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

231. Telegram From the Department of State to the Embassy in Japan¹

Washington, September 25, 1957—6:29 p.m.

740. Ichimada met with Treasury Secretary Anderson afternoon September 23.² Minister expressed thanks for Treasury help in assisting Japan successfully meet balance payments problem. In August international payments nearly balanced, reserves expected increase somewhat by end current FY. Minister said prices down by about 5 per cent since July, hoped trend would continue by like amount next 6 months. Draft JFY 1958 budget expected produce surplus of 50 to 100 billion yen. Forecast visible imports $3.2 billion, exports $3.15 billion, invisible account surplus $250 million, overall balance payments surplus $200 million end JFY 1958. Reiterated determination follow firm fiscal, monetary policy achieve financial stability, strengthen yen position.

Minister stated Japan contemplating IBRD loan request of about $300 million covering 5 year period for power, steel, highways. First priority given power, with projects handled in cooperation IBRD mission to Japan.

Minister expressed fear pound devaluation as half Japan’s trade with sterling area. Secretary Anderson revealed feeling British determined hold present value pound, said basic position appeared strong while speculation primary disturbing factor.

Minister said U.S., Germany appeared draining foreign exchange, implied both nations should take more steps correct situation. Secretary Anderson pointed out U.S. lost $13 billion dollar exchange during last decade, and that net dollar flow was out again second half 1957 after net inflow of dollars during first six months. He mentioned also that Germans had offered $75 million loan to IBRD. Minister expressed gratification and hoped for continuance new trend and constructive action. Particularly approved of IBRD,IMF activities in Far East. Secretary Anderson pointed out U.S. encouraging both institutions, said internal action by member countries basic to achieve stability, complimented Minister on Japan’s firm action.

Minister stated it generally accepted in Japan that Prime Minister Kishi’s government would continue several years but said Japanese leftist sentiment a serious factor. Defense budget particular left wing target. Japan determined keep promise increase defense but hoped [for] U.S. agreement substantial reduction Japan’s share cost maintenance U.S. forces in Japan in view U.S. force withdrawals. Hoped for sympathetic U.S. consideration this problem.

Secretary Anderson noted request but hoped in turn that the Japanese would meet our request for early GARIOA settlement. Minister said he promised year ago Japan would turn to GARIOA negotiation after settlement Indonesian reparations. Kishi planned visit Indonesia soon, hoped for early settlement. Minister reiterated would keep GARIOA in mind “for this is an issue which we recognize we must settle.”³

Japanese noted withdrawal half U.S. forces would mean sharp decline troop expenditures, expressed hope increased U.S. procurement to partly offset decline yen sales. Secretary Anderson stated U.S. would look into problem. He closed by indicating crucial importance timing in control inflation and danger responding too soon to pressure for relaxation. Minister agreed, said he determined resist pressure for premature relaxation.⁴

Dulles

1. Source: Department of State, Central Files, 894.10/9–2557. Confidential. Drafted in NA, cleared in substance with the Treasury Department, and approved by Matlock.
2. Minister of Finance Hiyato Ichimada accompanied Fujiyama to Washington.
3. Japan and the United States did not reach agreement on a GARIOA settlement during 1957.
4. Telegram 738 to Tokyo, September 25, drafted in the Department of Commerce and cleared in NA, summarized discussion during a courtesy call by Ichimada on Secretary Weeks. (Department of State, Central Files, 033.9411/9–2557) Ichimada called on Secretary Dulles on September 26. Disarmament, world trade, and an Asian economic development fund were the principal topics of discussion. On the last subject, Dulles reiterated the U.S. position along the general lines he had set forth to Fujiyama on September 23 (see Document 229). (Memorandum of conversation by Ockey, drafted September 27; Department of State, Central Files, 611.94/9–2657)