254. Memorandum From the Director of the Office of Northeast Asian Affairs (Parsons) to the Assistant Secretary of State for Far Eastern Affairs (Robertson)1
SUBJECT
- Reduction in Japanese Yen Contribution
Basis of Japanese Contribution and Agreed Formula for Reduction.
Article XXV of the Administrative Agreement provides that Japan will bear the cost of: (a) facilities and areas used by United States Forces alone or jointly with Japanese forces; and (b) transportation and requisite services and supplies in Japan, paid for in yen in an amount equivalent to $155 million per annum, “until the effective date of any new arrangement reached as a result of periodic re-examination”. Annex G to the Agreement provides that the specific amount should be agreed annually by the two Governments.
The Japanese contribution has been gradually reduced as a result of annual negotiations. In order to provide for a systematic reduction as the Japanese forces were increased and to avoid acrimonious negotiations, a formula was agreed upon on April 25, 1956 (Tab C)2 whereby the United States would accept a reduction in the Japanese yen contribution for each ensuing fiscal year equivalent to one-half of the increase in Japanese expenditures for its own defense forces for that fiscal year as compared to the previous year. The formula was applied for the first time in Japanese Fiscal Year 1957.
Japanese Request.
The Japanese have requested (Tab A)3 that the United States agree to a further reduction in the Japanese contribution over and above that envisaged in the formula. For political reasons the Japanese Government is determined to hold the total defense expenditures to approximately 145 billion yen. If the United States agrees to a further [Page 557] reduction in the yen contribution in addition to that provided in the formula, it will be possible to increase the appropriation for the Defense Agency. The following table, based upon recent telegrams from our Embassy at Tokyo, compares the defense appropriation for JFY 1957 with the anticipated defense budget for JFY 1958 (April 1, 1958 to March 31, 1959), with and without additional reduction of 3 billion yen as recommended by Ambassador MacArthur (Tab B).4 The table is in billions of yen (1 billion yen equals $2.8 million.)
| JFY–57 | Estimated JFY–58 Present Formula | Estimated JFY–58 With Reduction | |
| Defense Agency | 101.0 | 112.0 | 120.0 |
| Facilities for U.S. Forces | 10.5 | 8.0 | 8.0 |
| Contribution to USFJ | 29.6 | 25.3 | 18.35 |
| Total: | 141.1 | 145.3 | 146.3 |
Revision of Present Formula.
It would be possible to implement Ambassador MacArthur’s recommendation through revision of the present formula to provide for a two-thirds reduction instead of the present one-half. The result which closely approximates Ambassador MacArthur’s recommendations would be as follows:
| JFY–58 Computed by Revised Formula | |
| Defense Agency | 120.0 |
| Facilities for U.S. Forces | 8.0 |
| Contribution to USFJ | 18.6 |
| Total: | 146.6 |
The advantage of meeting the Japanese request in this manner is that it will continue to provide an incentive for the Japanese to increase their defense expenditures in order to phase out the contribution to the support of the USFJ and it will also provide a rational basis [Page 558] for explaining our action to the Congress—the more rapid withdrawal of USFJ than that anticipated at the time of negotiation of the original formula resulted in a revision in the rate of reduction in the yen contribution.
Recommendation.
That you authorize me to seek agreement with the Department of Defense, and the concurrence of Embassy Tokyo, to a revision in the present formula to provide for a two-thirds reduction in lieu of the present one-half reduction.6
- Source: Department of State, Central Files, 794.5/12–3057. Confidential. Drafted in NA.↩
- Tab C not found attached. See Document 75 and footnote 3, Document 69.↩
- Tab A was telegram 1703 from Tokyo, December 30, not found attached. In telegram 1703, marked “For Secretary and Robertson” and passed also to CINCPAC for POLAD and to COMUS Japan, MacArthur reported that in a further meeting with Fujiyama on the yen contribution problem, the Foreign Minister had emphasized the government’s vulnerability to Socialist attack on the issue and asked again for U.S. reconsideration of its position. (Department of State, Central Files, 794.5/12–3057)↩
- Tab B was telegram 1704 from Tokyo, December 30, not found attached. In it MacArthur recommended that the United States accept 3 billion of the 4 to 5 billion yen reduction suggested by Fujiyama. “At heart of matter is basic political concern that failure of govt to secure some concession from US will be tremendous political liability to conservatives in next election and to Kishi personally in his hopes to maintain and strengthen his hold on party leadership.” MacArthur indicated that he had reached this conclusion after he and the Embassy staff had “canvassed at all levels of GOJ and LDP” in an effort to evaluate “political argument of Kishi and Fujiyama”. (Ibid., 794.5/12–3057)↩
- 21.3 as computed by formula minus additional 3.0. [Footnote in the source text.]↩
- Handwritten notations on the source text by Parsons indicate that Robertson approved this recommendation after discussion with Herter.↩