No date given, nssm 172

.

sEcRxf/NoFuR! NSSM

I72 .

US POIICY TOIIERD ;''PAN

TABIE OF CONIENTS

The Ouestion

Policy pisq!ssion

1 2

INTERESTS AND OBJECTIV'S

5

a. u.s. rnterests in

5

ra

5

,nergy Resources

6

Elrope and tie Declaration of princiDles Tlade aDd Pahents

IO

Develooment Assistah.r

13

10

14 14

15

Reqional

1A

china and tne soviet Uni6n

I6

Vletnam and xolea

ta 20

c-

Itlajor lrs and rapanese obi 21-31

- Japanese ponestic potitical Constraints Annea B - Policy Backorou.d rlevious Decisi.ons Arnex A

SECRET/NOIORN

1-4

I 2

San

Cldente, xuilima and Hashinqton

3 4

Annex

a - Traditioral

Tlade and

Pa ments

Security Issues

I 1 3

China and the soviet l]nioh

Anrq

D

-

Japanese xconofric Trends (cIA Menoranitum)

1-13

SECIET/NOFORN NSSM

172

- U.S.

?OLICY IOIIARD JAPAN

Policv piscusgion Slnce 1952, I]S policy toward Japan has rested oD the

basic economic, political ard secu!i!y consiaerations. lhe o!jective cilcustances surlounCiig this lelationship ale changing. iensions lave {iecxeaseC betfeeh the US and ,apar on the one hand and heEeen the Us and the PtC and the USSR on the other, while iDcleasing between lhe latter saee

the Nixon Doctline, altelirg the nature of US involvea€nt in Asia. is seen by Asians iEcluding rhe Japanes€ as a leflection of a lelalive decrease i, LlS pove! and ]esE suplolt withi! the us to comit it abroad. fncleasing nurlers of Japaneser dlawi.g confidence fron thei! om achievements, io longe! see the Us inte.es! as the singte doninant factor ih all of lheir foreiqn policy considerations, an6 .re f'hCi',9 -t both eesirable , nd recessc!t to inclease the weight of lheir other intelests in policy

fomulation. scfre Asericans" hred by Japan,s econonic tlustrated lry Japan,s unvrilliDgness to becoie d unqueslioni.g cohltaent :o gs glcbaf stra:eqy. (This ts discussed ih rnlex c.) selious questions have arisen legaratirg rhe staliIity of the domesti. polilical scene in both countliesr with lhe ruling estallishment in Japan now suppolted by oily half of the electorate and facing a (This is strong chaltenqe tion the r€iuverated left. discussed lore extensively i! Annex A.) The JalaDese ale arare that President (enned:r was assassinarec, llesident JohnsoD decfiied a second tem nomination and the Eouse ot Representatives is aomafly considering the ihpea.tnen! of

Eefole anothe! decade has passed Japahls econmy nay ploduce a cNP greater tlan the ussR and lelhaps a per capita GNF qreate! th-n ou!.un. J.E.r6se econcrrc a.trvltier and lequirFre,.s o! lcw ndreEials .-nC r.!kets wrrh c.rconitdt econonic influence ale natters wilh qlobal irpact.

bilatela1 issues w!ich traditionall, lave !lasuec ,efations - hilitary bases ard security a!!angere[ts, China policy, traCe ahd ncneta!!,lroblers - Iave been reduced to nanae-eab1e llopoltions, tiough none have disappeared. Tl :. !e-6E:ve .j ..:cb o. _ .r.-.ic_nr b1I_t!rd_ .:.: v !- r.-ex-rirL -i--e re:-'.:-:The US-Japan

-lcRl.r/NoroRli 2-

Bhip to determine qhethe, anw cr.anoes are neede-i! our b*-l-Dolicia to insrre conti.ued u,s.-Ja.an cconera:ion in qlobal anri regionaL affarrs.

In section c Fe have leviewed Us poltct objectives to insure thei! lelevance over the next five Years and noted the constrairits that Japanese neeCs and sensitivities i(pose on tbeir attainnent. Ire-lane ex ined existing policy guidelines to deternine Hhelhe! lhey stil1 provide effective guidaEce on how ee walt our relations vith ;a!an to develop g1obal1y ani legio.ally. rie nave exanired tikely Japanese objcctives and identified so e potentialfv tloubtesone issues thich we kil1 cont.ilue to monilo! closely nq lc1icv suicelines rehain alr i9l"c!!9! i!,!! effective fd tl-a attainrert ci our oj)iecrlves, r'€ thereaore reaoMerd no chanqe in basic Us policles rovrard Jalan. culren! Policv Guideli^es the o.s. places lhe highest possible value uPon this paltnership, and resalds rapan a€ our rajo! partne! rin isia. vre sitl pursue reals to make lhe partnelsbip eqlal, leciprocal, ahd interdepelde.t i, orde! !o pteserve its $e will apProaci Us_JapaD nuftiialera] foDq-lelm viability. flotr the standpoint of our overriding collective cooperation glcbal and oill eschew erviroment, in a stable lnterest othe! advantages !n raking short-tem ecoromic, lo1itica1 or

st!ateqic 's_.tr"

w

tre wil] seek to pr€selve lhe Tlealy of Mutual CooPela_ tion and security without dencftelt. l{e ri1l continue to nate gladual altetations in ou base srlrct!re cro ba-e Ltitiz-tion jn J.P.n in oloe( to reduce maJo, .i --LanLs uhl-te !ero-njn. essenLlaI base funct-or t{e wi}1 continue to encourage JapaD to nake rocelate incleases and qualilalive impr.venents i! he! defense efforts, Hhile atoicing an, plessule o! ler to develop Eubstantially lalge! folces o! to pfay a regional militaly

will seek to sustain US-Japan cooleration on nlItilateral problets ol cornon cohcern -- especiaily the relatrorrr.c .:.-ali "d -"roc!"c es ship be'(F"n irade and roietary reform, Ildochitese eneigy, intenatioial rehabililation, and encouraqing cetente on tte iiotean we

s

d"unr

Lih-r

;lcR.Er^oFoxx 3.

We ritl coopelate rith the cOJ !o suppof,t Japan's tnterest in pemeeDt leplesentation on the uN secullty

Econonic/cor.eercial We wi1l continue to uolh with bilateral econoFrc !ef-rronship, Fxp.;d us expolt; and tlade in both directions, teep our bilatelal trade deficit ,ithin manaoeable linits, and fibelalize access to each othells nalket. we expect Japao to ldove lehaining quotas anat othe! irport restllctions which ale contrary to cArr

fle itesile peliodic neetingE titi Japan to assist plogless torald agleed-on balalee of payfrents goals and iD implenentirg coepatible economic po1lcies, to identily lenaiDins or eherging tlade llobfemsr and to rol} ou! constructive, tir.ely solutions to comon econonic plobLss. ile u111 cooperate with Japan iD seelilg libelalizatioD of tie lrade policy of the lulopea! Ccrnunity, and ir. rclking touald a succes6ful hult!1ate!a1 trade regotiation covering bot! industriaL and agricultulal products, leitucing both tarif! aDd non-tariff barriers to trade, alit defining a multllateral aon-disclimiDatory safeguald We tril] continle to urqe Lrapan to rove torarals a highe! level of official assistance on nole concessional tems. and to cooperate wlth,rapan i! strenglhening the iDtelDational flnancial institutions for lhe purpose oi promotlng tne economic develolment of the devefoliDg co!n!!ies.

rtU seet Japanese slppolt fo! ilterrational iefom on sarisfa.toly telns.

We will continue to cooperate eitli the lrapatrese govelment in 6eeking a rlltilatera1 apploach to the elergy probtenr particulalIy vith iespect to plonotinq a teduclion and slabilizatior of oil Flices, develo!Dent of additionaf enelgy sources and implored consedatio! tre

Donetary

techniques, and conducting cooperative energ-y

R&D

plograEs.

affin the ihporlance of close coopelation rith in secu!ihg ! stable sLpply o! enricl ed ur.nilr, includihg coope!.E-on in ttre necess-ly research and Cev-lopVre

Japan

.

tle will contirue to ulge the leFlval of obsracles to gs inveestrent in Japan, as welt as continle to facilitate Japanese investrer,! in the u.S.

rsbir

.

I irjrr

\ sEcrET/tjoloFN

science/techpoloqv

Ile ri1l seet a broade! ahd nore batahced coopelation rith.rapan in lhe fietds of science and technologi.

Cuitu!e/xducatto. gle kill !.o)n Hjrh Jepar ro dFvise irplov.d . ot culL!rqI anC !duc..iondt exchar.e, jn i,r.., riprogles ,r:p,.". ou! LLo_corn.!ies,Lncers.noin! or eEch other,s cLt!ur.-

lhe us and Japan have concluded t]re folloerinq basic agle.rerLs: (1951 , T.e-Lv 6f rl;.r Coop.ra(-on orC aecu.irJ _9b0', d :,-tls ohenL (,960r .n: :t- o{rr.au. ,...r.,.. r...-".-r. , S _', all of Hhich renain in eflect. Economic relations have been deveroled githin the frdeuork tr." r..iiy .i rii.na_ Ehip, Cd_prce nno t.dv'grrron ._95,."tar ,, ro,e r;c.rt.!,, Lh!ough 9.ice .e".-. rolEt .n -).Ls bjtr.ejet rcj.-;_o-.s ----pirticlr..-y .o o.fi..irii" r-r-oc,c . .rrL6pon .o.

Econoh c ;rr 1rs and tne Nixon-Tana.a Sur.nit Conferences of t9?2 anC 1913. ?rlnciples goverii.9 scientific tetariois and elaborzijno .tose corsLlt-Live tracts:.,e!v:oy n-ftur dboor.o - d nlnb! ) o: .d.e.r Fr.s,nqthc rosr!.laLrons .rro.t.nr-!eo! nnrch :!e he Lr-J.p.n ^:or" _ne- J. ;dreexc.L ,^953); us_ e.tabl : snr no th- Jol nr coi. _rEe. on b.renLr:rc coop -_...o, 't961), Et.Join: coo?!!d..ve t4!cical i .1d6., rne co6pF!d.:re in :cls-: !,o.r "rdano !h- cx"n-r."- p;oqrar Io7!.. o. acss.(es betveen Presi.rent Nixo! anc prire ui,ister sato estalrishins the Us Jep.. inrsLe,_ot tere-t veec-rs on Lnv-roMenr-l

coopetatioh G970).

Withih these quidelines ard on the basis of preseDt _. poUcy, re can continue to haidre our li1atera1 p;;ai;;;. oo.nric.t.re Lt.r tt.nr. L-_l be Do_icv ts Les conce!n'n. J-Fdn -"qL:!i'.s jecjs.o." jn he !ijLure'- rh.1F issues vi11 flow mainly f,on multilaierai p.obieiâ‚Ź; 6a4Ethe nosr s-rs-r.v- ol rtich rie:

Ehergy -- rh_s r."DF. err"rsjre.tv rF\ieqs e, ersy . ,ssues uhrch ar- vjr"t o lapar. E-a:c oecis,6ns ;; en-:.y tnrcsL--nr 'r.e::o"q Eot_!v, ho"c/e!, .rrolve oI!b"t rrd.: orls (h:ch !Fa.h vet- belono rre -!ea o( us_;a!"r r":ar-Ln_.

Silcri.n D-..tobr(nt -- -tis ro, c dcsF-ves consi:e--_ c.n,.x, o: r"t-t_ons vi:h Lte LSrR and sec r:rw.

Jdpar is " re.'o. rnLbresreo bar:y s..h rjh r re ho.e rart. comon i.EcrcsLs

-

A.cess ro Rak li{atelials ard focdstulis -- Supply to .. industrialized atl econonies, incfudins Japan. is ;o; a

T!1!egiona] ries -- This subject has been extenslve1y studiedr and is treated in this paper fron the viei?oint of

ou! retations with lraPan. IDtelnational Trade, Investnent and llonetan Relaticns -,lapah is c na'or p.rtrcjpanr in erfolrs Eo rettei manaEe these globcl probleis. rhese rultilarera' Droblens so bro.dty .irpcct on Ehe totaliLy of-6l;-;:Z;;l-'i:;G-s thar.t-ev rus! be oe-lr slLh ,r;ctrondlri for the Flocess or -onsidelatlon Lo have irtegftty. To propose policy options in rhis JapaD lissE on lssles which affect no! only .rapan but at1 otile! advanced Irdustrial nations eould inevitably produce unacceptable distoltiors in our analysis ald perceptions leading to lhe plesentatio! of unreaf options.

IN'TFRISTS AND OBJfCTI\,ES

A.

qs Intelests in Jalan

Since 1945, ou! fund ental interests with .rapan iave strateqic, as we sork towald a stabte securily bafan.e iD the legion shile ensuring that ,Ialanese infllence ii Asia is construclive ald benign and that the JapaDese do Dot agaih becore a threat to stabilily in the area or to the security oI rhe ur'red s'ates or Japan,s reiqhlors. ov6- Lhe rey. ljve ye.rs, J-pcn',s eronors cnd rechnotcgrca-! ex.euence, an.l its potential fo! lolitical intluence and even hllitaly !oue! uiu project those intelests with incleasing effect onto a glola1 scale. of tne rorld,s grea! pcaer centels, Japan aiII plobably cotrrinue to glcr econonicatfy at a relatively hiqh late ln spite of enelgy problesr abd yet no lfrpoltant naticn feels ]ess ce.taln of its positto! in a hulli-polar uollcl ro- of the ro-te jE Ehan JaFan. Our jhterests in regard to JaFan s uo!]d !o-Ie thlouchorr been

this five-yea! leliod riU be: Psrcholoqical

Given the effect of past and future flictions, ove! the next five rears as both countries atler.pt to exelcise thâ‚Ź valious s1obal options olen to them, the lsychologica1 dtnension of halcli!9 ou! !elationship uitlr ttre_,;apanise assues palticular inpoltance. si.ce Japan has becone a full-fleCged ccrpetito! in the econonic fielC, the Japa.ese a!e becoring'r(r...'n9ly as"!e tlaL Lherr erp.iiin. activities a!e arousins lesentmâ‚Źnt throuqlouc the uortd including ihe OS, iased in part o! laciaI grounds, in Part ou the 5ty1e of .rapanese international behavior,

.

slc Rrr /.ro! onN

5.

anil-in Da.E on Lhe belie. rhdUcpEn hcs behoved 5erLlshry -n evEdin9 inrerndrjonct responsi!rl1Lies.

For Jalalt che situarion is hard to handle, lecause ," pos..ion of depend-ncy ard vurre!;brrjrl ll.-!!l::. a-!rnsL r6.pIryed o!na o. !.ci,_ sel(_con.cioi"r."s" bacL9pecrric!r) rh" J,pcne-e s-n.i.:ve ,o any app_a;-,.c.

1:'!l i:i:. or o_scFr_n_Lort -.cr-sensrtiv.;y uP consL.r-ll. -- (pent: o! jr dissui-e __ .n .dpa-e.: lro!r-"::j(:s to such dicporaie ccLions 6s ou! e!.o,:s .o e_!"c- j cL!!prcy reoIjg,i.ent, ro pros6.Jte Lhb vje.rd Lo!, the. ihportance aith which He vievT developing relations wirh r.!op-, to redeljn6 he rorto sys -j jj Le.rs o! rLtri_ porarrty. ALcra i\": rtF) h"re -o ra:a,:oj.st:t o cny ihtiracy urLh.ny oLl-r sr-Le, rt,e ..p ncs- elcrinc L,e large of olr poljcy ccLjo^- crc pro,"ircere..s (! rle 6right6si evic6. Le -! d:sc-.nr."rjon oj -eD o!-rion .: (herr inrcrc... in rro r-5r, rc.cLpd n.,riii:.".r." accus.l:on r hcE "nr, Lh-1 u"!e ev"oind .r,". - i".u,,u.,ln"r re-!ons jb.Ij : j6.

bu, do r.o ).re an1 .e6l aotjon o- p_c, o: t.ol. to oo eboul ..hr-!ir( _E or:r:..cn: ;-c.use L_ the slspicion and risarusr r,ith uhich Jalan is stirt o:ten legarded. Fo! all of these dealirgs sith the J.panrsr r1.ws h"!- e | 9n ..rLe o: r.oljo,.L !onr.r,. "r.:ch, tr nor hdndl"d -nit :Ll_y c.r ser.ousrv .rpe!e our q.hj. v.rg part cur,! b6rrcy cor1s. t)_s suggesLs (hcL Lo .t.e exLo_.1 ou! slobar objecrives pemit it, ;i, diplohatic stvle shoutd: PlomoLe !ecoonrtjor o- lapan s qrouing starL!e jn iDte!national orgrnlzations

.

l{ul

j

rilaL.ralrze ou! pfcss!!e on Jopan rhe!e\er

Lhar

Bf !",sL d"r.nd:ns Lirh Lhe J-panese rn pr:v-re -Dut, not "r. in plblic; Adminisrer ou! poticy derands torard on the of- a carefully veighted and approled set of,rapan pliorities, Avoid surprisi.g the ,rapaneser but lather consult thee frequenrly and at many 1evels on irportant poticy and above all, Hhen pressure is n..essary, exert it rith a. acLjon Lr v -n io_.tl ,h6L r.rjon l plss.tle to avoid d&"o" 'o Ine v. .t .r.. Jupunl,.", and at a dninun ernibit an awareness of tne o r;r sid;,s JapaDrs feâ‚Ź1inqs

of isolation and insecurity reach rheir

slcRET/noFOPX

zeDith-where erelqy resources aie concerned, ahC thele is probJl]y a o!e6L-, cn.rce o! drverqence and ^_sundelsra.dinc viih respect ro Jdpan (and oLta! oal_ ihoE rL6 Jap.nFse consuni-9 counrlr(s' continue to opelate tithin a murrilateral sysid telatively open oiI narlels and vrithout .nsaging of o! othe! bilaterat aeals eThlch r:ou1d artificialiv i! !a!te! inoe.se ptices or shuE our h".r rh. corperiil;;.' .o a.hieve that objectlve it is in tha irteres! of holh .7apen .rd the Eo di /ersrfy tno soLlces .nd xrnds o enerqy avait.LIe, ard corpelrr_on amons suppliers a,d majo! cohpalies fo! Jipane; nalkets.

