96. Memorandum of Conversation1

PARTICIPANTS

  • Prime Minister Kakuei Tanaka
  • Shinsaku Hogen, Vice Minister of Foreign Affairs
  • Mr. Kiuchi, Private Secretary to the Prime Minister
  • Mr. Konaga, Foreign Office
  • Mr. Ukawa, Head of Economic Section, North American Bureau, Foreign Office (Interpreter)
  • Dr. Henry A. Kissinger, Assistant to the President for National Security Affairs
  • Ambassador Robert S. Ingersoll
  • John H. Holdridge, NSC Senior Staff Member
  • Peter W. Rodman, NSC Staff

[Omitted here is a discussion of unrelated topics.]

Prime Minister Tanaka: Particularly since I learned you were coming, I have asked my officials to look at the short-term and long-term trade picture. I have looked at your figures myself.

To give you my rather frank estimate of the situation, I do not think it is possible to arrive at a comfortable balance in a half year, or even one year. Perhaps in a period of three years, having studied the issues, we may be able to stabilize our economic relationship, in the sense of a not so uncomfortable imbalance as today. All of us should be seeking to achieve that goal, in that time frame, and I think it is possible.

Dr. Kissinger: What is the Prime Minister’s definition of a “comfortable” trade balance?

Prime Minister Tanaka: It is perhaps a rather difficult question to answer in exact terms, because basically you must seek a balance in a [Page 244]multilateral sense; this can’t be achieved just between the U.S. and Japan. In abstract terms, we don’t have export or import terms where our going up or down is too abrupt. And if I remember the figures from last year, the imbalance is on the order of $3.2 billion. I have asked my officials to come up with means to reduce it to less than $3 billion by the end of the present Japanese fiscal year, and if this is not possible also to seek other means, in a multilateral sense, to make the situation less difficult. So we may be able to arrive at within not too long a trade balance which is less difficult. Not just between ourselves but also with other areas—the Middle East, Europe—as long as ten years, as well as near-term measures.

Dr. Kissinger: We agree there cannot be an exact balance between our two countries, and that an overall balance has to be solved on a multilateral basis. We also favor a mid-term projection, in the framework which the Prime Minister indicated. At the same time, if our bilateral balance becomes uneven, the pressures within the U.S. for some sort of unilateral steps become so great that we will never have the time to develop the long-term projection.

On the statistics—I’m not an economist2—they seem to indicate the imbalance this year between our two countries will be about $3.6-3.8 billion, according to our figures. If that is accepted, if it could be reduced below $3 billion before the end of your fiscal year, that would be a positive contribution. We must think about what base you start with. And then, if we can take another significant step next year, that will be considered a very real progress.

Actually the President’s thinking is that, assuming these figures are accepted, we should make an effort to get next year’s program settled before Hawaii—because we don’t want to spend so much time negotiating on purely commercial matters when we have so many profound political things to discuss between us.

Prime Minister Tanaka: I quite agree we ought to try to be tackling what you described as the profound issues. On this question of the trade balance I have taken an active part in asking my officials to see what measures are possible. Perhaps we can work this out before Hawaii.3 Perhaps we can ask Ambassador Ingersoll and Mr. Hogen to look into the details. On the Japanese side some of the issues are: purchases of enriched uranium; purchases of civil aircraft; agricultural [Page 245]purchases, which was discussed with Mr. Eberle when we agreed to a special purchase of $50 million in addition to an estimated growth of $390 million in the current fiscal year in agricultural purchases, to a total of $440 million. It could reach a figure of $500 million. But I must emphasize that although we can put these figures together, it may not immediately have effect in solving the imbalance problem, because some of this will not show up immediately as Japanese imports. But by the end of March of next year, which is the end of the Japanese fiscal year, we will see if the Japanese officials concerned and a number of private companies might come up with measures that could reduce the imbalance to less than $3 billion. In the main by increased purchases. Also, by lending in foreign exchange terms, and at a cheaper rate of interest. These aren’t easy to implement, and take time. But I want to emphasize that I have pressed Japanese officials and Japanese companies to take steps which if they don’t have an early effect will come up with a reduced imbalance.

There is also the question of whether we can liberalize our imports of agricultural goods. Theoretically it is correct that if we reduce the restrictions we might be able to purchase more—but it is also possible that we might end up with increased Japanese purchases from Southeast Asia, the Middle East, and even the Chinese mainland. We have to look at a mechanism whereby we can increase purchases from the USA.

On economic issues, as you see, I have a list before me detailing the items that can be increased. Gas turbine generators, for example. Let us see what we can best do, before Honolulu. Ingersoll and our officials can make their best efforts. I don’t want to go into details now.

