underdeveloped SEA area; d) providing food and jobs for a population that is steadily increasing by million a year with an annual net increase of employables of 800,000; e) paying GARIOA reparations and other World War II external obligations?
How practical is it to continue our support and our advocacy of expanded and modern military forces and an industrial mobilization base in a country where the most rudimentary internal security controls have yet to be established? No legal definitions of treason, espionage, or state secrets exist. The communist party, the communist fronts, and communist labor unions are all legal, flourishing, and unmolested. No program of protection against industrial sabotage has ever been discussed. So primitive is the situation that it now seems probable that the Japanese civil service accomplices of Rastovorov2 can be prosecuted only for illegal currency transactions under the Foreign Exchange Law.
These are not questions which can be answered in a day. If the Secretary approves, the Embassy would propose to initiate a study of them, jointly with other US agencies in Japan, with a view to submitting a reappraisal of our Japan position prior to Mr. Yoshida’s arrival in Washington.
This reappraisal would necessarily include an examination of an alternative course of action. The premise would be defense against attack from within, not without as at present. It would require a shift in the emphasis of our policy over the immediate period ahead from defense to economics and internal security. We would then seek to use economic aid—or Japan’s foreign exchange obligations to us—to promote the reintroduction of Japan into the world trading community, to solve the reparations deadlock and foster SEA economic regionalism, and to modernize Japan’s industries. We would insist that the Japanese Government deal effectively with the problem of internal security, the communist manipulated [Page 1720] press, the leftist-controlled schools. We would seek to assist in creating a stronger Japanese government at home and in increasing the prestige and participation of Japan in Asian and world affairs.
This would involve, for some years, an acquiescence in the military impotence or neutralization of Japan. But until a stronger Japanese Government comes into being, until there is a recovery of national spirit and purpose, until Japan’s international economic position is considerably improved, and until there is an effective internal security system, this acquiescence would be no more than a recognition of the facts of the situation. It would mean, once again, that given a rough balance of (atomic) power, what we are striving to develop is the strength of the non-communist world, not the maximum military forces in being that they can build. We do not follow such a course ourselves.
Out of such a shift in our policies should come a stronger and, very possibly, a more cooperative Japan. Unless there is such a Japan our military assistance program will have no future. We should not of course abandon our military aid program, but we should limit it to what the Japanese decide they wish to have and we should be prepared to proceed with the relocation of the Far East Command and the withdrawal of our forces on whatever schedule the US national interest alone dictates. Paradoxically, for Japan, the absence of US insistence that Japan increase its military forces and the conviction that the US has only a secondary strategic interest in Japan may do more to establish valid and reciprocal defense commitments than any other course of action we might select.
J. M. Allison
  1. For background information concerning this memorandum, see the letter from Parsons to McClurkin, Document 802.
  2. In a press release dated Aug. 13, the Department announced that Yuri Alexandrovich Rastovorov, a former official of the Soviet Mission in Japan, had asked for and received asylum in the United States. For text, see Department of State Bulletin, Aug. 23, 1954, p. 271.