JAPAN ENEMY OR ALLY

105035

JAPAN
Enemy or Ally?

THE msrnruTE OF PACIFIC RELATIONS

of Pacific Relations is an unofficial and non-partisan
organization, founded in 19*5 to facilitate the scientific study of the
peoples of the Pacific area. It is composed of autonomous National
Councils in the principal countries having important interests in the
Pacific area, together with an Internationa^Secretariat. It is pri-
vately financed by contributions from National Councils, corpora*
tions and foundations. It is governed by a Pacific Council composed
of members appointed by each of the National Councils. The Insti-
tute organizes private international conferences every two or three
years. It conducts an extensive program of research on the political,
economic and social problems of the Pacific area and the Far East. It
also publishes the proceedings of its conferences, a quarterly journal,
Pacific Affairs, and a large number of scholarly books embodying the
results of its studies.

Neither the International Secretariat nor the National Councils of
the Institute advocate policies or express opinions on national or in*
ternational affairs. Responsibility for statements of fact or opinion
in Institute publications rests solely with the authors.

LP.R. NATIONAL COUNCILS

AMERICAN INSTITUTE OF PACIFIC RELATIONS, INC.
AUSTRALIAN mSTTTUTO OF INTERNATIONAL AFFAIRS

CANADIAN INSTITUTE OF INTERNATIONAL AFFAIRS

CHINA INSTITUTE OF PACIFIC RELATIONS
COMTTE D'ETUDES DES FROBLEMES DU PACIFIQUE

INDIAN COUNCIL OF WORLD AFFAIRS

NETHEWANDS-NETHERLANDS INDIES COUNCIL, I.P.R.

NEW ZEALAND INSTITUTE OF INTERNATIONAL AFFAIRS

PAKISTAN INSTITUTE OF INTERNATIONAL AFFAIRS
PHILIPPINE COUNCIL, INSTITUTE OF PACIFIC RELATIONS

ROYAL INSTITUTE OF INTERNATIONAL AFFAIRS
U.S.S.R. COUNCIL, INSTITUTE OF PACIFIC RELATIONS

INTERNATIONAL SECRETARIAT AND PUBLICATIONS OFFICE
i East 54th St., New York **, N. Y.

JAPAN

Enemy or Ally?

by W. Macmahon Ball

An ASIA Book

PUBLISHED UNDER THE JOINT AUSPICES OF THE INTERNA-
TIONAL SECRETARIAT, INSTITUTE OF PACIFIC RELATIONS, AND
THE AUSTRALIAN INSTITUTE OF INTERNATIONAL AFFAIRS.

New York 1949
THE JOHN DAY COMPANY

FIRST PRINTED IN AUSTRALIA, 1948
REVISED AND ENLARGED EDITION, NEW YORK, 1949

Printed in the United States of America by
American Book-Stratford Press, New York

INTRODUCTION

BY NATHANIEL PEFFER

MODERN JAPAN IS A VARIANT FROM NATIONAL
type. It is in politics the equivalent of a biological sport.
It conforms to nothing in the history of modern nations,
whether European or Western, industrial or agrarian. Cer-
tainly in Eastern Asia its development has been unique,
especially in the last hundred years. Alone it quickly per-
ceived what the impact of the West signified, perceived that
the power of the West derived, not from superior weapons
but from the economic and social system, mainly the techno-
logical development, that made it possible to produce supe-
rior weapons. Therefore, alone in Eastern Asia, so far from
resisting Westernism, it deliberately resolved to adopt West-
ernism and set itself determinedly to making itself over on
the Western model production by machinery, communica-
tion and transportation by the telegraph and telephone,
railway and steamship, and universal education, military
conscription and scientific research. Alone in Eastern Asia
in recent centuries, it became a great political and military
power and, just before its mad adventure in conquest, was
competing on equal terms with the economically most
advanced countries of the West.

The adventure in conquest was suicidal as well as mad.
For one thing, while Japan had performed almost miracu-

vi Introduction

lous feats ot transroruiatton, it had not yet arrived at the
point where it could challenge the most powerful countries
of the West with any hope of success. Its development was
unbalanced, mainly top-heavy. It had renounced its earlier
wisdom and spent its strength and substance in acquiring
modern weapons before it had the social and economic
structure that could support them, as was proved in the last
two years of the war, when Japan became progressively more
helpless, having the men with whom to fight but not the
materials or the productive capacity or the technological
capacity to provide the means with which to fight. The
superstructure was Western and twentieth century; the
foundation was still Eastern and eighteenth century. Fur-
thermore, the same insensate ambition that drove it to
conquest had aroused fear, suspicion and antagonism in the
neighboring countries that otherwise might have been its
natural allies. In its final hour of trial it stood helpless,
friendless and alone. And thus it went down to defeat for
the first time in its history, a defeat that carried humiliation,
almost ignominy.

Since then Japan has been not only a variant from type,
not only unique; there is an unreality in its conduct, some-
thing outside normal political psychology and political
experience. It was a people of fierce warrior tradition, as
recently as the battle for Okinawa faithful to the warrior
rule: victory or death. It was a people of frenetic chauvinism,
conceiving its soil and its spirit not only with patriotism
but in exaltation. No other people had so vivid a conscious-
ness of uniqueness, of separatism, if not actual xenophobia,
however tacit. Then it is conquered and is occupied by the
alien army that had crushed it, and its government taken
over by the conquering country as completely as if it had
been made a colony. The Emperor, till but the day before
not only infallible but untouchable, immanent rather than
mortally existing, calls on the enemy commander to pay his

Introduction vii

respects. A new constitution is written by the conqueror,
a new polity instituted. The highest in the land are subject
to supervision; they report for orders, receive them with
submissiveness and depart to execute them. So far from
being goaded by their traditional pride of blood, their
frenetic chauvinism, to berserk outbursts for revenge, to
shed the blood by which alone outraged honor can be
assuaged, they revel in self-abasement. They receive their
conquerors with cordiality, almost with affection, certainly
with all the appearances of deference. They embrace democ-
racy as their own. To the enemy commander they show a
respect once reserved for the Emperor. To all appearances
it is abandonment in masochism.

But is it? What does it mean? How explain it? Is it genu-
ine? Does it signify a real and lasting change in the people-
in their attitude, spirit, values, beliefs? Is Japan now really
adopting Westernism, as it only seemed to be in the nine-
teenth century? Is it now taking the essence as it once
took only the externals? Is this all just the effect of a
psychic shock from the unprecedented experience of de-
feator is it a genuine conversion or is it a web of deceit,
a shrewd and subtle stratagem to lull the conqueror's fears
and dull his aim and thus to speed his departure? Which?
Or is it a little of all?

These are questions the answers to which will determine
the political configuration of Eastern Asia for the next gen-
eration and by so much the political configuration of the
whole world: it should not be forgotten how great was the
interplay of Far Eastern international relations after 1935
with the making of the European war and, still more, with
the conduct of the European war after 1941. They are the
questions on which Mr. Ball's analysis bears. Mr. Ball has
been in an extraordinarily favorable position to get evidence
throwing light on the questions, to weigh the evidence and
to come to judgment, if only provisional judgment. Since

viii Introduction

1945 Jap 201 tas been g vemed b y an A 11 * 6 * 1 occupation
authority, which is a pleasant euphemism for American
occupation, which is a pleasant euphemism for General
MacArthur. But officially there has been joint Allied super-
vision, its organ being the Allied Council for Japan, func-
tioning in Tokyo for a larger Far Eastern Commission. On
that Council Mr. Ball served in 1946 and 1947 as representa-
tive of the United Kingdom, Australia, New Zealand and
India, the other members of the Council being representa-
tives of the Soviet Union, China and the United States. He
was thus in a position to acquire evidence at first hand,
and, more important, being neutral in the acrimonious
Russian-American differences over Japan, to be objective
and to examine the evidence on its intrinsic merits. He has,
too, the qualifications of a well-nurtured and disciplined
mind, with no little political experience.

The American authority has weighed the new, reborn
and repentant Japan and found it not wanting. It has
pronounced the new Japan democratic and therefore good.
The Russians have looked upon Japan and seen it, as they
see everything in which there is a touch of American influ-
ence, as a victim and a tool of sinister American designs.
Mr. Ball is less glowing than the American authority and
less jaundiced than the Russians. Probably his findings are
closer to the truth. It would be miraculous if Japan, given
the two thousand years of its past and, more particularly,
the last thirty years of its past, could have contrived a second
incarnation in four years, whether as a result of its defeat
or at the evangelical appeals of the American army which
had just destroyed many of its cities. The democratic spirit
comes neither by invocation nor on the persuasion of the
bludgeon. Similarly, it would be miraculous, a satanic tour
de force, for any country to contrive as much evil as the
Russians impute to America everywhere. Both on theoreti-
cal reasoning and on objective examination of the evidence,

Introduction ix

Mr. Ball's conclusion seems warranted: ". . . there has been
no fundamental change in Japan's social structure or in
the political outlook of her leaders."

This conclusion, if indeed it be sound, is of immeasurable
importance to America, to Eastern Asia, to the world in the
first instance, to America above all, by reason of Mr. Ball's
second general observation: ". . . since 1945 there has been
a far-reaching change in the attitude of the United States
toward Japan." For according to whether the conclusion
is validated by the event will it be determined not only
whether the United States has been self-cuckolded but
whether it has laid fresh destruction for Eastern Asia,
renewed conflict for the world. The soundness of Mr. Ball's
second general observation will hardly be disputed, nor
will there be denial of the reason he imputes for it: "But
the root motive is political. It is fear of Russia and com-
munism. America desires a strong and prosperous Japan
as a backing against the extension of Russian influence in
the Far East and the growth of Japanese communism."
Much turns therefore on whether the official American judg-
ment on Japan's reformation is sound, whether Japan really
has become democratic. If Japan has and America then takes
Japan to its bosom as ally and comrade-in-arms, one set of
consequences will follow, consequences neither politically
nor socially injurious. But if America is wrong and Japan
is unchanged and America then takes Japan as ally and
comrade-in-arms and Japan's strength is restored for puta-
tive use against Russia, then another set of consequences
will follow, consequences politically and socially cata-
strophic. They will be serious enough for America. The
Japanese militarist, now sick, a democratic monk would be;
but when recovered, thanks to American illusions, he would
be as before. America itself will suffer, for the postwar defer-
ence to America would change to lust for revenge against
America; American suffering, however, will be at one

x Introduction

remove. But the suffering of those closer to Japan will be
beyond measure and perhaps fatal. And their wrath will in
time be visited on America and justly visited.

The question, Japan: Enemy or Ally?, is still open to
examination and revised answers and a different policy and
program. For that examination, now imperative, Mr. Ball's
calm, fair, cool analysis is of invaluable assistance.

Columbia University
New York
February 14, 1949

AUTHOR'S PREFACE

IN THE PRACTICE OF POLITICS ALMOST EVERY
judgment is a guess, and the best you can hope is that your
guesses will be intelligent and reasonably well-informed.
It is very easy for the Westerner in Japan to guess wrong,
The Japanese language and the traditional Japanese reti-
cence with foreigners make it especially hard to reach con-
fident judgments. Yet judgments about Japan are being
made, and they must be made. In the following chapters I
try to record my personal judgments, or my guesses, about
what has been happening in Japan under the Occupation,
and to draw some inferences about the policy that the
Allies should now follow.

I left Australia for Tokyo in March 1946 to represent
jointly the United Kingdom, Australia, New Zealand and
India on the Allied Council for Japan. I held that post
until September 1947. From April to September 1947, I
was concurrently head of the Australian Mission in Japan.
I had not been to Japan before, had no specialist knowl-
edge of the country, and had a good enough sense of my
linguistic limitations not to attempt to learn the Japanese
language. Yet the positions I held there gave me some spe-
cial opportunities to observe closely the Japanese reaction
to the defeat and the Occupation, and the American atti-

xi

xii Author's Preface

tude towards the Japanese. Since leaving Japan, I have
tried to keep in touch with the main developments there.
In June and July of 1948 1 led a mission for the Australian
Government to East and South East Asia. On this journey
I was able to gain impressions of the way the leaders of
these countries regard Japan's position and prospects. My
short stay in China confirmed the view I have expressed in
this book that what happens there will have an immense
influence on what happens in Japan.

The Australian edition of the book was published a few
months ago in Melbourne. The present edition contains a
new chapter on major developments in 1948. For purposes
of reference the text of the "Johnston Committee" report
on Japan's economic problems and the text of the recent
American statement to the Far Eastern Commission on the
industrial deconcentration program have also been added
as new appendices.

All opinions in this book are my own, but I wish to ac-
knowledge my debt to my Australian staff through whom I
learnt most of what I learned wisely about Japan. The
recommendations I made to the Allied Council on Land
Reform and on Prices and Wages were the work of my
economic adviser, Mr. Eric Ward.

W. M. B.
Melbourne
December

CONTENTS

Introduction by Nathaniel Peffer ... v

Author's Preface ......... xi

CHAPTER

j Enemy or Ally? ........ . . g

2 Allied Instruments of Control ..... 14

3 Japanese Instruments of Control .... 43

4 Demilitarization ......... 91

5 "Democratization": Economic . . . . 112

6 "Democratization' 9 : Political ..... 144

7 Major Developments in 1948 ..... 167

8 The Future of Japan ........ i8f

Appendices

I. The Constitution of Japan . . . 195

//. Report of the Johnston Committee 210

I/I. U.S. Statement on Japanese Indus-

trial Deconcentration
Index ............. 243

1. ENEMY OR ALLY?

THE TIME HAS COME FOR A PEACE SETTLE-
ment in the Pacific. We want a settlement that will give
military security to those Pacific countries which have dur-
ing these last years been the victims of aggression; a settle-
ment that will provide for the economic stability of East
Asia and a rising standard of living for Asiatic peoples; a
settlement which, if possible, will lay the basis for coopera-
tion between the United States and the Soviet Union.

Allied postwar aims in the Pacific were declared in their
essential outlines in 1945, first in the Potsdam Declaration
of July 26, and later in the Initial Post-Surrender Policy,
which the United States Government transmitted to Gen-
eral MacArthur on September 6. Although this policy state-
ment was authorized only by the U. S. Government, it was
tacitly accepted by all the Allies, and the basic policy deci-
sion of the Far Eastern Commission, published in 1947,
was in agreement with the American Post-Surrender Policy
in all essentials. We were reasonably clear what we wanted
to do in 1945. We were determined that Japan should be
completely demilitarized. We were to foster by every means
in our power the establishment of a responsible and demo-
cratic government. We were determined that the Japanese
people should enjoy the same civil and political rights that

3

4 Japan Enemy or Ally?

are possessed by the peoples of Western democracies. We
decided to initiate economic reforms that would ultimately
replace a feudal economy by a welfare economy. We recog-
nized that fulfillment of these aims would involve revolu-
tionary changes in Japan's social and economic system.