Fo.ht ot vje,, the consjdelctions .. ,Irotr-the Jota.Fse enelgy lolrcy !re rhese: -- the tti!d j..9esr .rd :as.-st .rovring .rdLsrrra. ecorory.in tle uo-1d _s.bout Bs p..c";r dep;nc.ht or

-- Petroleh is and for tLe foreseeable furlre lritI be the rajor sNr! o.. cn-.oy.nd on_y t2 perc.rL is irpo!teo h-iIIion tons per yea: and uilI ;ave ro have ruch mole in the 'Ltrr" ,.rrsoJrces \rhjch ccn rFl IEce oil ale fullj developed.

-- The l.tiddLe rast is the source of BO pe!.ent (4G p+cen. nor 'b o, jdD..is p.'-o:-u- r.eeos "uro'-ers, toclaY..,l 1nCo.,e.j" ^ o: I5 p-.cer.:. !.terrjrive nolr capable of supplying onty a portion of JaDan's incrp-

hen La1 dendnc-

-- l.rhatever tre orjoin of .he per-oleu !e<re! rorei9n Fol_trcat conr-o1 et rte sourceirsel! and, case of Lhe I iddle La<-, o! dove!Eer.s viLh shjcn nas not tladitionaltl hcC clo-e rrt"crohs.

70 pelcont or r6!e of Ehe pet-o.eu Celiveled . _ -- r4oreover, fror. procLcrio. contlor.ec !y Lre cnjor irrelna_ :9 1:f"..:-"" t1onaI. or r cotrparles. r.p-nesF oured (or panies no, cor.rrol orry about aighE pelcent oi orI inpolr.d .!ro ,-e!an.

-- Jh the I jdCle j asr, the Jap.nese have fetL .omDe1t.c by thejr naled vulr.efabjt_ty Lo 9:ve Lherr policy on ti.e Arab-rslaelr dispuLe o pro-A!-b sr)r,t. rhe arabs have Lt-e Japa,ese ntich rhcy have us(d

-- Japan is also dependent on exterxal suFpties

id"n,,"rib.,D slcnlr,znononi 8.

fo! othe! enelgy sources -- on coking coat flon rhc !s, Austlalia, and canada and on the lrs .lone for nuclear -- Japan hcs ri Lrle slo!-oe caDociLy (.bour days fo! all po!) for enelsy s6urce:.

60

att contr:bute to u, oppr.""iu. or roriisn ".^.u .",6"ii..-r"i tifeblood, !no "na Lte Leeting Llai Jrpan,s supprres or p.t olei in larr,cutar coutd be encancer.d hv nor co!t!ol. ?tre Japanese do not lelieve that the !r;_ Octobei 1973 to! ac.ess Lo energy dre .ny _orq-r_ viable- rh-ay are oeeply con.-!nea elo.. r.-!,ic..i-o-1,, nJpply, cnC kou:d p.e:er ruIti.. re!al sotuijcns to the plotler:I Lhey c., !e rour-.o rrlougn i..asy-r.ii";icloup.proposal (h:.F Ehey sLppo, r, or rh!;u9h "t" sore oi;er -_ ' rornu.ra. Japdn was the ri!st oove!tr-nt ro ;ccep, the PresidenE,s irv. etron ro tha \:dininsr(n.onlererce. rI !p:roa.h rairn. !apanese :l:..1!ll.l:r:'"r re,uctar!ry brL viith Lota_ cor(!nE-.r.jo^ ro JornLhethe ;..e ro! biIdr.ral .eals ,ith olooucr 9 courtries: :I.ey r.iIr {eep opcn Lhe bilaLer"-t op.:on, buE 1..11 Jse it slarr.91y ..r.d olospe.rs lor Ene r:ulEiraLC!aj app.oacrr , sood 3:-!iiI. rnvorv_ns":. both .ohssrnq ord p!oducriq These facLols

ilepende:ce.oh _orFion-sovp/trcr,s

couhrrjes.

!nc-rra.nEiFs of rh. enelqy siru.,ion, coupted . . the ulth tha deremiratron o t.e OpIc . roJp -o exer. r gleaLer ;esree or tevela-e agajrst e i..-or ictern.rion!l rh. eoverru enrs o- rhe raror..onsujne coun !:es, ::l!^lt::,:l! sone control ol-, cr le.sr 30 pelce.r rr i peiro_eu uportec.rAto Jo!an. by I930. ,th-s _s of nor _arq" 616""".a ro the /u perc-nt tlaL riou_d srllt be cor-roIte: by,te rdro,s, rrL it v,ourc olve trr.:apaneie sore .1!!:II.r_9Mr reer !n9?of assurance Er.r they â&#x201A;Ź!e nor corplet;ry hercy or foleten "t the ihteresrs. leet,n9s Fxplojn u.hy J.pan js ni1.liro to cou!t cnrnese d spiea.u!e by ..,cour.,ins Lre 1.. .(n p;ojecr ^r,--1hese and otrer e,erct ceFts \.1rh rLe soviets, nhy.r!p"i.-i_a 5o hard -o havc her sorelFior.ry oleL rh- se.l.ali rsrehds ::llll!:d ,r rhe oiincsd Ra\elsion :!..iy, and vhy . r"panese Drd aoo!e-slvely

or

heu avai_dL.r_ties, ar.o

Lhy..p..'

!n tecfioloqiccl

deretoL:Frr IJodrr-s erC :.i,...b.tc .,-c! .:r.- .-!11 sro o :r __ch p.o..ises rs ort.oLs_I.

!IL".1ifilr.; or,, arLhoJgh Lhe.ap.nere.!e

sLrtt ctl snolr oa exFecri,g

stcRnrnoroR]r

assured quantitles

ot a,d priees for perloleM !n !etu!n. sde sorr of conc.rh occupjes thF .--. sonething of the ro orher enelsy soulces. rire Un.ired --::_::ill._::.::*:1,:e ,,.e rons !am u"ii:ur:r:ri'"i ro suppld-nt officjal - LS *"*.9. an rnr;rrarjo.._ry i,:.-a p,.e."i.! -B::9y:1.1":_!y.pfocF-dirg s1o!ry. rn any tha Ja!.rese divelsi -y rnei! sources ;r iase ii-"i* ,ed*" lhejr (qptete deperder.ce on -s supp.:es.en.icf"d lapan is ",a a!so Irt-.lestec in oo_luiion r!ee oas ai'"n _, e.9y aearr rne Doten. LJr u"..- ," e6iri"i .i *ti"* and Lhe Lechnorosr. o. exptorL.cion a.d del,"*y "ir.., ;s ;";;;;"i;.-".," elpeDsive. bt !e qotns too fa! to charactelize Japants ere!9y ^-^-,1.-Ti:1. !eoui!er.enr.. rne s_nole tros inpo!t.rt oereri in.nt of Jap.nese ro!e1(!. po._cy ao;,he fu.i,e.

-hjs is, in pa!t, a secu!.rr pr(blen .o!.r:pcn, bJr !he J.p.res;;; and, lalse co nor j erp-e( rhF ;ec;!,rr csp".is or this of , sov.-L nav"I tr !ar _o Lhei! vutnerq!-te 6ea ra.es ro Lhe rFile resr .,o _rdonesrc. ."i;;;i;;;; thaL.there js d por-nEj.t tl.r-"!.h _hjs !cqa!d, "h;t but Co not feel therp is ruch Lhey.an..o:itr,-rrtl .t abo!E or aborr c.rh.edr ,o rre lroduciro rr-1 ,s tL;. s-tres râ&#x201A;Ź!e they to falt rrCF! Sov.er o- ( Lhei l.ostrl- conLloI. A rore virjd conce,n to the ..pdnese js rndl, rn dn erc or oroslrq shorre9rs, !jsin9 bricesr dnd r.cjeqsFC rersrons Lave tna a_r .nc Llc rajor haErors :::::.1-ll:.a,_ons..hlch ploLcce ahC se-1 i,, ..!a.'s inre:esrs t.6 por:t:c.. ard ecoromic oorl.ies I:1-l::*"r9r,.I..,6be"!s r.rtr parr.cLl.. on the ljnrr.d states, urose corpanles sir_-be -apanis!or.e td!resr "..t;i;;;.. competjtion to! pe,roreu s!,pItes:s conce-r(!, .r is the united staLes about ar _ch-Jqpan _s rrinc.p"iry eoice.nea. ,,rapane6e nayrr s oLjecrives in rhe energy fierc <re: rt ,ht9h-leveI f) bitaLe!ar (onsr1!crro,. too!ojr;_rion naLrcls: "itr-i;etr.e !!!.rce en:s uirh ::^:"-:":IEy supptie.2)incoopera._ve !he even., o er-rgehc_es: 3) rt.e oi.co:Lio,dr enerq! rpsotlces i, .r.. rs,,i..::y:lopr.en, ."""' hier-t ir.ves, y:,if.

6 cuaranEeed po.cror oI-the outpuL; 4) joi.L venru!es Lo share lr!oF -corirrc ceveropren. ., t5i* c;*r;;..;;;;"rc.. _i:".*,):::.,,:1:I"^tr soulh.. sL ;sra even china, 5) cooD..o:iv( ..:.n.,r:. uia _;;;.i;;i-;;."r-.= "no oeliab. ereroy soLrcrs dnc F.o,e errrcrerL rea;" -o! uL lzing .ro 5) ruiLilatpla-I redsures

slcRrr/frofoPI

SECLI/I'O'OPIJ

10.

ihlough the EjlG and rith active Producing country participation to solve Energt problss 91oha11t. lurole and the Declatation of rrinciples The Japanese see tltir relalions with rutoPe largetY in tlade and Eoletary teins, lith tittle lolitica1 o! securitv l97l :or n'!,rLl3nLic inpur. 'he 56.'6'._y s c-]I r-rn'.p.'l I' c.uEI.: rhP "--p"h"se bw Ch-arre! dni 1._" 'a_'-i..1 surpris.. Tl.-t '"v. .rrce coordj ''r.( lanalinq o- rhe,i-or'ars "no i' that a trir.qional declaratic. oa princi!1es, nanifestinq the shaled a€pirat:ors ot the Peoples of lr€steln Eulope, Japan ald the UniteC States, is in olr coM.o! intcles!.

The principal JalaneEe .oncern is to receite equal cxeat_ ment in |ne resclution of lnis exer.lse and the triregi.nal declalation l:o!1a :ulfi1l tnei, ot,je.tive. any resolution of the declaraticn initiative rhich apEealed to consign JapaD to second class or "outsiCer" statu. \,o!1d Le viened by the Japanes€ as a siEnificant faiLule ior US and Japanese Trade ahd Panents

4@ trade rian -;rpe., or a qlobai basis our 1972 dcticit ot convertec into a s1.7 billion surplus i!

33.?-Tlll];;-d 1973. Ln inportant conlonent o: this vras the reCuction of our bilateral deficie lriiil Japan fr.n $4.t biflior in 1972 to 91,3 billion in 1973. ].he Japanesc aeel tshat this inFrovenent is due 1ar9e1, io the reas!.es tiey lave thenselwes talen, such as lhe revaluation of +,Ie yen, the lcri.ring of taliffs, the elirination of host inpor! quotas, the rcnoval or easi!9 of other non-tariff !arriers, anC d.fiberare encouraqe= ment ot in!o!ts. The cor feels tirat ie has accordinglv the lresident at honoled tne lrine rlinisteris (uilina ln August 1972 in rhich he +:p:essee his iltentior to reduce the trade irlralance to a hore nanageable 1eve1 !:e are glatificd {tthin a reascralIe Feri.d of tine. !hiIe t' 'h i. sho!:d Lha tr-.e !y .le sharp :rLro/-: e'. "'.ii ,aio r:e L. to:edt'" continre o-' -!ricrr 'L"'er rl._orgh expolt prorotion acaivities aiC by see\ilg the reducticn aDd removal of iapa.'s renaining rhport barliers Eeqc alq lCtEIl l.lj!g, elther fron the raPanese o! Us vi@tioint, axe o:'tl aliy treat.d Hithin a Elobal context. rlcEever, rap!dl! ewoLviig econcric cevelolnenls coulC, of course, gire tise to lrad€ aid Paltonts probleis betlreen tle Us and Jalan, Possi!1y requiring a li1atelal

qEellqls!q!{

' sEcR!t/l:"o!n .

11.

in a m.jor .cjusr. prices. to sharply higher e.erqy Ilough concer! nent during october anC iiovanJler I9r3, even panic, over crlde oil slpplies has been overcore, tne irpact of oil price incleases is certain to be selious. rl:e GoJ estrmates that paFebts fo! oil in 1974 {ill rise !y about 96 billion, Tlat astinate is probably too coisErvativei an lncreEent of lro billion is noie fikely, and eone obselvers thlnl that ever :his aroun: is tco 1ox. othe!

Iot'h US key ravr haterials costs are atso risilq. suppliers anC t]re USSR are asting a 3C-40 percext price increase for .o,:ing coa1. ).Etic!1t!ia1 ih:orts froh tle us, valueC at aboul SI.4 bilLion in !972r rcse !o nearly 93 biltion ih I9?3, nostly as a result of lrice inflatior. lurther i.creases ir soie agricnltural prices are possifte. ?he irpact of these and other factols or tne Jepanese e.onoFy is tne surject of an assessrent attacned as .,\p!enCi, D. since the Japanese econcnic situation is changi.g very lapicly, the Alpendix can be .o nore thar a general lreatnent; nonetheless there is good reason to expect that int€rnational palnents lrobicms uiI1 be an impoltant con.cxn of Japanese potictmakels Tne rapanese eco.ory rs .r.qoged

'.

