310 Australian Government to Noel-Baker

Cablegram 100 CANBERRA, 15 June 1949, 2.50 p.m.

CONFIDENTIAL

Your H.226. [1] Japanese reparations and levels of industry.

Recent United States' proposals cannot be fully examined and discussed until United States Government submits to F.E.C.

detailed plans for revision or amendment of existing policies. It will then be possible for Governments represented on F.E.C. to consider how far United States position can be met. In the meantime we think opportunity should be taken to discuss these matters fully with the State Department and try to obtain clarification on points where the United States reasoning seems illogical and obscure. It may be possible in this way to prevent the United States attitude from hardening into proposals which it may later become difficult to modify.

We are not prepared at this stage to let the principle of Japanese reparations go by default. To do so would be to abandon completely what has been a cardinal point of allied policy, namely that the Japanese should make just amends for the devastation they caused in allied countries during the war. In our view the United States authorities have produced no sound and compelling reasons why we should absolve the Japanese from payment of any more reparations.

The United States contention is that the Japanese need everything they now possess if they are to become self-supporting in the shortest possible time, and that removal of any Japanese plant and equipment would hinder the attainment of self-sufficiency and would therefore represent in the last analysis a contribution by the American taxpayer. The validity of this contention depends upon (a) what economic level the Japanese must reach to become self-supporting, and (b) how much of their existing facilities the Japanese can use in reaching that level.

The Far Eastern Commission has defined the peaceful needs of the Japanese people, during the period of the occupation, as roughly equivalent in the standard of living attained during the period 1930-34. We agree fully that Japanese should not be prevented from attaining a self-supporting economy at this standard of living.

But we are not concerned with raising Japan's economic level beyond that point.

It should be noted that, according to S.C.A.P.'s own figures, Japan's economic level is still only 70% of that of 1930-34. The advice we have had up to the present is that Japan can attain a self-supporting economy at the 1930-34 level without using au existing plant and equipment. Estimates prepared by S.C.A.P.'s Economic Section and by the Japanese Stabilisation Board of the levels of foreign trade and of production in major industries necessary to realise this objective in 1952-53 bears out this conclusion. We do not indeed see how the Japanese could possibly need all their productive capacity in, for example, shipbuilding and steel in reaching the minimum self-supporting level.

The Strike and Johnston reports, in recommending that the Japanese will need nearly all their existing facilities for their future peaceful economic development, are apparently thinking in terms of a stage of development above the 1930-34 level. This is not our concern, nor should it we think be the concern of the United States Government. The resources which are surplus to Japan's needs for the attainment of a self-supporting economy at a minimum level are therefore ostensibly available for distribution as reparations without any hindrance to the realisation of that objective.

If Japan is to become self-supporting in the shortest possible time, she must continue to receive allied assistance, and the speed of recovery will inevitably depend largely on the extent of United States aid. If the United States should decide to reduce or cut off aid, recovery would be hindered, whether or not the Japanese were left in possession of all their present productive capacity.

To leave surplus facilities in Japanese hands would rule out the possibility of reparations, on which it is clear the countries which suffered most severely at Japanese hands feel strongly, and would aid the Japanese in rebuilding their economy beyond the self-supporting stage. This latter is no necessary part of our policy.

We are asking our representative in Washington to discuss the matter informally with the State Department on the foregoing lines, making it clear that we are aware of their difficulties and prepared to consider realistic proposals, but that they cannot expect us to accept their present line of reasoning unsupported by convincing facts. We would reiterate our desire to see Japan become more self-supporting as soon as possible, and re-affirm that we are prepared to do all we can to this end, particularly in stimulating Japanese trade. We would also remind them that we are not ourselves primarily interested in receiving reparations, but that we are interested in seeing justice done to other claimants.

1 Dispatched 21 May 1949 It set out a number of questions concerning the US proposals (see Document 307) about which UK representatives were seeking answers.

[AA:A1838/2, 479/10, v