The question which now confronts us is whether we still
want to pursue with full earnestness the aims we pursued
in 1945. Have changes in the world situation and in the
balance of power changed our views about what we want
to do with Japan? In 1945 Japan was a still-hated enemy,
Russia was an ally. But much has happened since then. Do
wfe still believe that Japan should be completely demili-
tarized, or do we feel that in the changed circumstances of
1948 we should rather consider her as a potential ally in an
area of vast strategic importance? And do we still feel the
same enthusiasm about fostering revolutionary changes in
Japan's social and economic system? If our primary interest
in Japan is military and strategic, then it may well be that
any deep disturbance of Japan's social hierarchy might
weaken her capacity for effective military organization.

Our answer to these questions will depend on our view
of the whole world situation, and much more on what we
think about Russia than on what we think about Japan.
The problem of Japan will become a fragment of a world
problem. If we believe that the differences between Russia
and the Western democracies make war between them a
real danger, then our military interests in Japan will over-
ride everything else. Efforts to bring about economic and
political reforms will be subordinated to military aims.

And if we need to re-examine carefully the aims we pro-
claimed in 1945, it is equally important that we carefully
reconsider the most effective methods to make the peace
settlement effective. To what extent shall we be prepared
to use force to ensure that Japan faithfully carries out her
treaty obligations? What kind of sanctions do we propose

Enemy or Ally? 5

to establish? What type of control machinery is likely to be
most effective?

I believe that the answers to both sorts of question, the
formulation of the right aims and agreement on the best
methods, must be found in large part in our experience
and knowledge of Japan under the Occupation. There can
be no doubt that a political observer, both in selecting his
facts and in drawing inferences, is influenced by his own
political outlook. It may, therefore, be useful for me to
begin by explaining the political outlook with which I
have approached Japanese problems.

My primary concern in the problems set by Japan has
been to protect and promote the best interests of the Brit-
ish nations, and particularly of my own country, Australia.
I feel no need of self-consciousness in stating such an aim,
lest it may seem narrow and nationalistic. It is right and
necessary that the ultimate aim in international politics
should be to produce a good life "for all the men in all the
lands" without distinction of race and nation. Yet, when
faced with immediate and specific tasks, it is necessary to
have more immediate and specific goals than the welfare
of mankind as a whole. A nationalism which recognizes the
interdependence of all nations, which is directed towards
peace and welfare and culture, which renounces every im-
pulse to dominate or exploit other peoples, is the friend
and not the enemy of internationalism.

To Australia, where we escaped invasion and occupation
so narrowly in 1942, whose soldiers went through long years
of fighting or captivity in the Pacific, the first interest in
Japan is undoubtedly a negative one: to assure by every
possible means that she shall not regain the power to be-
come an aggressor in the foreseeable future. This is not
revenge, not even retribution. It is an unavoidable impulse
of self-preservation. I was often told in Tokyo, not only by
Japanese, but by Americans and others, that Australians

6 JapanEnemy or Ally?

seemed more bitter and revengeful towards the Japanese
people than any other of the Allied peoples. I once had the
disagreeable distinction of being described in part of the
United States press as the "leader of the revenge school" in
Japan. Surely it needs little reflection to recognize that a
nation of seven million people in the Southwest Pacific is
likely to hold more acute memories of the danger to their
own homes in 1942 than either the people of Great Britain,
preoccupied as they were with much nearer and greater
dangers, or the people of the United States, which must be
the least insecure nation in the world.

To place the security of our country first is not to cling
to a lasting hatred of the Japanese. In Japan, as in any coun-
try, you will find numberless people who are honest, kind
and generous, and you will make good personal friends.
Yet it is a mistake to argue from the kindness and charm
of the individual Japanese to the peacefulness and friend-
liness of the Japanese nation as politically organized. I was
one of those people who nearly fell into that kind of error
in Germany after World War I. When I was in Germany
in 1930 and 1931, 1 was deeply impressed with the honesty
and intelligence of individual Germans I met. This made
me very receptive to propaganda about the injustice of the
"dictate" of Versailles, the Allied strangulation of German
industries, and the dread of encirclement with which Ger-
mans so sincerely plied their foreign guests. This is a very
close parallel with what is taking place in Japan today.
Sometimes with deliberate political intent, and usually with
sincere conviction, the Japanese are sedulous in efforts to
impress their Allied visitors with the pains and penalties
of life in their overcrowded islands. They point to the
need for Japan to get access abroad to raw materials and
markets if economic collapse is to be avoided, and the "Red
Fascists" on the north are not to overrun and destroy their
country.

Enemy or Ally? 7

It seems to me right and natural that Allied people in
Japan should meet and make friends with individual Japa-
nese and listen patiently to these views. The danger is that
we will be lulled by these new friendships, or the renewal
of old friendships, into forgetting that often the most dan-
gerous political organizations are made up of people who
as individuals are generous, honest and kind. We can be
fully alive to what is good and attractive in ordinary Japa-
nese people without that leading us to false political con-
clusions. In my view, the people who, within the limits of
the Occupation, rule Japan today, belong to the same
groups and retain the same outlook as those who ruled
Japan before 1941. 1 hope to give some evidence for this in
later chapters.

Our first task, then, as I see it, is to resolve at all costs to
prevent the resurgence of an expansionist Japan. If we can
agree on that, we should then do all in our power to foster
the welfare of the Japanese people. We should do this not
merely from goodwill, but in our own interests. There can
be no stability or peace in East Asia if there is poverty and
turmoil inside Japan. Moreover, it may well be that in
working out practicable methods for raising the standard
of living of the Japanese people we shall have to revise very
radically some of our earlier ideas about the kind of eco-
nomic penalties we would impose after the defeat. We need
to be very careful that in determining the level of Japanese
industry and the kind of industries which the Japanese
shall be permitted to develop, we make our decisions in
terms of military security and not from motives of nation-
alist commercial jealousies.

Moreover, if we are genuinely concerned with the future
welfare of the Japanese people we will recognize that there
can be no future for them but disaster if we regard Japan,
not as a sick society to be nursed to social and economic
health, but as a strategic pawn in the rivalry of the Soviet

8 Japan Enemy or Ally?

Union and the United States, the two great world powers.
We must always think of the peace settlement not merely
for what it will do for Japan, but for what it will do for
China and the countries of Southeast Asia. The Japanese
settlement must, in a word, be part of a general Pacific set-
tlement, and there can be no satisfactory settlement in the
Pacific without the cooperation of the United States and
the Soviet Union.

There is a good deal to astonish the Allied observer in
occupied Japan. He will find smooth order everywhere.
He can go through the cities and the countryside with the
same or a greater sense of security than he would at home.
He will be met with the eager greetings of smiling chil-
dren, the gentleness of women and, with some exceptions*
the polite cooperation of men. If he goes to see the Im-
perial Palace in Tokyo he will find that, like the chief
buildings of the Allied forces, it is provided with American
or British guards. Until late in 1947 the two greatest shrines
in Tokyo, the Meiji, glorifying the Emperor system, and
the Yasakuni, honoring the souls of those who have died
for Japan in battle, were also guarded by American or
British soldiers and out of bounds to Allied visitors. He
will read daily in the Japanese press effusive expressions of
gratitude to General MacArthur for his benevolence and
of reverence for his greatness. Conversely, he will find many
Allies tireless in expressing their enthusiasm for the Japa-
nese. Only twelve months after the surrender it was com-
mon to read incidents like the following. The Nippon
Times of August 19, 1946, carried a letter from the captain
of S.S. Henry S. Foote, which brought wheat from America
to Japan. The letter was addressed to the Japanese people,
and ran:

The officers and crew of the Henry S. Foote would like to
express their appreciation for the wonderful time that has

Enemy or Ally? g

been shown to them during their only too short stay in
Shimizu. They would like to thank the Governor and the
Chiefs of Police for going far beyond the points of duty in
making their stay a happy and pleasant one, and they will
leave Shimizu with a warm feeling in their hearts towards the
Japanese people. . . . There comes a time when all good
things must end. So we leave with the impression of a brave
people making a brave comeback. However, the sooner we
leave the sooner we hope to come back to Shimizu, and if we
do not leave soon we are afraid the people of this Prefecture
will sink the ship in this beautiful harbor with fine and beau-
tiful presents.

The general tone of the relationship between Americans
and Japanese is, of course, set by General Headquarters,
which is completely controlled by the authority and domi-
nated by the personality of the Supreme Commander. The
attitude of the representatives of other Allied powers in
Japan does not always coincide with the American attitude.
These divergencies are not very important, since Allied
policy in Japan is in practice American policy. The Occu-
pation is in all essentials an American occupation. The
GHQ of SCAP (Supreme Commander Allied Powers) is an
American organization and employs only a handful of non-
Americans in comparatively subordinate posts. The British
Commonwealth Occupation Force has been an important
addition to the American military forces, but has not been
able to play any distinctive or independent part in the
work of the Occupation. Its Commander-in-Chief serves
under the Commanding General of the U.S. Eighth Army,
and, even in the area of Southern Honshu, which British
forces occupy, the Military Government's teams, the only
link between GHQ, SCAP, and the Japanese authorities,
are exclusively American. It is easy to understand why this
has come about. It was American material, American trans-
port, and in the main American man power that defeated
Japan. Only America had the resources to carry the main

10 Japan Enemy or Ally?

burden of the occupation of Japan. Nevertheless, this
means that a study of Japan under Occupation must be
mainly a study of the American attitude to the Japanese
and of the Japanese reaction.

If Allied policy in Japan is American policy, American
policy is expressed through General MacArthur. General
MacArthur's attitude seems to have been determined by
three basic convictions.

First, he believes that defeat, demilitarization and disar-
mament, together with the loss of her Empire, make it
impossible for Japan, in any foreseeable future, to be again
a military danger to her neighbors. General MacArthur has
said that Japan is destroyed as a military threat "for at least
100 years."

Second, General MacArthur believes that the defeat and
the Occupation have completely changed the hearts and
minds of the Japanese people. They have become genuine
converts to democracy and peace.

(Third, General MacArthur believes that, since Japanese
democracy can only be overthrown by the "extreme Right"
or the "extreme Left," and, since the "extreme Right" has
been destroyed or converted, the only actual danger is the
"extreme Left." Hence the danger of Soviet influence. It
is, therefore, urgent, in General MacArthur's view, to help
and strengthen a "democratized" Japan against the menace
of Communism and the Soviet Union. It is a key strategic
area in this world struggle/?

General MacArthur has often expressed these views, but
perhaps never so clearly and confidently as in his statement
on September 2, 1946, the first anniversary of the surren-
der in Tokyo Bay.

They [the Japanese] suddenly felt the concentrated shock of
total defeat. Their whole world crumbled. It was not merely
an overthrow of their military might not merely a great defeat
for their nation it was the collapse of a faith it was the dis-

Enemy or Ally? 11

integration of everything they had believed in and lived by
and thought for. It left a complete vacuum morally, mentally
and physically. And into this vacuum flowed the democratic
way of lifeTTThe American combat soldier came, with his fine
sense of serf-respect, self-confidence and self-controL They saw
and felt his spiritual quality a spiritual quality which truly
reflected the highest training of the American home. The
falseness of their former teachings, the failure of their former
leadership, and the tragedy of their past faith were infallibly
demonstrated in actuality and realism. A spiritual revolution
ensued almost overnight, tore asunder^ a theory and practice
of life built upon 2000 years of history and tradition and
legend. Idolatry for their feudalistic masters and the warrior
caste was transformed into hatred and contempt, and the
hatred and contempt once felt for their foe gave way to honor
and respect.

This revolution of the spirit among the Japanese people
represents no thin veneer to serve the purposes of the present.
It represents an unparalleled convulsion in the social history
of the worZdTjrhe measure of its strength and durability lies
in the fact tat it represents a sound idea* ... Its underlying
concept, new to Japan, but fashioned from the enlightened
knowledge and experience of the free men of the world, will
remain the cornerstone to Japanese freedom unless uprooted
and suppressed by the inroads of some conflicting ideology
which might negative individual freedom, destroy individual
initiative and mock individual dignity. . . .

Should such a clash of ideologies impinge more directly
upon the reorientation of Japanese life and thought, it would
be no slight disadvantage to those who seek, as intended at
Potsdam, the great middle course of moderate democracy,
that a people, so long regimented under the philosophy of an
extreme conservative Right, might prove easy prey to those
seeking to impose a doctrine leading again to regimentation,
under the philosophy of an extreme radical Left,

If we would, in the furtherance of this task, guide the Jap-
anese people the more firmly to reshape their lives and institu-
tions in conformity with those social precepts and political
standards best calculated to raise the well-being o the indi-
vidual and to foster and preserve a peaceful society, we must

12 Japan Enemy or Ally?

adhere unerringly to the course now charted. . . . The goal is
great for the strategic position of these Japanese Islands
renders them either a powerful bulwark for peace or a danger-
ous springboard for war.*

On March 17, 1947, General MacArthur developed this
theme in a talk to the Allied press. He propounded what
became known to visitors to Japan in 1947 as the "doctrine
of the three phases." The first phase of the Occupation
was military. The task was to demobilize the Japanese
fighting forces and destroy all armaments. That phase had
been completed with brilliant success. Not only had Japan
been demilitarized, but her people understood, perhaps
better than any other country in the world, that war did
not pay. The second phase was political. The task was the
democratization of Japan. While complete democracy had
not yet been achieved, the political results already accom-
plished had been extremely successful. The people had
abandoned their feudal outlook. The new constitution and
its implementing legislation well and truly laid the foun-
dations of democracy. It was now up to the Japanese people
to live up to their new institutions. The third phase was
economic. Whether this phase should be carried through
with the same success as the earlier two phases would de-
pend not on the efforts of the Occupation forces, but on
the readiness of Allied Governments to recognize Japan's
plight and take prompt and effective steps to remedy it.
General MacArthur claimed that war was still being waged
as bitterly against Japan as when the guns were being fired.
Indeed, the punishment was now even more bitter. Not
even the atom bomb was as deadly as economic strangula-
tion, for the atom bomb kills by thousands, but economic
strangulation by millions. And then General MacArthur
appealed to the conscience of the Allied world to abandon

italics.-W. M. B.

Enemy or Ally? 1$

its economic warfare against Japan and grant her the aid
she needed. 2

The question now facing the Allies is to what extent it
is desirable or possible to build the peace settlement with
Japan on the convictions and attitudes that have been ex*
pressed by the Supreme Commander during the Occupa-
tion. The peacemakers cannot avoid these issues.

No official transcript of General MacArthur's talk to the Press Club
was made available, and most of the correspondents present were caught
by surprise when he told them that he would be willing to answer
questions on the record. The above summary of his statement is based
on the reports of the main news agencies, though, since these were not
wholly consistent in the quotations they ascribed to the Supreme Com-
mander, nothing in the above statement must be regarded as a direct
quotation.

2. ALLIED INSTRUMENTS OF CONTROL

SCAP

ON OCTOBER *, 1945, GENERAL MACARTHUR
set up GHQ, SCAP (General Headquarters, Supreme
Commander Allied Powers). This organization was divided
into two main parts: the General Staff, to deal with purely
military matters, and a number of Special Staff Sections, to
deal with non-military matters. For example, the Govern-
ment Section dealt with political and constitutional re-
form. Economic affairs were dealt with by three related
sections. Economic and Scientific, Natural Resources, and
Statistical and Reports. By April 1946, when the Diplo-
matic Section was established, there were fourteen sections
in all.

