Foreign Relations of the United States, 1969–1976, Volume III, Foreign Economic Policy; International Monetary Policy, 1969–1972

82. Telegram From the Embassy in Japan to the Department of State¹

Tokyo, October 23, 1971, 0615Z.

10649. Sub: Japanese reactions on defense burden-sharing. Ref: Tokyo A-377, May 24, 1971.²

Begin Summary: Embassy believes it would be useful to summarize present state of Japanese views on this subject. Japanese have been casting about for ways to cope with apparent pending US demands on defense burden-sharing. They see issues as falling into different categories. All Japanese seem to favor idea of increasing economic aid to Southeast Asia, and GOJ has already started to do this. GOJ expects double its concessional aid in CY 71 to $700 million. It intends to increase total financial flows abroad to one percent of GNP by 1975 (about $4 billion). Possible proposal that Japan assume a greater share than present of US garrison costs in Japan, in ways amounting to defense support arrangement, has met with categorical opposition. Question of increasing arms purchases from US is being debated with increasing intensity. GOJ favors idea, mainly as a means to cut cost of expensive new weapons programs, and despite probable 8 to 13 percent cut in fourth defense buildup plan, probably will purchase $800 million to $1 billion worth of US equipment, or roughly double purchases under third DBP. End Summary.

1. Defense burden-sharing has become one of major concerns of the Japanese in recent weeks. Japanese are not clear as to what this may entail or its ultimate cost. They feel they must respond positively in some manner to placate the US and win concessions on currency and trade issues, but do so in light their plans to prune already modest defense budget proposals because of anticipated revenue shortfalls.

2. In GOJ and public mind, defense burden-sharing consists of: (A) increased economic aid to Southeast Asia to help compensate for US aid reductions; (B) assumption of a greater share of costs for stationing US forces in Japan; and (C) increased purchases of US military equipment. There has been little opposition to point (A). Big business interests favor increased economic aid as the means for meeting US defense burden-sharing demands. GOJ not only expects to double concessional assistance this year to $700 million, its objective is to increase its economic assistance to same level as US (.32 percent GNP CY 70) and other industrial countries relative to GNP as soon as possible. Further, GOJ has declared it intends increase its financial flows to developing countries to one percent of GNP by 1975 (estimated at about $4 billion). Governmental economic assistance would then amount to about $1.3 billion of this sum, and target is 50 percent ODA (concessional)GOJ assistance.

3. On increasing Japan’s share of US forces costs:

A. Japanese have publicly and privately expressed categorical opposition to anything which seems reinstitution of defense support arrangements existing under 1952 Treaty. (Department will recall administrative agreement at that time provided GOJ would pay $155 million per year for purpose of procurement by US of transportation and other requisite services in Japan; that GOJ insisted prior to 1960 Security Treaty on omitting such provisions anticipatory to 1960 Treaty.) According to press reports, US has suggested that Japan assume balance-of-payments costs for maintaining troops in Japan amounting to about $650 million per annum. GOJ leaders, including Foreign Minister Fukuda and JDA Director General Nishimura, have stated that no formal request on this matter has been received from the US, but that in any event it would be unacceptable.

B. Other Japanese officials argue that much of US costs are being incurred more for strategic defense of the US than for the defense of Japan, or that a large portion of the $650 million is being spent not on defense but on US forces purchase of goods and services for private personal consumption. (Comment: In fact, in CY 1970, 62.5 percent of this sum was from non-appropriated fund sources, so Japanese analysis is correct.) In any case, they state that national sentiment would not permit assumption of such additional cost for US troops, equal to more than one-third annual JDA defense budget. After reversion of Okinawa, they fear this amount might have to be doubled to take care of US forces costs there.

