175 Memorandum From Stuart To Phillips

29th November, 1956


Trade Talks with Japan

SECRET We have today sent two cables. The first, No. 400, covers the essence of this morning's press. The second, No. 401, covers a further discussion which I had with Mr Yoshino at lunch today.

2. The story about wheat and Mr Kono has now broken in the press and as an indication I attach extracts or translations as follows:

28th November Japan Times Food Import Daily Nihon Keizai Sankei Jiji 29th November Japan Times Asahi Shimbun Mainichi Shimbun These all tell substantially the same story. The important thing is that it has now become public knowledge.

3. Today I had another surprising luncheon conversation with Mr Yoshino. The Ambassador's cable includes some comment on the conversation [1] and, as a consequence, I shall merely outline what Mr Yoshino said.

(1) The recent press reports all emanate from the Foreign Office, which is talking freely to reporters and which is anxious to place the full responsibility for the present situation squarely upon Mr Kono.

(2) Two days ago, on 27th November, the Foreign Office called a meeting of the Vice-Ministers (i.e. Departmental Heads) of the interested Departments, five of which were present. These were Foreign Office, Finance, MITI, Economic Planning Board and Agriculture. All of the Vice-Ministers, with the exception of Agriculture, were in favour of accepting the Australian request in its original form. However, because of the opposition of the Vice- Minister for Agriculture, the first meeting then went on to endeavour to frame a counter proposal. The Foreign Office produced a proposal for 300,000 tons to be purchased concurrently with a third surplus programme. This was to be arranged by delaying third programme purchases and by carrying extra stocks in Japan. This was not acceptable to Agriculture, nor was the same scheme reduced to 200,000 tons. The meeting then broke up indecisively. It met again the following day (yesterday) to endeavour to frame some instructions for Mr Takasaki, whom the Foreign Office believe will meet Mr Menzies and Mr McEwen either today or tomorrow. [2] No agreement could be reached upon the instructions. The Foreign Office suggested that Mr Takasaki should be asked to adopt the role of an independent and personal negotiator, that he should suggest to Australia that he believed he had some chance of persuading Japan to accept 300,000 tons, that he should endeavour to get that figure accepted by Australia, and that he should then return to Japan with this acceptance as a strong bargaining point in the internal negotiations. The Vice-Minister for Agriculture said that he could not agree with even this proposal without consulting his Minister. He did this and his Minister refused to agree. As a consequence, the proposal was not proceeded with for what seems to me to be a curious reason. Mr Yoshino said that in Japan it was a firm and traditional convention that Cabinet meetings and other similar meetings such as those of Vice- Ministers must be unanimous. For this reason, the proposal, once having been submitted to the meeting, could not be proceeded with because of the veto of the Vice-Minister for Agriculture.

Consequently, Mr Takasaki has been sent no instructions but a lengthy cable has been despatched giving him full details of the recent proposals and schemes which have been put forward and which have failed.

(3) The opposition to Mr Kono is growing rapidly. It includes not only all relevant Ministries, together with the entire Japanese press, but also the significant 'big business' organisations such as Keidanren [3] and the Japan Chamber of Commerce. The Kono problem is a deep-seated one affecting all aspects of Japan's political life, and the Australian wheat matter is merely the last straw which has brought things to a head. (Please forgive the mixed metaphor.) (4) The conclusion of a third or any other surplus agreement is a treaty matter and can therefore only be handled by the Foreign Office. The U.S. accepts this view and regards Kono's recent discussions with Mr Morse and with Mr Garnett as being completely unofficial and informal. [4] The U.S. considers them to be without substance and will not take any action with respect to an agreement unless and until a request is received officially and formally from the Foreign Office. The Foreign Office, including Mr Shigemitsu, have no intention of making such an approach. In this case they are using the 'veto' against Kono. Although the U.S.

Department of Agriculture supports Kono, partly because they like to deal with a strong man who makes quick decisions and partly because he wishes to take American wheat, there are sections of the State Department who regard Kono as dangerous. In particular, they fear that if his power continues he will increasingly endeavour to play the United States off against the Soviet Union.

For these reasons, and fully aware of the internal significance, the United States is maintaining the attitude that any moves for a third programme must come from the Foreign Office. In this situation, the Foreign Office feels that it has Kono 'blocked'.

(5) It is traditional in Japan for a new Session of the Diet formally to be opened late in December and for this to be adjourned on the same day until after the New Year. This year the date fixed for this formal Session is 22nd December. It has also been decided politically that this is the occasion on which the new Prime Minister (whoever he may be) should formally be elected by the Diet. Diet Members need money for the New Year holiday season and before they elect a new Prime Minister they will want to know what financial support they are going to receive the next year or so. If Kono could get a third programme he would have very large sums at his disposal for bribing Diet Members. The surplus programmes began in 1953 and this is the year in which Kono began his rise to power. His power rests to a slight extent upon his personal ability but primarily upon the fact that he has been able to use very large sums from the counterpart yen [5] for political bribery. In the next few weeks Kono will be unable to promise his supporters a continuation of this bribery because he will be unable to guarantee that there will be a third surplus programme.

(6) For this reason, Kono's political support will increasingly weaken in the period up to 22nd December and the Foreign Office is 'very hopeful' that a situation will develop in which the new Prime Minister, once he is elected, will break with Kono who will be removed both from Cabinet and from any position of influence in the Liberal Democratic Party.

(7) In these circumstances, which Yoshino agrees are by no means certain, it would be possible to decide in the New Year against a third programme and to accept the Australian request.

(8) For these reasons, the Foreign Office has decided to keep the Japanese delegation in Australia indefinitely with instructions to 'string the negotiations along' until the New Year.

(9) Yoshino particularly asked that Australia should appreciate Japan's internal political difficulties and not place any obstacle in the way of a desultory continuation of the negotiations for the next month or so.

4. I made no comment upon this last request beyond saying that I would pass it on.

5. I have already sent you a cable indicating that the Nippon Sen- i Shimbun of 27th November reported that MITI proposed to increase the wool allocation by 130,000 bales. The full text of this report is given in my Wool Summary today. I did not consider it good tactics to ask Mr Yoshino today whether there was any truth in the report.

6. I am giving copies of this memorandum to the Ambassador, who will be sending them on to the Department of External Affairs.

1 Watt commented in Cablegram 401: '(A) Yoshino's assessment of Kono's strength differs from that given on 21st November and may reflect wishful thinking. Doubt whether Kono's power related solely to control of counterpart Yen. (B) Conceivable Foreign Office wishes to avoid declining Third Programme [of purchasing US surplus] until after Japan's entry United Nations for which full American support desirable'.

2 See note 2 to Document 169 and note 4 to Document 170.

3 Japanese Federation of Business Organisations.

4 See note 2 to Document 168.

5 A reference to the local use of proceeds from surplus sales under PL480 provisions (see Glossary).

[AA : A1838/283, 759/1/7, v]