GHQ, SCAP, issued directives to the Japanese Govern-
ment through the Central Liaison Office, a channel estab-
lished for this specific purpose. Most of the members of the
Central Liaison Office were former officials of the Japanese
Fpreign Office. Botti the American and Japanese organiza-
tions were in Tokyo. On the lower levels of administra-
tion, the prefectures, cities, towns and villages, supervision
was carried out on behalf of SCAP by the military govern-
ment teams of the Eighth Army, stationed throughout
Japan. It was the task of these teams to ensure that the
directives issued by SCAP to the central government would

Allied Instruments of Control 15

be faithfully administered by the local government bodies.

It may be worth while to remark on certain significant
characteristics of the GHQ organization, particularly since
there is some controversy on the kind of control machinery
that should be established in Japan after the treaty. While
General MacArthur has said that he believes all military
forces should be withdrawn when the treaty is signed, there
are some who believe it desirable to maintain some meas-
ure of military control.

Firstly, GHQ, SCAP, was essentially a military set-up,
although its most difficult and important tasks were of a
non-military kind. The destruction of ammunition and ar-
maments, the supervision of demobilization, the return to
Japan of surrendered personnel were primarily military
undertakings, and for these tasks a military organization
controlled by men with military training was well adapted.
Yet the more difficult and constructive work was in the
fields of economics, politics and education. Soldiers do not
usually receive a professional training in these fields. For
this reason GHQ employed throughout its political and
educational sections a number of civilians in uniform. In-
deed, after the first year of Occupation many of these offi-
cers were encouraged to resume their civilian status. Yet
the experts in political and economic questions were few
in number and generally in subordinate positions. Mr.
John R. Stewart, who was formerly with SCAP in Tokyo,
has pointed out that four months after the Occupation
began, only one officer was working on the problem of the
Zaibatsu. The organization of the Zaibatsu industries in
Japan is exceedingly complicated, and the project for their
dissolution raised the nicest problems of organization,
finance and administration. Only one officer was available
to handle Japan's huge chemical industry. The textile
industry, which had been the most important peacetime in-

iQ JapanEnemy or Ally?

dustry, was being handled by only two officers. 1 Many civil-
ian experts in SCAP were men o great professional dis-
tinction, but, because the tasks imposed on them were in
most cases far too heavy, and because their findings and
recommendations had to be "channeled" ^in accordance
with the rules of a military organization, it was not easy for
them to exercise the influence which their ability war-
ranted. It was not easy, for example, for an economist who
held a subordinate status in the military hierarchy, what-
ever his personal distinction, to get his views passed up to
the Chief of Staff, still less to the Supreme Commander.
And the senior officers were soldiers, who did not always
appreciate the significance of the advice submitted to them
on nonmilitary questions.

The senior officers of GHQ had not only the soldier's
training, but the soldier's outlook. They tended to think
of the Occupation of Japan as the final operation in a mili-
tary campaign. Surprised by the suddenness and complete-
ness of the Japanese surrender, pleased with the nearly uni-
versal compliance of the Japanese with their orders, they
tended to feel that once the actual military power of Japan
had been destroyed their task was done. They thought in
terms of military conflict and of strategic areas and had
little sense of the economic and political issues. They had,
however, retained from their wartime experience a full
sense of the value of propaganda and tended to maintain
throughout the Occupation the propaganda technique
which they had adopted in the face of the enemy during
the war. In the face of the enemy it was generally consid-
ered sound policy to play down difficulties and failures, if
they could not be completely concealed, and to anticipate
and exaggerate successes.

One of the most highly organized and efficient sections

i John R. Stewart, Notes on the Economic Aspects of the Allied Occupa-
tion of Japan. Institute of Pacific Relations, New York, April 1947.

Allied Instruments of Control 17

o SCAP was the Public Relations Section. This section
was insatiable in its desire to publish endless praise of the
Occupation's achievements, however fulsome in tone and
however dubious in source. The Public Relations Section
took pains to arrange that visitors to Japan, particularly if
they were publicists, should be properly "orientated."
Every precaution was taken to protect these visitors from
coming into contact with any of the unpleasant facts of life.
Conversely, the SCAP censorship organization attempted
to prevent publication in Japan of any facts or comments
which might conceivably be considered a reflection on the
success of any aspect of the Occupation. At times the cen-
sorship seemed to overreach itself. An interesting example
of this occurred in October 1946. The Jiji Shimpo> an eve-
ning newspaper which seemed to take a relatively inde-
pendent line, published an editorial on October 11 on the
fact that the Japanese-language publication, The Life of
General MacArthur, had been a best-seller in Japan since
the surrender. It warned its readers that there were some
misguided Japanese people who expressed an adoration of
General MacArthur which verged on idolatry. It pointed
out that the existence of such an uncritical reverence cre-
ated the danger that, once General MacArthur had with-
drawn from the country, another living god might be
searched out to take his place. And the next time it might
be a Japanese Hitler. The article concluded:

Among the Japanese people at large there are not lacking
those who at one time or other called Hitler greater than
Napoleon. Whatever the reasons, there must be still more
people in this country who hoped for a Japanese Hitler. The
writer who said that the Japanese should quit discussing the
Emperor institution and let General MacArthur run the coun-
try directly, probably represented quite a large number of
the Japanese. Nevertheless, unless this servile attitude is
overcome, the opportunity afforded us of standing on our own
feet and of establishing democracy would be shamefully wasted.

i8 JapanEnemy or Allyf

It is only the nation that has the independence of spirit to
resolve upon mastering its own fate that can really establish
democracy and work it To break up the s,ooo-year-old hero-
worshipping mentality must be the first step toward democ-
ratization. On the other hand, it is precisely by such an estab-
lishment of democracy that the security of the Imperial lineage
would be assured. Whereas, if the respect for the throne de-
pended merely on the traditional spirit of hero-worship, it
would be easy for another hero to replace the Emperor, there
can be no such change of heart among those who do not idolize
the Imperial family. Under a democratic government, the real
power is in the hands of the people. An Imperial family
divorced from this political power becomes the object of popu-
lar Jpve and respect.

tChe way to express the gratitude of the Japanese people
to General MacArthur for the wisdom with which he is
managing postwar Japan and for his efforts to democratize
the nation is not to worship him as a god or as a hero, but
to cast away that very servile spirit and to gain self-respect that
would bow the head to no one, and to take hold of the power
of government themselves. Only thus would General Mac-
Arthur rest content that the aims of the Occupation have been
achieved.

This article had been passed by the American censor in
the ordinary way. On the following Saturday Nippon
Times, the Tokyo English-language newspaper, reprinted
it. When the first edition appeared, SCAP censorship offi-
cers ordered the burning of the 50,000 copies containing
the reprinted article and its removal from later editions.

One of the greatest difficulties I found in my own efforts
to understand the situation in Japan, and I know that this
difficulty was shared by other Allied observers, was the ex-
traordinary sensitiveness of senior SGAP officers to any in-
quiries which seemed to demand a precise and objective
reply. The senior officers seemed always to be nervous lest
the information they provided might in some way be used
to reflect on the achievements of GHQ. Brigadier-General
Courtney Whitney, the Head of the Government Section,

Allied Instruments of Control 19

exhibited this reaction very clearly when, in reply to the
first question asked by a member of the Allied Council, he
reminded Council members that they had not been brought
to Japan to pry into the Supreme Commander's armor.

Moreover, a military organization is perforce a hierarchy.
In structure and in atmosphere it does not seem to be well
suited to foster democratic procedures. A military set-up,
by its very nature, seeks to eliminate the individualism, the
independence, the freedom of discussion and the atmos-
phere of equality which make the fabric of democracy. I
am well aware that it was not possible to establish in Japan
the kind of well-trained and experienced civil administra-
tion that would have been best adapted for the work of
political reform and economic restoration. My comments
are in no way a reflection on the military qualifications or
achievements of the senior officers in SCAP. Still less are
they a reflection on the notable work done by certain of
the technical and scientific sections. This work has often
been of a very high order, and it seems a pity that it could
not have been publicized in a more sober and objective
way. The Public Relations Section of SCAP seemed to
place little confidence in the art of understatement.

The Allied Council for Japan

The United States Initial Post-Surrender Policy of Sep-
tember 6, 1945, provided that, in the event of differences
among the Allies, "the policy of the United States shall
govern." This was a clear indication that the United States
was prepared in the last analysis to accept full responsi-
bility for the occupation of Japan. Nevertheless, in the last
quarter of 1945 other powers which had played a part in
the Pacific War made it dear through diplomatic channels
that they wished to play an active, if subordinate, part in
framing Occupation policy, and even to share in the work

so Japan Enemy or Ally?

of carrying it out. Mr, Molotov urged the creation of a
Four Power Control Council. This was not acceptable to
the United States, and, although an effort was made to
enable all belligerents to have some say in Occupation pol-
icy by the creation of the Far Eastern Advisory Commis-
sion, it was emphasized that the work of this Commission
was purely advisory. These provisional arrangements did
not satisfy the Soviet Union and some other countries. Aus-
tralia, in particular, was anxious to share responsibilities in
a more active way. After some months of negotiation, the
machinery for Allied control of Japan during the Occupa-
tion was decided at the Moscow Conference. In the Mos-
cow Agreement of December 27, 1945, provision was made
to set up an Eleven Power Far Eastern Commission, with
its headquarters at Washington, and a Four Power Allied
Council, with headquarters in Tokyo. It was to be the re-
sponsibility of the Far Eastern Commission to formulate
the main lines of policy. The Allied Council was to be the
eyes and ears of the Far Eastern Commission in Japan. The
following were the terms of reference of the Allied Coun-
cil:

1. There shall be established an Allied Council, with its seat
in Tokyo, under the chairmanship of the Supreme Commander
for the Allied Powers (or his Deputy), for the purpose of con-
sulting with and advising the Supreme Commander in regard
to the implementation of the Terms of Surrender, the Occu-
pation and Control of Japan and of Directives supplementary
thereto, and for the purpose of exercising the control author-
ity herein granted.

2. The membership of the Allied Council shall consist of
the Supreme Commander (or his Deputy), who shall be Chair-
man and United States member, a Union of Soviet Republics
member, a Chinese member, and a member representing jointly
the United Kingdom, Australia, New Zealand and India.

3. Each member shall be entitled to have an appropriate
Staff, consisting of military and civilian advisers.

Allied Instruments of Control si

4. The Allied Council shall meet not less often than once
every two weeks.

5. The Supreme Commander shall issue all orders for the
implementation of the Terms of Surrender, the Occupation
and Control of Japan, and Directives supplementary thereto.
In all cases, action will be carried out under and through the
Supreme Commander, who is. the sole executive authority for
the Allied Powers in Japan. He will consult and advise with
the Council in advance of the issuance of orders on matters of
substance, the exigencies of the situation permitting. His deci-
sions upon these matters shall be controlling.

6. If, regarding the implementation of policy, decisions of
the Far Eastern Commission on questions concerning a change
in the regime of control, fundamental changes in the Japanese
constitution structure, and a change in the Japanese Govern-
ment as a whole, a member of the Council disagrees with the
Supreme Commander (or his Deputy), the Supreme Com-
mander shall withhold the issuance of orders on these ques-
tions pending agreement thereon in the Far Eastern Com-
mission.

7. In cases of necessity the Supreme Commander may make
decisions concerning the change of individual Ministers of the
Japanese Government or concerning the filling of vacancies
created by the resignation of individual Cabinet members after
preliminary consultation with the representatives of the other
Allied Powers on the Allied Council.

The circumstances in which I myself was appointed to
represent jointly the United Kingdom, Australia, New
Zealand and India on the Allied Council showed a new
and interesting development in British Commonwealth re-
lations. Australia had originally hoped that the Allied
Council would be made up of representatives of each of
the eleven belligerent powers. The Soviet Union, however,
held out for a Four Power Council. Then the United King-
dom Government, recognizing Australia's primary inter-
ests in the Pacific, agreed that the Australian Government
should nominate a representative who would speak not

32 Japan Enemy or Ally!

only for Australia, but for the United Kingdom itself. New
Zealand and India both supported this arrangement.

In accepting this appointment, I went to Japan with
high hopes that the Allied Council might be able to do
useful work. I fully recognized the leadership of the United
States. Moreover, as an Australian, I was deeply conscious
that General MacArthur and his forces had, between 1942
and 1945, created in Australia an eternal reservoir of ad-
miration and gratitude. I recognized that, while Australia's
interest lay primarily in the Pacific, the United States,
Soviet Union and United Kingdom had vital interests in
Europe and the Middle East, and that it would conse-
quently be unreasonable to expect the Australian view to
be adopted without modification. It was clear that the
problems of Japan were only one segment of a world-wide
problem. Nevertheless, the countries I represented had car-
ried heavy burdens, made great sacrifices and faced real
dangers throughout the Pacific campaign. In India, Burma,
Malaya and New Guinea, in the air and on the sea, British
Commonwealth forces had made notable contributions to
the final victory. For these reasons, I felt that the countries
I represented had both the right and the obligation to ex-
press a distinctive and independent point of view on the
control of Japan after the surrender. Respect for the
achievements and recognition of the power of the United
States did not, to my mind, involve die obligation to give
in all circumstances uncritical support to United States
policy.

The atmosphere at the opening meeting of the Council
in April 1946 revealed in a sudden and unexpected way
the immense difficulties to be overcome if the Council was
to be of any constructive service. The atmosphere was heavy
with mistrust and hostility between American Headquar-
ters and the representative of the U.S.S.R., Lieutenant-
General Kuzma Derevyanko. It was no secret that General

Allied Instruments of Control 23

MacArthur had strongly opposed the establishment of the
Allied Council. He believed that Mr. Byrnes had made
this concession to Russia at Moscow in a spirit of appease-
ment, without properly considering its mischievous im-
plications in the administration of Japan. The Soviet
Union had not accepted the United States invitation to
contribute to the Occupation forces, but had instead estab-
lished a large military mission in Tokyo. The purpose and
activities of this mission were mistrusted and feared by
American GHQ. Senior officers in SCAP believed that
its primary purpose was to organize a secret service in
Japan, to support and strengthen the Japanese Communist
Party, and to sabotage American Occupation objectives.
General Derevyanko was the Head of the Russian Military
Mission, as well as the Russian member on the Allied
Council. It was, therefore, hardly to be expected that the
United States Chairman of the Council, or the officers of
GHQ, who attended the Council as expert witnesses, would
take General Derevyanko into close and friendly confi-
dence. The strained relations between the American and
Russian members of the Council set the tone of every
meeting.

In his speech of welcome to the members of the Council
at the opening meeting on April 3, 1946, General Mac-
Arthur made it clear that he held the Council's powers to
be exclusively consultative and advisory. He pointed out
that all major directives to the Japanese Government had
already been issued, and that these would set the lines of
future Occupation policy. He insisted, moreover, that the
Council should not concern itself with his past actions. He
asked that the Council should meet in public. He said:

The suspicion, the distrust and the hatred so often engen-
dered by the veil of secrecy will thus be avoided, and in the
undimmed light of public scrutiny we will, therefore, invite
full confidence in the sincerity, the high purpose and the recti-

24 JapanEnemy or Ally?

tude of our aims. As Supreme Commander, I can assure you
that I entertain no fears that such an opportunity for public
discussion will have the slightest adverse effect upon the dis-
charge of my responsibilities.

