Foreign Relations of the United States, 1958–1960, Japan; Korea, Volume XVIII

202. Memorandum of Conversation⁰

Washington, September 30, 1960.

SUBJECT

• Visit of Japanese Finance Minister

PARTICIPANTS

• Government of Japan
  • Mr. Mikio Mizuta, Japanese Finance Minister
  • Mr. Masao Kiya, Chief of the Foreign Exchange Bureau, Ministry of Finance
  • Mr. Yoshisuke Isoda, Financial Commissioner in the Ministry of Finance
  • Mr. Yusuke Kashiwagi, Financial Secretary, Embassy of Japan
• United States
  • Mr. Douglas Dillon, Under Secretary of State
  • Mr. David M. Bane, Director, Office of Northeast Asian Affairs
  • Miss Thelma E. Vettel, Acting Officer in Charge, Economic Affairs, Office of Northeast Asian Affairs

Minister Mizuta opened the conversation by expressing the hope that the Under Secretary would extend the same cooperation and assistance to him as he had to the Minister’s predecessor, Minister Eisaku Sato. The Minister said that since the unfortunate June disturbances in Japan the atmosphere had entirely cleared up and that shortly the Diet would be dissolved and elections would take place. The Minister expected “very good results” from the elections. He characterized the present Ikeda government as “pro-American” and expressed the belief that after the elections that government can do more for United States-Japanese relations.

The Minister then reviewed recent developments in Japan. On the political side, he said, the situation had been stabilized. On the economic side, with the support and cooperation of the U.S., the situation was going well and the Japanese hoped for a large growth in their economy over the next few years. The Minister said that to attain this desired growth Japan needs foreign capital and that during his visit to this country he has been making contacts in an effort to obtain such foreign capital.

With respect to trade and exchange liberalization, the Minister said that the Japanese Government has prepared a program which will liberalize commodity import restrictions over a period of 3 years and invisible import restrictions over a period of 2 years, with the objective of at least 80 percent liberalization during this period. He added that discrimination against dollar goods would be entirely removed by the end of this year. The Minister requested U.S. assistance in obtaining removal of restrictions on Japanese imports by other countries.

The Under Secretary expressed deep appreciation for the visit of the Crown Prince and Princess. He said that their visit to Washington had fully borne out the good reports which had been received regarding their visit to the West Coast. He said that this had been one of the most successful visits primarily because of the picture presented by the Crown Prince and Princess who reached the hearts of the American people.

The Under Secretary said that we feel that we can work very well and closely with the government of Prime Minister Ikeda since we know him well and believe that his government has an appreciation of the great problems and issues of the day which is very similar to ours. He expressed the belief that the Ikeda government shares our desire to remain free and to develop institutions of democracy and freedom, rather than to go in the other direction by imposing controls on all the people. It is for these reasons that we believe that the U.S. and Japan can cooperate closely together in our mutual interests. We prefer to think of our relationship with Japan as based upon mutual goals and attitudes rather than the fact that the Japanese Government is considered to be “pro-American”.

With respect to trade liberalization, the Under Secretary welcomed the steps already taken by Japan and was glad to hear of the program outlined by the Minister since it would move toward the goals which we think are attainable now that the Japanese economy is developing so well. The Under Secretary added that, while we realize that after having a regime of controls for a good many years it is impossible to get rid of them all at one time, the U.S. hopes that the Japanese Government would keep this matter under continuous study and review with the objective of moving as rapidly as possible. While 3 years are all right, the Under Secretary expressed the hope that conditions would be better than expected and that it would be possible to complete this program even faster than planned.

Minister Mizuta referred to the question of Japan’s raising tariffs in order to speed up the liberalization of commodity imports. He said that the proposed tariff increase on soyabeans and a few other commodities (under Article XXVIII of the GATT) was not for the purpose of restricting trade, but rather to enable liberalization of quota restrictions on those commodities. He said that these were necessary to ease the adjustments within the Japanese economy which would result from liberalization. He added that the Japanese Government expected the volume of trade to increase as a result of these actions.