Jalahts !esponse to paleents lressures could conplicate the internaticnal econoric situatic. of the U.S. Tie Us objective renains tha! of oleral1 equilib:im in our international pa)nelts posltion, Ire recogiize that enerqy inporters uill tave !o ac.ep! Ceterioration iD a result of hiEher oil lrices thei! current ald lro ar6 cooFeratlng Hith oit inportirg countri.s to avoic u.ilateral effo:ts to fird short-teri solutions to balance ot palments prcblers arising therefron. It is essenlial that Lrapan cooperate in seeking muluatIy corpatible polieiesrriction 1i'l .l e Us _oJl.: d6vrl.- ' _ -1.6 -dr.r' sF conpetitively devalue the ,en or if they orlark on an export prcrotion or irport clrtailre.t Frcsr \ihich slcceec€d in disruFting !S trede or doiEstic Fr.duction. In this connection, the Japanese relrese.tatiwe to the last I,:?'3 heeting proje.ted a balanceC lraac accourt for 1914. civen recent larqe nonthly d€iicits in the traie Lalance, a siza!1e turnaroune pronably req!irirg .iajcr pollcy C.cisions *ou1C have to cccur in the next fevr ronths. tlilita::ing agalnst najoi changes in rapan's foreisn ecororic Folicy, hosever, is the likelihocC tiat fcreign countries, :rcluding the usr aould letatiate. Tle coJ has so far qiren .o overt indicatioi that such najor changes are urCer consideratro. and las, in fact, gore to soFe trouble to affir that nc export expansicn

u"^,,..,,,'.,,...""."'/.'o,o* 12-

or inport curtaitnent polic! or conpetilive Cetaluation i3 far in ealfy 1974 the va1!e of the ven has tluctuated bet\reen 27: alC 3C0 to the dollar. In relrluarv and Narch the Eank cf JaPa. did not intervene in forex harLets and the ldte has settled at about 273. lressure aqoi's- l.at !dEe .-__ rrol"bly '-\ l'P as lncr_".e:o" ri"".r cosrs l.av- o te rct. :e ot_- l."ve Lo !es'sL Env rut" siifts vJhicn the cor i.duced or a11o,iei "*l,lo"on ,itn a-vieH to irproting the uncerlyDE taiarcc as opP.sed to shifts induced by rarliet pr.sslres. Established .ontacts bet\reen top fi.ancial ofiici.ls 1ri11 !e lti1izec to assure a consisteicy ot (lltilateral Polici.s arong deve16leC ahd a nultilateral problen is The colntries. getting coclcraof .Ia!a!es. tne b.sl chance has allroach to us ahd.rapanrs other acceltable tlon ih a solutior that is majo! tradlrq larlners. shoutd Jalah adopt unacceltab1c ieasuxes to deal t'iti to its layrenls !!obI.hs, vre ale !6t !"ithcut the nears 'I .i-.Lr.5t-'. oererr'' s''r rs r.-.e:e LE, "'"t".i our (.iPlo "'\ l" sly-e oa ihe r" L,e "co"orr".d '.1 sl ou d ,akc rs oL 'hrd above, ii!ltilatera1 traie lecotlarions are 6f major inlerest Srness to lrovide tle to .rapan;-=-eG?dGa-!y i: conference lrnicn fornallv op.nea ior the rliniste!ia1 site 1913. The Japah.se iol{yo in SeFterter the trade round at to c.npete on vorld narkets of tbeir altrilitY ale convinced to reducc exislinq lartiers ald equally conv:rced of ehe need to traCe. rn tne nultilatoral traae neqot!.tion6 xe erPec: them activelt to pursue the foI1o$ing goals: 1) substaDtiat reCuctio! o: taiiffs, 2) eliiination o! leducticr of Don-tarifi barriers, 3) cleation of ion-disctini.atorv, hlltilateraI safequard sysler/ a) tne Prot.clion of dorestic ag:iculturo lth1le assurinq f.reign su!!1ies, 5) the extension of telefits to lhe IDCrsr and overall, 6) the prin.i!1e of reciplocitY. Throughort the negot:iations .rapan giIl irsist o! the .r'! i at.o r'c:p!o''iy.

D)in iDl s o ror',rscr! ii.". o. jev'lopI 6j cl . t 'vel o :onsidars lrs - o 5a1_ re. "rE and ecorcmic rallrity thich eltittes it eo the equal treacnen! it fe.1s ie has leen often aeriec in the past. rn neeting !â&#x201A;Źu, prolles, Japai vrilt be open to ane.Cilg the rures 6f tle c:uT provided these principles are res!.cted.

Adreâ&#x201A;Źrents ccncernlnq secuxlt! oi sup!]y are an eaarple oi such a neH area vrhich |ou1e in:ciest ,iaPf,n and lrhich miqht tequire .nerCrelt of the GI:'T. Inter!ational nonetaiv refor efforts ale sulPorted So

stcnx?/r:oron\

rrsMiribn^ sEcRxr/NoLoPx 13.

rn-EFrerJr, Lhey have supported Fulolean !y l!: y:p*.... app!oaches on several :fpo,!arr aspe.ts of ;erorr, cnd wourd prerer a Lightc! slsten o. seEtl"trent, a less ,leliLte exchange late re9irE and toos(! aciu.rnenr ob_igrLions ti.h vie have ploroscd, oh the oLhe- nard, the j.p"nese have Iound tneir.!ecenr eype!j.hce,ith .io.r,nc'!;;s;;.bIy s.LlsIacLo y, arC lecogni2e Ehat .c pr.s.nE floatrnd legine is.ploorb y the rost epp.oprEre p,dcLrc.I r";ponse !o a h 9r ry unceftajn ari vo_qrrle srruer.on. l:hite heavy enphcsjs on aloaLjno rs ctea!Iy nor ice6r to! rhronge- ttrr in the J.ooncse vje.., tf^y -!c Drolar-y rou prepdled Lo cccepl crlore- !.Fh-s.s on !-elib__rLy Encn berore jn I tghr of rh-rr lecenr expFricn.-. pevelopreht Assistance

h:v" r:dc s.eaqy proof,ess .r . The Jap.rese asslBfoncp progr:rs o the point |here :h.v ale thej! folciSn to the Unired st6tes in telrs o_ rotal lesour.e arous Lo '

the.less Ceveloped coultrieg. Totaf Japanese foreig, .56istenfr rs noi. .lose ro the .jj .ocI or o. e !cr.o;r of GND. DFser\od .!irrcish o. rlre o\. -!ve. or offici.; d6!Ltolreri assjste-.e, t.. h.Lcness o_ .itj L6.r si !ronrh a- o !arl ,oL exceidi.9 thaL or the econorv.s I ul.oj-, cnc Lhe cloqF !eletionsr-p bpLveen Japane.- f.r-.. n aqsj.tor.c. .jd c.iei oblectr".s, snorld noL obscur- -.ne te. rhoL.ome .e ..b.re:e nent l.es-s.e, d.i-y irplov.i jts pcrFo.j.on.^, :.cr*s_n9 ia" 9.v-,h_ vo1!he of cio ar. .rJrnC i s r.rr.. tha J.pcncse cre corrr.r(o to contribute to ttre reconstruction effolt in rbdo.hin:is noe cause for conce,n that the elergy .rtsis and -TheraJ.pdresc !osult:n9 b.l)nc- o. prlncr,Ls !obrF-s r.;11 a(tver,c1\ ., rect Japan's con r bLE-Ln Lo ,.ir.n e\eloLrent. rJiLh Lectj;ir. foleign excr.nge ._ lponcsc vri_t r. io curtuil forejgn essi.,.nce !un.:s, ajd .he .eFd to-p..a !iy g.eatcr attentior to the r,r.Cole,stas. cnC olrF! ort p.ocuc:iq are:. may detlrct F!or. . aDa. assjsrJnce ro othe; naEron: i; Fron our poinr or viel tr.:an! se fo,ei.-,n assisrance Policy_should te orje,.r.c p-ii.rily rov.oro .onscr Leh heeds for econorr. soc:aI ,"..-'opr er r _h ,;.. cnC in ":.cko-1d. .n tr.e An ard Drograr (ocused entirel) on g.iri,9 -cc,ss io c:rd6 o_t and !-u r.L-!i-Is ,ould rot serv. ti: ne.Cs, â&#x201A;Źnd by Lernr ro6 btat.nt.tv a dev:ce fo! 9a1.in9 .o.rlor o( laiou-cas ijou d rn .h; en. not se!!e JaFanese intelests .ithe!.

Nor is it i. our iDtelest that Fos! of JaFaD,s lilaterat assistance is ried

to

Japanese plocureient.

srcnrr/xoroR!

isrilrrirrru\ sncRnr/foFonx Sjnce Prine Fjn.isrer 'ron-ka,s tlrp ro SouLheasl Lsran

thveslnFnt r.ot so.ppclenlty exploitorrve in jts goars. r,rtr!o1i.y cn.ou!c9enenL qnd c;s.reerIy iI9_ied plessure fron !s "n.r oLl-e! oonor and rcc:pienr ..LnEriFs, the JdDrr_esc car prol..bly Le persraoec to.or(Lot Lte irpotse to rse_ aid to isolve' their enerEy ald ! r materiais p;o;ie;s; anal.instead use it in a nole baranced say for iroade! ;nd ultimately nore useful !u!poses.

Froh poputa! a,.counts of some recent events, ore ntghr conclude that ls/raran telations are arready very seliou;ry ueal,e'-d, and rhct r.n J.p"n!sp 1F".e!sh.F leLor;1e,v .no_ hcy docide to ore.k l rtl. rh. t'S rro oo ir alore. Thii rs obv-ousry ro, the -Ese, bJt Lh- L_rar--.. ,etoLionshiD is corpl-a} a. un., t-ral.

-5crF rs c vasr u:th Lhe Jcpdn.s. :r o i- st.re ard oLjectives fa! hore fregle.tly tha! v.e fihd ourselves iD

i.: t Iiv- . -c!s .ou-d becore se_-oJs, vh!n ,\rr.rc.r. p.!er cn., ir_lr,.rce .r..(!ndr.o..ct_y r.- rr

r. decr.'no.ro i_pa,.-.is rjkc.r ." r; "Li*:i-. ucr.dir.. cnl .; ererq.jq :it:E_ .ak.

I1"".::,' TI.e eidless

tjohs L rlI-2 ueys nave ro pl-c( :c":nsr e ,r"cl,-ounc or deep.urtur_l -rd -ituaLi!ra_ ortte-enc.s. As sud9"r.eC throushout this s!!dy ue co nor see deverolirg in rh;J.Pcnes. eT.csr:c po_iL.c-l 61st .n :er..jeicies f6- sh.rp djY.tg.n.,, ftor Us polrc'es, p-ov1-e- Lhe :..1.nn..,.i."rsnlp cc. obLa.r. s(re serse oI .ssuL.j.ce _h1r st nes . .oah s ne^.ts drd ,r\es .her due .onsid.rar:o! t, constructing 1ts Eol1cies.

Se.Lrity ard rl.e Bdse sL.r.r,rp prinary U.S. security interest vis-a-vis !ra!a! . the .Tbe is nrailtehaice of a relationslip !,hich contrirrut;s to the.strbilitr anr ecce or rh( !-s1;r r 1 ."*..in9 ir.. credjbi_:1, ot u.s,r securjLy 9Lc_ar.t"es, f.:..r.jn;h1s r.sic rt.revo!L ch.19ing cjrcu-sr_..cc< ".: rechrc cay ray !--. pernil 9!ear f c).-rjliLy il tha nurle!, si:" -; n.ision uc n.v- -n rnLe_est ih F.:n_ ta:n r9 eccess to enC rse ot L-s(s rr s!!!1ciprr r.u,b(r t( supoolt odacrdt-1y our nititdry -,q.i!en"hrs, pInedecuare poeer, Llus co.r|buting to i'sEo!r_1Ly E,.a insecL!ity jr Jap.r's :nt, !.-L rs ro prcs. re rhc Us stratee-ic deter!ert sL!r. .rent saijqrac.:on ror

and .to provrce

s!crET^jofoRN

id. nrIiblrr

SECRETAOEORN

I5.

.

'

to pelsuade us to naintain the alliance. In Japanese eyesl the !!ese.ce of US lorces in JapaD shoulC not thpact adversely on the donestic potitical situatio!, or involve elapa! in dlsputes alro4i. The seculity and stabillty Frovicec hy the secu!ity !etationship shoula erhance Jalan s effclt to lfrplove its trace and political relations vrith the ussRr china ard the rest of Asia. Jalan's .m nilitaly !r6g!am 6hould be geared to a Eteacy but Elaaual develcpFert of a military infrastructure v,hicb .ould be !a!id1y expanded should the neeC arise. rh:is developnelt slou1d be closelt coordinateC \?ith the U.S. to ensu:e corlinuing conplerentaritl, in tne respective roles of U,s. ard Japa.ese Eilita,y Iorces. fhe absâ&#x201A;Źnce o! lerceived threats to Japa. itself, tle dofrestic political vreaLnesE of those eho miqht advocate a najor hilitaly role for Japan, manp.uer constraintsr constitutional irhihitiohs. the stlorg ibertia of past policies aiC pacifist fao1ings, the vulneralrility of frilitary Frografrs to doresti. lolrtical attacLr and the anxieties of tie neislbors lrith thon Japan uishes to lenai, frienily all nilitale asainst any assunplion by Japan ot a major nilitary ro1e. only the energence of a hator rilitary tnteat to Jalan at a tine ben Japar felt isolated ari insecure could cause the Japanese to consider a major rilitary progran, xven then, conFeltinq strataqic, political ard cconoEic considerations hilitate against Japah even .o!si.iering the acquisition of nuclear \reapons.

As one of the worldrs prihcipa] peaceful nlclearP@rer genexatirg states/ tlapan Plays an ever-ircrcasing role in the developxâ&#x201A;Źnt and use of nuclear naterials. Japan's latification .f the NPT and coisequent participation in the fomulation of 9loba1 Folicies on .on-protiferation, safe_ gualds and leaceful uses is therefore irlortant to the US. convelsely, if Japan rerains outsi.le tle )iPr, tnis xi11 constitute a selious gap in the Tleatyrs covelage and could have adverse consequences on the attitudes of otner nations.

The rost likety strategy that Japan lrilI folIolr over the Dext Cecaae (and ole sh:ch corresponds ctosely to our orn intelest) lroutC !e to .ontinle the glaiual noielnizatio! of he! oDn conventionat forces.* Japan \-i!1 also seel to ensure tle retentioi i! Japan oi those !s For.es essential for the maintenace of a creaible stratesic deterrent aDd !o the defense of Japan ltself (such as naval and r"The DIA vie\i is that there is a strong chance that Japanrs leaders will corclude that they nust have nuclea! !r.a!ons if they ale to protect thei! interests agairst nuclear adec neighbors in the changing Asian pose! equa:ion."

dMLL

hff!-lsll:ziq9n 16.

ai! Iaci I it i! s) , tut to ondeJvor Lo pcrsuade us Lo adopl cn au:L.re I !es, n.e in ev,ry orher respecr, I:rch of f,his po-icv rjIl b, .n !-slo.s" .o co j.nE ard uhrLnitriro pressur" r!oa Ehe do. e..ic poI_tjcat oplosjtion vtj-h opposFs Lhe sF, J_ l rr-:ry .no |s presiirc". our Ldses !.i rosr r.-6viry in okrr cra, uhare Lhe !Frio. "Le !o, r::nt-rnirq"_l slcn ex(ensiva facrliLres i6 qLesrioreo rn rho.cce-or 9ro\rinq pressurF In

ar a lthe shen US policy cafls for the our s:r1'(9ic c.rr iuer.L.- .nF _or g!e.te! effotts on ie p"rE of o.! alti-- ro prorroe,or ei! oqn r re i"par"se . !e . .).o_r9 rh. -.S .,onesLic d,l oyr^r, -, pcrri.ut.!Iy.,t.ue! rh. N_ron Docttine and Cetentâ&#x201A;Ź in nsia shoulC occasion a aotrn ard revision of the sllategic minimum Aherlcan presence vhilc reducing-also the ext.rt to ejhich Japanese bases are dependeC oD by U,S. rorces for rhe deferse of olher areas in the sumr

Thus lc!, these diIIe!r19 reeos.-- not jn 1.t:,e cohrt-ct. r.rthcr, rhc cJestjor ha. bc one ot sle(d and tactics. a return <jr irternationat te^sicns, or pressule oD the Japanese to s!e! u! the pace of its defeDse buildup or to urdertaLe assistarce Froqr.:ns Qith nilirarv overt.n;s that \iould not h^ sDppo-ra. po- r I t6!rs, could, l.or:cv!!, th-oi US.-.pan J:_r.r,-\... rnroI i..sf..p re.i'.", The JlpFr ^s.

LI-is or.- hjve conslE. 7 art ro Llt to uorl< vitli Ls Lo tl.rn hoL. Lo aroia b-.,s pt:ce! in en htol.-.Lle porrLjon )-cause or 6 d.f.e!r.ce issu-s- Tnrs -ouLd in\olv( q, evEr.r.i \.rlrin!r.esq take .he lecal and dcr ir .(.drrvo steDs noLessa!y co Lo' p!o!io- r.cit-ti.s to L.a. ro.-e. on i r.entry or _r"ncly bre:s This misht pemit a leduclion of our for.es ii ,rapan, lu-t at the_cos! of qrenting Lrala! gloate! authority o;er the cotrditiors urCe! rhich these facilities tright ie urili2â&#x201A;Źd.

Technoloqw

uhtif recently, Japanese neasures ro restltct ihports - channel and irvrard illestreDt ih order to provide ploiectioh for grovrth industries linited tre abilirv of ir.sfllms to expoft Ll6r. tecl.no-o:!c LIv-t.seo Lroducrs to Japan o! to establish subsidiary filns in JaDa!. This teC U.s. rirr.s ro licensc rt.er! :e.rrorocv Lo J.;cnese fi.r s at royclty i"v"L- rdjcLaLea by i:r:r) ql.:cn .i, .-.,..p.., vele proLably too low. rhis sitlarion, coFbinec ,iti the

U-s. Iirrs .{ d 9re- ^r ej .q-..:.1 ... \.ich risl-c' ,o _,.",, Japanose cohpetitors than dtC the corresponriing Cevetolnerts sIcRrT/iior.0ix

'

o'"'l-na4121pryav T7,

in Canad.

and lreslern Elrope

Japanls abitity to irport Buch techEologl' inexlcrsively to assinilate it rapiCl! and effectively nade possible a htgher tate of ecororic srolrth. rapan pard S3.4 tiil]ion in purchase price aid loyalties for foreign technology in the decade of the 50rs, \'ith ove! rO percent qoirq to 11.S. firFs. alrhougE the totel of such palments .ontinues to !1se ($145 nillion ir 19'71, u! 26 lelcent ove! 1970) the U.S. proportion is declining (froE ?1 perce.t in 1970 to 67 percent in 1911) . some algue that steps should,re taken to plote.t ou! ccnpetitive position by liFiti"g lhe availabitity of U.s. techlologt' to Japah. It is no! at all ciear, ho\"e!er, that snch a policy riguld at this tine provide bcnefits offselting the a.]!,e!se Japanese reaction it vrould cleate.