Nevertheless, General MacArthur went on to warn the
Council against "sharp and ill-conceived criticism o our
Occupation policies," and reminded it that there were evil
forces in the world which, for various reasons, sought to
sabotage the success o the Occupation. General Mac-
Arthur explained that he would normally be too busy with
his administrative duties to act himself as chairman, and
announced that he had appointed Major-General W. F.
Marquat, the Head of the Economic and Scientific Section
of SCAP as his deputy.

On finishing his address, the Supreme Commander with-
drew, and General Marquat, as chairman, called the meet-
ing to order for the consideration of procedural questions,
it having been agreed that no questions of substance would
be raised at the first meeting.

It was of some interest that General MacArthur, in
describing the functions and powers of the Council, made
no reference to the existence of the Far Eastern Commis-
sion, and that he should have insisted that the Council's
powers were purely advisory. It seemed to me that para-
graph 6 of the Terms of Reference provided that the
"control authority" of the Council mentioned in Article
I would, in certain circumstances, be not only advisory
but permissive. In other words, if any member of the
Council disagreed with the Supreme Commander in the
way he was carrying out policy decisions of the Far Eastern
Commission on questions concerning "a change in the
regime of control, fundamental changes in the Japanese
constitutional structure, and a change in the Japanese
Government as a whole," this dissent would have the effect
o invalidating the Supreme Commander's action until

Allied Instruments of Control 25

the question had been considered by the Far Eastern Com-
mission. It seemed to me that it was this provision in
Article 6 which gave the Council its main authority. I,
therefore, thought it remarkable that General MacArthur
should have omitted all reference to it.

It was not, however, until the second meeting of the
Council, at which questions of substance were first dis-
cussed, that SCAP's attitude towards the Council was
revealed with unmistakable clarity and force. The first ques-
tion on the agenda had been proposed by General Derev-
yanko. The question was:

According to the available information, undesirable persons,
falling under the directive, dated January 4, 1946, in many
cases have not yet been removed from the leading positions
they hold. Since this fact endangers normal progress of democ-
ratization of Japan and may negatively affect loyal realization
by the Japanese authorities of all directive instructions of the
Supreme Commander for the Allied Powers in general, it is
desirable that the Allied Council be informed on this matter
as fully as possible by the appropriate representatives of the
General Headquarters, Supreme Commander for the Allied
Powers.

The Chairman introduced Brigadier-General Courtney
Whitney, Head of the Government Section, SCAP, to reply
to thie Russian question. General Whitney behaved in an
unusual way. On mounting the rostrum he clearly indi-
cated by his manner the anger and indignation he felt
that this question should have been asked, or at least asked
in this particular form. He said that, since, nevertheless,
the question had been asked, he would give a comprehen-
sive reply, "even though it took all summer." He then
delivered an address lasting for about three hours, although
the relevant answer to the Russian's question could have
been given in five or ten minutes. General Whitney spent
the greater part of the three hours in reading slowly long

26 Japan Enemy or Ally?

lists of political organizations that had been banned by
SCAP. This was the kind of information which could not
in any sense be regarded as a genuine answer to the ques-
tion, and it was anyway available to all members in pub-
lished form. The published text of General Whitney's
address gives an incomplete picture of the reactions which
it created, partly because it gives no indication of the sar-
castic and contemptuous tone in which he spoke, and
partly because it omits his asides. For example, after read-
ing a seemingly endless list of banned organizations, he
said in an aside: "There are 30,000 members of these or-
ganizations, and I must apologize to the Council for not
having the names with me. That was an oversight of mine.
If I only had them with me I should read them to you with
the greatest pleasure."

General Whitney's performance was a gross and ill-
mannered affront to every member of the Council. Before
any member had been given the opportunity to express
any question of substance, General Whitney had come to
the Council as the representative of General MacArthur,
and he took control of the meeting out of the hands of the
Chairman, General Marquat. The Chairman was in a very
unhappy position. He had already shown himself anxious
to be friendly and cooperative. There was no doubt of his
desire to do all in his power to enable the Council to work
in harmony, but the circumstances were too difficult for
any chairman. General Marquat seemed to feel that he was
bound to support General Whitney, but was obviously un-
comfortable in doing so. It was inevitable that his chair-
manship was at times confused and inconsistent.

This second meeting of the Council was very important,
since it really decided the Council's fate. It showed that it
would henceforth be hardly possible for the Council to
cooperate in any serious work if an inquiry from the
Soviet member were always to evoke a frivolous, hostile

Allied Instruments of Control 37

and contemptuous reaction from the representative of the
Supreme Commander. General Derevyanko behaved
throughout this meeting with dignity, courtesy and re-
straint. It might be argued that the form in which he put
his question about the carrying out of the political purge
was provocative, and implied the suggestion that SCAP
had not been efficient or wholehearted in carrying out
this program. It will be noticed, however, that the English
of the Soviet member's question is clumsy, like many
statements that are obviously translations from another
language. I think it highly probable that if either the Secre-
tary-General or the Chairman had invited General Derev-
yanko to rephrase his question he would certainly have
been prepared to do so. During the Council's discussion
he declared with some feeling that in framing the question
he had no intention of making any criticism of what had
been done by General MacArthur, but simply pointed out
that any undue delay in carrying out the purge would im-
pede the progress of democratization. It was notable,
moreover, that the Chairman did not follow the usual com-
mittee practice of asking General Derevyanko, the pro-
poser of the question, to open the discussion. He was not
invited to explain his reasons for asking it, or to elaborate
it in any way. He, with other Council members, was in-
stead compelled to submit to listening without interrup-
tion to General Whitney's outburst.

This second meeting was important not only in that it
revealed very clearly SCAP's general attitude towards the
Council, and exacerbated so unfortunately the relations
between the American and Soviet members, but more
specifically because it made clear that SCAP would tend
to regard any question, however pertinent and important,
as an effort to secure information which might reflect on
the accomplishments of the Supreme Commander. General
Whitney, speaking on behalf of General MacArthur, in-

28 Japan-Enemy or Ally?

insisted that "the Council is not set up for the purpose
of prying into SCAP affairs, attempting to find some
weak point in SCAP armor, probing for something by
which to create national sensationalism." This placed
Council members in a dilemma. It was hardly possible to
give "constructive advice" on any question without infor-
mation. It was only possible to get information by asking
questions. But it would not be possible to ask for informa-
tion which might supplement or correct the picture of the
Occupation being regularly provided by the Public Rela-
tions Section.

The effort to get information continued throughout
my eighteen months in Japan to be a major difficulty for
the non-American members of the Council. These diffi-
culties were increased in April 1946 by the issuance of a
GHQ order that all requests for information by Council
members should be made in writing to the Secretary-
General, who would then send them to Diplomatic Section
and to Gs before they passed to the particular Section pos-
sessing the requested information. The reply, as drafted by
this Section, was to be sent back through the same devious
channels. In my own experience this procedure usually
took three or four weeks to complete, even when the in-
formation asked appeared comparatively simple and un-
contentious. In many instances it should have been prac-
ticable to get information by personal interview with the
officer who possessed it in a ten minutes' talk. Such direct
contacts were, however, sternly disfavored.

During the early days of the Council there was a great
deal of discussion on the number of days which it would
be reasonable to allow the Council to consider directives
before their issuance. General MacArthur had offered in
the normal course to send every directive to Council mem-
bers at least forty-eight hours before its issue.

The Russian member persisted in his request that these

Allied Instruments of Control 29

directives should be made available at least five days before
they were sent to the Japanese Government. That, in his
view, was the minimum period necessary for their proper
study and consideration. As time went on it became clear
that this debate had been largely unreal, since, after April
1946, SCAP normally controlled the work of the Japanese
Government without issuing any important directive. The
offices of GHQ gave two reasons for this. They claimed
that all important aspects of the Occupation had already
been covered by a series of major directives issued between
September 1945 and January 1946. And they pointed out
that, after the free elections in April, it was important,
if the Japanese were to learn respect for the institution of
free government, to avoid giving the impression that the
Government and the Diet were merely the instruments of
SCAP, instead of the expression of the people's will. Con-
sequently, General MacArthur decided that it was wiser to
give guidance and direction to the Japanese Government
privately and informally rather than by directives.

The formation of the Yoshida Government, the drafting
of the new Constitution, and its debate by the Diet, the
passing of the laws implementing the Constitution, the
efforts for land reform and for the liquidation of the Zai-
batsu all these events were of fundamental importance,
and involved continuous guidance of the Japanese authori-
ties by SCAP. They generally took place without the issue
of fresh directives. Since GHQ did not inform Council
members of the progress of its private dealings with the
Japanese authorities, it was hard for Council members to
know what was going on, or to make any informed con-
tribution to the discussion of these questions. Moreover,
when the Council was consulted by SCAP about some
aspect of Occupation policy, its members would usually
receive first news of this when the agenda was issued
on the Friday before the Wednesday meeting. This would

go Japan Enemy or Ally?

leave only three working days for the study and considera-
tion of what were sometimes highly complex and technical
questions.

Land reform was the only question among those I have
just mentioned on which SCAP consulted the Council.
This unwillingness to consult the Council placed its mem-
bers in a peculiar position and gave them the feeling that
they were very remote from the source of executive
authority. They were aware that each week SCAP was
making major decisions in the direction and guidance
of the Japanese authorities. A number of expert missions
came from the United States to Japan to advise GHQ on
various political and economic questions, on the Consti-
tution, on food, on trade unions and labor relations and
on the dissolution of the Zaibatsu. Council members, how-
ever, would generally only learn of efforts towards the
solution of these problems through the columns of the
press, or in discreet official reports, which were usually
published some time after the critical decisions had been
taken. In a word, General MacArthur steadfastly declined
to take the Allied Council into his confidence or to provide
the means by which Council members or their staffs could
have direct, informal day-to-day contact with officers of
GHQ,

An examination of the agenda of Council meetings
makes it hard to understand what determined SCAP's
choice of those subjects which he submitted for advice.
Apart from asking advice on certain highly technical ques-
tions which the Council was not the proper or competent
body to deal with for example, the most effective method
of inoculating repatriates against specific contagious dis-
easesthe Supreme Commander did invite Council opin-
ion on certain major questions, on land reform, on methods
for increasing coal production, and on the stabilization of
prices and wages. Yet, when these important questions

Allied Instruments of Control 31

were introduced, the American Chairman, Mr. George
Atcheson, 2 invariably tried to prevent any effective dis-
cussion, and sought instead to extract individual state-
ments from each of the other three Council members, and
then close the debate.

In these circumstances it was difficult to develop the
kind of free discussion which might have enabled members
to maximize agreement. The Chairman sought only the
advice of Council members, not the advice of the Council.
It seemed that GHQ often worked on the assumption that
the Council was non-existent. I cannot recall any reference
to the Council's existence or work in the Monthly Sum-
mation of Non-Military Activities, produced by GHQ, nor
in any other SCAP publication. The effort to avoid any
reference to the Council's place in the Occupation set-up
sometimes appeared trivial and a little ludicrous. For
^xample, in May 1946 the Far Eastern Commission pub-
lished a policy decision setting out the principles that
should be followed in estimating Japan's need for food
imports. This decision provided, inter alia, that the Su-
preme Commander should act "with the advice of the
Allied Council." The wire agencies transmitted this policy

^It is not possible to write this record without many references to
Ambassador George Atcheson, Jr., Head of the Diplomatic Section GHQ.
SCAP. Mr. Atcheson replaced General Marquat as Chairman of the
Allied Council and Deputy of the Supreme Commander in April 1946.
He lost his life in an accident on August 15, 1947, when the aircraft on
which he was traveling from Tokyo to Washington came down off Hawaii.
On several occasions in Japan I was under instructions to take a line
which diverged from official American policy, as put forward by Mr.
Atcheson. Moreover, the personal opinions I express in this book will
sometimes show sharp disagreement with Mr. Atcheson's statements and
policy. These political differences in no way affected our personal rela-
tions. During a close association over eighteen months, I formed for Mr.
Atcheson a strong affection and very deep personal regard. He always
acted in accordance with the highest standards of professional and public
service. The driving power of his immense industry was a disinterested
loyalty to his chief, to the United States, and to liberal and humanitarian
ideals. In private life he was one of the most thoughtful and generous
men I have ever known.

gg JapanEnemy or Ally?

decision in full to Japan. After it had been submitted to
GHQ censorship, it was published verbatim in the Japa-
nese press, except for the omission of the phrase referring
to the Allied Council.

On those rare occasions when the Council was asked to
advise on important questions, and when members made
considerable efforts to formulate careful and helpful rec-
ommendations, it was difficult to escape the feeling that
GHQ treated these recommendations in a light-hearted
fashion. At a meeting in August 1946, the Chairman was
asked whether it might not be possible for General Mac-
Arthur to tell the Council of his reaction to some of its
previous recommendations, and indicate the extent to
which he had found this advice acceptable, and how far
he had felt able to act on it. In reply, Mr. Atcheson made
it clear that Council members should be content with the
privilege of offering advice, and then rest assured that the
Supreme Commander would give it the consideration it
merited. It would be improper and impracticable for mem-
bers to follow up their advice by inquiries whether it had
been acceptable. Normally members would be able to dis-
cover, by watching the course of events, the extent to
which their advice had been incorporated in the Supreme
Commander's decisions. Mr. Atcheson said:

If the Supreme Commander consults and advises with the
Council in accordance with the Terms of Reference, it doesn't
seem to me that there is any particular question whether he
considers the advice of the Council or not, or any reason that
I can see, after action is taken, to prolong the discussion.

And, if Members of the Council are dissatisfied, their recourse
would be to make representations to their own Governments
and to take the question up on governmental level, with a
view to having the basic policy decision altered. 8

To sum up SCAP's attitude towards the Allied Council:

8 Minutes of the Allied Council.

Allied Instruments of Control 33

At its inception, General MacArthur's representative
treated it with frivolous derision. General MacArthur
omitted to consult it on many major questions. The pro-
cedure prescribed for providing members with informa-
tion severely limited their opportunities to give informed
advice. The representatives of SCAP showed exceptional
sensitiveness to any question or comment which might be
construed as a criticism of any aspect of the Occupation.
In these circumstances, it was inevitable that the Council
should have been on balance a failure, and at times a fiasco.
It provided periodical opportunities for the American and
Russian members to give public expression to their mutual
distrust. To that extent, Council meetings aggravated a
relationship that was already unhappy enough. Yet I be-
lieve the Council was able to make some useful contribu-
tions to the Occupation. Statements and questions by
members sometimes seemed to stimulate GHQ to activity
in desirable directions. Indeed, I believe that on several
important issues, e.g., land reform, coal mining, prices and
wages, members of the Council were able to contribute
useful and constructive advice, and that this advice affected
the subsequent actions of both SCAP and the Japsgiese
Government.

