Foreign Relations of the United States, 1964–1968, Volume XXIX, Part 2, Japan

75. Memorandum of Conversation¹

Tokyo, July 7, 1966.

SUBJECT

• U.S.-Japan Bilateral Relations

PARTICIPANTS

• Prime Minister Sato
• Foreign Minister Shiina
• Chief Cabinet Secretary Hashimoto
• Ambassador Ryuji Takeuchi
• Makoto Watanabe, North American Section, Foreign Ministry
• Secretary of State Dean Rusk
• Ambassador Edwin O. Reischauer
• William P. Bundy, Assistant Secretary of State
• J. Owen Zurhellen, Jr., Counselor of Embassy, America Embassy, Tokyo

1. Mr. Sato noted that he thought U.S.-Japan bilateral relations were all going well. He wondered if the Secretary had something to say on bilateral problems.

2. The Secretary agreed that bilateral relations were generally in good shape. This was partially because there had been a rapid expansion of economic relations, and trade and prosperity tend to ameliorate problems. He was happy that the civil air agreement had been concluded since the last Joint Economic Conference. He had mentioned some other matters during the conference on which Ambassador Reischauer would follow up. Among these was the problem of Micronesian claims on which he hoped action could be taken. He noted that the U.S. and Japan also had to think about fisheries and similar matters but the important questions for both countries are the larger matters which involve the rest of the world.

3. Prime Minister Sato said that now that the civil aviation matter was settled, there still remained one small problem—that is wool textiles. He had noted last year that this problem had caused President Johnson concern and it was still pending. The Secretary said that it would, of course, remain pending until it had been finally settled. This was a troublesome matter and he hoped it could be taken care of.

4. The Prime Minister said that in view of the President’s deep concern about the wool textile problem last year he had tried to keep this matter quiet in Japan but he did have problems here too. He realized, however, that the President had far greater worries.

5. The Secretary remarked that problems of this sort tend to become issues in the U.S. in election years. We should try to do things in the in-between period as much as possible.

6. The Prime Minister asked whether there would be a Cabinet level meeting regarding the Kennedy Round. The Secretary replied that there no doubt would be at the right time but now what was needed was more effort at the working level. The next move was up to the EEC.

7. Mr. Sato recalled that at the time of the first Joint Economic Committee meeting at Hakone, a cartoon had appeared in the Washington Post alleging that the Pacific was a “one way street” as far as trade was concerned. At that time the U.S. had had a favorable balance of trade. Now the situation is reversed and the balance is in favor of Japan. He thought however, that this was a natural phenomenon and should be treated as such.

8. Mr. Rusk said that Japan has a favorable trade balance with the U.S. of about $300 million a year and in addition to this, obtains $300 to $350 million from American military expenditures in Japan. He hoped that the U.S. Treasury representatives and those of the Japanese Finance Ministry would discuss this problem. If the problem is a serious one, he hoped that a way would be found to settle it without hurting relations between the two countries. He noted that Japanese sales to the U.S. were rising faster than American sales to Japan, but said we should see what happens. He noted that the Vietnam war adds a billion dollars to the U.S. balance of payments problem. This is one of the many reasons we would like to see peace in Southeast Asia.

1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, DEF 4 JAPAN–US. Secret. Drafted by Zurhellen and approved in S on July 25. The memorandum is part 6 of 7. The meeting was held at the Prime Minister’s Residence in Tokyo. At the conclusion of their official meetings Rusk and Sato met privately at 7:30 p.m. They briefly discussed the military situation in Vietnam and their joint efforts to keep UN representation in the hands of the Republic of China. (Memorandum of conversation, July 7; ibid., Conference Files: Lot 67 D 305)