Foreign Relations of the United States, 1977–1980, Volume III, Foreign Economic Policy

182. Memorandum From the Special Representative for Economic Summits (Owen) to President Carter ¹

Washington, November 29, 1978

SUBJECT

• Japan

At lunch last week, Jacques deLarosiere, head of the IMF, praised the US and Germany for effectively carrying out the agreed Summit strategy, and said that his main worry about the world economy now was Japan’s failure to fulfill its Bonn growth commitment. His IMF staff calculates that Japan will only achieve 5% growth; this means a large continuing Japanese surplus which will disrupt world trade and growth. To persuade Japan to adopt a more stimulative Japanese domestic policy:

—He is now sending an IMF mission to review the Japanese economy; on the basis of its report, the IMF will publicly press Japan to improve its performance.

—He hopes that the US and other Summit countries will make clear to Japan that its failure to adopt more stimulative policies would result in its being isolated and blamed at the Tokyo Summit for the consequent threat to world recovery.

He was glad when I told him that we were maintaining steady pressure on Japan to change its ways; he saw your decision not to fix a Summit date until we could see how Summit preparations were progressing as a useful element of this pressure.

Comment: The Tokyo Summit’s success will turn on a change in Japanese policy, as the Bonn Summit’s success turned on a change in German policy. We will have to apply the same combination of carrot and stick that turned the FRG around. At the international Summit review December 11, I hope that the other countries’ representatives will join me in pressing our Japanese colleague for new Japanese policy decisions. As at Bonn, we have one thing going for us: the Japanese are anxious that the Summit in their capital be a success.

We will submit proposals to you as to how Ohira could be approached on this issue early in his term. A pre-election telegram says that he told the Embassy he “saw it as essential to move immediately to cope with Japan’s trade imbalance,”² and he generally has the reputation of being more expansionist than Fukuda. On the other hand, press reports quote him as saying that he is less firmly committed than Fukuda to the Bonn 7% growth target.³

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 40, Japan: 6–12/78. Confidential. Sent for information.
2. Reference is to telegram 20877 from Tokyo, November 27, on Ohira’s foreign policy views. (National Archives, RG 59, Central Foreign Policy File, D780488–0053)
3. An article published in the November 29 edition of The Washington Post, for example, noted that while “Fukuda had promised repeatedly during the past year that Japan would reach a growth level of 7 percent in the current fiscal year,” Ohira, while not “expressly abandoning that goal,” had “suggested during the campaign that strict adherence to that goal could cause a new bout with inflation. That could be taken to mean he may retract or slack down some of the public-service spending that Fukuda had initiated in supplementary budgets.” (William Chapman, “Japan’s Ohira: Keeping Tradition,” The Washington Post, November 29, 1978, p. A19)