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

377. Memorandum of Conversation⁰

Washington, August 2, 1963, 11:30 a.m.

SUBJECT

• The President’s Meeting with the Japanese Foreign Minister

PARTICIPANTS

• The President
• The Secretary of the Treasury
• Under Secretary of State Ball
• Mr. Roger Hilsman, Assistant Secretary for Far Eastern Affairs
• Ambassador Reischauer
• Mr. Robert Barnett, Deputy Assistant Secretary for Far Eastern Economic Affairs
• Mr. William J. Tonesk, Deputy Chief of Protocol
• Mr. James Wickel, Department of State Interpreter
• Foreign Minister Ohira
• Ambassador Takeuchi
• Mr. Michio Mizoguchi, Interpreter (Second Secretary, Embassy of Japan)

The President said he was pleased to have an opportunity to meet the Foreign Minister again, and expressed regret if any actions taken by the United States caused the Foreign Minister to come to Washington at this time.

The Foreign Minister thanked the President for receiving him on such short notice and expressed appreciation for the President’s leadership of the Free World.

The discussion then turned to the subject of U.S. balance of payments measures. The President began by expressing regret that U.S. actions had created difficulties for Japan and by assuring the Foreign Minister that the United States wishes to lessen the impact of these measures on Japan to the extent possible. We recognize that Japan has not actually contributed to our difficulties and has refrained from taking gold from the United States. If the problem concerned only Japan, Canada and the United States, a solution could easily be reached since the American dollar is almost the common currency of these three countries. However, the problem is common to all of us in the Free World. In taking these measures to defend the integrity of the dollar, the United States feels it is acting in the interests of the entire Free World. The great number of dollars outstanding which can be converted into gold is alarming. This outflow of dollars and consequent claims against the U.S. gold reserve cannot be allowed to continue, the United States having already suffered a gold outflow of $15 billion in the last ten years. The American dollar is the very basis for the entire financial system of the West and the cooperation of all parties is required if the dollar is to continue to serve that function. If the value of the dollar were not maintained, then a new monetary system would have to be invented since there is obviously not enough gold to maintain world trade at its present level. This is an area, however, where nations guard their sovereignty most jealously.

The Foreign Minister assured the President that Japan understands the necessity of safeguarding the value of the dollar to maintain the prosperity of the Free World. Japan has cooperated to this end in the past and desires to work even more closely with the United States to help overcome the present difficulties. There will be no change in this basic policy of the Japanese Government. The Foreign Minister expressed confidence that the U.S. balance of payments would be successfully resolved under the fine leadership of the President.

The President expressed appreciation for Japan’s cooperation in a number of problem areas, such as textiles, which has helped to maintain an even flow of trade.

The President repeated assurances that the United States is anxious to explore means of minimizing the unfavorable impact on Japan of the U.S. balance of payments measures. He noted that the joint communique¹ was being drafted with a view to inspiring confidence in Japan, halting the decline of the Japanese stock market.

The Foreign Minister handed to the President a letter from Prime Minister Ikeda,² a copy of which the President had already read. The President remarked that he appreciated the Prime Minister’s concern over the impact on Japan of U.S. balance of payments measures. We recognize that Japan requires a regular inflow of capital.

The Foreign Minister expressed appreciation for U.S. efforts in GATT and for the assistance rendered Japan by the United States with respect to Japan’s entry into the OECD and IMF.

The President inquired whether reference might be made in the joint communique to matters other than the balance of payments. Under Secretary Ball said it might be useful to mention the importance of the partial test ban treaty and Japan’s announced intention to adhere. The Foreign Minister replied that Japan had not considered going so far in the communique. Ambassador Takeuchi added that inserting an additional paragraph on the treaty in the already long communique would make it unmanageable in length and suggested that consideration be given to a separate communique covering other matters. The President said he would leave it up to the others present to decide.

In response to a question by the President, Ambassador Takeuchi said there had been an overall drop of 10 percent in the Tokyo stock market since the President’s speech of July 18. Secretary Dillon compared this to the decline from 734 to 640 in the index of U.S. stock prices in the past year.

As the Foreign Minister rose to leave, the President inquired about the reaction of the Japanese Communist Party (JCP) to the Sino-Soviet split. The Foreign Minister explained that the JCP is basically sympathetic to Communist China but that there is severe internal strife between pro-Peiping and pro-Moscow factions. The JCP has about 100,000 members and polls about 2 percent of the popular vote in Japanese elections. Its real strength, however, is greater than these statistics suggest.

The President asked for the Foreign Minister’s views on the possible course of Communist China in the near future. The Foreign Minister said he believes Communist China will become more active in promoting its ideological position, particularly in Southeast Asia, but will probably remain cautious about undertaking any actions in Southeast Asia.

0. Source: Department of State, Presidential Memoranda of Conversation: Lot 66 D 149. Confidential. Drafted by Wickel and Knowles. Approved in S and the White House on August 28.
1. The joint communique has not been found, but a joint communique issued at the conclusion of a meeting of the U.S.-Japan Committee on Trade and Economic Affairs on January 28, 1964, quoted a portion of it as follows: “if contrary to U.S. expectations, serious economic difficulties were to arise in Japan, the United States would consider appropriate measures that might then be taken to meet the problem, including some form of exemption from the proposed interest equalization tax for new issues of securities.” (American Foreign Policy: Current Documents, 1964, p. 911)
2. Dated July 31, it deals with the interest equalization proposal. (Attached to an August 21 memorandum from Benjamin Read, Executive Secretary of the Department, to McGeorge Bundy; Department of State, Central Files, E 1 JAPAN-US; also enclosed is Kennedy’s formal note of reply to Ikeda, dated August 26.) See the Supplement for all.