Since the establishment of the Allied Council was a
serious, if largely unsuccessful, effort for Allied cooperation
in Japan, and since, presumably, these efforts to cooperate
will continue after the peace treaty, it may be worth while
to try to state the main reasons for the Council's failures.

It was the custom in GHQ circles to ascribe all, or nearly
all, of the Council's failures to the attitude of General
Derevyanko, the member for the U.S.S.R. For my part,
I formed the following impressions of General Derev-
yanko's work on the Council. I thought that he behaved
consistently in a friendly and dignified way. I felt that on
most occasions when he asked for information, which

34 Japan Enemy or Ally?

GHQ seemed reluctant to provide, his inquiries were fully
justified, although he often presented his requests in a
way that would have made it impracticable to meet them
in precisely the way that he desired. For example, at the
opening meeting the Russian member asked GHQ to pro-
vide the Council with copies of a large number and variety
of documents, including every single regulation and decree
that had been issued by the Japanese since the beginning
of the Occupation. Neither the Chinese member nor I
was able to support General Derevyanko in the form in
which he put his request, since it would have involved
GHQ in the gigantic and impracticable task of making
copies of tens of thousands of documents. General Mac-
Arthur, in his reply to this request, pointed out that the
physical volume of work involved would be so great that
it was impossible for him to agree to it. This did not, how-
ever, always deter General Derevyanko from making sim-
ilar requests later.

When General Derevyanko suggested at Council meet-
ings that the aims of the Occupation were not being satis-
factorily carried out in some particular field, he tended to
make charges of default and failure without producing re-
liable evidence to support them. He was often pressed by
the American Chairman for the evidence on which he
based his criticisms, but was generally shy of producing
the specific information which might have given weight to
his charges. This tendency to make general and imprecise
criticisms produced continuous irritation among the offi-
cers of GHQ. Moreover, General Derevyanko, like all offi-
cial representatives of the U.S.S.R., was clearly compelled
to work under close instructions, which allowed him the
minimum of individual discretion. There was, conse-
quently, a certain rigidity and lack of adaptability about
the lines he pursued at Council meetings. Basically, how-
ever, the reason for American hostility towards General

Allied Instruments of Control 35

Derevyanko was the conviction that Russia's primary in-
terest in Japan was to discredit the achievements of SCAP
and to sabotage American objectives. I believe there were
good grounds for this conviction. Whether American ob-
jectives, as pursued by SCAP, always completely conformed
to Allied objectives, as expressed in the policy decisions
of the Far Eastern Commission, was another question.
There were reasons to suspect, as I shall try to show in
later chapters, that General MacArthur's policy on eco-
nomic questions, for example, placed an emphasis on the
value of free competition and the dangers of socialist
organization which would not faithfully express the view
of the United Kingdom Government or those of some
other Allied Government.

The basic mistrust between the American and Russian
members cast its shadow over every moment of the Coun-
cil's work. It meant that it was hardly possible to examine
any question on its merits. There were no problems o
Japan: every problem of Japan came to be considered for
its effects on Russian-American relations.

A second important reason for the difficulties and fail-
ures of the Council was that its deliberations were always
open to the press. General MacArthur had been particu-
larly anxious that the Council should work in open session.
At the opening meeting, I had put forward a modification
of this proposal. I had urged that there should be two
kinds of Council meeting. Normal discussions, which
might often involve detailed and technical proposals,
would be held in private. This would enable members to
talk more freely and modify in the light of discussion their
initial attitudes in an effort to reach agreement. To pro
vide the press with a ball-to-ball description of these de-
bates might be dangerous, since a newspaper reporter, in
order to meet his deadline, might often report the state-
ment which a member made early in the discussion, when

36 Japan Enemy or Ally?

this would not accurately express that member's final view-
point. I agreed that it was desirable for the press to be
admitted to meetings at regular intervals. My idea was
that at these public meetings members would be able to
state their definite views on agenda questions and give
their reasons for them. This proposal that we should have
both private and public meetings was supported by the
Council. Unfortunately, however, this scheme came to
grief after only one private meeting had been held, in
April 1946. The Chairman felt that certain confidential
material discussed at this meeting had been improperly
disclosed to the press, and, therefore, declined to hold any
more private meetings.

The presence of the press at all Council meetings pro-
duced a number of unfortunate consequences. The press
corps in Tokyo included a number of able and objective
journalists. Yet the atmosphere in which it worked seemed
to be hostile to the writing, or, at least, the publication of
balanced and objective reports. 4 The reporters tended to
fall into two sharply divided groups, the supporters and
the critics of General MacArthur. General MacArthur's
journalist supporters tended to show that undivided and
uncritical loyalty which is so desirable in the attitude of a
soldier to his commanding officer in wartime. This group
maintained intimate relations with the Public Relations
Section of GHQ, and Public Relations officers went to
great pains to provide them with the sort of background
information that supported their convictions. The second

I had personal knowledge of several cases in which GHQ went to
extraordinary lengths, by threats or inducements, to suppress news reports
that were critical of certain aspects of the Occupation. GHQ was satisfied
with nothing less than unqualified praise of SCAP policy and achieve-
ments. Every effort was made to remove offending correspondents if the
pressures applied in Tokyo foiled to bring them into line. GHQ did not
seem to recognize any inconsistency between these practices and its fre-
quent exhortations to the Japanese to emulate the democracies in estab-
lishing a free and independent press.

Allied Instruments of Control 37

group contained some who felt an emotional antipathy
to General MacArthur, and some who, on Left-wing ideo-
logical grounds, were anxious to expose what they con-
sidered to be the undesirable conservative tendencies in
SCAP's political and economic outlook. The prevailing
tension between the U.S. and Russia unhappily provided
both groups with excellent opportunities to pursue their
different missions. It did not foster the detached and ob-
jective view. It meant that any differences of viewpoint
between Council members, however minor in substance,
or however quiet in tone, tended to be. reported as a
dramatic clash between the American and Russian mem-
bers. This feature of reporting in Japan was described
by Mr. Lauterbach in the October 1946 issue of Front
Pag the journal of the American Newspaper Guild.
Some of his comments may be worth reporting:

Many correspondents must still depend on the graces of the
Army even for living necessities. For ethical or other reasons,
they believe they owe General MacArthur's administration the
same uncritical loyalty which they owed him as a wartime
commander. . . .

Sources are more unreliable than usual. In Japan nearly all
journalists, politicians and intellectuals are anxious to show
how pro-American they are by tipping U.S. correspondents to
stories or supplying factual information.

Home Office cables reiterate that the U.S. versus Russia stories
make the headlines. It would be superhuman of the men as-
signed to the Orient if they did not dig around for a good
Russian-American squabble or an angle that slammed the
Soviets. 5

6 From the standpoint of the British member of the Allied Council, it
was unfortunate that the reporting of the Occupation to the outside world
was left almost wholly to American journalists. The United Kingdom
and British Dominions were, of course, themselves entirely responsible for
this failure to send their own representatives to cover Japan. In May 1946
there were 70 Allied correspondents in Japan. This included the repre-
sentatives of news agencies, newspapers, and radio organizations. Fifty-six
were Americans, seven from all parts of the British Commonwealth and
Empire, and the remaining seven came from other Allied countries. The

38 Japan Enemy or Ally?

I have myself from time to time become unwittingly
involved in what sections of the press presented as serious
conflict with the American member. On one particular
occasion at the seventeenth meeting, on October 16, 1946,
a number of newspapers gave great prominence to what
was described as a "clash" between Mr. Atcheson and me,
and headlined the "outburst" by me which had precipi-
tated the dash. It may be of interest to give, as well as I
am able, an objective account of what actually occurred
at this meeting.

The meeting had proceeded for nearly two hours when
Mr. Atcheson took exception to General Derevyanko's
references to the election of April 10. He claimed that the
general election "demonstrated to the people of the world
a free, honest and orderly election, such as few, if any,
of the Western democracies could boast to a more com-
plete degree." Mr. Atcheson said:

I may say that I often wonder at the continued allegations
and charges against the Japanese authorities in connection
with their efforts under the Occupation. They seem never in
this Council to receive credit for the good work they do.

Developing this theme, he went on to say:

In fact, the time has come when Japanese aims have become
virtually identical with Allied aims.

B3.C., the London Times, the Daily Telegraph and the Manchester
Guardian all relied for their news on American wire agencies and news-
papers, or on American journalists in Japan who sometimes sent them
supplementary material. There were then two Australian journalists hi
Japan, but the Australian Broadcasting Commission had no representa-
tives. When the new arrangement between Reuters and AA.P. came into
effect at the end of 1946, the situation was considerably improved. An
Australian was appointed to represent both associations. I am not want-
ing to suggest that American reporting is in any way inferior to British
reporting. Yet the British Commonwealth has its own distinctive interests
in Japan, and it seemed to me unfortunate that British newspaper readers
should have had to rely mainly on the picture of Japan presented by
Americans for American consumption.

Allied Instruments of Control 39

He ended his statement with an invitation to other mem-
bers to make comments. I now quote the following ex-
changes from the verbatim minutes:

MR. BALL: Mr. Chairman, I should just like to say that I
agree wholly with you that the Members of this Council should
try to be just and objective in their assessment of developments
here. I would also like to go on record as saying that I would
not, without very careful further consideration, be able to
identify myself with your expressions of cordiality and con-
fidence towards the present Japanese Government

THE CHAIRMAN: I am sorry, I didn't hear your last words.

MR. BALL: I should not like to identify myself with your ex-
pressions of cordiality and confidence towards the present Japa-
nese Government.

THE CHAIRMAN: I do not think, Mr. Ball, that you will find
in the record that I have made any expressions of cordiality or
confidence in the present Government. I made a plea for rec-
ognition of merit where merit exists.

MR. BALL: I should only be very glad, indeed, to join with
you, Mr. Chairman, in any recognition of merit where merit
exists.

THE CHAIRMAN: Does the spokesman for the British Com-
monwealth imply that no merit exists in connection with the
conduct of the elections or other activities of the Japanese
Government?

MR. BALL: I think that the Member for the United States
has expressed the view that the Members of this Council are
reluctant to express appreciation of the good work of the Japa-
nese Government where it does good work. And I think I have
noticed in the last few months, when any Member of this
Council has raised questions which might possibly be construed
as a critidsm of the Japanese Government, that the United
States Member has been very quick and eager to defend the
work of the Japanese. All I am wanting to say, today, Mr.
Chairman, is that I should not wish to identify myself with the
attitude that you have expressed until, or unless, I have re-
ceived much fuller evidence, much more complete information,
about the actual course of affairs in Japan today.

In making my comments, I had several things in mind.

40 Japans-Enemy or Ally?

First and foremost, I did not believe it to be true that the
aims and ideals of the Japanese Government were virtually
identical with Allied aims. If such a statement by the
representative of the Supreme Commander of the Allied
Powers had been accepted in silence by other members
of the Council, it might have been inferred that this
silence implied agreement. Moreover, if it were true that
Japanese aims had become virtually identical with Allied
aims, it would be difficult to justify continued Allied
occupation and control.

In referring to the cordiality and confidence which Mr.
Atcheson had expressed in his references to the Japanese
Government and people, I had in mind not only state-
ments made by Mr. Atcheson in the Council, but other
statements made by General MacArthur and his senior
officers during the preceding few months which, in my
view, gave the Japanese people and the world a greatly
exaggerated impression of the progress made in the devel-
opment of democracy in Japan. The most notable state-
ment was that made by General MacArthur on September
2, the first anniversary of the surrender.

Nevertheless, Mr. Atcheson had himself, on several
occasion^ in the Council, expressed a sympathy and sup-
port for the Japanese Government which appeared to me
not wholly warranted.

I first noticed this tendency at the seventh meeting
(June 17) when Mr. Atcheson, after pointing out that the
land reform program submitted by the Japanese Govern-
ment on March 15 was "inadequate," went on to say that
he believed that the Government had, nevertheless, pre-
sented this program "in a sincere spirit" In my view, this
particular program was evasive and insincere, and in-
dicated that the Japanese Government was anxious to
frustrate rather than to fulfill the purposes of the SCAP
directive on land reform. It, therefore, seemed to me sur-

Allied Instruments of Control 41

prising that Mr. Atcheson should have felt it desirable
to commend the Japanese Government for its "sincere
spirit."

When, at the eleventh meeting (August 7), I had asked
Mr. Atcheson whether he considered the Japanese Gov-
ernment a suitable body to be entrusted with the carrying
out of the purge directive, he had shown some impatience
at my question and had remarked that it was easy enough
to criticize the Japanese Government when it was "not in
much of a position to defend itself

At the thirteenth meeting (August 21), while explain-
ing the reasons for advocating the "unofficial" extension
of the Council membership, Mr. Atcheson had said that
the Japanese people were "in the spirit of a team," "seek-
ing the same goal" as the Allies.

At the sixteenth meeting (September 2), Mr. Atcheson
had referred to the dissolution of the Commission for the
Investigation of the Causes of the War and the Defeat.
He showed regret that this Commission had been dis-
solved. He said the Japanese Government had dissolved it
on its own initiative, as a result of the criticism directed
against it by the Soviet member and me, and "in order to
avoid further misrepresentation of its purposes."

Since the early days of the Council, the Chinese mem-
ber and I had been reluctant to place items on the agenda,
even in the form of questions, since it was dear that GHQ
was extremely sensitive and resentful about any question
or comment which might be construed as a criticism of
General MacArthur or his officers. For my part, I felt that
on many occasions it was highly desirable to ask certain
questions on the Council about the progress of the Occu-
pation, but I avoided doing so for fear that in presenting
these questions I might become involved in the charge of
aiming criticism at General MacArthur. The situation had
now developed that Mr. Atcheson seemed to feel nearly,

42 Japan Enemy or Ally?

if not quite, as sensitive about criticism of the Japanese
Government as he would have felt about criticism of
SCAP. This made it difficult, if not impossible, for Council
members to take part in any objective examination of
Occupation policy without becoming involved in a clash
with Mr. Atcheson.

These, then, were the three main reasons why the Amer-
ican and other members found it difficult to make the
Council a cooperative and constructive body: the hostility
between the United States and Russian members, the
attendance of the press at all meetings, and the extraor-
dinary sensibility to criticism shown by GHQ,

JAPANESE INSTRUMENTS OF CONTROL

The Emperor

IN THE CLOSING STAGES OF THE WAR WITH
Japan there was much debate and considerable disagree-
ment in Allied circles about what should be done with the
Emperor after defeat. One school of thought, pointing out
the dangerous fusion in the Emperor's person of Japanese
tribal idolatry and aggressive militarism, claimed that the
Emperor system must be forthwith abolished if the danger
of Japanese imperialism was to be removed. Some went
further and urged that Hirohito be tried as a war criminal.
The second school of thought claimed that if the Allies
retained the Emperor it would be possible to exploit his
prestige with the Japanese people to our advantage. Some
members of this school claimed tlftt the Emperor had, in
any case, always been a mere figurehead and that it would
be unrealistic to saddle him with responsibility for Japan's
aggression or for the conduct of the Japanese fighting
forces during the campaigns.

