794.5 MSP/8–2454: Telegram
No. 795
The Ambassador in Japan (Allison) to the Department of State
441. Regarding Department’s 3821 and paragraph 2 Department’s 405.2 Okazaki called me in urgently this afternoon to state that over week-end Yoshida had decided he did not agree with GARIOA settlement formerly proposed and forwarded my 350. According to Okazaki, Yoshida said Japanese counterproposal not generous enough and not sufficiently close to German settlement. Okazaki said that while Finance Ministry and Foreign Office were still undecided as to final exact amount of new counterproposal it would be in neighborhood of 550–600 million dollars with interest 2½ percent, payments to be after five years and extend for thirty years. Okazaki showed me preliminary Finance Ministry figures which included subtraction from total amount on account of coal furnished Korea. I informed Okazaki it was my recollection that United States had already subtracted this item before it submitted its first proposal. It was agreed that Diehl and Takeuchi would discuss figures, but Okazaki said Prime Minister wanted me to be informed at once of new proposal. New proposal has two conditions: [Page 1713]
- First, which I understand we are prepared to agree to, is that provision be made that if during period of payment Japan’s foreign exchange position becomes critical, payments can be postponed by mutual agreement.
- Second, payments for initial period of five to seven years be made in yen to be returned to Japan for use in economic development internally or “for Southeast Asia.” Okazaki was frank to state Burmese reparations negotiations have impressed on Japanese not only necessity but difficulty of settling reparation problems unless some aid was given. Burmese have maintained that politically they cannot accept less than Philippines or 400 million dollars. They have suggested, however, that inasmuch as Japanese proposal to Philippines was 400 million dollars over twenty years, Burmese might be willing to accept 200 million over ten years, inasmuch as present Burmese Government has 10 year economic program which this would fit into. However, for ten year period Japan would be obliged to make payments to Philippines and Burma totalling 40 million dollars annually. If to this sum is added an equal sum for Indonesia, Japan would have to pay 60 million annually on reparations account. It is to help out on this that Yoshida thinks GARIOA settlement can be useful along lines suggested above. Okazaki said that if direct way of using GARIOA repayment to help refinance reparations could not be developed, it is Yoshida’s hope that these payments in yen could be used to finance internal development such as hydroelectric power, irrigation, and land reclamation. He said Japanese officials would work with American to ensure use of these funds would not be inflationary.
This is in essence similar to what Embassy has previously recommended and I urge that most serious consideration be given to accepting this condition provided that final agreed sum is satisfactory to United States. If it is in United States interest, as I believe it is, to help Japan reestablish normal diplomatic and economic relations with free nations of Southeast Asia, I believe we here have real opportunity for constructive action.
- In this telegram dated Aug. 19, the Department expressed approval of the Japanese desire for an early GARIOA settlement but stated: “Offer reported your 350 [see footnote 4, Document 790] not regarded as worthy submission.” The Department then reiterated its position that the United States should seek a settlement along the lines of that with the Federal Republic of Germany. (794.5 MSP/8–1354)↩
- Dated Aug. 23. In paragraph 2 the Department reported that Ambassador Iguchi had been informed the previous day that the United States considered an interest free $500 million GARIOA settlement as unacceptable. (110.11 DU/8–2354)↩