Japan's.,fo-Ls Lo C-vclop iLs indigono.s technaloqi-.1 capabilities have been vely irplessive, although they stilt 1a9 reI1 belind t'te U.S. in x,ith the hiqhest Percentage ancng nations of its young people graduatinq flcr uliversity culriculuns ir scier,cc and engin.erilq, a close and cffective lartner.htp !et,ee! ildestly and goverrment in R&D a,rd (by coiparison vrith the !.s,) a! irsiqnificant portion of its RaD qoinq to non-econoric (i.c. defeh6o) purposcs. it is closihlJ the techrological gap vcry rapidly. rapa! si11 te a hajo! conpetritor of tlre u.s. i! the rorlA halket for techrologi.cal goods. .rcpan's R-D effo-r is c-ovin( vF.y riti.Iy, fron to 1969 lle h@ber of scientists ard enqinarrs ehployed-964 in autotrotive R&D qreH 93 percelt in Jepan (to approxinately 13,000) ih contrast Nith 33 percent (to 17,000) i! the U.S. ReD cooperaticn vith ,iapan cohsequently offer. leal be.efits to bcih sidesr and the lrenefit rritl llobably tncrease as and

L .obsialering the irlact of techiology tlansfefs, the folloliilg factols ale lelevant: -- The undesi.able f.atules of technotogy sales to Japan may already !e corlectix:" thenserves. rrericah Licensols are no( de(andinE higher financial returns and a g!ea!e! sha!e oI rhe ncn'qer.rL \j -h r.l.-<sc i!t.s.

-- I! i6 difficult io plevent technolosy fron crossins iltehatioDal bolders in our in.reasinsly intercelencef,t so!1dr enC it uoulC Le eslecialtl hard to restrlct technoloqical sales to tlapan Nithont Ciscririration of tLe kina to shi.h ,rapan is particularly sensitile. lreezing technologicat excha.Ee vio!1C deprivâ&#x201A;Ź the !nited

i3.

States of aD opportunity to shale in the lesults of Japanrs expanding R&D effort, inchdiig Japar's potential !1nancia1 and seientific coitributior to the kind of elomous efforts in the developrert of nev, solrces of enelgy that nay lequile tIe expelditule of lesoulces beyond the capabitity of ou! nation.

'

Regio!al

cbiha and th€ soviet union Both china and the soviet Union ale as intelested in acqullihg greater lDfluence in JaFan as Japar is in exploitinq its nevr found positior of aCvantage vls-a-vis then. In the process of erploring this Celicale siluatjcnr Japan miglt eelI find ilself iD a position !,lrere lhe Corestic and iltelnational consequ6nc€s of its actions are i.inical ao the 1lterests of cniha o! the ussR -- of the us, I\?, in turn, have alreacy seen tn tle Japanese lcaction t. the exocution of our china iniiiative hos the style of ou! hoves to e::pIoit tbe Sino-Soviet rif! can adversely affect olr position in Thus fa! thc JaFane6e lead6rshiD bas cencnstlated no proFensity to play off the chjne.e aha thE soviets asainsc eac! ot!e, -- or the us. I'ihi1e re slould .ot expect foLyo to !e bli!.t to ollollurities pres.nted by chibese

sovict hoslilitt to eacn oiler/ re see ro basis for anticipa_ iing Llachiav€11ian initiatives in this triargular rerationship flcm the .ralaneso oler the next five years. rie uould rather erpect Japanese polictmaking in this arca to xemaih leactive ard most sensiti!. to our initiativos fron thc standpoint of darage minimization xather than opportlnitt' and

vielnam ahd l:orea The pressures everted !y the ladlca11y diffelent situation

. .

plevaifirlE anons the sreat !o\,ers in Asia, shaPea fultler bt JalaD's ovn doiestic political aligments, have produc.d Japanese attitudes touales Tai\ranr the Indo-cninese states aDd thc xorean Fe)rinsuta (hich valy unrefrarkably fror our o\rn.

The continui.g e6sential iifferexce viIl !e a Japahese refusal i! the futrre, as in the past, !o do ar,ythinq lrhi.ch could be ta|eled as direct Japanesc paFents for Us irvolveneDts in Asia. Iio everr the Lrapareso vrant to assist in a Najor uay in the reconstrlction anc ,ehalilitatlon of InCoChina. This lerains tlue Ces-.itc the eeakness of the !DP, lolicy sritches Iy such thirc cclntries as r.ustralia, ald plessure frcn lia.oi alC its Cones:i. syhFathizers lnich opposed any !ea1 actiob unti] the coJ \{as \ri11ing atso !o

irldd r.ib n .Ct.T/l-oronx

r9. recognize llaloi and discuss aid to tle \oith. Tie Jalanese have indicated that once ,rapan has leEun ah aid lrogram fo! North vietnan, it toulC not Le able to accede to a leqxest !o ioi. tie us in using the tireat of lrithiraual of assistance as a neans of conleIling !:aroi to conpl.y vrith the cease file alran-derents. trilh respect to ilorth Ilor.a, create n. ar inplo'renert ih tha nood on lie l'eniisula i.on v,LiiiIloyon!y 'c. pressu-.s srtl.j, J.p

p.-rjc'l-rly : o'e- rrtor in tlat direction.

Vle ray ther.forc assune that Japan \ritl continue to difler flcn the united states ih its tr.atre.a of le1atlons sith certain nsian co!.trres. ll:e Japanese o.ptanation ui]1 cortixue to be that their aclions vi11 Le carlied out in a riaM.r calcnlatcc to nininjze r!.ic.ce of hcrican policy, anC that sone iaFarese acti..s, particularlY tiose unCe!tal,er by lrusiress inrerests driv.n by n.ofit rotives to riaLe a nane for thenselves, ere Dot or lotiticians.!t subjec! !o governitent conerol. !!e pressur.s that opcrat. in,lapan refle.t r ciffcrcnt.xcer of.ioi.stic Fclitical philosoFLy on s..!rity natt.rs, considcratiors, a iiffei.!t and a diffcrert geogirphical anC clltuxal settils. Japanis hovertents Hill also reflect t. a Ccaree a iilferert rPF!.ach to Jarer by tne c.mxnis: natjors .j rsia. PcLi.g, Pyong!,ang and Ilano: all have qelt_otqanizeC tackilg i. J.!a! aid relarilcIy gr€ate, ihlact.n attitudes in Jepa! tian in Thore ale litttc qrounds fox r.a1 conc.r! over tho .€xt five ycars about the ratur. of Jalan's actilities i:ith tl,es. natiors. tha JaFanese estallishr.lt il1 iot uiIli.gty saci:i:ice its basic plef.rencc for aligrrent l:ith the lor_Corxunist qcrld and its far nore irlortant interests ih tne r.n_cor,nunist areas of civlied ,\sian countrics. Thi. suggestsr ot course, tiat loqular ahd systenatic consultatio! $i'jh the JaFates. o! Asiar lolict ael,e1opr.nts ih larticulai is necessary to kc€p the Japalese atiEned sith our Folicy anC iriorme.l oa cli irtentions to the extcrt that is esse.tial. this $ou1c prevert the kihd of Cmagin! erotioial reaction in .Ialan that occulled r!€i it Lecare l:no\in in the autuiin of 1972 that .rapan, iron ,hor a rajor aid co.tiibutior vas erpecte!:., vrc!1c hot Le anong the countriEs at:endi.g the international cor:cr.:.e to su!.rvise the cease frle ih vj.tMn. The initial JalanEsc feaccio!, lased on :gnorance of the intenC.d scor,e oa the confercnce, cane Iron across the Jalanc.e don.stlc po1itic.1 spectrui and, $nile il soon sllsid.d, lias r.nctheless real and left a lastiig aftertaste that coula have leen atcia.a: by iore er:6.si1,. ccnsultatic. l.ioie thc anroun.6ent ras neae.

20.

GOJ

' -

interests -- Until recently, Japar,s tolelgh tolicy

has b;;;_E:;;a-;fthe rate pline ri;isre; yoshida,s'pr;mise-rlat .lapan's !re1I-bein9 is tieitrtca,rly Cependent on a .tose relationship uith the Ubited States. This premi6e, particulall, its hl1ltaly and secutity a6!ects, has ne!e! leen accepted by the politicel oplosilion, nor by the-najorit, of the iDteUigentsia, the eedia and uice segnents of the !!b1ic at 1arge. foday it is Leing questioled Ly nahy nen of niddle age ahd lank vitniD tie bureaucracy and the I,DP itself. Nonetheless, it has not been supplanted by any

6enstble alternatiwe-

To functlon as a rajor partDer of the uritec states, on the basis of sonelhing approachirg .rlualityr uilt lehain over the nelt five years the onlt allangenen! liat salisties Japan's perception of its plac6 in tne vrorld, anC its psychological need for a dctineC place in a staLle licrarchy

correDsurate \rit! its xeatislic calalilitics and as!ilatlohs, Independent non-alignment vrould not do, ana heither Houtd associalion \iith thc soviet union, the PRc, or aly

interrational qro!pinq. !o! the foroseeable future, a contilued alliarcc rith the United states, froh tne sielter of !,'iici Japar ray exercisa such initiativâ&#x201A;Źs as a!!ea! requircCr h.ol.ds the bcst prorise of permittirg Japan's estabiishrert to rerain ir polrer by achie.ring Jalan's econonic aoals. conversely, a (.ca!:ening of Jalah's idertification vith tha rajor democraric naticis of the qorld lrould brinq alout an iieological contest qhic! night vicll destro! Japan's ovn denocratic i..riturions. (one can constrLct a valiety of possiblc scenariosr but all \rou1d lesl}t elther in a genaral acakâ&#x201A;ŹiiEg of qovernnent dLr\o!.ty o! c riol.a loxr Lh. .Lrc(re ol uhich riorld be Cjili.u't to p!!-r-r eac.!L tr.EL the poriLic.systeh -- ehaeeve! fom it took -- No!1d be much role authorilarian and .rapanrs f oreign policy un!!edictable. )

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Japan.se Dohestjc Political A Inouledqe

Constraj!ts

o'the,'or.-sr.c po-)rj(1t b,l-ncc in

Jcp"n is or unJ-.'.1 ixporL.r,r :r. a:sLsIing tte strength cf tbe US-Japan relationship, sin.e in Japan rhere -i, in cr r' .., .o 'ioy-- o!po,ition .s _._ as for' i(n policl /-.d (ven nosL dor -:...c !o,i-) | _s-!es are concefne.:. For the hos! paxt, the dplositioh parries, perhaps frole so than in aly other hajo! nation, lepresebt a â&#x201A;Źlectrum of lositions on foreigh Foficy tssues lhich ale strcngly to rlose espousea by the governnont larty, "pposed The ruling Liberal Democratic party's ircreasing !;eakness at lrore over the next five years viII affec! its ability to assee politicat rist::r on inrernatj.onal issu.s. ',.esr

.f.d r'e sr.. IIov(..!, rh'q . hd. \le!c tl COJ -r o-.ng.h- ,.,..- Lo p.cc rl.. r. e 'o,ship wjth the Us ahead of its n.ed for Cones:ic noliti.al surv:vc!. r'oiL lor .nr-.., ,1. .. ot.osi 'on F--ri.s .; v.rr.r 'rr--1n r,.hl" .o ..or"-L -::1..r ii-rv :... v or corI..L .. .1. rh. Jd!'.r s. . n :.,.r.r1;, "_:. sonei/e.

Io\ieve!? the LDI ray !e comleIl.d to couxt cllosition elcments for ar i.fomal coalirion as its Diet srr.n.th

The factional coalition that Tnnal<a put tcgether to attain the LD! prcsidcncy i5 delicat.ly Lalanccd. In acdition to the 1ar9e faction of loxeign tlinister ohira, it relies ' o r_.y t_ir-rj-)'oh . lt.,o. t,e L-. ._ ...c

--:.o clions , -.!t..rlyp"nti-r,'ns'!-. \r.s- .'j. l.s I-...c, ;nd u, ''.cip_,nF-, unpredictalle ani intensely ar.Litiors. Takeo r!)tuda'a appointtrent as rira.ce Itinist.r ari r]1e strorg ,epreschtalion of lis facticn in the larcst cabii.r hava b6lh sllengthened Tanakars governrcnt a.C intlo.hced ner) strains to hi5 coalition. Tanaka,s oricihal nardate resi:ec leatily on his personal loFularity arc tris coi:ion touc!, his ralutation as a cecisive nan of acrionr the sulpo,t of tlie blsj.ncss ccFiuiity/ and his slilt rs rotiti::1 tacticiar. thesa assets r.rain thoLrgh cal1eC intc question by sut,sequabt elelts and actioDs. The men he originally chosc Ior his catiret and part! tcadership positions hale .ot bclr ourstancin( on conestic ;ftatrs ..n cno T-r'.'.r l' -e1.. .r:.-_.'....1-!, ia : to.o.t Lt.e ov exPectntions tirat resulteC fr..r l:ls lorceful r:ove to gras! polrex. Ea! fror peri.rnirg as the 'conluteri2c.i bu1ldoz.r,,, he is nov, lite all Ja--anasa rri.re r.:iniit.ls i! the recent ,ast and the fo!e:...:blc fu,.Lr6, onl.y ttro Lead of a coaliricn of contenci.g ;a.tj 3 iicludiic tlro puretiye .or:F.rit.rs to succeeC hin, oh: and xuiruria. r:e has atso Lad tte irissrlc)1!r/r.roforl!

,J",,i"lLib,".r

SnCRNT/nOIO_li,r

2.

fortune to be in pceer at a tine of gleat financia-r crises.

Thusr lnstead of the blxclrirt fo! a nes ,IalaDr his plan to r'Reshape the lrciipelago" set off speculation in ieal eslate to vrhicn the public reactior nas ]leen uDdelslanCably negative. Tanaka is also blamcd for lailure to conrloI the ao!st inflationary tren.i sin.e the irmediaaa !osr-!ja! pe!iod.

Consuner and \ihotesale prices ros. 19 and 29 percen! respectively j! 19?3. Iiuch of tne piice ihcrease is attfil-uta!]e to the increasac cost of lnportec ras hatertalsr a glcbal circmstarce over \rhich Japan has 1ltt1e influcnce. The first sigrs, hosever. coihcided Hiti lanaka!s asslnptioh of cffice, In any evant, pu]jli. opinion !o11s inCicate tha! 1atrala's lopulality has fatfen fxon abolt 65 lercont fo11olring hi6 tri! to reking, !o about 20 peicent today.

rlle issues telind tlris puDli. diserchant(ert arc almost entirely doncstic ahd, in additi.n to thc cost oI fi!,ing, embrace the "luality of lifer'j factors -- housing, .ducation, nedical care, vrâ&#x201A;Ź1fare txograms, sanitatic!, !ransportation, and environn.ntal lollutio! -- tlrat have Le6n negle.tec in tho yeals ol Japar's headtorq cfjolt to raiEe industrial outEut, In recent, y.ars, tha Jalan Ccronnrlst party has nost cloarly senscd tic pllrlic xood. r! Cisassacialin.J itself fron b.tL Pclrinq and l:oscor, rejecting violcr,i tactics, and cotrccrtr..tjls on colditiors of .iail! 1ife, tbe .rcp has successfully portlaycd itsclf as a rodelate party in tunâ&#x201A;Ź $itn the ne\r Jatancse naticnaljsn and qenuinety prepared to do soretll:.g a]:o!t the uelfar. of rhe arcraga cirizen, Its success on tIo policy 1e!e1 tras ):een natchcC trt its olganizacioral aflorts. Eased on eficctive leade!slljp ahd careful p1arnitrg/ the .rCP ov.r the last decade las conc.itrateC or uihhihg ihfluenc. I], reslcctable parliahentary neans, seeltinq first to gain scate in 1o..1 assenblics, cooDeratihg rith thc So.ialists a!d othe! opposition parties to suplort flogressive canCiCat.s fo! najor tocat olfices, and liDatly nrovins \rith fclce into a]]e natiohal scele. a result of the Dacc re! 1972 !o$er riolse etectidn, the JCp Eot 1O .-.Ls, ,r- ror. rn r. cnti-:r'..d, ".d .ec":,e^s over 10 lercent of tie vote fo, t!. filst tire siDce the irnediat. post-uar Feriod. This s!!ge has nade tLa .rcp a fo!.e to contena \rith in tne Diot.

The 1972 election \ias not a disa.tei for tle ruli.a liler-l -"ro "i''- r-..).. It -n... Jp\j.-l 2sI oi t..o (6t s.ats/ tut l,DP-saoneorci cariiiates !:or lcss t!a! 50 percent of the l:cpular vo!. r:or the tl)irC etectio. in a !ot, and lanaka's larsoial p6!!!a!ity haC no effcct olr.i)l !(..:.. in ).r. l_-Ll's'o.'D.es.