The second school of thought won the day. I believe
that, looking back, the conclusion is ineluctable that the
retention of the Emperor was fully justified. The prompti-
tude and completeness of the Japanese surrender in every
theater of war undoubtedly saved the lives of tens of
thousands of Allied soldiers. Since the surrender, the com-

43

44 Japan Enemy or Ally?

pliance of the Japanese Government and people with the
orders of their conquerors must be attributed at bottom
to the Emperor's authority. After due credit has been
given to General MacArthur's firm benevolence, and the
generally high standard of behavior of the Occupation
troops, the extraordinary smoothness of the Occupation
stems ultimately from the Emperor's will.

I believe, therefore, that the decision to retain the
Emperor was wise, and I think that General MacArthur's
attitude towards the Emperor has shown just the right
mixture of tact and firmness. Yet it is important to remem-
ber that our tacit support of the Emperor system and of
Hirohito means a price to be paid and risks to be run.
Without vigilance to minimize that price and guard
against these risks, the consequences of our policy may
seriously threaten the aims of the Occupation.

Memories are short, and it is worth while to recall that
the issue of the Emperor system was the pivot of the sur-
render negotiations. In these negotiations it became clear
that the Japanese Government was prepared to sacrifice
almost everything but the Emperor. In the Potsdam Dec-
laration, issued July 26, 1945, it was laid down in Article
6 that "there must be eliminated for all time the author-
ity and influence of those who have deceived and misled
the people of Japan into embarking on world conquest."
This is apparently the one provision that the Japanese
Government was prepared seriously to contest. In its quali-
fied reply to the Potsdam Declaration of August 10, the
Japanese Government declared that it was ready to accept
the terms of the joint declaration "with the understanding
that the said declaration does not comprise any demand
which prejudices the prerogative of His Majesty as a
sovereign ruler." Mr. Byrnes, on behalf of the Govern-
ments of the United States, United Kingdom, U.S.S.R. and
China, sent a reply on August 1 1, which in effect accepted

Japanese Instruments of Control 45

the Japanese Government's condition, since this reply
specifically referred to the Emperor as the authority that
would be required to ensure that the Government of
Japan and the Japanese Imperial General Headquarters
should carry out the provisions of the Potsdam Declara-
tion. It is true that Mr. Byrnes's reply insisted that from
the moment of surrender the authority of the Emperor
should be subject to the Supreme Commander of the Al-
lied Powers, and that the ultimate form of government in
Japan should be established by the freely-expressed will
of the Japanese people. There is little doubt, however,
that the Japanese Government and people regarded Mr.
Byrnes's reply as an expression of Allied willingness to
retain the Emperor system in Japan.

Some weeks later, when the Premier, Prince Higashi-
Kuni, described to the Japanese people the circumstances
in which the final decision to end the war had been taken*
he said: "It was decided to accept the terms of the Potsdam
Declaration, with the understanding that this did not com-
prise any demand that would prejudice the prerogatives of
His Majesty as sovereign. The war of Greater East Asia
has thus been brought to an end."

The Imperial Rescript, in which Hirohito broke the
news to his subjects that the war had ended, was a remark-
able document:

To our good and loyal subjects:

After pondering deeply the general trends of the world and
the actual conditions obtaining in our Empire today, we have
decided to effect a settlement of the present situation by re-
sorting to an extraordinary measure.

We have ordered our Government to communicate to the
Governments of the United States, Great Britain, China and
the Soviet Union that our Empire accepts the provisions of
their Joint Declaration.

To strive for the common prosperity and happiness of all
nations, as well as the security and well-being of our subjects,

46 JapanEnemy or Ally?

is the solemn obligation which has been handed down by our
Imperial Ancestors, and which we lay dose to heart. Indeed,
we declared war on America and Britain out of our sincere
desire to ensure Japan's self-preservation and the stabilization
of East Asia, it being far from our thought either to infringe
upon the sovereignty of other nations or to embark upon ter-
ritorial aggrandizement. But now the war has lasted for nearly
four years. Despite the best that has been done by everyone-
the gallant fighting of military and naval forces, the diligence
and assiduity of our servants of the State, and the devoted serv-
ice of our one hundred million people, the war situation has
developed not necessarily to Japan's advantage, while the gen-
eral trends of the world have all turned against her interest
Moreover, the enemy has begun to employ a new and most
cruel bomb, the power of which to do damage is indeed incal-
culable, taking the toll of many innocent lives. Should we con-
tinue to fight, it would not only result in an ultimate collapse
and obliteration of the Japanese nation, but, also, it would
lead to the total extinction of human civilization. Such being
the case, how are we to save the millions of our subjects, or to
atone ourselves before the hallowed spirits of our Imperial
Ancestors? This is the reason why we have ordered the accept-
ance of the provisions of the Joint Declaration of the Powers.

We cannot but express the deepest Sense of regret to our
Allied nations of East Asia, who have consistently cooperated
with the Empire towards the emancipation of East Asia. The
thought of those officers and men, as well as others who have
fallen in the fields of battle, those who died at their post of
duty, or those who met with untimely death, and all their be-
reaved families, pains our heart night and day. The welfare of
the wounded and the war sufferers, and of those who have lost
their homes and livelihood are the objects of our profound
solicitude. The hardships and sufferings to which our nation
is to be subjected hereafter will be certainly great We are
keenly aware of the innermost feelings of all ye, our subjects.
However, it is according to the dictate of time and fate that we
have resolved to pave the way for a grand peace for all the gen-
erations to come by enduring the unendurable and suffering
what is insufferable.

Having been able to safeguard and maintain the structure
of the Imperial State, we are always with ye, our good and

Japanese Instruments of Control 47

loyal subjects, relying upon your sincerity and integrity. Be-
ware most strictly of any outbursts of emotion which may en-
gender needless complications, or any fraternal contention and
strife which may create confusion, lead ye astray and cause ye
to lose the confidence of the world. Let the entire nation con-
tinue as one family from generation to generation, ever firm in
its faith of the imperishableness of its sacred land, and mind-
ful of its heavy burden of responsibilities, and the long road
before it. Unite your total strength to be devoted to the con-
struction for tie future. Cultivate the ways of rectitude; foster
nobility of spirit; and work with resolution, so as ye may en-
hance the innate glory of the Imperial State and keep pace
with the progress of the world.

This is perhaps the most significant statement of the
real attitude of the Emperor and the Japanese Govern-
ment after the defeat of Japan became certain. It was
made before the American forces landed in Japan, and
when the Emperor consequently retained some degree of
freedom. In my own view, the weeks between the day
when the Japanese Government decided to surrender and
the day on which the Occupation forces landed were of
incalculable historical importance. It is my firm belief,
though I cannot produce documentary evidence to support
it, that during this brief breathing space the rulers of
Japan quietly agreed upon the strategy and tactics they
would follow during the Occupation period. There were
to be two keynotes of this strategy: complete outward com-
pliance with the orders of the conquerors, combined with
lasting spiritual resistance to the conqueror's will.

Whether or not this version of happenings at the time
of the surrender is accepted, the Rescript contains within
itself considerable interest. It will be noticed that it makes
no reference to surrender. The Emperor has merely de-
cided to "effect a settlement of the present situation." In
conducting this course, the Emperor is striving for "the
common prosperity and happiness of all nations." There

4 8 JapanEnemy or Ally?

follows a strangely brazen attempt to justify Japan's aggres-
sion. The Emperor declared war from his "sincere desire
to ensure Japan's self-preservation and the stabilization
of East Asia." There is no suggestion that Japan has been
forced to the point of unconditional surrender. Rather the
"war situation has developed not necessarily to Japan's
advantage." The Emperor expressed his deep sense of
regret to the nations of East Asia that were forced to ally
themselves with Japan, since they had "consistently co-
operated with the. Empire towards the emancipation of
East Asia." And, lastly, there is the statement that the
acceptance of the Potsdam Declaration enables Japan "to
safeguard and maintain the structure of the Imperial
State."

In my view, the Emperor expressed in this Rescript
more of his real mind than it has been opportune for him
to express since the arrival of the Occupation forces. The
Rescript gives no hint of any change of heart or mind.

The public debate continues on whether Hirohito can
justly be regarded as guilty of the kind of crimes for which
Japan's political and military leaders were tried by the
International Military Tribunal for the Far East. This
jguestion hinges on whether we believe that before and
during the war the Emperor's political position in Japan
prevented him from exercising any effective influence over
his advisers. It seems to me clear that he did exercise some
real influence, though it seems nearly impossible for the
foreign observer to know what degree of influence he was
able to exercise on particular occasions. I think it is sig-
nificant that the wartime rulers of Japan should be so
insistent that the Emperor was free of all responsibility
for aggression. Yet a careful reading of the diaries of
Prince Konoye and of the Marquis Kido, and of the evi-
dence in defense of General Tojo, seems to me to provide
dear evidence that the Emperor was a party, though some-

Mate Japanese Instruments of Control 49

times a reluctant and subordinate party, to actions which
are now considered as war crimes. It may be true that at
the critical meetings in the last quarter of 1941 the Em-
peror always sought to break the deadlock with the United
States by diplomatic negotiation rather than by resort to
arms. Yet he allowed himself to be swayed by his advisers,
and thereafter contributed to the efforts of the Govern-
ment to work the Japanese people up into a fighting mood.
While there may be little evidence that he played a posi-
tive role in the decision to make war, failure to act is some-
times as culpable as positive action.

If Allied public opinion today accepts the thesis that the
Emperor was a helpless pawn in 1941, 1 think it is difficult
to give him credit for the part he played in bringing about
Japan's surrender. There is a tendency among some people
to insist that the Allies should feel great gratitude to the
Emperor for having brought the war to an end at a time
which saved the lives of numberless Allied soldiers. Un-
doubtedly this is the response which the Emperor and his
friends wish to produce. It seems to me quite inconsistent
with the available facts. 1

1 1 believe that the real part played by the Emperor before and during
the war has been accurately described by Mr. T. A. Bisson in the following
passages: "As to the Emperor's influence with respect to aggression and
territorial aggrandizement, no elaboration need be made. He supplies the
tribal ideology which knits the coalition together, with its unrivaled
motivation of the 'sacred mission' of a 'master race/ The aggressive
instincts of Japan's dominant groups are buttressed by a divine impera-
tive: to extend the "benevolent sway* of the Emperor over previously
unfavored regions. Under these conditions, with an Imperial influence
tending invariably in a given direction, the effort sometimes made to
pass off the Emperor as a puppet without political responsibility of any
kind, or as an institution which can be directed towards good ends, hardly
merits serious consideration. To regard the Emperor system as something
which is by nature politically neutral and can be used for good or ill, as
if it were some inanimate object like a pistol, in which inhere no social
values, but which takes on such significance only when it is used, is a
gross misunderstanding of its history. In the complexities of Japanese
social development the institution of the Emperor has inevitably given the
Japanese State structure a certain bias which has predisposed it to the side
of reaction." Pacific Affairs, December, 1944. P- 399-

go Japan-Enemy or Ally?

The Emperor system in Japan has been a dynamic
fusion o patriotism and religion or, to put it more bluntly,
of tribal ideology and superstition. The task of the Allies
was to purge this system of militarism and feudalism, and,
so far as possible, of superstition. If the Emperor were to
be retained it was essential that he be humanized. The god
was to become a man, the sovereign a symbol, the warrior
a man of peace. This was an ambitious project, yet there
was some historical evidence to suggest that it might be
feasible. Sir George Sansom has pointed out that, despite
the halo of sanctity that is supposed to have surrounded
the Emperor from earliest times, no nation has treated its
titular rulers so cavalierly as the Japanese. The history of
Japan is strewn with emperors forced to abdicate, emperors
exiled and emperors slain. Between the eighth and the
nineteenth centuries even the religious functions of the
emperors made little impact on the life of the nation.

The kind of emperor worship we have witnessed in
Japan during the last decades is a modern product. After
the restoration of 1868 the rulers of Japan made tireless
efforts to inculcate in the Japanese people the belief in
imperial divinity as the first article of faith. During the
life of the Emperor Meiji his rescripts were treated as holy
writ. In schools and public offices there was compulsory
worship of his portrait In moments of national crisis the
leading statesmen and generals did obeisance to the im-
perial ancestors at the Shrine of Ise. This elaborate build-
up of the Son of Heaven, with his divine mission to rule
the world, was greatly aided by Japan's victories in war
and by the spectacular development of her industries and
increase in her wealth. The defeat of China in 1895, with
the annexation of Formosa; the defeat of Russia in 1905,
with the annexation of Korea, fostered the myth of imperial
invincibility. Yet these were all very recent developments
in the long history of Japan* It was hoped that the over-

Japanese Instruments of Control 51

whelming defeat of Japan in 1945 would, in destroying the
myth of invincibility, make it possible to destroy the asso-
ciated myths.

It was, therefore, natural that observers in Allied coun-
tries should have attached great importance to Hirohito's
message to the people on New Year's Day, 1946, when he
"voluntarily" renounced divinity. The Emperor said:

The ties between us and the people have always stood upon
mutual trust and affection. They do not depend upon mere
religion and myths. They are not predicated on the false as-
sumption that the Emperor is divine, and that the Japanese
people are superior to other races and fated to rule the world.

The new Constitution provides that the Emperor's
powers shall be reduced to those of a constitutional mon-
arch. This is, undoubtedly, a revolutionary change in
Japan's constitutional structure. The Meiji Constitution
was the gift of the Emperor to his people. Under the Meiji
Constitution the Emperor was the absolute sovereign. It
was only possible to amend it at the Emperor's initiative,
and it was perhaps, therefore, not surprising that it was
never amended. The following articles illustrate the place
this Constitution gave the Emperor. "The Emperor is
sacred and inviolable" (Article 3). "The Emperor is Head
of the Empire, combining in himself the rights of sov-
ereignty and exercising them according to the provisions
of the present Constitution" (Article 4). "The Emperor
gives sanction to the laws and orders ... to be promulgated
and executed" (Article 6). The prerogatives of the Em-
peror as the Supreme Commander of the Army and Navy
were defined in Articles 11 and 12. Although no mention
was made there of the way in which that prerogative was
to be exercised, the general burden of the Constitution
and the authoritative commentaries on it showed that
there was no intention to place the control of the armed

52 JapanEnemy or Ally?

forces under the civilian government. This was one of the
most dangerous features of this Constitution of 1889.

The new Constitution makes a complete change in the
Emperor's status and powers. It provides that he can act
only on the advice of the Cabinet, which is, in turn, re-
sponsible to a Diet elected by universal suffrage. "The
Emperor shall be symbol of the state and of the unity of
the people, deriving his position from the sovereign will
of the people" (Article i). "The Emperor shall perform
only such acts in matters of state as are provided for in
this Constitution, and he shall not have powers related to
government" (Article 4). The few functions left to the
Emperor by the new Constitution are formal and cere-
monial. This is the purpose of the distinction between
"acts in matters of state" and "powers related to the gov-
ernment"; he may perform such "acts in matters of state"
as the Constitution provides, but "all powers related to the
government are denied him."