C. Finally, FonOff officials state that SOFA Article 24 would have to be amended to enable GOJ to pay for costs of stationing US troops beyond what is done presently. They are extremely reluctant to make any changes in SOFA for fear of provoking opposition moves against SOFA and Security Treaty. In this connection, it should be noted it is estimated GOJ on annual basis in Japan contributes $110.247 million from budget (JFY 71 estimate) for land rentals on facilities provided US forces, land acquisition expenses, management of facilities, relocation expenses, subsidies to municipalities to compensate for revenue loss or other expenses incidental to presence of US forces, payment of highway tolls, unreimbursed labor administration costs and special contributions to US forces Japanese employees. (This does not take account of similar substantial contributions expected for Okinawa, post-reversion, on which we do not yet have budgetary estimates. It should also be noted US expects to save $30 million per year for local defense responsibilities, which will be assumed by JSDF, and $10 million per year on land rentals, as result of reversion.)

4. Question of increasing arms purchases from US is being debated with increasing intensity between certain GOJ sectors and big business interests. Fukuda and Mizuta have argued in favor of this burden-sharing approach, while warning against GOJ adoption of any clear-cut weapons purchase plan similar to US-West German offset agreement. Both Finance Ministry and Secretariat of National Defense Council have reportedly expressed strong support for purchase of major new weapons systems (such as F5B trainer aircraft in place of Japanese XT-2) mainly in interest of cutting costs. Strong opposition views have come from MITI and industrial organizations such as Keizai Doyukai (Committee for Economic Development) and Keidanren (Federation of Economic Organizations). They claim that increased purchases from abroad would represent a reversal of former JDA Director General Nakasone’s “autonomous” defense policy, which has as one of its long-term objectives development of indigenous defense industry capable of meeting all of JSDF’s equipment requirements. Business interests also argue that foreign weapons purchases would detract from domestic development of technological know-how and benefits to the economy, and subject JSDF to whims of arms export nations.

5. JDA is now revising 4th defense buildup plan (covering JFY 1972-76) based on views of Finance Ministry and NDC Secretariat. While definitive information is presently unavailable, it appears likely that cost of this five-year plan may be reduced from 5.2 trillion yen ($16 billion at 330:1 current exchange rate), excluding 0.6 trillion yen for pay increases, to about 4.5 to 4.8 trillion yen ($13.6 to $14.6 billion). Defense spending will, therefore, probably range 8 to 13 percent below originally planned level. Heaviest cuts will reportedly be made in supply, service support, and procurement of new equipment. Embassy (MDAO) believes reduction in last category will probably be in neighborhood of 20 to 25 percent.

6. Latest indication is that, partly as result of Finance Ministry pressure, JDA would make little change in revised 4th DBP as regards military purchases from US, despite overall budget reduction indicated above. On 11 October, JDA Director General Nishimura stated that his agency was currently studying possibility of buying $800 million and, “depending on circumstances,” up to $1 billion worth of equipment from US under that plan. Relative to purchases from the US under the current 3rd DBP (estimated at $500 million by Nishimura), his latest estimates represent increases of 60 to 100 percent at 360:1 exchange rate, or increases of 45 to 85 percent at 330:1 exchange rate. Thus, even at a time of budgetary stress, there will still be proportionately large purchases of US military equipment and technology out of total sums available for procuring new equipment.

7. Meanwhile, partly as a sop to business interests, Nishimura has repeatedly emphasized that JDA would make no basic change in its “autonomous” defense policy. On 11 October, he said that despite reduction of total spending under 4th DBP, he hoped to increase R and D funds above originally planned levels. He said primary effort would be placed on development of aircraft and missiles.

8. Foregoing represents latest state of play in Japan on defense burden-sharing issue. Underlying GOJ reaction is prevailing mood against increased government spending in view of anticipated revenue shortfalls. We will have a clearer picture of Japanese response when JFY 72 budget, and possible 4th DBP, are put in final form late this year.

Meyer

1. Source: Department of State, S/S Files: Lot 73 D 153, Box 124, Morning Summaries, August 25-December 31, 1971. Limited Official Use. Repeated to the Secretary of Defense, COMUSJAPAN, HICOMRY, and CINCPAC.
2. Not printed.