Foreign Relations of the United States, 1961–1963, Volume XXII, Northeast Asia

353. Paper Prepared in the Department of State⁰

Washington, March 22, 1962.

SETTLEMENT OF THE UNITED STATES CLAIM FOR POSTWAR ECONOMIC ASSISTANCE TO JAPAN (GARIOA)

On January 9, 1962, the Agreement between the United States and Japan for the Settlement of Postwar Economic Assistance to Japan (GARIOA) was signed in Tokyo.¹ It formalizes the Memorandum of Understanding initialed in Tokyo on June 10, 1961,² prior to Prime Minister Ikeda’s visit to Washington. The Agreement is now pending before the Japanese Diet for ratification.

The Agreement provides for payment to the United States by Japan of the principal sum of $490 million over a period of 15 years in semiannual installments, with interest at 2-1/2 percent per annum on the unpaid balance. Accompanying exchanges of notes provide that 1) the United States intends, subject to appropriate legislation, to use the major portion of the payments to further its economic assistance programs and 2) the United States will accept $25 million of the total repayment in yen to be used for educational and cultural exchange between the two countries. A letter handed to the Japanese Foreign Minister on January 9 states the U.S. intention to accept this $25 million in yen from the first two installments.

The bulk of the assistance to Japan covered by this Agreement was provided under U.S. Appropriations Acts for Government and Relief in Occupied Areas (GARIOA) for fiscal years 1947 through 1952, plus assistance provided on an emergency basis by the Army prior to the GARIOA appropriations. Total disbursements for Japan under these appropriations were about $1.99 billion. After deductions for U.S. administrative expenses, counterpart funds not of direct benefit to the Japanese economy, etc. the U.S. claim for GARIOA assistance to Japan was about $1.8 billion.

Formal negotiations with Japan on this claim began in May 1954. Settlement has been delayed to await the settlement of Japan’s reparations obligations and because of a series of difficult political and economic problems in Japan. Since the opening of the negotiations this claim settlement has been a major political issue in Japan, where many people have considered this assistance to be a gift. Although each succeeding Japanese Prime Minister since 1952 has publicly and privately recognized GARIOA as a “debt of honor,” Prime Minister Ikeda is the first to take steps to make a settlement.

The Socialist Party, the Democratic Party and certain elements of the Liberal Democratic Party have opposed settlement of GARIOA from the beginning. The government in power has been subjected to questioning on this matter at each succeeding session of the Diet since 1954. With the Agreement now pending before the Diet for ratification, the Socialist Party is organizing its opposition to it. All opposing factions are expected to seek to use the coincidence of the settlement with Japan’s present deteriorating foreign exchange position to embarrass Ikeda. The Ikeda government appears to have prepared well for debate on this issue and to date appears to be handling it with considerable skill. Although particularly acrimonious debate centering on U.S.-Japanese relations is expected, present estimates are that the Agreement will be ratified in May.³

In accordance with U.S. intention expressed in one of the exchanges of notes, the proposed Foreign Assistance Act of 1962 contains a provision making available for appropriation the dollar repayments of Japanese GARIOA for the purposes of the Act.⁴

0. Source: Kennedy Library, National Security Files, Countries Series, Japan, 3/62. Confidential. Attached to a covering note from Battle to McGeorge Bundy. A handwritten note, signature illegible, indicates that this paper was prepared pursuant to the President’s request for information on the subject.
1. For text of the Agreement regarding the settlement of postwar assistance to Japan with exchanges of notes, signed at Tokyo on January 9, 1962, and entered into force on September 11, 1962, see 13 UST 1957.
2. A text of the Memorandum of Understanding is attached to despatch 1391 from Tokyo, June 12, 1961. (Department of State, Central Files, 294.1141/6-1261) A memorandum from McConaughy to Rusk, June 6, 1961, contains a summary of the negotiations leading up to the memorandum. (Ibid., 294.1141/6-661) Additional documentation is ibid., 294.1141 for 1961, 1962, and January 1963; documentation for the remainder of 1963 is ibid., FN 14 JAPAN.
3. By May 1962 the GARIOA Agreement had been approved by Parliament, but domestic enabling legislation (for which the Japanese Government preferred to wait until exchanging notes putting the Agreement into effect) would not be passed until September. Documentation is ibid., 294.1141.
4. Once the GARIOA Agreement had gone into effect on September 11 the United States and Japan negotiated further regarding the method of repayment under it. Documentation on these negotiations is ibid. For text of the Agreement relating to the payment by Japan of the first and second installments under the agreement of January 9, regarding the settlement of postwar assistance, see 14 UST 202.