894.10/6–852: Telegram
No. 569
The Ambassador in Japan (Murphy) to the Department of State
421. Yoshida invited me to dine with him last evening and suggested that I arrive half hour before dinner for discussion with Finance Minister Ikeda Japanese financial situation. Ikeda after complimentary references to benefits realized by Japan result US aid and Dodge policies outlined position with which Dept familiar, viz., favorable aspects including foreign exchange on holdings of Bank of Japan amounting roughly one billion dollars of which about 700 million in dollars; balanced budget “even a surplus”; slightly favorable balance of trade; improved banking situation etc. However adverse factors he said cannot be ignored Japanese enjoying temporary benefit expenditures incident to Korea which may cease any time; lull apparent in number of lines especially textiles; current favorable situation cld change for worse overnight; while foreign exchange portfolio good at moment this cld evaporate rapidly; obsolete [Page 1268] plant equipment needs modernizations; power plants must be built etc.
Then Ikeda came to point: Japan needs fresh capital but more especially what govt desires is the establishment of a line of credit by US. Ikeda did not wish to state a specific amount but said something from 100 million to 200 million dollars say a ceiling of 200 millions. I asked whether he had prepared a specific program on which an application for such line of credit cld be based. He replied that several programs were well advanced and based on different amounts of credit 100, 200, 300 millions. He referred to conversations he has had with Dr. Reed of Defense and Diehl our Treasury attaché along same lines. He wanted Embassy’s support for his idea which he said is not limited to economic considerations; he wished to point out that politically it is necessary for the Yoshida govt to have this support from the US Govt in view of the elections. Therefore it is not so much the question of amount of line of credit but mark of confidence officials in Japanese Govt which is important. I asked whether time of elections had been decided and he replied that of course Yoshida will decide date but he believed it wld be some time next October. He wld like to urge the importance of favorable US action by August if possible.
While there were a number of considerations I wanted to mention in this connection I thought best to defer reference to Japanese rearmament, as well as to taxes and the rest until later and after perhaps receiving from Dept some indication whether there is even remote possibility Japanese proposal receiving sympathetic consideration.
I made passing reference importance of Japanese efforts to stimulate interest of private American capital this market and Ikeda said that Japanese administration is not obvious [oblivious?] to this important factor. I added that it wld be necessary to make market attractive to private venture capital and especially guarantee that capital cld be re-exported within reasonable time. He agreed saying that foreign investment bill now pending on Diet wld make adequate provision and that foreign investors under that legislation wld be able to withdraw capital after two years period.
Later I queried Yoshida about press speculation concerning his recent conversations with Hatoyama, leader Liberal Party. He said that unfortunately there is no truth in these stories. Hatoyama is his old friend and he implied their relations are good but Hatoyama’s physical condition resulting from stroke he feared will not permit Hatoyama’s return to active political life and the responsibilities of leadership Liberal Party.
While Embassy now preparing submit to Dept its views on general question loans to Japan, I wld in meantime be grateful for [Page 1269] Dept’s advice to what if anything I may say to Ikeda re his direct inquiry subject lines of credit. If some formula cld be found it might be helpful in pressing govt to accelerate its lagging armament effort.