Foreign Relations of the United States, 1955–1957, Japan, Volume XXIII, Part 1

223. Memorandum From the Director of the Office of Northeast Asian Affairs (Parsons) to the Assistant Secretary of State for Far Eastern Affairs (Robertson)¹

Washington, September 13, 1957.

SUBJECT

• Fujiyama Visit—Defense Proposal to Japanese to Substitute Reimbursable Aid, Payment in Yen, for Present Military Assistance Program Aid

On December 17, 1956, in a joint State–Defense–ICA message (DEF 915079 attached as Tab B)² a proposal, originating in the Defense Department, was submitted for comment to CINCFE and Embassy, Tokyo, the key element of which would be a) the purchase by Japan under the reimbursable aid provisions of the Mutual Security Act of the equipment needed to meet its force goals (instead of the furnishing of such equipment as U.S. grant-aid), b) payment by Japan for such equipment in yen, and c) the use of such yen receipts by the U.S. to procure in Japan items needed for Military Assistance Programs (MAP) in other Asian countries.

A joint Embassy/CINCFE/MAAG–Japan reply of April 30, 1957 (FE 804868 attached as Tab C)³ strongly expressed the view that this proposal would not accomplish the goals of inducing a higher level of Japanese defense expenditure, achieving a sound and mutually satisfactory military relationship with Japan, and developing and utilizing Japanese defense production facilities to meet Asian MAP requirements. The Embassy and CINCFE pointed out that a substantial reduction or termination of grant aid would probably result in unwillingness on the part of Japan to appropriate the larger sums required to meet the force objectives of the six-year plan. They also believed that the advantages of using yen instead of dollars for reimbursable aid would be small and the disadvantages to the U.S. might be substantial, since the Japanese would probably consider such a proposal favorable only if assurance could be given that the yen used for U.S. procurement in Japan would be additional to the amounts the U.S. would otherwise spend for procurement in Japan. Furthermore, they believed, Japan might demand a greater voice in the procurement for which yen is used than it has with respect to current procurement. The Embassy and CINCFE recommended that the present gradual substitution of reimbursable aid (on a dollar basis) for grant aid be continued and that the current applicable U.S. policies be effectively carried out by procurement in Japan of items and services required for Asian MAP and U.S. forces in Asia when such procurement is to U.S. advantage.

Since receipt of the April 30 message this proposal has not been discussed with this office by any representative of the Defense Department.

Deputy Assistant Secretary of Defense SHUFF met in June with Admiral Hoshina and Mr. Uemura of Prime Minister Kishi’s party and with Mr. Kaihara of the Japanese Defense Agency to discuss certain matters of mutual interest. Our first knowledge of these meetings came from a telegram from Embassy Tokyo of August 5 (Tab D)⁴ reporting that during these discussions the Japanese were told that beginning with USFY1959 MDA grant aid to Japan would be drastically reduced and that Japan would be expected to proceed on the basis of reimbursable aid with payment in yen which the U.S. would use for procurement in Japan of military equipment for third countries in Asia. The Embassy reported that this had caused great confusion, deep concern and considerable press comment in Japan, leading to the querying of the Prime Minister, himself, on August 1 by the Foreign Affairs Committee of the Upper House of the Diet.

In response to the Embassy’s telegram a joint State–Defense message was sent on August 8, cleared by Mr. SHUFF, stating that no proposals were made at the meetings with the Japanese, and that no such plan had been developed by the U.S. Government nor discussed officially with the Japanese (Tab E).⁵

On August 23 Mr. Yasukawa, Counselor of the Japanese Embassy, came in to inquire if the U.S. was seriously intending to discontinue MAP aid to Japan. He said that Mr. SHUFF’s “proposal” had disturbed the Japanese Government, which had based its Three Year Defense Plan on the assumption that MAP aid would be the source of certain items. (Memorandum of Conversation attached as Tab F.)⁶

Meanwhile at an inter-departmental meeting on the FY1958 programs, in response to FE questions regarding provision for a follow-on aircraft production program in Japan and the significance of “deferment” of a large portion of the Japanese program, Defense representatives referred to the “proposed package triangular deal discussed with members of the Kishi party” as related to plans for aid to Japan. (Memorandum attached as Tab G.)⁷

Further investigation by NA revealed that the yen reimbursable aid arrangement had been strongly recommended to the Japanese by Mr. SHUFF during his May and June conversations with them. (Excerpt from stenographic record of Mr. SHUFF’s conversation with Mr. Kaihara attached as Tab H.)⁸ It is easy to see how a suggestion of this kind made by a Deputy Assistant Secretary of Defense would be considered by the Japanese to be an official proposal.

An official–informal letter of August 27 and a telegram of September 10 (Tabs I and J)⁹ from Embassy Tokyo again refer to the confusion caused by this proposal and the Embassy’s efforts to assure the Japanese that no such proposal had been made. Our Ambassador also reports that Foreign Minister Fujiyama intends to raise the matter with both State and Defense during his forthcoming visit.

It is apparent that this suggestion made unilaterally to the Japanese by Defense officials has caused unnecessary confusion and concern in the Japanese Government. This is particularly unfortunate in view of the fact that the proposal has not been fully considered or approved by all U.S. Government agencies concerned. Therefore, I believe that it is imperative that the problem be brought to the attention of Assistant Secretary of Defense Sprague with the request that the Defense Department cooperate fully in clarifying the matter with Minister Fujiyama and that in future such proposals be appropriately cleared before being presented to the Japanese.

Recommendation:

It is recommended that you sign the attached letter to Assistant Secretary Sprague enclosing for clearance a proposed position paper for use in discussions with Minister Fujiyama (Tab A).¹⁰

1. Source: Department of State, FE Conference Files: Lot 60 D 514, Fujiyama Visit. Confidential. Drafted in NA on September 11 and concurred in by U/MSA.
2. Not found attached and not printed. (Department of Defense Files)
3. Not found attached and not printed. (Ibid.)
4. Telegram 315 from Tokyo, August 5, not printed. (Department of State, Central Files, 794.5–MSP/8–557)
5. Telegram 311 to Tokyo, August 8, not printed. According to a typed notation on this telegram, it was cleared with SHUFF in draft. (Ibid., 794.5–MSP/8–557)
6. Martin’s memorandum of his conversation held August 23 with Takeshi Yasukawa is ibid., 794.5–MSP/8–2357.
7. Not found.
8. Not found.
9. Tab I was not found. Tab J was a copy of telegram 730 from Tokyo, September 10, in which the Embassy pointed out that the information given Martin by Yasukawa on August 23 contradicted the assurances contained in telegram 311 (cited in footnote 5 above) and that Japanese officials still hoped to obtain further clarification. (Department of State, Central Files, 794.5–MSP/9–1057)
10. Robertson signed the letter, which is dated September 14. In it he reviewed the matter along the lines outlined above and concluded: “In order to avoid future misunderstandings of this kind, I urge that in the future care be exercised by members of your staff in their discussions with Japan officials and prominent Japanese citizens and that they refrain from making proposals or suggestions of a basic nature which have not been fully cleared within this Department and other interested United States agencies.” The draft position paper, enclosed with the letter but dated September 13, contained the following paragraph: “Although certain individuals may have given thought to the possibility of such an arrangement, no plan for the replacement of grant aid by the sale of military equipment to Japan for yen which would be used by the U.S. for third country military procurement in Japan has been developed by the U.S. Government.” (Both ibid., 794.5–MSP/9–1457) The position outlined in this paper is marked for discussion at Japanese initiative only; Fujiyama apparently did not raise this question.