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6. Letter From Secretary of the Treasury Dillon to Secretary of State Rusk 1

Dear Dean:

It seems to me that your forthcoming trip to Tokyo for the Cabinet Committee Meeting presents an opportunity to raise with Japanese officials the question of the level of their defense budget and the reduction or offsetting of the continuing high level of our defense expenditures in Japan. You will recall we discussed these matters in a meeting with Ministers Ohira and Tanaka at the time of the Cabinet Meeting in Washington in December 1962.2

In spite of the efforts which we have made over the past year, including Ros Gilpatric’s visit to Japan3 and representations made by Ambassador Reischauer to Japanese officials, increases in the Japanese defense budget continue to be disappointing and considerably below Japan’s economic capabilities. In fact, the percentage of GNP going into the Japanese defense budget is one of the lowest in the world, and is even lower than Cambodia and approximately the same as Burma.

Our defense expenditures in Japan continue to be the second highest in any country in the world, exceeded only by our expenditures in Germany. The Defense Department’s program to cut back our worldwide defense expenditures will reduce somewhat our dollar outlay in Japan. However, even with currently planned U.S. redeployments and other cutbacks, including the cessation of our truck purchases in Japan, our defense expenditures are likely to continue at a high level. Therefore, barring further and drastic redeployments and cutbacks, it is essential to find a means for offsetting a large percentage of these expenditures. However, in order to find a meaningful offset formula, which would mean Japan purchasing military equipment from the U.S., as do Germany and Italy, it will be necessary that the Japanese defense budget be increased. I am not suggesting that the sole objective of an increase in the Japanese defense budget be for this purpose, but rather that Japan has a responsibility to provide for its own self defense and in order to do so needs modern military equipment. As has been proven [Page 5]in the cases of Germany and Italy, such equipment can in most cases be produced faster and at less cost in the United States.

In view of the importance of these matters, both to Japan’s own military capability and to the continuing high level of U.S. dollar expenditures in Japan, I recommend that you raise these subjects with the Japanese during your visit. Assistant Secretary John Bullitt, who will be the senior Treasury representative on the U.S. delegation, will be prepared to provide any necessary backup information on the above matters and will be prepared to assist you in any way you feel would be appropriate.

With best wishes,

Sincerely,

Douglas
  1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, DEF 19–3 US–JAPAN. Secret.
  2. For a memorandum of conversation of a December 3, 1962, meeting, see Foreign Relations, 1961–1963, vol. XXII, Document 362.
  3. An in-depth report on Gilpatric’s visit to Tokyo, February 6–7, 1963, is ibid., Document 368.