The election sho ed other sig.s of a cllange in Jalahese

3.

polttlcs. h additioh to the Comunist galns. the Japan Socialist Party rebounded fron ttre 1969 disaster to r/ir ff3 -e)ls, vilr 're lelt \iin ,r^"9i.q:n oI th" !arry rppererLs. il.p,idCl, o -rte-ro...1 yorer,o and the Denocratic Socialist Party suffe!ed se!ious setbachs, ard nolr lold only 30, and 20 saats r.slecrivaly. r! palt this ,as Cue to intarnal CisFqtes virhin tbe Dsp anC to xomelto,s i1l-acvi6ed sevelence oa iis folnaI ti.es to the Soka Ca)rkai to appeal to a lroader segrenr of the population, Tiexe $a. also a feeling rlat these r\$ lreakest of J.pan,s five parties could lot hope to offar a reasonable atternative to the L!?. fle trD parrics rhen.clves have concluCod, holrever, that ttey vrare leater lecaus. thcy had too oiter sulloIte.j the LD! axC that their holes of salvation husr lte in vlsoroue opposition to tlre sove! rcnt end more cooperatlc! elth the parlios of the left.

A strong anC self-confident !D!/ lf it vare operating in a polttical ni1j..u vne,o dccisjols are nade by r.ajoriti !n1e, hiqnt $elcorie this clialIen... Eut lhc rDp has Dot fespor.:eC in tLia menner ahd ianan is stifl a corsensls so.ict, \ihcre confrontaticrs are ris):.d only \)lrc! necessar].

Ir e. ca o', rh! o-hi r .'-.1.r, ,.r .c... - y ir.. J't , lF. o, '..'jlDP, Tar2]:a and lialascne are in th:i! aiftj€s, but th. average ag€ of tle present calin.t is iD the iid-60!..

The IDP is not conFl.tely irrure to chanqc, ,ecent1y, the Seirarkai, a group of sone thirty relat:lvo1y yolng rDr DieLrcD, has a.hieveC somc ruccas. in !r9in9 oh the r,Dr leaderslrip a policy of sharlrer conaro.ta.;ior {ith the oFiosition. ,the Soirar\ai las also lrequ! to chall.ngc opcnly tbe fourda:icns of Ta.al:a,s g.varniiq .oatitjon throu.,h attacks on loreiqn rrinisrer Ohira. r.ihilc tt. seiranl:ai has s.t its iights at Tanaliars lesigrration aiC hls ,cptacc.. hent by luhlda/ it is unclear to ehat.rtEnt Eukuda supports tlrei, oDerl}| disruptive ractics, rhe sel..!l:al has receil,e.l \riCe Fublrcitt ai.l thtrodlc.d a highly cltrgeC netr €1eh.Dt int. t!. atrosphele \,'thin the r"D!. Eo\rv6r, it is (iotrltllI tlat tbis qrcup, !:hdse herbers ccne frol a valietl,of traditioial aactiols, ii11 ex€rt a perha.eit lnfllenc. o! th. I,D1l leadership !)lri.ch still lests target! in tbe lunds of ren qhose paeterns of tloLglt lere fon:o.l before l;or1d riar II. LDI suat.gietg agree that sor,ethilg Cxastic n:st be dcnc. The IDI holes to rcgain sch. ultar sulport by tacltlin.r t)re qualitv of Ij.fe Flobleri th.t the connuntsts have so c:l.ar!t i.iertiiiea as of concern to tlr.r loter. sone, tll<, !_.f.ha, fec! tlat the situ^tior :cquir6s a coia:crt.1::1..

They f.r.r clanging JaFanrs rNltj-.j.at constitf,crcy systcr into .r single-s.at syst.r uhdor i!i.h LD! c.ndidatcs, faci.g four fragren:.d pa!ties th eacir constltu.ncy, ni.iht rri!

SECRET/NOtOFll

4.

as nany as 70 pelcent.f the seats rhile poflinq retl under half of the votes, othels favor an attenpr to ;ejuvenate the Ds! ald tne xomeito ard to split off ile risha 6tns

of tbe ,rSPr offering lorer in return for larticilation in a neH rulinq coalition. ranaLa t,iec ro inplarent rhe rjtrr pl"n in |ay oI -97J, I!, d led j noririousty Lher lris poor't pl.nri:d etf.!( to ix:roar.. :'.,...=.oiy resrsle..o,, qas blocted by a united opposirion atd failed to \riD puilic ' Tire prosp(cts no,r o: F.Lr-r -tLatedw sr..eedir.9 rhe !-abDiress o. Ehe rD?,s racr_c__ raii..-ry,..s ioor.t.r.t-t. ,hen the speaker of tle ioee! louse and tle l:ihister in charo. o! rhe D-'-i,e r.gencv upre :orc.d to !esrgn ... trr- I:ay 'otn t9?3 fo! seeri.g1y tlivral slips cf the torqre. lhe !D! js in oa.cer or osu.9 r:s 'o.i ,'o.-" tr-.-:jLy -n the to June/Jlly 1914 electiorr and is tLelefore i! no position take forceful action or controvorsial issues. rhis situatlon causes JapaEese loliti.a1 leaders and otaicial.s ro strongly suqqest lhat tle Us should Le cauticls atout lresslng 9oa1s !,hich the lDp's position cannot sustain.

Us polic, las beeh to prorote the grovrth of a der.ociatically olienreat/ politicafly stable and economically viable Japan .s ou! pr$ciDol :t1y in -asL As:c,

dlet Jalan into ou! systa of politico/nilitary alliances tut, recosnizirq tLe attitldes of othe! Asian nations tovard Japan and Japan's ovn lacifisn, !:e accepted Japar's hilitary role as confiied to t)re conventional defense of Japanese eerritory. r,e eapected ,ra!a! to proviie !s the bases and irdustrial calabilicy needed for deterrence and, 1I nccessary, Eo su!io.L r oi.b. olereLro's elseahere. These consideraticns vrere reflected in the Treat),oMutla1 cooperarion anC security of 1960. Japan ras rot lequired to assisl in the defense of , tle CS or !.nelican forcos elsevrhere. fioHever, the fact that the Treaty constituted a volunlary aligrnent of Japan's fate witn thc free vorld vas -- ard is -a cause for br,L-i Po.i.i..l dtsp.,- .. ,"p"n.

Despite this, the vieus of the conservative establlsinent stilt prevail, a.d th. Treat!, lefralns the basic definition of the relatiolship.

Aehind this shietC, US policy promoted a stable, Cenoclatic po1iti.a1 atrosphere in .ralan, ahd ebcouraseC econonic qlc\rth by enEJ' 1n9 Llat Japrn as -b- . to olra1n access to overseas nalkets (most n.tably our osn), !a, materials We

SECXTT/NOEOPN

2.

dd. rp.hnology. untjl 1955, rte us en:oteo a surplus an Lrcd^ uirh Jrpan, ard L-s !e_6, iveli to.elant -! the protecl:onjEL mF.qcn.srs Jap.n de\rseq ro corLrol irpor.s s. :he LS .1. o ucs rot over Jopa.is-1o,.-pro i,c c:plo.-rr. e!fo!ts, cohcelned the trade cnd curr,a. !e_arions :f j-vetopec \.rt;o! .i"1.ssp P(, o! its rejecrjon of a securrrT roie oeyod its d.n "ro rtr.

Ptevicus Decisi..q The fi!st leconsideration (jS policy in the light of Japar,s emerqeice as a sioni of trca.t cente! cahe ih the leslonses to t:ss 5 in t;e ssrâ&#x201A;Źx powe! of 1969r and to NSSM 122 in tte sleer of 19?I.

asral partne-, s.,L:n-. .o jrD..cv^.. ,!r,,i"".r, I ii"-1re po rt o rj(! or Us nrLi-..at tn,e).sLs incre.sin. r -a.ser ,1,t ,._.,.,.., ,.i; a";j,;;;:","::-. "n( seerino 2h

g;.:i :i;i:j!li:ii::i'ix';}. ti' ; ;t^il,i",:i i.ti 9radLeI .Ite-. r-oj s

tj ^. t;.,

rcduce loc-1 f.:c,.ons r.t --e !.t.irjrq ess.n!.,a1 _uncriohs.

-- Encolrage (oderata increases ald qlafitative uplovenents tn ,rapan.s defense eflorts ,6ite aroici.6 p!*$_e on JaF)n tc dev-top.r.sL-..t.:t1y :.rs i _"i.""

.

or to pla) q l...er r(9io-1I Eecuri,, rotc, r.*1. rhc !.v, rsioh o! o\jnrl- jn .97, Lnde! condrtrons treetino oLr esse..i-_ -^-,.:.

Ay thc ss.r.! of 197t, t!6de ard oayr.nrs !ro:lq.s \ !t. ,rapan had Ero n ro r\e bcinr ! her. :.sDi: .lo, !-:ed Ns--I r//, rer rree -nt) jj rcss,no ." o., ,"r,,it-j ;;; on ::.l;ir, ,nrer"^rs ahd !ocuss,C irs1.-" oi oLr b:la,.r.J P-oblus, Tle .,.rconor:c pcli-y o. ..u?usL 15, .."".,i;'. l97t rhe nelr ch.,.c .e( !-,rJr (,.e o-.u.i rol.cy r.:, r'cs arnouj .(and respor.s-.Lo l\scl Le-r- oJcf.ec, iJO .cco:.1:nc \-I22,-s consrs.Fd prii.r.ry j.i.iiii.i-:i o: rns.."..ri(,. -o _r.l..trrr u.. (s_rapcn.ojht c.b:ne, ll" l!!'i..r.IrtrSDj:o!-rhe rn 9ere!at, tJ0.i ecL(r Lt-e Ls de-eger!s Lo: -- Reflect tlr significance and cfosehess ot the relatjonslcRrir//!oro!\

'

sFcREr/l,oro:d

3.

ship Lhlough s.oca pres:olnrrEl slpporr for !atr!ic.Li.n o! rhe Ot_nc!.a p6vers.or -_eoty.rd (o! coopelatio! in scientific matters and in see*ir; 1iberali2.tion or f,urop.-n tradp pofrcies <r.o " rajc! truriit.Le!.r attacl on trace barriâ&#x201A;Źrs-- ProFo.o l\ct !.e qork L09!ther io 6ch.eve r!luatty a9ieed and .o pdrrbl- b-lonce ot pa}/nerrs 96. Ls, lirire!i'_y through ''.de Irr(r.ljz.Eron .nvo.vrnq 6tj _naLr.; of !apon's upo:t qloL.s on.g!icfl !!oI prodLc:s, corp-r-!s, aircraft, and inteor:rcd .ir.ri+s -- uake clea! our intention to aclrieve a leasoDablv balanced bllateral tlade account by the ehd oJ t9?3 and'a leval!ation of tne currer.ies of olr major tradirq paltners (a levalDation cf tle yen in the 15-20 perceDt range iias tnousht Decessary)

-- Relate to lhc-e qoEl6 .ertarr sacondary rS oljecl..-s incleased Japahese pulchases o! Us milit.ry eqriFrent, th.reased Jalanese cn sortcr tefns,.rc ltberalizaticn of Japanrs restrictions against foreiqE -- Dr-to-c p6iio.:c rF. t,.9, .o .sscss t-oq)-..s .nd to rcei..'1 pro.l.:s cnd .L 96.r so.tu..o s o -hrr, s n clenorre, liuilira aic liashilcto, Subs-c'. nt po r.JJpdn fo-toled rhPrcsider, s r.c.r.os ,.itn : ro ar :-n cla -a.e on January 6, 1972; and ralaka at :iui1ina, i:al7aii on audlst 31, 1912, arr _r (ashin! on t9-1, the Seh C-eman-c coMtrliqle s.t tre date'for tbe r;ve:sior of okina{a; ;IJ;e; closc co-su.-tror or A,:cn p, rr). ano.-c:,'i,,cd.uLi,or.-ro. t],e xurrrl iec!ri., rr.aty. c. -:q rn the |c1," o. !i.;' snirhson-an !.9rr6re.c "n- .l.e ._!"r.ser.,rr on syr .-tjc .nc prolIe..s ir a Fcr.ner bl;r.

1L re."".1,"c ".:s_"_, the nportlnce o: " jr Ler-nE tr.s ErC ,.ote- rjiLh satisfacL-!n tl.e Eroc_-ss ieir.9.,ee Eolj i rr.e jj.p.c.erenL (f trace coro.irror6.nc econon.< ie--tjohs ij 9"n"ral'.

The Xlilima cornuniqre rellected d.ep concâ&#x201A;Ź!! ove, tle tlerd in Lilatelal ecororic retaticis. the key paragraph adverse recogli2ed the need to nove to'a:d rretter equiiitxiui i; !alanc- or . "]1 -r1s ...c !!--" ro.-.ions, a.a(!_r p- ea.o!Esotrrl:oLh sidcs sou d . -^6 .o er !]rora.. acr..d on rl valre ol -JrLr' : 1.1. -. .et nc-.:..9 -o l: c.,ss ir. evo-virE econor.ic *e'.ti(ns (in. .crng aj icC.:coj:.s elr'y rn l9-3 cs sIcr.T/xofctur

,

SECRP!/NOTORN

4.

feasible), and included a statenent by prime Miriaaer ranaka that it was his governnenr,s ,'inrention to leduce ihe irlatance to a hore ranageable size l,ithin a reasonabre peliod of tine.,i The 1973 tiashington Tabata-iixon Coriunique focused o. the corfton objectives of the tso count.ies in the landlins cf 91oba1 questiors ahd specified aleas of agreemelt ana cooleration

in legard to other bations ald ioltdproltrIens. lrithout bilarela1 resolDtion oi bilateral tlade lrechdilg problehs, it alfirneC the inportarce lotn sides attach to the successful concllsion of fru1ti1ateral ned6tiarions in th- tr.C-.nd roneratrT.re !.. the J.!inese dnnornced.j unprccod.. ed s-lres or qrarrs ro 1-.erjc.r eiucaLjon.I inst:tutiors; r rs:dei c r\r).on cxD"e-JeC rn! ,'s hope rh_t Japan rluld beccne a ?crnanelt tlembe! of the Untted Nations Security council, P!esent Per.cptror.

Thus over a perlo.l of thr€e yeals, tie fo.us of OS poiic! torarC .rapan shiftecl perceltitLy flon seeXing solutions to bilateral. lolitical, securityr trade and ec;nohic rattels, to furthe!iis our comion iitelests i, nultilateral neqotlariors ard in h:,oI-n. thir. -ou)')r, p!obl-... rerecting tn;s sh..,, tbere has leen a. equally perceEtible cia.qe of rood on both sjdci. t'hile e".h sov^-;-- p.r.-ctv:s:ir-s rhe ort-r o! tl.conlinuing value and need of a close and cooperative relatior.iri:, n-lrner is LrL rerpr- rre -i'h ,le "cr:or.s (t the otl.^r .nd borh app.-^nL_y -r tLr,:d.n doubrs aLouL -h, o., .r partn6r's ability to assess correcrly and slnpath€ticatl1l rtr: tte orh.! nr.r .o ro a-jusr ro Lt-i!_!L-p^c;.;e j. .e!ndisjtue.'ons "r.o to rh( .trnq_hq |o-to e.v_rotr.nr.

_

Itost Japanese hav. a clea! lecodnition of lhe enomous importaice ot the u.s. to Japan. Ifrelicais have a nore ditly pcrceived vieq of shat Jalanrs lurgeoning econonic powei rea1ly heans a.d \rhat lt is 1 :elt to iiean

In five or ter years tine. some Aselicans feet iesen+jent torarC Japan for failinq to eviCerce sufficient glatituie for Us assistance after HollC tiar 11, and see Japa, as usilg o!! ploteclicn and sponsorshi? !o avoid tnternaeional reeloDsibilities, usinq their reliance on o!r opr:ons LJ.r-. cev^lo.:n, th.j- our 9-o -ccD-e corr...jct ti.e !:rh tl.ose L,!re osron.iltl lrotccrina thefr, taki.g advantage of najor i;s initiarives to advan.e their o n intelests ehile corllaininq of inadeduate consuttation: deryjro r-d.L -c.ess ,o Jap.n !or l's qcoc- dr.o inr.-rhents \rhile exploitinE the Us rartet to tie point of becorinq the clief cau.e of ou! treCe anC !a!n€!ts Cifiiculties, being sibgularly slos and self-centered in responding to s!crlr:f/rioro&r

sEcRnr/Irono],n

.

