Foreign Relations of the United States, 1961–1963, Volumes VII, VIII, IX, Arms Control; National Security Policy; Foreign Economic Policy, Microfiche Supplement

364. Memorandum of Conversation between Ball and Japanese Ambassador Takeuchi, July 29¹

July 29, 1963

SUBJECT

• Interest Equalization Tax—Japan

PARTICIPANTS

• • Ryuji Takeuchi, Ambassador of Japan
  • George W. Ball, Under Secretary of State
  • Mortimer Goldstein, Deputy Director, OFE
  • Thelma E. Vettel, Special Assistant to the Director, EA

Ambassador Takeuchi referred to his conversation of July 26 with Secretary of the Treasury Dillon and Under Secretaries Fowler and Roosa regarding this subject. As it stood following that conversation, the U.S. Government had indicated it was not prepared to extend an exemption to Japan. But, he said, the matter is still under negotiation. He said the Japanese economy was being greatly affected by this action. The stock market was again collapsing; on July 29 it fell another 59.54 points to the lowest postwar level. He said the stock market drop since July 18 was the greatest since World War II. The most recent drop was caused by press reports (based upon the statements of a “high U.S. Government official”) that after negotiations with Japan the U.S. had decided not to give an exemption to Japan.

The Under Secretary said that one of the problems the U.S. was facing was the fact that the dollar had been under attack. Any indication of a further broadening of the exemption would create problems for us.

The Ambassador said that Prime Minister Ikeda and Finance Minister Tanaka both wanted to minimize the effect of these new measures on Japan’s economy. Therefore they had been saying that the future was not so dark; that the measures would somehow be moderated; and that even with the tax there would be some chance of future borrowings. Meanwhile, he had instructions to explain to the U.S. Government that this was not so. But, he said, the U.S. Treasury is apparently of the opinion that the tax will not greatly affect the Japanese economy. In Japan, however, they were very worried.

The Ambassador’s call on Under Secretary Ball was for the purpose of determining whether the draft legislation would name certain countries for exemption or would leave the granting of exemptions to the discretion of the President. He explained that if the latter were the case the Japanese would have more time for negotiation. If certain countries were named, however, the question of discrimination and of the FCN Treaty would be raised immediately. Furthermore, the Ambassador said, if Canada were to be named in the draft legislation the Japanese must hurry their negotiations. He said his Government was considering sending two Cabinet Ministers to the U.S. for such negotiations. After Saturday’s press statement, however, the Ambassador felt the U.S. would not be in such a hurry to say that Japan was excluded from exemption.

The Under Secretary said that although he had not seen the draft legislation, he was sure it would not name any countries. He said the Department would strongly oppose legislation which did not leave exemptions to the discretion of the President. He asked Mr. Goldstein to determine the status of the legislation and inform the Ambassador later in the day.

1. Interest equalization tax. Limited Official Use. 2 pp. Department of State, Secretary’s Memoranda of Conversation: Lot 65 D 330.