Dr. Kissinger: I agree. May I make one suggestion, Mr. Prime Minister, in the spirit of frankness we have always observed? Some of our differences in the previous period were due to the fact that we had an agreement to do something in principle—but the differences came up in the interpretation of what it means. Therefore I believe that before Hawaii it would be helpful, and will avoid difficulties in the future, if we could have an understanding on what to do in detail, not just in principle. It would help if Ambassador Ingersoll and your officials could work out something concrete and detailed; for example, concretely what a reduction of the trade imbalance to $3 billion means.

Then in Hawaii we can pass over the economic issues except in a general way.

Prime Minister Tanaka: Yes. I think it is important perhaps to look at it through three phases, or through three actions. First of all, we agree in principle that we would seek a more normal economic [Page 246]relationship between our two countries; we acknowledge that as a common goal. As I said, this could not be achieved in a period of one year. It would take until 1973, or 74, or perhaps longer. Secondly it is important to have meetings at the expert level as often as possible. An idea comes to mind perhaps to organize them on a quarterly basis, to look at the trade balance. Not just Ministers, but as at Hakone—with Eberle. Not too much publicity.

Dr. Kissinger [interjecting]:4 With your press and our leaking?!

Prime Minister Tanaka: That’s what comes to mind. Perhaps in Tokyo, perhaps they might be invited to the U.S.

Dr. Kissinger: We could alternate.

Prime Minister Tanaka: The key is closer contact.

Third, the fact of the matter, the problem is we are getting dollars in increased numbers, and don’t have much to do with them. We bought short-term Treasury Bills, SDRs, but refrained from buying gold so as not to drive up the price of gold. Perhaps we could make more substantial purchases, perhaps $3-5 billion of bills issued by the Federal Reserve Bank. I understand that the West Germany authorities buy these on five-year terms. Perhaps we could do this for longer, for 10 years. The experts can examine this. I understand the Germans get 5% interest. Perhaps we can pay you more as a means of bridging over the economic balance until we could seek longer term measures, a more basic international balance.

The third idea is a proposal like the man-wife relationship in this country: When they make a savings account they put it in both names, in a joint account. We should be doing the same. We should be saving jointly.

Dr. Kissinger: When they break up, one of them usually runs away with the money!

Prime Minister Tanaka: With the U.S., it is acceptable.

Dr. Kissinger: No, Mr. Prime Minister, I agree. For the long-term problem we need regular consultation, perhaps a mechanism by which the experts could every three to four months meet, with as little publicity as possible, perhaps at alternating locations. As regards your specific suggestion, I think it should be discussed by the appropriate experts. And also at Honolulu we could discuss the basic mechanisms of how to deal with the problem.

But on the short-term problem, as I understand what you have said here, we have agreed that before Honolulu, Ambassador Ingersoll and your officials will work out a specific program to [Page 247]reduce the deficit to $3 billion this fiscal year.5 So that that matter doesn’t have to be dealt with at Honolulu.

“Foreign Minister Ohira: Well, on the question of the trade imbalance which you touched on, it is a question which we in the Foreign Ministry are quite deeply concerned about. Under Prime Minister Tanaka’s energetic leadership we hope hard work can continue so that by the time of the meeting in Hawaii we can announce to the peoples of the two countries what we have arrived at. I think we can conclude it.

“One thing on which I am a bit concerned, that is we are now talking about trying to reduce the fiscal year imbalance to a level around $3 billion or a little below that; we are also trying to work out a package between Ambassador Ingersoll and Minister Tsurumi. What concerns me is that these two things we want might not necessarily meet as an exact figure. In the package, we are talking not only about trade, but also about services and imports which extend beyond this fiscal year. So the resulting package may not necessarily be reflected in reductions in the trade imbalance referred to earlier. In our talks you have understood this. I would like to make doubly sure that there is full understanding of the question.

“Dr. Kissinger: The Prime Minister made this point this morning. Ambassador Ingersoll and I have had a chance to discuss it at lunch. We understand that some part of the package will not show up in the trade imbalance until after this year. But we are talking about the spirit and general objectives; we will not do it like bookkeepers. [Laughter.] What we are talking about is reducing the deficit, and we won’t be too concerned if some figures don’t show up in the trade imbalance.” (National Archives, Nixon Presidential Materials, NSC Files, VIP Visits, Box 926, Tanaka Visit 31 Aug-1 Sept)

Prime Minister Tanaka: When you mention that we try to arrive at a program to cut it to $3 billion by the end of our fiscal year, this isn’t entering figures in a bank account. What is important is that either it can be done or it cannot. What we will do is try. We will attack this problem using that figure as a guide. It is evidence of our forward-looking attitude. It is a guide I have given my officials, and also on the basis of reaching a solution as two family members, against the background of our effort to normalize our relations over a period of two-three years.6

Let me use this example, in confidence: I have instructed our authorities to see if they can increase Japanese purchases of arms—this is now estimated in the range of $700 million—to make it, say, $850 million. If you say this must take place, and show in the statistics—which aren’t the same in the U.S.—by the end of March, it won’t be possible. What I’m saying is, it can be done in the range of, say, five years.