5.

lequests thet Jalan take the sreps necessaly to lectify ou! tr.de.anc p.rrenrs imbalance; p.!suirq -shorr -nnge Japan6-e rf,t.rest Io! \{radle ra6L perrotFf ,csoL!cesi Eno-rerng une.Jl_.9 ro.lcepr., eqLjL:tte shale ol Lh6 Dlroens or p!ororrro Horlc Dea.e and sLcbjtrLy, rhF-e are clso qrorcds for d:ssarist.crion u:th che uby d.resric political corsidelari ilterfere unnec;ssariry uith ou. clc-- !-gl,ts LrCe. tr.e sr.J!1Ly -feery, rr itthe rh(l r Hay lhe JcpenFsc aorerrrcnt jas t.-r.dlecand ruch xey pLDlrc r(lctrorq p.oblcns rs .e b-oposcc axchar.se of vlsirs by the Presjeent .nC Lhe !Ip"ro!.

If the ahertean mooc contains 1a!se coses ol tllitaticn and flustlatio!, the rapahese rood is ii"ee6 wrth a;;1;ty and r. enu.rL, I ca,:ri.pd Ly tne .^o!r.ous ..ouir of err-;._on th6, c( /ote Lo dnolyzing rhe !.talion"h D. Marl l.tanpse sc6 rpc6, I rr.eri.dn uLerf )I .lfficulrr;s and exte!.a1 pollcy noves as indicatile of a loss of airl jf hot rl.e abi-rry Lo p1-y a _ea(.-..rrp !ot-. l4osr v..11 admjt rr)t J6DaniE b"19.jj ijq po-..'-on Las Ice. cr.atlw strero'h.neo by ,le rarn,r in rh..r ihe prcsiJ!rL elLr:arEc tho s'no-scv)<c sp---, brt enL6r...j, v..y nisl-1!-r LhlL rL"y Hilt !vcr .9-i. i,no.. ;h"i.9.!eerees o:

ate. th.y req! th.: r,e ts ra! pr.cc i chi1" :h-.d ol rl.o.F \:th r:1u., r.,.r rhe s.L-.e90ii. ions rerl1l'rErn rfuL .he -s has losL 5 I i1.L.r) sup:.,4c! and tle nuclear lrbrel1a its raluc; that rhe_ ix;n Dociline PorteDds US !rith.1!a\re1 lrch ),sia, aid tiat i{erican references to an .r--r9in. r -lrjpo 6L r.or_d re.n rha. .t.e Un no _oiE-. thjnls of .ap , cs rr .1I,,, !u- p_-_rrs insread a bc.I-rce o, po'ar in ihicl J.p"n's ptace rF ro 1on9, - essur.,l, ecororic Ii,ld, rh- , apa:ase u-rF auarF ir l9-t_72 - ln athesLrIlJS tnat.s r.dtlon reirs q..s rr.e obti(4rioh r. r:r6 !enec_i<1 <L.Is, bJr f.tL rnar tho I s d.ve ro; ti .rl( cr.:it !..sr)es tli47 .ool!. srj-l :.Fl ,h. t publicly rlF LS r.akFs po_rr...t:l cosL )r,el .q.rds thoL a!e occdsionallJ.on:-r'icrorl, .hd rro.:.(. to JaF-n untrif p!rctic(s .r.c c dc.e!rrraL..n ro t.rc over |n;1e sFc,o!jtraC6 the Arerrcdr --o,.ory l.irlour raJ:ihq -r_!r! r.rrt a.coLnt ;f o! the cor.parac'ive ec. noFi. ectors \.h:ch sDU:reC Japer s productivity ahd race Japalese qoocs sot.ve attla;cive. Aid o;era1I thore is the sense tlat the US takes Japan fo! granteCl aates cecisions aifectirs rapar's vital ht;rests *ittout i."r consultatioi, and matres dâ&#x201A;Źrands on Ja.an $itbout unCarstanCint tle m:ur- o tr.e J.ojn.so oo-_t-or ;!oc"ss o. r,.- ( _e.t or DS hust xaly to plotect tts ilterests in Japan. sEcrr-T/l.oEoFii

6.

uore irPortant, in the last vear e*porf,s or sorb, a. s :;.,

or

"::_:,'

a.Ljors ro rF-i,:cL

"n" ".h.; ,hich is q rer-li\!.v -.p""0:;.-;iil'i,l ,ili fi l:;i::",:::i;", on ampolted fooisruffs ald r". has si,onery ;:i;;;.;-.;p";;.;'"".;lli;r.i.,,l..Lilr"ilii. ""i",..r.

"'

l;;r:ii;i;.il:i;:i:.i:i,:ii;i"i:IiJl'iri

i,

rr:1i' ;s";,3;'

:::l.i:i: :::'ii;,:l:-;':;;l;:':;"; ;l i!lili;'"i'3;'r:""

slcnEr/noroltr

Tladitional Problen Areas Trade and pahents xhe najor areas are !re11 lrnorn. trade ceficit uas (or a on- lrobteh Ljrc ou. .ejor co^c-.f. th. usTne rar d bolr..J pa. L.rjl 9b5. IE jLs p"a} rr '.s.LirLh alri-E :800 r.i:Lo.. rn th. ni-_i9.0,s, to;i, us rnpolts rro: J:pcn 1,r.1 Eypols -pr.,j our trdd6 --,-r. exccFc-_ sl Lrl.ior ir ou, 19?t;n. sa b...:.,,

r:'olc sect. rs . j tr ! /r !r. a econo. t h. r. .e_r .n_la r. :!rc. r (:.rorls t}e ..'.vl .rp_r, o! i.p(n!s. '. !9!ty 1o r L. s \...i., co ro c.. per-' -- -_ !.:ii ralanese soocs. In the case or sor. I:s rav natarials, corcertratec .rapanese puxchasea have teniec ro dlrve up p.r.es a.;'t;;;;r.y _____ to conlound our proble s.

DoIicj^s r'hrch stri utar- ,.!..n,s qro,,tb .hl exoorLs. - 7!chuon:ssers and.the vt ch * tl1ei. scctss, L"\e be, h E,,at.)e. ^x,!rsivc y..;--:i;.;;;-.;_' ;t":if;;;;. t.e to re'o'hlze r..1, -..ris pol.tjcrl l.r (!s r!e no, ". ,. ,'.i r..olono 9,o1.Ln t,s r..c adverse as !:e11 as bencficiar eifects. rn parti;lar, us Plessures have nade tlen a!,a!e urat.re,ica; ieact.ion; to the conrinuine trade deflcit thlearen.i,ot o!1y to .r",." fi"ii,"ti",r.t tre -ni.eo sLE,"-, 1i6 er.ti.,. .-br1c ronshib. th, y o, Lhe oro! n. ,re'.r ecor 6ri. ji: cE ih.rh,r Asi;n h ti..q ald in nulope. the ibcreassd co;t cf erergy anc !a natexials is â&#x201A;Ź_-o,or. ro rtr!r j-.pdn,q snorr ano,o-9

9ror.rh

r y!

ect!

Lr

cns.

-he.rapanos \cve r.ren rary sLe.s in r^^ent 1.e:!s -.. prot t!n-, r-ch r..s Lo a. rror.Lc acronplrsh'd rj.-e'edl, Elo\j.y, orl-v ef e! tne atplicaj, "npr(:sur., but iL,st,orlb_e ur_.ier, .s qr\en tra L!i]1. .n _n"r ra of .he .or.!n..u6 _( i Lad decislon-ra!.ing mactrirery in ,ralan, it coulCorlave lee! accomplished i! any othe ay. In an, event, .rapa! has: -- Peduced its crtl itt-o,1 rrbo!r :Jo.ts fror, t2O vhi.n-1r-e r.,1r.-se c-.., p_rs rher lr!:prr.?jn rl,Lc.iasnuirbe!

-11 a oh or tra(:E e__!-.s t.iLh L'e rt.op:an .,t:ons, and.plans to of the renaining non-as;icultula1 jrLee,.Lcd cj--uits, ano cn- oin..rrculrur"l --_' r..;;.i;,' -- Re%lueo-rtc yen - irjr.r)Iy b) 3r lc-.-nr "bour eorprred Lo the dollar - a r"-e unr.f ri__ r:ove ti -"-..i",

2.

::":ii::r*i**

of parmelts dericits in the dile.tion of

its ptedce ar tu..sE ror ea$nsrvc _..-., -. Ful!jtled .o-rcrltcycl p!oducrs ind ;;; aovance palment fo! nuclea! ei!iclhent ._r.r-(., servicâ&#x201A;Źs. adp.advcrce repltreh! o. sore st75 rjIIjoj. ouc_ _- -- on srandrr9 pt

ir, cAf.cr .no 430 j^debL_Jn 5s, .or-olid. ior o! -n. Lcit_ti,: -. .-- Iina,c-d rhr.kyo .o ,-: ..t" l, l.r:.:_":,ouid "hi 1.,.!( .trr.r, cert.tn US IacrI Lrs i. ok.j.:., ,,__: -r.r.',"-r7 "ij;on"ori:dL. resrtt ri si.n.Ii. .t I ro.-r-r._ ej.d _orerJn e-^hrnqe savrngs to rhe u.s. milit:rv -.r.r"",..- ooverrlls .or ," Jot_.r.to , :;^1:l-_:lrl::.

D th- poii! wl-re.or.. .. jr.-s,,r.rcv-io, ij \-s...enr ho\-or,100 p-r(.r.1 o , -i .-t L,; 2_

or thrr nurcr r7 \.i.r re rr..rr .,r.."r. il"lilll"i: irr r,ei yearE t..o !_ n. r!.. !"rr:cr.d trade and ririhs, p.,ti.r ii!.i.ii,iiiii r. fi"::;.:::"', N"-.p":'rLs jo ei.r po- .o,.o jnves..6,r In -...--: eylstlng rnausrries on 25 r ^f wrrroJ, :, --"r :,p-o...rto.;; "!r..r ...,' ."."-;; ;;':,:::,:'i;'.

fll.f=...".'.-''.r,.1...orp.j.!.. . .'.-s - 1r "ar eo i o. r. iI"',,.. .. do.. the \rill of its nnnasemclt, !!!ry.r :q"i..tLne..,"n-stotnL o v.-1.. i,; i;. .;;.,,_ ,-, he.vy de). pouity..,,o", ijiil;'l: "r "o=.,r,1"'"=.

-- Adopted an eipahsiola!y btrcdGt for s lor social stinulate domestic Cenald for irfnstrncrura franulacturee lncreasec outla\

Cut tnriras LritcrrLal.y ir r:orerber 19/2 rv,o acrosi the toard

ne..ty )OOO r-riri .ur._"ri.u.

Aeduced corfioCity taxes or autonobiles.

Peroved.resLnctiors oj oL:r,._d jrve ..ent so a,,ra,_i^ J6pan.se ).o-orn.s 1r Ltc LS p.oL"bty on

jrp,ovo, en- :.n so.e o the _-. ,n.ru ",r.,-ria_ l: roo. ro,r^iLcri(ns reasures, "bo\e r_F btoo.fry ror of rcaL s!sn1r_calc- .r.r the r^r-x"Lion oL .o, (rors ;. i;";.,":,""

gDCRtT/nOEORij

3.

are rot yct fullr rn e!fnc nor as i.pollarr "" t,i_:u.","_ nationalistic attitudes-

I!orov.r, :n -Clit'on to lrol rdrif.q :uotas, "i.o in-o.r Jap"a.eE,jns a.. Ie! o: .o. L"r-r: D,.jr.rs..

5.ch;s goverlnent lroculene.t pracrices, standard r.tho.i of sotile_ (ent, questionaLle neatth anC saf.t! srarCerCsr anC ,estrictions on estalli.hinq retail stores -- vrhich irpact uith valyirg deqrees of severit! or U.s. exports. ' Orer ehe lonE terr, intellal aactors nav also ease J.Par',s --orr p'6".. :. tt. .-j,.,rc.1,.rP-,. .n9 io.o., r ouap"r 's .o.-r jnrJ.L.o .rr spjral ','o.'sr" !osl-' -.7 \cq - havo L en ris-r, : a ..o.r .-ivr'. _ -c-.rL .)O.s p.r.ah, t..r \e3r p-."irr .hi; l-.r, ,1...r ou ^',j,t'ld'\. r-r" ol g-o.j,h.r are strohg pressures to irvcst Fr.h.ro-..1j).'y, roie of JaDan,s availrble as in .,i-r_--, .e,e is a I e -r aJ .:- Iir.' .r -...Li - ,l rchr v . r :n . iv. co. i. !.-j ' ror.L.ior ,c publi ...c.r.v,.)1..ce, -:^ j -)..' .I . .r.5 -n,.... ..-.1 . .t-L Ll e. rrol'., .o n^tp :ji..,...o po1i1-.... t."n \.. jn niq conql tL i.:i. 1.. -,.--:.t-. t.l. p '. .oo' or .ie.or-iLions of ur.rw l"e c "n i- fo -rgn rot .,.-s. ., Securitv Issues seculit! issles nov appea, to cortrilure less to us/Japan bitatoral strairs - a! least proFortio.ately -- thar );r. have in tba !asi. Det.nt! in !.sia has crea:ed neu or.nrcq _ r. .o..,.cJ. .h. o..r, ,., lor th- . i!--"t'j . : .rr.,. i-s._,s.u..: n. oj .'.e i-sJ.q r1_:.e ".9 out of tle ner circursrances seen to nave grcatly arous.d public enCorserert or Cono serious Cana.le io ttre_rulirg estabri.sirrcitis corritrreni tc tlo s"curity raratic.ship. .i.. !i.: ,...orpos: 'oh'. '.. ,o 1o, - r,e -c n v- C I, .- -.,.. on D.r,.- .pr.ror tha! the realization that, !,ith the enC oa Us pariiciFation in the hostilities in vietnar anC vrirh China aiC re aoviet Uhion saehilE to conpete ior JaFrn,s favor, tte danq.r lhat us .iilitary activitic. !:ouic sof,ehor: jnvotve Ja,an .iIt t,:.i.s.....d. in - v.. rrs.l-r ...r."-r.--- 1i.-t boll C' -r." end . h! : ov., . ': -on t v, .t! - L._.i .r'ric-.i or Lh. tS..Dar -. .r) y.'.s j... rr).1.!! .r.. r t, tre etfor'. o. s cu",Ll publi. rationale Jo, cortirLa.ce of ttE se.urit! ties..u sp.'l:. ol r'., i::-.- r..- v-l .r oL 1.. ia J.I-, "]]...-. at the r.st funCanental Iel,et -- security -- oi retatio.s _

srcnFl/r..FOPir

4.

s' es, .rd r. hdvin. b-en rn ta.9- parr .e,ponqil.e rl! corC, :ons of qict _-jLy Lt-"t r.aoe detenic

in East Asia possable, 'Ihe rov -r.-1t,s Dra e.\rng L,./1r-r1.rr prasFrce rn roo p---tpjr of Us lorces fro rast isia, ere trenin.t ias vriirinEness to perhit lho carrier xlcuay tc olaiai-aror lo,rosuka, to funa the (anto ltains C.nsolidatior !1.n, to ac.cpr proposnls.elat.C to th. re.leI o[ us flyinq a.tivitles anc ground installati.rs fron !r.lra, and ao agr.€ to the ror. lecent olti.aqa Ease ccrsolidatior ttai. one nay tegitinatety questlo. llr6ther rapar o! the us stinds ro d€ri;e the greatest Lcnefit fron th6 latier tut drell do leflect a liasic Jalanese ccsirc to ret;in the security-tles {ith the lirited strtas, This is not to say that the corcept of our rutuat s.curit\r .r.:rh u, ...pt\ .. c -1 .. is Do lonqer th. issue of !re.te.t ir;edia.y. rraFanis' pe.celL on o

..iij

) rl ..

trhile tl,ere are soFc i. J.!en \.Lo e:rdorsa thc co;c.pr of a ruch 1ax9.r E:ilitary .apali1itl/ .rte:rdi.. t6 the atjlity t.

Japan's sca lar6:j ..o tlra r1:i.td1e rart, .nc FerI:aps ei,cn r;lrote.t the cv.na!.] acquisiti.n.I ru.leir 1:capons as a n.ans.i en.urih\i that no other nation rritl tLreaten rralan,s ir!.rosts -irl L.-, "L'l- o.r..r "r'. rt .. ,. :,.o.E Dautrality as th€ lroNer couxse for Japan to fo11ou.

The SelI-D.fense lorc.s ldr harre tle defcnsive cap.bilit! to contain a co.v.ltional attack on Janan frol .r,. e...rio.s Lh j, o. .o--,. t'.r. -- p.: or t-. ]acL tie abifity to proje.t signif!.:)t forcas acxo.s several hundred mi1.s oa occa.. Tne erapar.se cannot, of couxse, coDltex rhe v.ried soviet rhr.ats/ a1lhough a corlentionat Soviet air atta.l plolabIy l:oulo su:ier srgrrtlcant .rosses fxon tlananese intcrc€Faors and air defense nissiles.

