Preparatory Committee for Peace Treaty with Japan
I would like to bring under your notice one or two matters in this connection.
One of the difficulties we are experiencing in our work on the Treaty is the question as to the ambit of the Treaty. For instance, is the Peace Treaty to deal only with Japan or is it to deal with such questions as the territorial allocations and the question of Manchuria and Korea? It struck me that in talking to General MacArthur you might have the opportunity of ascertaining America's views on the following subjects:-
1. Territorial Allocations
Are these to form part of the Peace Treaty? If so, certain allocations have already been made, e.g., the Kuriles and Sakhalin go to Russia, and the Carolines, Marianas, etc. are under trusteeship to America. There are quite a number of other Islands, such as the Ryukyu, Bonin and Volcano Islands. Does America expect to have these? I should say our policy was that she should have them. I have no ruling on the subject.
I think that Russia may want to exclude this from the Peace Treaty and even China may take the view that it is all fixed up by the Agreement of 1945.  There are, however, one or two things that still remain unsettled. One is the status of Dairen. Is it to be handled on the Treaty-port line; is it to be governed by a Municipal Council; or is it merely to be a port in which freedom of entry and use to all nations is to be guaranteed by China? I rather think that the latter is the only arrangement to which China would agree, but, of course, China cannot be relied upon as she is not able to enforce anything as against Russia.
We do not know whether it is the intention to deal with Korea in the Peace Treaty, and I presume that this must wait until something comes out of the Conference between Russia and America which is at present sitting. I presume the Americans have some views on this which would be handy for us to know.
4. Fishing Rights
In dealing with Sakhalin and the Kuriles, it must be remembered that the Japanese have been accustomed to fishing off these coasts for hundreds of years, and, during recent years, a big canning industry for salmon has grown up. Under international law, they would have no right to land on the territories for the purpose of obtaining bait or for getting their fish cured. This has always been a fruitful subject of dispute in history. You will remember that fishing rights off Newfoundland were first dealt with by the Treaty of Utrecht  and have several times since then been the subject of International Treaties. I would say that, as fishing occupies such a large part in the Japanese economy, it would be a good thing to deal with these matters. While Japan held part of Sakhalin, she allowed the Russians fishing rights off her coasts.
5. Open Door
At one time, America was very keen about extracting opendoor undertakings from China and other countries in relation to Manchuria and other ports of China. There are several treaties or statements of policy which contain guarantees of this kind. Are we to say anything about them in the Peace Treaty?
6. Constitution of Japan
The position with regard to this is that we have secured the decision of the Far Eastern Commission that the Constitution will be reviewed. Something will have to be said in the Treaty, but an agreement to revise a thing is not an agreement as to the substance or the methods of revision. Is the Constitution to go to referendum, for instance? Or is the Supervisory Council for Japan to give its consent to a revision of the Constitution?
We are spending a lot of time in considering how the Zaibatsu can be liquidated with safety. So far as I can ascertain, the American view is that they have already been liquidated. In one American despatch read in the Far Eastern Commission, it was stated that Colonel Kramer  had spent an evening with the Zaibatsu and everything was arranged for its liquidation. This, of course, is absurd. We are endeavouring to work out a mechanism for the liquidation of these monopolies but have no idea as to the views of other parties.
Another important question is the intensity and duration of the control. Our Economic Advisers in Tokyo and here are quite clear that Japan is in a state of financial and economic crisis and that she can only be lifted from this by very stringent economic controls, such as price-fixing, wage-pegging, the control of central bank credit, and the nationalisation of industry to a greater or lesser extent. A good many of these things are contrary to the American mores. I do not know what the views of other parties would be as to an elaborate system of control, such as we feel inclined to suggest.
Then there is the question as to the duration of the control. The plan on which we are working assumes that military control will go on while the Supervisory Commission considers it necessary. At some stage, it may be exchanged for a civilian control. In the latter case, the Allied nations should retain power to enforce their control by military means, if Japan shows a disposition to break the undertakings in the Treaty. For this purpose, some base nearby should be retained.
The Treaty should contain certain guarantees by the Japanese against rearmament. As far as one can see, the Americans are going to advocate a relaxation of control from the time of the Peace Treaty, but nothing is said as to the means by which the obligations of the Treaty can be enforced if Japan is inclined to break them. Some base nearby seems necessary. The British also appear to be in favour of an early relaxation of control.
I am bringing these matters before you because you will probably be talking with the General and his staff and possibly with the British Ambassador about various phases of the Peace Treaty, and, if you can get a line on any of these questions, it will help us considerably. Otherwise, we might come to the Peace Table with an elaborate set of our provisions which will be swept aside because of the unwillingness of America and Gt. Britain to consider them.
If we can get some idea of their attitude as at present, we may be able to take steps to convince them; an opportunity may arise to convince Gt. Britain at our Conference at the end of August. In this way, we may be able to draw up a set of provisions for the Treaty which would be satisfactory.