The Under Secretary recognized that, upon moving from a closed economy to a free one, adjustments occurred such as price levels etc. On the other hand, he said, Article XXVIII is a very powerful and dangerous instrument, and it is the belief of the U.S. that it must be used with great discretion and not too often; it can be used to make a tariff as restrictive as a quota. He pointed out that the U.S. has been under pressure on this subject and has tried to resist using Article XXVIII. He explained that the sensitivity on this subject in the U.S. stems primarily from the fact that we negotiated tariff concessions in order to gain accession to the GATT for Japan; Japan’s withdrawal or modification of those concessions now creates uncertainty in the U.S. and raises a question as to what the trade policy of Japan really is. He said that this is something which Japan must decide for itself, but he emphasized that it is a delicate operation and that the U.S. hopes that it will be used with discretion.

With respect to Japan’s trade with other countries, the Under Secretary said we recognize that Japan should be treated in a non-discriminatory fashion. He said that the U.S. has tried to keep its markets open and pointed to the fact that Japan’s exports to the U.S. have been growing. He said that the U.S. has also tried to help with the other countries and has always spoken up in the GATT, and at every opportunity has talked individually to other countries in favor of non-discriminatory treatment for Japanese exports. He pointed to our success with the French and with Chancellor Adenauer in obtaining some relaxation of restrictions against Japanese imports. He said that we would continue with these efforts since we feel strongly that this is how the problem can best be handled. He added that the U.S. also believes exports must be handled carefully to avoid flooding markets and expressed appreciation for what the Japanese Government and business has done with respect to U.S. markets and what he assumed they were also doing with respect to other markets.

Minister Mizuta expressed appreciation for U.S. efforts on behalf of Japan. With respect to proposed tariff increases he pointed out that in the case of automobiles the increase would not affect American cars. With respect to soyabeans, he said that the tariff increase would of course be restrictive if it were a 40 percent increase; the Japanese are, in fact, asking for only a 3 percent increase.

With respect to Japan’s need for foreign capital, the Under Secretary said our Embassy at Tokyo has reported that steps have been taken by the Japanese Government to facilitate equity investment and to make the operation of foreign businesses in Japan a little easier. He welcomed these steps and expressed the hope that this tendency would continue. He said there is a great interest in Japan among U.S. business firms which could result in considerable investment there if they are welcomed.

The Under Secretary referred to the concern of American oil companies which operate in Japan over the proposal which we understand is being considered by the Japanese Government for bringing in as “yen oil” the crude oil produced in the Persian Gulf by the Arabian Oil Company. The Under Secretary said that we recognize basically that this oil should and must go to Japan and be used there, and that it will increase in quantity as production develops. What the American oil companies desire is that the importation of this crude be handled in a way that is fair and non-discriminatory to avoid undue difficulties for them. The Under Secretary expressed the hope that this concern be taken into account by the Japanese Government in finding a solution to this problem.

Minister Mizuta said he believed the situation was being explained to the American oil companies in Japan. He emphasized that, with the prospects for Japan’s future economic development, requirements for petroleum would so increase over the next several years that imports from the Arabian Oil Company would not result in decreased imports from the American oil companies.

The Under Secretary referred to the Minister’s discussion with Secretary of the Treasury Anderson on September 29 regarding the U.S. GARIOA claim.¹ While not wishing to repeat the points made by Secretary Anderson, the Under Secretary emphasized our great interest in reaching a settlement of this claim. Although he recognized that negotiations prior to the forthcoming Japanese elections would not be practical, he expressed the hope that after the elections we can sit down and settle this claim, which is about the only major remaining problem outstanding between the two countries. The Under Secretary welcomed the assurances which we have received on this score since Mr. Ikeda has become Prime Minister and expressed the hope that settlement could be reached soon after the November elections. In response to the Minister’s inquiry, the Under Secretary said he had full knowledge of the Minister’s conversation with Secretary Anderson on this matter.

0. Source: Department of State, Central Files, 033.9411/9–3060. Drafted by Vettel and approved by U on October 13.
1. A brief summary of the conversation between Anderson and Mizuta on September 29 was transmitted in telegram 650 to Tokyo, October 5. (Ibid., 033.9411/10–560) See Supplement. Regarding the GARIOA claim, understandings for continued negotiations toward a final settlement by representatives of the two governments were reached in June 1961.