Tne Last eliCence of l,here pubIi. olinion stands novr on the qlestion of .japa!'s Caie.se capahilii, is that over the East !(o t,eers u:.4th De:crsc xuildLF ilan arl] the deferse Lucset,:avc ruh inro qr.at.liaficuitr in ti€ Dict and t.: - --o Li,. r .r d 1 r,.s r: ,he r.f.. sol.h . r - lJ b.....r.9-_r ol . rL.' .e.- O. i pr holr C':l . i o "- rL I?'2 . cent of cIiI ald 6.5 ;er.e.t oi ti:c tuige.. D!:erse eyp.r;irL,es for thc currcrt rourth Dei.rsc luildrD plan {19?2-t9rrj 1,i11 be 1alEer (anout d.lirle) tlran for ahe'pr.vious ptan, but sEci!r1lr:ol qR:i

sEcrxr/uoronr,' 5. .

5ti11 less lhan ono percent of crrpr and ro.t of th. increase ei1l be accouhted for try tie aCC.d expe.ses of def.iCinq Okinarra, b!, p.rsoiael coses (self-Dcfelse lorce lay, vrhich eats up about 40 percent of th. cefense bucger, riscs at the safo l5-I3 Fercenj: per year as tlat of gclei .rt civitians) aid b,' the increa.ed costs of xepairs, nainte.ance and repla.erent equipnen!. ?hus the li.ricatiors .L of rl]e currenr fiv.-year plan -.lor o-e,sr5 "5. iL -o, c not s' Do ourrng 1rs rfe s!.r rthrouqh Ie / /) .

I".hi1e tiele 1rill be a hodest increase in defense capability tnrorgh acquisiti.n of nocern aircraft a.d ihclease.l naval tonraqe, tbe au.rhoriz.C itr rcrs of pexeo.nel and total defehs€ capali1ity 1!cr.as. !,i11 be less than one rould e,pect. At the iaxirun, thcir dcfe.se !o1ic! is desi:.ncC to expa..r nilirary forcas slcr1y, ro estatlistr a Fodest noLltizatior L-ase, .nd to de.7e1ot a qreater degree of aulononr- in C.Iense hardvar€ Froductian. Jepanis n;nnlclear lo1rcy rii1l pr.LablJ.' lr€cor:e cns;:rineC !y Di.t ratification oI th. ron-Prclif.rrat:on Tre.lty in late 19r4. chinr and th.::oviet L:n ion Tension has also b€en draincC froi th6 third nni.; "n 1.t.. r-. ^r.: o'd:4.-Llr/', tie Conrxnist nati.ns in g.r.rf,I ari Chi.a in parricrlar. $hen thc chih6s. dc.ideC to acceFt our cv.rturca, ttrcy also decidcd to reiuff sirilar ov.rtures fror the gato govarin.nt, uhila lessenirg tlrclr iitin:cy \rith the Ja!a! Socialist Party. Ior alnost a 1€ar/ tie sato govefjtert !,as hetd in Paralysis on cLina polic1,, \rni1c donesljc pr.ssure for r , o1.',r. or. .t . s 0.6, tions Io! lresidcit rixor,s trip nnfoldeC, These prassures a.ot irsilrnificant xolc in Taiala s.air.aion lIay.d! r..., to b.. .:p"r.nt, Sa'o'.'.i .t6r'5.4 o'si-.. to the !ri(e irlr:istersiip, the Chincse imeCiately nad.^.it clear tlat he vrould he an accetralrle visito! ro Fekinq. l.Uy they .lecided to discard thc ir,rlnse1y po!:erfuI lever they had over the conrse of tI.I,arcse donesti. lolitics !as not altoq.t!-ar ciear, iut it Has ille Chinese alC not tie Japanese lrro deternin.c the riring and paca of thei!

results, erc6pt jn terrs of Lrapan,s viev of the Rellblic of cliha on TaiFan/ havc been i:ather ni1d. rrade betlree.

Jalan anC ihe PRC alro5t do!5led in 1913 aro if rhc chiiese bring ther:seIles to acc.lt :no 6ne tLin.J that ni11 Lrjxq abou! ..rlroP,r,tl.s',',.1 !ri1I proLatlt :in.i thc tla!:rnlse rrittirg. !r.dc a.d civil aviaticn .gx.c.e.ts have iree! sig...l ..C tliere nas been slo( progress toqard thc fishirg arid o,.h.r agrecre!rs Fro;os.c The

s!cnFr/iro!oI::.i

SECFNT/IiOFOPN

'

6.

relations (ere {hen Tanaka vas in Pekinq. Diplonatic __ inbassadors dic not lliiuriun.a at a velt reisurelt pace has alrive until six fronths aftcr tle Tanata trip lrhat ;e.n sionillcanr i rhe f..L th-r 'h'i" !robl'rs hc/_ )F'n 1n U /J'oan iElations' r"*oveA, not o_lv as: sou!ce of conc'rnjs''u-'rara '"o's I porl-jc.

1c ;il "'="...."1., -" '. rjr nrcre .-l'lart."' prcoe<6sso!-, r:vF t. ,.Lr,. ""i, p"i,t:'.r ."pi,"' on corLlnL-nq L-shrs ov"r cl'ina po i'v' ,the ahin-se ,-pp:oc".r.nt l.!c .:r"r_y 1nF!ov.d J?P,n's Ehe -ov-et o Lo I chrn. barc-lrinq rcs-''on.:,. t..p.'.

.

-'

:'c 'rd :ov1!t''ouJr't u;i;; - "ri p',I-ps incr'- ':c:'s -i"r' a catrPaign io ..""t., tti, sin;,/rapanese raplrocr'crent bv of their onn to ir:Prove bilaterat relations lrith JaPan' ;n the ioliE:c l t:'r.1 I.v .erL cror-)o 'o -o'lo ir' J-hurrY, J 9?2 :rd I ov C ro to In tie econcmic fiald tl:ev 9av. rene$eC attention 'otrirt i' s'r .roLo.-1- !o! - J r3hc.'e -l"t'ii -:.. rn'-' I r'or'e_ t1tt rl' on the .-ucr.- i ,u. o .l.".r "h 'i..y r(^, n ct. ,L't d bli " "n",,ar"'o over tlre terrilorial questior.

11,- o .' .:'ion: o. rh, -' -.'io ' P o'!Fc " utvelo" el t ol !1" o_ Ll. Y'L "r nat :, 1,e d"\.loP. nt j' '--. ,r.. co. '1,.. :o .:;,""".*-.

"-"r..

-. d ,or o'l i,.o 5-s i. i"a .c r,.tL r cs. ani -)r.ole .f a PiF'1axe to Japan __ thc cohstructicn alout Srathalin anC rtoa.l c.D:.Itr Io' l1 hr'c /,'00 "'",ia"a ' o' L:sr fio' b'r-e! niie oi.ctine "loaq il,e ou.he!I '1" v'd Lii 'l't l n !e'.

Ir),uL'sL'ro Laho ]., h"' .rr._cnE'I " r' -"s JlParose \'.h co.E'c._ l '!v ' suPpor' e!r'1on l. bulI ' q t il-old r"ic pt.t..t o" jn \rJ-- be a-"i1ir1.s for...'r.", -'.;o p- tt:Lc p;o,"c tr.. i-i L "r'-'hg"i'rouE "iii.

1nc explo:' r'oi_ .. " .-^i p!-. -n . ^ l--" .t. r-" , 'r". r' 1... o' L!.c,-.1'oFc !)r.l 1." ac:..: c,cst, jd ..ii,lii.. ", ii:i"-ir.. .r. Jrpa.c<! ro plo r's.:.jp'e.t -id nat'ri':s. th_ reen 'e:i'il(_i' nlLh;uol. -o.^ ", -tt_ ir.,iecE:on rr srzc 1o-i fc! ... sovi"ts r t.,L! .]-"anc;. -e,(_al-!'u -t. qu-ritv .r' ojr, oi ;i'i;; ;.;"", -, rhis is not entirelt to the ieasiLilitY of the sctene. ol c''r-se .1..t-.olqted 4.;,i.-" rir..nq, ano ,),-e :s )r.o ')a . .r, in 1 J.; , * 'r,'.'"'c :;::"";;,::;-;" -, p-o\ r' "s'_r'cL_lro:oo]' r-.r'-l ' ".r.-. r"_,. '.ooi nr\'i.e '": .9 ll'. '' ..s-." s.cL-'ir. en. .. i;;";;jnq; inqi( ). - ".- ir Ir.' J,l" be ia concert sith Us corlaiies ratlcr tlan alone- In

srcRrr/IroroRN 7.

lale 1973 thc soviels told the Jalahese that theY could dcliver 25 nillion t6ns of cruce fo! exports annlatlv/ lot the 40 hillioh tons tne JaPancse had hoped foi' This has disaplointed the Japanese utro aI.o vronder hovi secura a Soviet night be if pclitical difficulties akin to the uiddle nast co.flict should arise in lho future. The Ancrican colpanies iricrested (cul.I and rsso) consider lhe scviet calditions too one-siced anc .lara too skirlv anc unreliable to:.errit them to tahe up the Jalarese ofiet of 10 to 20 percenr participation in lhe toreiqn share.

The Yakuts! natlraI gas project has ad,vatrced to tle u_ f. d J_p"n hc'Do:nL ..h-, !t 'ri.l :E..e o'Ll ;rsc..q.r rij.j.cins ploioct, and the teacing investcrs, rl Paso 6as ard 'rolvo cas, hav" a,rrcerl in lheri! olD talls inat thev should soon open three'Farty Degotiations \.1th the -(!Yiets. us particiF.tlon, horevar, ray be ir:loltartlLy affect.d Lv pcD.lirg legislaticn vhich !ro!1.1 bat the exte.sior ca ljsc creiits to tie t-(Sn. to pxove that the extent Eurtn.r cxplor;ijon r:it1 be..c.3s.r} js to luslifY qas large erougl dcFosits of the Yelrltsk on go!.rrmcnt is oFtinistic l:he sovie! exploltatior, Lut the repatnen! of to tlat an.1 6eens Nillirq liuarant.c ihe Etratc-dic nilitaiy factors rih!.11 inhiLit apP.ovnl of the Tyunen project ale lcss sltong in the case of tha Iar.utsk gas lroposal. Yal:utsl \ioxld co.triL,utc to the or'era11 der,eloNrent of eastefn sibcrja, lrrt Noulc bo! ,iilc.tty suppori solii.i rilitary ani !:\ra1 c!]era'Jiols ir thc narrer of tle ryun.r. lrojece. us and rapates€ rapr.s..ta!11'es agree that tha l-llc talkers nee.i.d to carrv Yakutsl gas shoutd not !e unce, soviel control as t5e latter Hooli !ish.

Neitle! th€ us Do! Jalan coula ;c.1 as sccule atout deliveries if the sovicts had cohtrol of ti:e ItrG tarliers and col1C use ther to Ceiiver the Sas elserrnere.

The chihasc at first toterated the soviet overtures to the Japaxese aid conletted tharselves tith r'arnings l. -o !l.at tr.- ,"9"-^-' i1oLld '".- tr.' 'rJ \ '6 ..ossi .s:re, or th.i .i'!l deal |rlh, 1',,( Ch'ras".! pooing the JaparEse !,ith oil salos, and raising foreboiings of the mititary inliications !o! Jalan of a v7el1-oil€d far Soviet fleet in Pa.ific eaters. lhe Jaianese havc so'vants .l'h ..., o' )u'ray t,c ljrLla h..o, -igl.t Da-. .rorr. in tro rir.. ri-. ., ]rn, in rl( r'i.dt'( r 'r'r,v soLrc(s .."

C:\r's-. dirccrlon-, "f. v \."n- ne'. ,,s ,, to ro I to aovicl .b noi La ry, br! or sovie!-r\rab blackriail.

TEis situaticn i11u3!rat.s |oth tie advarxages and Ca.9'rs

sf,cru:f/.r0-oRl:

.

8.

tte neQ internationat leIatjonships. lotn to lrofit by the siho-aowiet sptir and to lIay the ore agailst the other. But a ni.catculation could get .Ialan in:o scrious difficulties vith on€ ox the other ot ier qiant laiqhl:orsJapan 1s ruch rore }lkeIy to r.main a cordial advelsary of both the USSR ard China than to bacone an ally of €ithe!, Diffc!ences of race, larguage, culture, ard potitical and social slsters, histolic erities and rlvalriesr arC the psychological inaLility of any of the three to .1eal o! equal tems lrith any of the othcrs all \ieieh against Jepan's aligmrant vrith either of the other two. lreither aecounts for riore than tro pelcelt o! J.!a.!s toeal trade. china,

by E-l od : -h. ro po-uli.re prorjs-ng e):Po!t na!kct, tut not for the increasingly solhisticatoC ProdDcts -- esFecially cc.surcx l]roduc,ls -- v:hich the Japan.rse {ou1d }i}e t. sel}. The USSR is obviously a pot€htiall! grca_ci so.rr. : -F"io.,,,:iler I ao\.....ond:r:.;j ,equira that JaFan adlance tne ioiey ald lrnit to te paid in products, anC the.Iapanese ar. loath to lecotre too CepclC.nt on the Soviets. ror tho norcnt JaDnh is i! the enviaue po.ition of Leinq coultcc Ly bot!, vrhile itself pursuins only liriteC olr:jcctiv.6 !rit! ea.h. Plobleis itvolvinE Chila aDd the Soviet Urion are not no\r loints of friction tn JaFan/tnericar affairs. lrapan has de!iveC fron Japan is in a posltion

-$lqryrlie!qq

s,LrrrlNoronN JAlilNlST

ECOXOUT. TTENDS

tiab.n uill aypr'ence iLs sla-pF.L .^oior,c s.orrdoHa s'r-r !rrc rc-lo.0s Lr.,- Je'! bLi ,..1 ..it oo D,rL-r thJn nost dcr.lop.d !sr.n . h.t e. I ouL.!,r"d Drt Li.- groH b. r-5 .^, ui.t. - to r-,-.r h"n ". l0 ,r .- h. o_I c_r"rs, ue expectcd a 9 pelcent gain in 19?4.

Drastically incr.ased priccs for ihport€d oi1 are larqely responsible for rhe .hange in ecoromic ou!1o6k.

The cxpected rise in oil jnport costs (on the basi5 of cDrrent pxicas) of about S13 billion rhis vear qilL b€ a lo..Jnd,.d -or-. 1 p.r for ,rapa..se goods atso si11 b. ndvcrsely affcct;d by huge oil imr5rr bjl1s tnat pronise io slog econonic qro,tir jn -i... /9. h,: 'o- li I,-..o.. eonsiderably unless the qovernin.rDt takes se.ong conpcnsatory Beause th. trade balance is funnilq in th€ red and r. r... ,.I--1..o1 ro.co.. .-, ro.to : I nor. " -.'r io.. ,s _. .,. .... L -.. lolicies to stirulatile 6nes. prime Ujnjst.f Talaka,s pol;.icr. Po-. s..i. q_1 \i i- b- .o_,irl cor.i!, pr)c!-, .o .jd ni..., o i .n... )ku1a to rl o. o.i .I-. L-).vai q ro L-'-9 :n .-.o. und.r control cven at sone cost in ecoDoni. qrovrrh, JaFare.e

ecJro,i.Jroi (xr nJ,o-ary

Lh

y, r../ ..!

ol.1 ,d DU o-ynor.

Afr.r at.roo_r', " t4 p. .. 1 .. , i. he i.5L hdlr .o 'n rt.. .h..J .nd ot s !-o"-t '."' fourth quarrers. Tie pinch on oi1 suppli.s startinq in November force.l a slight declile in indusUial output, grouth of knich had been sloriDq since hid-y.ar Lecause oi capacity co.straints. oil deliveries ro Japan durj.ng the fourth quarter Here about , percent belov normal. overall d.nand remailed stronq despitc stackening gro{th in governmelt 071, J.p. ,'s

inftation raf,e accelerated in the february, co.suner priccs Nele over 25 !ercent abovc tho February 1913 1ere1, \ihile l,holesalc prices had increascd by norc than 35 perc.nt, larq.rty b.cau;e of surging costs oi imporred law materiats, Until. reccnlly ,isi.q The already high

uinter fronths.

Dy

sEcREr/NoronN

2.

labor costs vere nol a frajot factor stimulating itrflation because thc exceptionat 20 percent gain ih productivitv last irbor cosEs ,o.. 1, s. , l9?r th-n lrros' rn .-nosl an) other industrial countrY. Alamed by spiraling pxices, the gowernnent has dradd-1rv ,ovea ra rh^ aosr r -r.'-r . , . o1-r:-y a1d 'j_c._ !'ouDol.ci,,s'i.n qe\Frot jea-,. ...o"rn i- .h. ron-v -rDpl) D'a L '' ."re lon.io. ao v ' or Apr-l throu'i5 jn points, and the discoDni rate (as hiked Lrv 2 percentaqe qDantilative limits aDthoritio. furtner tiqhten€d oD banl't 1enaing. These anti-jnflationarv noves basicallv rellect the vi;e,s of llilistcr of rilan.e Fukuda, sho toohFrkuda olfice in Late Nov.nber. ,,onq ]inovn as a conscrvative, sees ilflation as thc most serious thieat to JaDan's cconomv and hopes that success in cotrtiolting it wift help him b'cone rhe next I)rine minister' o ro o." ir.e 6 -,.9 ,np 'ra " tY -..ono 1 t- oa o7r,qoods to scI1 abroad. Eapo.r volumo !'as dcnand and lack of i. the second half of l97l than a vear ea,.l.1er' little hj.rhcr jn to $3, billion -- nbout The eroD the 19?3 trade surplus __ did not dcter Tokvo fron ao the 19?2 lcrcl ""t"irt "r on a net basis, outflous. capitaJ enci'uraqjnq Iong-tcim record billion last voa,. to a olLIlovs.nounted $9.7 these dollars deinand for heavy lrlaced strong do\)n\rard lne rcsuttinq jD octob.r.