The nature of the debate on the draft Constitution, in
both the House of Representatives and the House of Peers,
indicated that many Diet Members were deeply perturbed
at the way in which the draft sought to undermine the
Emperor system. There was no feature of the new Consti-
tution which aroused anything like the same interest or
concern. Tokujiro Kanamori, the Minister of State in
charge of the Constitutional debate, found himself in
constant difficulties. His last line of defense in the face
of conservative critics was the curious argument that,
because the Emperor and the people were really one
and always had been, sovereignty continued to reside in
the Emperor, as well as the people, for the two were one
and inseparable.

Whether ,the new Constitution brings about a real, and
not merely a temporary, legal change in the Emperor's
position depends at bottom upon the seriousness with

Japanese Instruments of Control 53

which the Japanese people regard this document. The
draft which the Japanese Government presented to the
Diet bore all the marks of Western political ideas and a
very strong American influence. There was no doubt that
most educated Japanese regarded it as alien to the Japanese
spirit. Premier Yoshida repeatedly warned the Diet that
it was essential to adopt the Government's draft "in the
exigencies of the present international situation" and "be-
cause of the feelings of the Allied countries." He begged
the Diet to remember that "the Japanese Government,
because of its present position, is subject to restrictions on
its policies." He insisted that the new Constitution did
not, despite appearances, mean a sharp break with the past.
It was not to be assumed that it brought democracy to
Japan for the first time. The charter oaths of the Emperor
Meiji fully expressed the spirit of democracy. The new
Constitution simply expressed it in a new form. Above all,
it did not mean any change in the "national character,"
and the national character meant that the Emperor, who
comes of the imperial line, "unbroken for ages eternal,"
still forms the center of the unity of the people.

I think it was significant that the day the Japanese Gov-
ernment chose for inaugurating the Constitution, which
was to strip the Emperor of all political power and
separate religion from the state, was Meiji Day, and that
the Emperor's first act that day was to report on this strange
event to his ancestors at the three main shrines in the
Palace precincts. Later a great rally of citizens was or-
ganized on the Imperial Plaza. After the crowd had lis-
tened below the Palace to speeches by political leaders
explaining the significance of the new Constitution, the
national anthem was sung. Suddenly the imperial carriage
was seen crossing the bridge over the moat. The Emperor
was arriving. The crowd shouted itself hoarse in a fever
of devotion. Allied newspapermen present told me they

g 4 Japan Enemy or Ally?

had never heard such banzais since the death charges of
the war. When, after two minutes, the Emperor withdrew,
the crowd surged after him, treading many underfoot in
their excitement. Priests beat their drums to ward off evil
spirits. For hours afterwards the crowd filed over the dais
for the honor of treading where the Emperor had trod.

Since early 1946, the Emperor has visited a number of
prefectures outside Tokyo. He usually appears in slightly
threadbare civilian clothes, and moves about in a shy way,
as though he were perpetually startled. The reports of his
exchanges with the common people seem to the Westerner
to be strangely drab and meaningless. Yet these appear-
ances have aroused turbulent and overwhelming popular
enthusiasm. It is often necessary for the Occupation forces
to come to the aid of the Japanese police to protect the
Emperor from the consequences of his subjects' reverence.
In whatever way open to him, Hirohito seems anxious to
foster and maintain a sense of national unity and tradition
amongst the Japanese people. It is the custom each year
for him to prescribe a subject for a poem for the Imperial
New Year Poetry Competition. For the New Year of 1946
the subject selected was "Snow on the Pine." The people
were thereby invited to contemplate the tree they loved
so much, the tree which bends under the winter's burden
of snow, but never breaks. The Emperor himself wrote a
verse appealing to the people to emulate the pine tree.

It is difficult for the foreign observer to assess the im-
pact of these changes in the position and habits of the
Emperor on the minds of the Japanese people. So far as
I could discover, when the Emperor disclaimed divinity,
this created an immense impression in Allied countries
but hardly any impression in Japan. Experts on Japan
have pointed out that divinity means something quite dif-
ferent to the Japanese from what it means to Westerners.
Moreover, the educated Japanese never took the doctrine

Japanese Instruments of Control 55

of imperial divinity with literal seriousness. It is well to
remember that in Japan it is considered good form for a
public speaker to end his address, no matter how eloquent
and able it may have been, with an apology to his audience
for having wearied it with so many stupid ideas, presented
in such halting and stumbling words. It is, therefore, pos-
sible that many Japanese regarded the Emperor's dis-
claimer as a superlative example of the self-deprecatory
statement that is part of good manners in Japan.

It is my strong impression, despite all efforts at democ-
ratization, that the Emperor is still the political sovereign
and still the Son of Heaven in the hearts and minds of
the overwhelming majority of the Japanese people. I
think it probable that his real political power is even
stronger than before the war. He is all the Japanese people
have to hold on to. They have lost their empire and their
fighting forces. The wartime political leaders are dis-
credited by failure. The Emperor alone remains. He is the
divine ruler, who preserves their national unity and who
will restore that leadership among nations that has been
temporarily lost through the blundering of their generals
and the overwhelming material resources of the United
States.

The Japanese are an adaptable people, with a great
facility for compromise. It may be that they will come to
think of the Emperor in much the same way as the British
people have come to think about the King. But an attempt
to graft a Western concept on an Eastern mind is a ticklish
operation. I think it useful to remember the circumstances
in which the Emperor was restored to dignity and power
in 1868. The Satsumo and Choshu dans engineered the
restoration and set out to persuade the people that the
Emperor was divine and infallible, because they felt that
this was the most likely means by which they could assert
and maintain supremacy over other rival dans. The Em-

5 6 Japan Enemy or Ally?

peror system was to be the facade behind which they ruled
Japan. We need to be wary today lest those conservative
groups that are so anxious to protect the Emperor system
are not merely hoping to exploit the Emperor's new
human and democratic attributes in the same way that the
Satsumo and Choshu clans tried to exploit the Emperor
Meiji's divine attributes. A feudal system could hardly
have a more acceptable front than a human and democratic
Emperor.

Cabinet and Parliament

If the new Constitution strips the Emperor of all po-
litical authority, it is in order to give to a Cabinet respon-
sible to a freely elected Diet supreme executive power.
It is through the Japanese Government that General Mac-
Arthur has ruled Japan, and it is likely to remain an
indispensable instrument of Allied control after the peace
settlement. A great deal will, therefore, depend on the
political outlook and capacity for leadership and organiza-
tion possessed by Japan's leaders.

In this chapter I shall discuss only the Yoshida and
Katayama Governments. They have been the product of
free Parliamentary elections. The earlier post-surrender
Governments had been too obviously tainted by their war-
time inheritance to be adaptable to political life under the
Occupation.

The election of April 10, 1946, was a notable event.
SCAP had already produced striking changes in the po-
litical scene. The Great Japan Political Association, which
claimed 377 out of 466 Members of the House of Repre-
sentatives at the time of the surrender, had been dissolved
in August 1945, The "Purge Directive" of January 4,
1946, had ordered the abolition of all ultra-nationalist
societies, and had debarred about 200,000 persons from

Japanese Instruments of Control 57

public life. Consequently, only about 50 Members of the
former House of Representatives were able to stand in the
election of April 1946. The more conservative parties were
particularly hard hit by the purge. Meanwhile the Com-
munists had been freed from prison and the Communist
Party was given full freedom to organize and campaign.
Women had been given the vote and the right to stand
for Parliament. The voting age had been reduced from
25 to 20. In all these circumstances, it was natural that
the election should have aroused world-wide interest. Yet
polling day was remarkably free from excitement or
drama. The impression I formed in the polling booths I
visited in Tokyo was of quietness and order. Men and
women moved through the booths in endless lines and
seemed to be performing a drab routine according to in-
structions. The Emperor and General MacArthur wanted
them to vote, and so, of course, they voted. I saw no
faces shining with a sense of exhilaration at this new free-
dom. Yet the conditions of polling were undoubtedly quite
new. There were no police or officials to exercise open
intimidation. No charges of improper pressure on the
voters were brought to SGAP's notice by any parties or
defeated candidates. It would be unrealistic to suppose that
there were no such pressures. But this was, nevertheless,
certainly the freest election in Japan's history.

Voting was not compulsory, yet polling was heavy by
American or British standards 78.5 per cent of the men,
67.1 per cent of the women enrolled. The election pro-
duced a House of Representatives with the following dis-
tribution of parties: Liberals, 140; Progressives, 93; Social
Democrats, 92; Cooperatives, 14; Communists, 5; Minor
Parties, 38; Independents, 8*. The Liberals and Progres- .
sives, despite their names, were the most conservative
parties in Japan. Neither party was either liberal or pro-
gressive by British or American standards. The differences

58 Japan Enemy or Ally?

between these Right-wing parties were mainly due to
group and personal rivalries. The Social Democrats avow
socialist objectives. The party is sharply divided into Right
and Left wing. About three-quarters of the Social Demo-
crat members of Parliament belong to the Right wing, and
seemingly regard socialism as part of the theory, rather
than the practice, of politics. Nearly all the Independents,
and most of the members of the minor parties, could be
safely classed as conservative. Hence, despite the increase
in the number of Social Democrats from 17 to 92, free
elections produced a Diet that was fundamentally con-
servative. This was recognized by SCAP, which summarized
the election results as follows:

In general terms the basic issue may be discerned between
the older political forces, chiefly represented by the Progressive
and Liberal parties, and the new element, represented by the
Socialists and Communists. All parties recognized the need for
change. The Progressives and Liberals would limit the scope
and temper, while the Socialists and Communists would move
more rapidly towards fundamental reforms. Seen in this light,
the election represents a victory, possibly temporary, for the
more conservative forces in Japanese civilian life. 2

After six weeks of party maneuvering, the Yoshida Cabi-
net was installed on May 22, based on a coalition of Lib-
erals and Progressives. Mr. Shiguru Yoshida was an out-
standing member of the Japanese group of intellectuals
commonly described before the war as "liberals." There
was a widespread absence of enthusiasm for the new Cabi-
net. Most of its members were aging and weary men (their
average age was 61), retrieved from obscurity because more
able and vivid figures were either unwilling to accept re-
sponsibility at this time or had been debarred from office
by the purge directive. It soon became apparent that this
Government could hardly provide the united leadership,

* Summary of Non-Military Actwitiw, April 1946.

Japanese Instruments of Control 59

initiative and vitality so badly needed to remake Japan.
Yet nothing in the election appeals of the Liberal or Pro-
gressive parties had foreshadowed quite how nerveless and
hesitant, nor quite how conservative the Yoshida Cabinet
would prove to be.

The basic weakness in the Yoshida Government's policy
was that it was unwilling or unable to impose direct con-
trols over productive resources. At the end of the war Japa-
nese industry was in a run-down condition. Capital equip-
ment had deteriorated through lack of maintenance and
some had been destroyed in air raids. Production of key
raw materials had been falling for two years. It was essen-
tial that capital equipment should be reconstructed and
repaired and the output of basic raw materials revived, as
the necessary basis for any permanent recovery. This was
particularly so in the coal industry, where mines and plant
had been badly overworked. Transport equipment, such
as railway rolling stock, was also in a poor state. Industrial
efficiency generally was at a low ebb.

Such a program required the mobilization of all avail-
able resources, and would only have been possible with the
strictest control over the distribution of raw materials, the
rationing of major consumption goods and the prohibition
of unessential production. On the financial side, balanced
budget, high taxation and control over wages and prices
would have been necessary. It was a case of husbanding
Japan's scarce resources for the rebuilding of its industrial
machine. Individual initiative was weak. There was, there-
fore, a strong case for the Government's taking over the
control of certain basic industries, not necessarily perma-
nently, to mobilize resources for their reconstruction where
ordinary commercial incentives might have been too weak
and uncertain a motive.

For the first two or three months after the surrender the
Government's authority was weak, and little in the way of

60 Japans-Enemy or Ally?

firm control could have been expected. Early in 1946, how-
ever, especially after the general election, conditions were
more favorable, and an attempt might have been made to
exert firm control to avert the dissipation of valuable re-
sources in production which would not contribute to per-
manent recovery, and to provide a basis for effective finan-
cial controls.

The Yoshida Government, however, did not take this
opportunity, but placed its faith in the operation of ordi-
nary commercial incentives within a framework of limited
and weakly-applied controls and in its own financial policy,
The effect of this policy was to provoke inflation and to
delay industrial reconstruction by allowing resources to be
drawn away from the basic and essential consumption goods
industries to unessential production.

The Yoshida Government's policy mainly expressed the
economic philosophy of Mr. Tanzan Ishibashi, the Finance
Minister, who was a firm believer in free enterprise, and
appeared to put complete trust in the adequacy of the
profit motive in all circumstances.

Meanwhile, the American economists in GHQ were in
private becoming increasingly alarmed at the Japanese Gov-
ernment's incapacity to control the worsening economic
situation. Yet in public the representatives of GHQ con-
tinued to compliment the Yoshida Government on its as-
pirations and achievements. However, by March 1947, after
the Yoshida Cabinet had for ten months been showing that
it had neither the will nor capacity to do what was necesr
sary, General MacArthur staged a personal intervention of
a surprising and significant kind. On March sa he wrote to
Mr. Yoshida; at the Allied Council meeting of April 2 he
not only asked for advice ou the best way to stabilize wages
and prices, his Chief of Staff, Major-General Paul Mueller,
sent a Minute to the Council, which elaborated the thesis

Japanese Instruments of Control 61

of the MacArthur letter, and Dr. Sherwood Fine, the senior
economist in GHQ, gave the Council his views of the eco-
nomic situation and what the Government should do to
meet it.

General MacArthur's letter was courteous and restrained,
but made it quite clear that GHQ was deeply dissatisfied
with the Japanese Government's failure to take essential
steps to protect and restore the economy. After discussing
food as an example of the need for more effective Govern-
ment action, the letter went on:

At this time I wish to call to your attention Directive No. 3,
which I issued to the Imperial Japanese Government on Sep-
tember 22, 1945. This directive made it the responsibility of
the Japanese Government to maintain a firm control over
wages and prices, and to initiate and maintain a strict ration-
ing program for essential commodities in short supply, as well
as to ensure that such commodities are equally distributed. It
is imperative that the Japanese Government carry out this re-
sponsibility to the Japanese people. The Allied Powers, of
course, are under no obligation to maintain, or to have main-
tained, any particular standard of living in Japan, nor is there
any responsibility to import foodstuffs to meet deficits arising
from the failure of Japan to assure the just and efficient dis-
tribution of its own food supplies.

The food problem, though basic to the peaceful reconstruct
tion of Japan, is not an isolated phenomenon, but is on the
contrary only one part of the over-all problem of economic
stabilization which includes the additional factors of increased
production of raw materials and industrial products, stabilized
wages and prices, maximum exports, and sound public finance.
By the same token, black marketing of food and failure to
realize full collections are only two manifestations of general
maldistribution. These problems are so inextricably interwoven
that it is not practical to think in terms of a solution for one
independent of the others. What is required is an integrated
approach across the entire economic front Accordingly, it is
essential that the Japanese Government, through the Economic
Stabilization Board, which was created for this purpose, take
early and vigorous steps to develop and implement the inte-

62 Japan Enemy or Ally?

grated series of economic and financial controls which the cur-
rent situation demands. 3 These economic objectives are na-
tional in scope, transcending the special interests of any group,
and, therefore, should be non-partisan. Unless determined
measures are undertaken at once by the Japanese Government,
the inflationary condition of the economy, together with its
attendant maldistribution of food and other necessities, will
become increasingly serious, industrial recovery will be fur-
ther retarded, and the achievement of the social and political
objectives, toward which the Japanese people have made such
an encouraging start, will be endangered.

