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

77. Memorandum From the President’s Assistant for National Security Affairs (Brzezinski) to President Carter¹

Washington, November 29, 1977

SUBJECT

• US-Japan Trade Issue: Current State of Play and Next Steps

Prior to his departure from Tokyo last week, Dick Rivers was given an initial Japanese Government response to our suggestions for reducing Japan’s current account surplus. It fell far short of our requirements in its extent and in its specificity. Indeed, it was a minimal initial bargaining position which eschewed any formal commitments to achieve a deficit on current account by a particular date, to increase significantly the economic growth target for the next fiscal year, or to expand imports of manufactured goods dramatically.²

We instructed our Embassy in Tokyo to convey disappointment at this response; to note the priority we attach to Japanese assurances to the international community that it will take the steps necessary to achieve a current account deficit as soon as possible; and to inform the Japanese that Ambassador Alan Wolff, Bob Strauss’ deputy, would be prepared to come to Tokyo on December 4–7 to continue the discussion of these issues as a prelude to a possible trip by Bob in mid-December.³

Intelligence sources indicate that Prime Minister Fukuda recognizes that his hastily-prepared $3 billion import promotion program and the recent appreciation of the yen will not be sufficient to reduce Japan’s huge current accounts surplus for many months. Thus Tokyo will remain vulnerable to growing pressures from the United States, Western Europe, and non-OPEC developing countries to buy more or sell less. Consequently, Prime Minister Fukuda has ordered his economic advisors back to the drawing boards to draft additional substantive measures, including tariff cuts, quota increases, and a higher economic growth target. He has evidently decided to send a new budget to the Diet in January, instead of waiting till April—which suggests that he has further measures for domestic expansion in mind—to meet pressures from the Japanese business community. The Prime Minister faces an uphill battle on his import policies because his Ministries are feeling the heat from special interest groups—particularly small and intermediate size businesses and farmers. Expressions of our concern about growing protectionist pressures in the U.S. have lent urgency to Fukuda’s efforts, and our soundings—with Ambassador Mansfield, Japanese newsmen, the Japanese Foreign Ministry—suggest that the continued application of pressure from us (provided it is adroit and unobtrusive) provides the Prime Minister with much-needed leverage with recalcitrant Ministries.⁴

On November 28, the Prime Minister sent his Private Secretary to convey the following message to you:

—He has reshuffled his Cabinet and brought in a more experienced and impressive team to run the Economic Ministries. (Comment: Fukuda’s primary motivation in selecting these men was his desire to facilitate the development of more forthcoming positions in the negotiations with us.) The new Minister of International Trade and Ministry, Toshio Komoto, is a favorite of Japan’s big business community, and is pressing for a more expansionary budget. Kiichi Miyazawa, the new Director of the Economic Planning Agency, is a genuine internationalist in his outlook and a strong friend of the United States. Tatsuo Murayama, Minister of Finance, was formerly the Director General of the Finance Ministry’s Tax Bureau; he was Fukuda’s junior during the latter’s days in the Finance Ministry and is responsive to his direction. Nobuhiko Ushiba has been appointed State Minister without Portfolio with responsibilities for International Economic Affairs. Ushiba was formerly Japan’s Ambassador to the United States, is a prominent leader in the Trilateral Commission, and has strong experience in international trade and financial matters.

—He would like to continue consultations with the U.S. on trade issues by sending a small group of close confidantes to Washington around December 10. He is thinking of a team led by Ushiba, and including Morizuku Motono (Foreign Ministry) and Owada. (Comment: While a prime objective of such a mission would be to explain the political constraints which impair Japan’s ability to produce immediate results, all of these men appreciate Japan’s need to move more boldly to reduce its huge current accounts surplus. Thus they can be counted on reliably to report on the political pressures for action that exist here.)⁵

Meanwhile, Ambassador Mansfield confirms what Japanese officials had told us previously: that U.S. pressure has not strained relations between the two countries, and is welcomed by Japanese officials who are pressing for action within the Japanese Government.

Though we had planned to dispatch Alan Wolff to Tokyo this weekend, that no longer seems necessary. We can decide whether Bob Strauss should go to Japan late in December to reach final agreement on a package, after the Japanese mission has been here.

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Brzezinski Office File, Country Chron File, Box 24, Japan: 9–12/77. Confidential. Sent for information. A stamped notation reads: “The President has seen,” and Carter initialed “C” at the top of the page. Owen and Armacost sent the memorandum to Brzezinski for his signature under cover of a November 29 memorandum. (Ibid.)
2. Widman reported on the results of the visit of U.S. officials to Japan in a November 22 memorandum to Blumenthal. (Carter Library, Anthony Solomon Collection, 1977–1980, Chronological File, Box 3, 11/77)
3. Telegram 281957 to Tokyo, November 24, transmitted the U.S. reaction to the Japanese response. (National Archives, RG 59, Central Foreign Policy File, D770436–1167)
4. In his November 30 Evening Report to Carter, Vance noted that both he and Mansfield believed “that we are on the right track and that it is important at this time to continue to move forward with steady but not excessive pressure, trying to reduce somewhat the public air of confrontation which the press has given our discussions.” (Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 19, Evening Reports (State): 11/77)
5. In his November 30 Evening Report to Carter, Vance asserted that Ushiba’s visit would be “the key period for us.” He continued: “We intend to calibrate very carefully the statements that each Cabinet member makes to Ushiba. We are stressing with the Japanese that the trip will not be the conclusion of our discussions, but only part of the process, and we are still thinking very much in terms of the possibility of a trip to Tokyo by Bob Strauss at the end of the year.” (Ibid.)