Rv earlv Januar? ycn prassurc on the begi.ninq on tne Tokvo 5 bi1Ilo. lhe eentral bank nad sold naarly $6_ L''f v d't--c..Led \" ir. , cnl 1e v.n nor icn'jid s'rcns ,""'" no 16 rha r'- h.onir. ,rc leror_ "r..'"r rn r!brLr-y c.d JI1' cn.

E9ese-9!5 Japan's real g!ov7!h Ni11 be do!'n sharPlv in 19,4 because antiof nnde;1yins cyclical trends, thc contihuation ofquarto!, second the at leas! through efiorts inflalionary oil lrices on .laPan and the contractio)ary inpac! of higher jrs as 30 llarch, r€centlv solls to. ahd thc colntries Japan fo!fr of a inposed in the Ras additional ecolontc restraint if lokYo is that surtax on cotporate profils. Ile believe grouth dena.d, slou to respo;d to the problefr of inadcquate rate percenl Iouest -- the in real oulpdt \ril1 declinc to 3 since the mid-1950s. If Tokvo moves d.cisivelv wilhin the next fee months to stimulatc a€nandr lhc Aro\ich rate shotld rcach about 5 percent. The first sicn of a chanse ltobf,blv vi1I be an easinq of direct conarols on bank lc.dinq Bcfoxe

!I!1!l-tl4r1!l

-

SECRI]T/NOIIORN

3,

its mobetary and fiscal poticies, the govelnthat such a.tioh is required.

Finance r'linister Fukuda and ccntral bank hedd Sasaki appea! to !e eztrenely concerned with ihflation at plcsent and EuLuda e.pecially v7i11 be anong thc last to endorse expansionary noasures. Pritoe r.linisrer ranakn and ,l,1inistcr of rnier,ational Trade ahd Irdustry Nalasona probably eould be more responsive !o a volsening slump in p.oduction. ' several ildicators suggest that a slum! in private invesUnent, uh:ich constitutcs one-third of cN?, has developed. Nev orders for maclrinery and equipnent dropp.d substahtially in Deconber an.l havc becn r.porred veak through tlarch. Const.uction ordcrs h.ve folloued a sifrilar patteln/ sith Dotn residenrirl and industrial c.nst!uction sagsinE. Thc aroath of personal c.nslm tion also alpears to havc sloRod, sit! demand i:or consumer durables especially teak. Ne\i tax.s and hiqher gasoline prjccs havo cut do.p1y irto motor: vehicle sales. on a seasonally adjusred bnsir, jndustrial pro.rlcrion declin.c 2 perce.t ir Decembei, 1.:!e1ed off i! Ja,ruaryr and slipped alothox L!1f point in aebrnarl,.

I{ahufacturing shipients dxoDir.d 4.? !er.enr iD February, honever, aDd jnvestori.es of finislred go.ds rose. rhus, further production cutbacks nay be coi,iDqIteducing thc inflatio, rate eilI be dj.fficult b€carsc industry {i11 pressures this year tnan last. fhe oi1 price hikes ot the past year \ii11 boost indrstrial production costs by roulrhiy lO lercent. unir 1a!or costs Hill inclease appleciaLt!. Unions are ,inDing 25 30 Dorce.t saqe incre.scs this .pring, and p.bductiwity gains vill be snall bccau.e outpul r,il.l incr.ase litttc and cr6ton ai1l hinimize layoIfs. If Toh'o forces f:irms to absorb cost increases by ertling plofit margins, iivestment spendilg ald econonic gloHth could be set back eve! mofe than is nov ToLyo can leverse

nent nust reach

Reststing a Txade Deficit fokyo hopes fo! a small trad€ surplu! this year despite a $1.3 billion dcficit in the firsr qlarrer. The rripling in oi1 inport costs played a riajor role in piodncing lhe deficit, brt non-oil inlorts also aarc substaitially highet than a y€ar aqo. Hith oil inport volure lite1y to renain near last yea!'s level ahd noi-oi1 inporr v.lufre expecrer ro s1oe, tho 36 percant gain in import value in the fixst quarter flofi thc sanc period last year is nol litjely r:o be lcpcarcd.

Nonetholess, irports tor the yea! as a vl1ole Nill rjsc by at least

lsng!4tqiortr.l

id.ili,r Libft .y

spcREr/!oFoRN

4,

40 percent to $43 bil1ion. Exporrs uer. up 36 perc.nr in valu. lu-i.9 Eh. "i-st q "r irop, s fo g-on.n n-., 'is I 'l !or Ln i-tr,iidcr of Ehe;._r No r-dt "-xpo-L rvF" dc/!Iop d ). -he jr -- quor,.:, rp-1jzpd., n r r,.. .d hi9h.. p!i.6s.

Tokyo las raken no dirccr sreFs to tinit imports or 6ncoL ,.J. .?oo L- d so'r, .i-s- | Lr,d. detjc-1. '., LIi ..i .san.r..

'I're lono- (-n I ".:n,.r'v

_o'..

Lre si,.lc/

-ii''_r

o', ino,

l comuritu on an aggregate basis, anc furthcr rcductions .re ebvisaq.d for thc n.s rornd of nul.tilateial trade negotation.

lI-x,'

I 1or Llr.r.oui. ir, .. ..d bal.' '. t. ! ' ' about r cr:nsritntinq rra<l..estrair:Lsr yct is Iirtt. sisn of action. oDly jn the cas. of cfldc oil havc JaDanese orfi.i:rs

. . , ..1o., o i' or rs, p. .-.. t1. o Japa..s. firns s.e)rinq auctionod .j1, and restraints on D.octr.r p-c-:,,. :.o. -. ,i^..or.L_ot. ,.io- , v._. :,. ., o , D- t, - 5'i.co, rn.o. i. .t o. i Lo rt o upori. ,r rt.rn '. '-r! il.as:. ouo,j ,. I r.i ... ir!o.r o manufactured goods, r.d gj.ve. abe tradE delicit, gover.rncnr Iead.rs are tess rikcly to push f.r their ,.roval. TLese badiâ&#x201A;Źrs are in tne loxn oI !c.t-tep. in tha qoveinn.nt bureaus .. bv ai. .b.ror.. ,rduq .r io ',.. o. ,.r o. lv 'lo. ba. i!,-.,a-i. " .rtv.o-.. r !L tn" rr. ale liko1v ro h. r.m;vPd fiscal resrrajnts Nere aCoDr.d ,rio1 in r_r"b ! 1 _c-r t- that r!oc. brlcn!c as e11. The restraints reduce donestjc denahd, pe.ni*ibq excess capacity to develop. rn this situjtioh, Japrnese lr.ducers can be axpected to folloN past patte.ns and produc; for ef,poxt even if tho profir is smal1 o, nonexjate.r. This perrits .. r Lh.m !o,, jn.- n -:.h tov.1o D. :ij Lh do.'e--r. s 0!60.. -n d ., ..y .o lnr our f.-.s .qforeign markets/ and cxport '-ry volunâ&#x201A;Ź incr.ased 20 Dercent. Thjs yc,! L\' "uLorob. - r..J.s .y no.-s -o rr:.- ovrrl."so-cvolune by one-quarter, ahd the ste.1 indusrry las similar anbi, The nonerary and

id. iarLibrtq sEcRrr/NoroRN

. the

5.

JapaDese axporters pro5ably Hill concehrrate more on narkct ih the comiDg nonths. rhe physical volDme

US

of sales to tho United seates felI by an estimatcd 10 Feicent in 1973. Export industxies i! frany instances ke.. stra:ining againsc capacity, and Jatan lound it moie profjtabt. to sell to other countrils becausc the ven haa cpprp.i i ,o ..rcn I 6 -oc-.

1 rn-n ,gu.,. the do1lar. Thc ycn is eipocted to depreciate retarivc to the dol.lar ov.r the next sevclat r.nths, increasinq tne c..,. ro pro'iL-oil y 1.r{, United Statcs of cars and sorie other items alr..dy are noDnrinq Frotecti nc lxchanqe Rescrvos oh batance/ ve rhink a trade deficit ot at teast s2 bitlion deve:l.ol, this year. Japan ,ould thcn iavc e current account delicit of about 96 b:'r11ioD and a strong motive to leduce sh.rply the nct outflou of lonq-r.rm capjral, Hhicn vras nearry 110 billj.on last yr:aJ. Totyo .ow is permittinq overseas b.rroping by Japan.se iorestjc firrrs for the firse tine in thr:ec years and is linjting lons-term capi:ai outl floas lry various cans. Thc J:j.^jstr} of rira.ce already has approved 9650 nillion in nc( forciE. r,orr.,ing !y poser" compani.s, sleet pro.tuc.xs, and sbip-t:,riI.tcrs. covernmcjlr institutiors no tong.r qjlI Iinoce irv.stnent in forejqn

sill

-r lc tl.- ',ou r or l9r1 until. 1.rte last year To):lo had actilet-y ehcouraged o!crseas lendi.g and i.vcstinq by r.Lran.s. banlts an.i corpoiari-ons as a heans of prcventing ra!j.] qrovti oi foreiqn clcnan.e reserves, Not outfloHs of lonq-reir .apiral rcached slo billion la.t year, and To).yo hopes to rcduce tlrjs by hait in 1974. SuDpliers ot oil ahd oL)rcr key ra{ @terials havo a priority clann on Japrnesc calita1i houe\-er, and ri1l recaive grolins ahou.t6 of inwestneit deslite Lhe cutbf,ctis. In general, rccent efforts to roduce outflo!:s are far 1.ss r.strictive tha, the policies that {ero folloNed iD the 1950s an.l 1960s.

Even eitn $12.a billio. i. officj.al rasexves and abour bil1io. in non-ofiicial $3 mostly dotla! dapo.its in comercial hanks -- lhe Japanese have about the decline ih official holdinqs. Tolryo eanrs to k6ep its offic:iaI reserves fron droppinE belo- SIO biIlion. These reservcs act!a11y increasad slightly in the first qualtcr as rokyo tapped nnolficiat holdings. Non6rheiess/ tbo S1O !i11io.

Ievol probaLrly witl be reached bcfore the vcar ends unlcss rorp is don, -o boo. . .dp-r ,l i"l"'ors, e::r1. oL.tto.is, o, oJ-l' ,xports. /r .inrrrr vrlr s..b.trn.r. .y in.rc"q( ., ir -o",.J.L.o.d. 1n,t ctr -,d!, are steppinq up borroninq i.n the US acceltance narket and the Eurodollar market ro heI! iinrnce Lrade. Tokyo witt atso ary to attract l\rab oit dollars bDt ploblbty sil1 have ljttle

h.id.",i"l Lib.".v sEcRE'r'/NoFoRN 6.

success because Japa! lacks a ell_devetoped ibteinational

,.

lrt :

ToI)o lac y:: . - s_.4

I LeL-d ,. JDour .iO pcrc I b, 1r" . F -, or -!5^!ve. ..i.r

b'riio-, ,c,o u r /or,, r (-r -\i -; apirarentty jrotivatinq

;q

faeror in ih. i _ qo Lo ,- ,:) .oI! ' Ia-r .o" rh-J" .., ri..-, ..o o .oo: r, iE Drlng ,c ,.,!d. s j..^ ..../o 1,- pt, .-o t,r -.r-, -i- - "9<-_o r I I ;on i. i",". , .

-, ., .. !ni- y...) ro /tj td c

states ]_cr- '\, i

. j lrli,

Perccntaq! Char!,e f:cColraspo.iing !,cc.C of Plevious !.rrl Real 1.963

1f69

1911

\67

221

1973

4t1

10.7

14.4

16.5

11.9

r7.3

10.3

11,7

6.3

24.\

11.

24.3

16.0

23.6

9.6

,142

o

6.9

I ratcs oi.h::r!!

cllc::.:.i r) t.j:-s oa re. to albid cistortio.s i:!.:tr:rr.:s.

2 Calculat.c :,1 ar.ri:. e::.:::?e ::,:. to, ure year, quart.lly totals arc s.asonal.:L)..ajL:Jx.a a:::a1 r.:. s. ca!scd 5y cr:.a.i:1. r::.

, ; t,.l

id$liat Library,r.,: n

_.

i.,rir11

... ,t ..,

.;J

3.

JAPAN: XNA!

GROIIfJI

!':T'S III coillo:rrNTs o!

GnP

Percentagc change !ron

Corrcspo)aiiq !criod

of Previous

1963

r971

10.0

24.9

9.4

19.s

6.4

7.5

71.4

6.3

7.O

3. ).

7.1

Y.:ar

14.J

9.1

13.3

l9'13 t9'13

I II I]I

7A.2

t7 ,4

5,6

25.

i

76.',1

3.5

a.

/,

20.7 3.4

0.3

-2.7

,*,.*.r.,tiiLi:

;itii Porcentaga Charqc:.or

coftcsporiiDq F.rio.l

of Pxevious

Yn.

r

.Tn:.!,{ 1969

0.9

4,2

5.6

3.9

2.1

5.4

5.6

3.7

3.6

5.9

19 71

3.2

{.3

19 72

4.6

3.3

1913

1t.B

4,5

75,e

1913 '7.1

4.2

t0.s

11.0

11.2

11.4

12,9

12.3

l5.t

I3.6

72.7

15.7

19.0

1,1

r6,6

13.

7

t4 -6

16.3

20.3

\4.2

17.5

22.3

.4

4.4

5.1 5.9

1I.r lI.9

?.5

a.a

12.0

15.

9

r9.1 t9'14 2A.A

:r'rl il:rl

9.4

23.1

11.0

26.3

"t::.i

t0.

UNI1ED STATNS

L\D t'-CPiX:

I\SDUSTRIA,- }RODUCTION

Perceirrce clrnnq: ar.f, corrcsrc.r.ilnv i€r j or of Previou. y.ar

5.

15.4

1969

1

13.

197f

;.

\912

?.

2

3

2.6 7.2

0

t7

.6

f9 ?3

I

11..3

1?.5

77

III

1A.1

I974

2.9

9.3

1.4

a.)

0.2

l'.'-;11,o'.'.,. ,: . .. :.._.. ,,:

_i

i

!r., i r.1 :.-,_a ,, - :-- ''. - t l.J

11.

t_1irla) s:;.::s ;r:D _':!r.:-\:

!_r..3oR

r:iDrc:Tolts

p"r(:.: :.1. :.-: ::.,..1.r: rn:l'

196 3

19

71

7912

us 6.4 6.0 5,1 6.5 6.1 6,6

J:_?;]i 16.9 I3.,1 Ir.6 15.6 t5.9 22.:

--: p!-'....-t) -JI

U;.::1.1::.t (o"......t .: r Da. :o! . ,

us 1.1 ?,a 0.6 5.9 3.5 5. i

us 3.6 3.5 1.9 5.9 5.6 1.9

J:_!;\ \9.4 t3.6 \a.1 d.3 11.1 2D.2

Ja!li-\

t.2 1.1 1.1

t.2 1.1

1.3

:

,is:.i!);,i'iii.l 12'

JAPT,N:

Brr,.\NCr

rrrrn rsr uIITEo sr,_'.Ils

Billioi . ' ilpo,-

7l ,.; -4.1 3.4

19'72 3.o -5.0 4.0

-1.2 0.6 a. B o.2 3.0

-t_.3 0.7 3.4 -L.',t !,7

19

(r,o,b.)

InPorts {f.o.b.)

balanc.

Non- nititary serwlces Tr:ac.r

and

ctrrrant aecount )ralance r,oDg term

capital

movercnes

1973

o.s

-8.3

I.2

-].3 0.7 0.6

-2.0

-\,4

US

$

a-,r;"..)

I 3,

\971-

\912

.19r3

23.5

28,0

36.2

-19.r

-32.4 3.1

-2.3

servi.es and tlansJels Cutrent accoDnt balance

-3.3 -0.1

!onq-term caPi-tal novehonts Non-)ioreCa.y short-tern caliial mole:en':s ald errors and onissio!s

2. 5 4,

Ovela11 halance Chanqe

cnange

in official resotves in non-ofiicial

,eselve Position

-10.1

-6.2

10.3

1.6