Let me use two more examples: You asked us to liberalize our imports of fresh oranges on a seasonal basis, in Hakone. My officials said no, it was not possible. I asked them to look again, to see if it could be done in a different time period, or with liberalized allocations. These won’t show in the figures by the end of next March. I also asked my officials [Page 248]about importing a greater quantity of feeder cattle. It is now at 5000 head. We could consider going up perhaps twice or three times that amount, if this is possible to do. Other purchasers are aggressive and competitive, however.

There was also another idea floated at Hakone—on mixed blending orange prices—if we could seek an arrangement where the agricultural people on this side—the opponents—can be made a partner on this, with the American partners.

[Page 249]

Dr. Kissinger: We will approach it in a spirit of friendship. And if you approach it, as you have, in a spirit of concreteness, then I am sure it can be resolved. Prime Minister Tanaka: To put it frankly, during the Sato-Nixon talks on the question of textiles, I believe an Oriental, a Japanese expression was used by the former Prime Minister—zen sho sru. [The interpreter indicated that it was difficult to translate, but that it was roughly: “I shall look into this, in a judicious and forward-looking manner,” or “in a spirit of goodwill, I will use my greatest efforts to see what can be done.”] If someone says this in the Diet, it is accepted as a statement of a forward-looking attitude—but perhaps not between foreign governments. I want to avoid the misunderstanding, which may have been a problem in the past, by saying that we would aim at a reduction of $1 billion, and trying to indicate to my officials an approach in that sense. So if we cannot come up with a reduction by March 31, I do not wish to be accused of not being good at my word. I meant an order of magnitude, a goal.

Dr. Kissinger: That’s fair enough. On this basis, no misunderstanding can arise.

Prime Minister Tanaka: The way to put it is, Japan and the U.S., working both together, mutually try to seek whether they can reduce the trade imbalance to less than $3 billion by the end of the Japanese fiscal year. But some measures, some purchases, mentioned earlier on would not show up in the trade figures by that time.

Dr. Kissinger: That’s understood. That’s understood.

Prime Minister Tanaka: What I try to emphasize is that we try to tackle the problem with the best will in the world.

Dr. Kissinger: That’s all we ask. We will blame Ambassador Ingersoll if anything goes wrong!

[There was a brief recess from 11:00-11:03 a.m.]

Prime Minister Tanaka: To try to solve this issue before Honolulu, I nominate Mr. Tsurumi, Deputy Vice Minister of Foreign Affairs—who has led the Japanese group on this. He can be in touch with Ambassador Ingersoll to work out the details.

Dr. Kissinger: Good. Where shall we make the announcement of this decision—at Honolulu or before?

Prime Minister Tanaka: We would have no strong preference. We should aim at the more effective use of this. Therefore, what is your view?

Dr. Kissinger: I think we should aim at announcing it at Honolulu.

Prime Minister Tanaka: Just the confirmation at Honolulu of the details worked out.

Dr. Kissinger: Just confirmation, no details at Honolulu—just confirmation between you and the President of what our Ambassador and your people have worked out.

Prime Minister Tanaka: Taking this into consideration, Ambassador Ingersoll, perhaps you can discuss with us the details on timing and wording and content?

Ingersoll, Kissinger: Yes.

Ambassador Ingersoll [to Kissinger]: You can give me some guidance.

Dr. Kissinger: Yes.

Prime Minister Tanaka: It may turn out that as long as we are agreed in advance on what we are planning to announce, perhaps we could announce it before Honolulu—so we could clearly divide it from what we are discussing at Honolulu?

Dr. Kissinger: Why don’t we wait til we have a package, and then decide?

Prime Minister Tanaka: Yes.

Dr. Kissinger: If we can solve the package we can solve the announcement.

Prime Minister Tanaka: Yes.

[Omitted here is a discussion of unrelated subjects.]

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Presidential/HAK Memcons, Box 1026, HAK-PM Tanaka 8/19/72. Top Secret; Sensitive. The meeting was held in the Mampei Hotel.
  2. In a June 12 conversation with Tanaka (when he was still MITI Minister), Kissinger said: “Let me ask the Minister something about economics, which is not a field I usually address in great detail…. My major interest in economics is to make sure it doesn’t disturb foreign policy.” (Memorandum of conversation; ibid., HAK-Tanaka 6/12/72)
  3. President Nixon and Prime Minister Tanaka were scheduled to meet in Hawaii August 31-September 1.
  4. These and all but the last set of brackets in the text of the memorandum of conversation are in the source text.
  5. Later in the day Kissinger discussed a wide range of topics with Foreign Minister Ohira in Tokyo. Concerning the trade balance issue, the memorandum of conversation reads as follows:
  6. [text not declassified]