The social and economic welfare of Japan will depend largely
on Japan's own efforts in the redirection of its human and nat-
ural resources to peaceful living, and upon competent public
administration of democratic and effective economic controls.
Aid to Japan cannot be expected upon a scale sufficiently great
to overcome maldistribution and inflation within Japan. Out-
side assistance is contingent upon full utilization of indigenous
resources, which is entirely a responsibility of the Japanese
Government.

In explaining the situation to the Allied Council, Dr.
Fine expressed more bluntly GHQ's dissatisfaction. He
said, inter alia:

As indicated in our partial staff study, we are not without
experience in trying to effectuate economic controls with the
Japanese Government responsible for implementation. How-
ever, we are forthright in admitting that we are quite dissatis-
fied with the results realized. 4

The overt intervention by General MacArthur and senior
officers of GHQ was significant for two reasons: it was a
public statement of SCAP's dissatisfaction with its main

My Italics.-W. M. B.

* Minutes of Allied Council for Japan, sgth Meeting, p. 15. It was
at this meeting of the Allied Council that, after giving my fullest support
to the line taken in General MacArthur's letter, I said that the Chief of
Staffs Minute was "a most disquieting record of continuous failure."
The context should have made it quite dear that I was referring to the
continuous failure of the Japanese Government, not the continuous failure
of General MacArthur, as reported in a section of the press.

Japanese Instruments of Control 63

and indispensable instrument for pursuing the aim of the
Occupation the Japanese Government; and it was an un-
equivocal statement of SCAFs belief that in the existing
situation it was essential that "free enterprise" 'should be
replaced by a directed economy.

It may be worth while to speculate why SCAP delayed
so long in rebuking the Yoshida Government for its inac-
tivity and instructing it to take firm and comprehensive
control measures. One reason may have been the tendency,
which I repeatedly noticed, of the senior soldiers in GHQ
to try to shield the Supreme Commander from gaining offi-
cial knowledge of what was unpleasant. Being untrained
themselves in economics or public administration, these
officers may have failed to appreciate the seriousness of the
economic trends, and, therefore, failed to give due weight
to the warnings of those civilian subordinates who were
well aware of what was going on. It may have been, too,
that General MacArthur was reluctant to instruct the Japa-
nese authorities to carry out the sort of policy that would
be difficult to harmonize with his own "individualist" out-
look on economic questions, even though the controls he
directed were only to meet a temporary emergency. Finally,
it was normally the considered policy of SCAP to avoid
publicity in putting pressure on the Japanese Government.

To make a sound appraisal of the Allies' chosen instru-
mentthe Japanese Government it is very important to
remember SCAP's deliberate decision, after the issue of the
basic directives in the first months of the Occupation, nor-
mally to guide and control the Japanese authorities behind
closed doors. To forget this may mislead us seriously, for
we may assume that a number of liberal and reform meas-
ures sprang from Japanese initiative, not from the advice
or direction of GHQ. And this would often give us a false
picture of the outlook and aspirations of Japan's political
leaders. We should appreciate the solid and disinterested

64 JapanEnemy or Ally?

reason that made General MacArthur decide to do good
by stealth. One of his primary tasks was to educate the
Japanese in the habits of responsible government. That
meant they must respect the authority of their freely-elected
Parliament and the Cabinet responsible to it. The Gov-
ernment would almost certainly lose face if the people
came to regard it merely as a body set up to take orders
from SCAP. Moreover, if the Government's policies were
ostensibly the expression of its own will it might be ex-
pected to make greater efforts to administer them efficiently
than if they were publicly recognized as SCAP decisions.
Lastly, some future Japanese Government might find it
easier to repudiate the reforms during the Occupation if
they could be stigmatized as the mere imposition of the
conquerors' will. For all these reasons, SCAP's direction
of the Japanese has normally been carried out secretly.
GHQ officers have tried to persuade and induce, rather
than compel. Yet the Japanese have recognized that Gen-
eral MacArthur has force in reserve, and they have, there-
fore, shown sensible compliance. Explicit disagreement or
overt opposition have been excluded from the tactics of
resistance.

When all has been said in favor of private pressure against
public compulsion, it is a technique possessing certain dis-
advantages and dangers. SCAP's hand is never completely
concealed. The Japanese political leaders know what hap
pens and they tend to discuss freely in private, sometimes
with resigned good humor, sometimes with bitterness, their
subservience to "requests" of GHQ. The sense of respon-
sibility which General MacArthur has been trying hard to
inculcate does not seem to develop. Instead die Japanese
atutu4e is, "Well, let's leave it to SGAP. SCAP will de-
cide anyhow, so let us not worry too much about it at
present."

Japanese Instruments of Control 65

During the course of a Diet session the officers of GHQ
would industriously work out drafts of desirable legisla-
tion in many fields. As the session wrangled along its
course, it would be observed that the tempo of legislation
was slow. There would be insistent prodding by GHQ.
And in response the Diet would "process" at breakneck
speed a series of measures which sometimes bore in every
line the mark of American authorship. Once these meas-
ures had been made law, the Japanese Government tended
to feel that it could relax again. Perhaps it realized that
it is not legislation, but administration, that gives life to
a law.

The chief danger of the policy of concealing SCAT
pressure is that it may seriously mislead some Allied peace
makers in their decisions on the sort of controls that
should be established after the settlement. Anyone who
relied exclusively on the official reports of the activities
of the Japanese Government and Diet under the Occupa-
tion would have immense difficulty in reaching a true
view of the outlook of these bodies. In conformity with
the policy of concealed pressure, these reports record a
number of liberal and reform measures in a way that
implies they were spontaneous. "After a free and compre-
hensive debate the House of Representatives, by almost
unanimous vote, adopted the following amendment to the
Bill." Or, "Despite its previous disagreements, the Cabinet
at yesterday's meeting reached complete agreement on the
measures it should take."

It is perhaps not desirable to give prominence to specific
instances, but anyone officially associated with the Occupa-
tion knows that on many important occasions the "una-
nimity" in the Diet or the "final agreement" in the
Cabinet was the simple result of a firm instruction issued
privately by SCAP, sometimes on his own initiative and

66 Japan Enemy or Ally?

sometimes in carrying out an explicit directive from
Washington.

It may be thought that, in emphasizing the difficulties'
that have faced SCAP, and that are likely to face the
future Allied control body, in working through a Japanese
Government, I am failing to give due credit to Japanese
cooperation or to recognize the liberal-mindedness of
some of Japan's postwar leaders. I try to avoid that error
of judgment. I met and had very happy social relations
with Mr. Yoshida and some of his senior colleagues. Mr.
Yoshida himself has a fine record of resistance to the
"militarists." I am sure that he and his close associates
sincerely desire good relations with the United States and
British Commonwealth. I can express my feelings towards
the significance of men like Mr. Yoshida and Mr. Ashida
and Mr. Katayama and their "liberal" trend by quoting
three passages from a chapter entitled "Japanese Liberals"
from Japan in Defeat: 5

(i) Perhaps in every country motives of patriotism come first.
It is probably wrong to speak of, say, a French statesman as a
friend of England; he is, first and foremost, a French states-
man, but one who is susceptible to the argument that good
relations with Britain are conducive to the interests of France.
This is true in a far higher degree in Japan, since patriotism
is for the Japanese a religion in itself. A European statesman
is aware of the brotherhood of man, of the principles of right
and wrong, universal in their application, and has an abstract
sense of justice, before which all men are alike. He may not
always act upon these principles. He may turn them to the
patriotic end in view, but he is aware of them and influenced
by them the whole time. The Japanese, on the other hand,
have little conception of right and wrong as standards by which
the conduct of all mankind is judged; to them whatever con-
duces to the greater glory of Japan is right. The Japanese
statesman is, therefore, unencumbered by the scruples which

Japan in Defeat. Report by a Chatham House Study Group. Oxford
University Press, N. Y. and London, 1945,

Japanese Instruments of Control 67

beset European statesmen. He comes direct to the point and
means to achieve the end are justified, provided they show
some probability of success.

(2) The decade following the last war, therefore, saw the
emergence in Japan of democratically-minded statesmen. Such
statesmen were picked for their sincere advocacy of democracy
by the committees behind the scenes, and, in particular, by the
Genro, in order to try out this experiment. The scene to be
presented to the world was to be in conformity with the pre-
vailing democratic lines. The facade was to be democratic; the
interior was, at the same time, to remain true to Japanese tra-
ditional conceptions. The politicians themselves were probably
sincere, but they were manipulated and never did they sink
the aims of Japan in visions of the brotherhood of man or the
comity of nations. They attempted to see how democracy would
work; they attempted to probe the possibilities of peaceful
penetration, as opposed to military aggression.

(3) It is highly probable that the Japanese will dress their
window at least partially in democratic fashion. Liberal ele-
ments will be of use; they will be used. Their influence will
not be as individuals, but as instruments. Once again this will
not necessarily imply a change of heart, but only a change of
dress. The frock coat will replace the military tunic, but the
body will remain the same.

It would be a mistake to assume that all, or most,
Japanese postwar political leaders are liberals. Indeed, the
election of April 1946 and the formation of the Yoshida
Cabinet both revealed how men who were previously as-
sociated with the militarists still held powerful places in
Japan's politics. In these free elections, Ichiro Hatoyama,
the President of the Liberal Party, received a greater
plurality of votes than any other candidate, and his party
became the leading party in the new Diet. Shidehara, the
retiring Prime Minister, decided to recommend Hatoyama
as the new Prime Minister, and Hatoyama accordingly had
a preliminary audience with the Emperor. But already
some pertinacious Allied newspapermen had been investi-
gating Hatoyama's antecedents. Their reports prompted

68 Japan Enemy or Ally?

GHQ to make enquiries and then to disqualify Hatoyama
from public life. 6

It was surely interesting that a man with Hatoyama's
record should have been the most successful candidate and
most successful party leader at the first free elections in
Japan.

After his disqualification, Hatoyama continued to take

*The directive barring Hatoyama, dated May 3, gave the reason for
his removal as follows:

"i. Under the memorandum of January 4, 1946, 'Removal and Exclusion
of Undesirable Personnel from Public Office' (SCAPIN 550), the Japanese
Government was directed to disqualify any candidate for the Diet who
had deceived and misled the people of Japan within the spirit and letter
of that directive.

"s. After the election on April 10, 1946, the Central Liaison Office was
informed that the eligibility of one Ichiro Hatoyama (member-elect of the
House of Representatives from the First Electoral District, Tokyo), to hold
any public office being open to doubt in the light of evidence published
subsequent to his screening by the Japanese Government, it was expected
that his eligibility would be re-examined by the Government forthwith.

"3. The Japanese Government, having failed to act on its own respon-
sibility, the* Supreme Commander for the Allied Powers has determined
the facts relative to Hatoyama's eligibility and finds that he is an un-
desirable person within the meaning of paragraphs i and 5 of Category
G,' Appendix 'A/ SCAPIN 550, in that:

"a. As Chief Secretary of the Tanaka Cabinet from 1927 to 1929, he
necessarily shares responsibility for the formulation and promulgation
without Diet approval of amendments to the so-called Peace Preservation
Law, which made that law the Government's chief legal instrument for
the suppression of freedom of speech and freedom of assembly, and made
possible the denunciation, terrorization, seizure and imprisonment of tens
of thousands of adherents to minority doctrines advocating political, eco-
nomic and social reform, thereby preventing the development of effective
opposition to the Japanese militaristic regime.

"b. As Minister of Education from December 1931 to March 1934, he
was responsible for stifling freedom of speech in the schools by means
of mass dismissals and arrests of teachers suspected of 'Leftist' leanings
or 'dangerous thoughts/ The dismissal, in May 1933, of Professor Taki-
gawa from the faculty of Kyoto University on Hatoyama's personal order
is a flagrant illustration of his contempt for the liberal tradition of aca-
demic freedom, and gave momentum to the spiritual mobilization of
Japan, which, under the aegis of the military and economic cliques, led
the nation eventually into war.

"c. Not only did Hatoyama participate in thus weaving the pattern of
ruthlesa suppression of freedom of speech, freedom of assembly and free-
dom of thought, but he also participated in the forced dissolution ol
former-labor bodies. In addition, his endorsement of totalitarianism,
specifically in its application to the regimentation and control of labor,

Japanese Instruments of Control 69

an active "unofficial" interest in politics and consulted
privately with Cabinet Members.

When Mr. Yoshida was forming his Cabinet he asked
Chuzo Iwata to be Minister for Justice and Shiroshi Nasu
Minister of Agriculture. SCAP barred both men for their
past militarist activities. It was not until many months
later that several other of Yoshida's Cabinet colleagues
were dismissed from office under the Purge Directive,

is a matter of record. His recommendation that 'it would be well* to
transplant Hitlerite anti-labor devices to Japan reveals his innate antipathy
to the democratic principle of the right of labor freely to organize and
to bargain collectively through representatives of its own choice. It is a
familiar technique of the totalitarian dictatorship, wherever situated, what-
ever be its formal name, and however be it disguised, first to weaken and
then to suppress the freedom of individuals to organize for mutual benefit.
Whatever lip service Hatoyama may have rendered to the cause of par-
liamentarianism, his sponsorship of the doctrine of regimentation of labor
identifies him as a tool of the ultranationalistic interest which engineered
the reorganization of Japan on a totalitarian economic basis, as a pre-
requisite to its wars of aggression.

"d. By words and deeds, he has consistently supported Japan's acts of
aggression. In July, 1957, he traveled to America and Western Europe as
personal emissary of the then Prime Minister Konoye to justify Japan's
expansionist program. While abroad, he negotiated economic arrange-
ments for supporting the war against China and the subsequent exploita-
tion of that country after subjugation. With duplicity, Hatoyama told
the British Prime Minister in 1937 that 'China cannot survive unless
controlled by Japan,' and that the primary motive behind Japan's inter-
vention in China involved the 'happiness of the Chinese people.'

"e. Hatoyama has posed as an anti-militarist. But in a formal address,
mailed to his constituents during the 194* election, in which he set forth
his political credo, Hatoyama upheld the doctrine of territorial expansion
by means of war, referred to the attack on Pearl Harbor as 'fortunately
... a great victory/ stated as a fact that the true cause of the Manchuria
and China 'incidents' was the anti-Japanese sentiment (in China) instigated
by England and America, ridiculed those who in 19*8 **<* *9*9 had
criticized the Tanaka Cabinet, boasted that that Cabinet had liquidated
the [previous] weak-kneed diplomacy toward England and America/ and
gloated that 'today the world policy drafted by the Tanaka Cabinet is
steadily being realized.' This identification of himself with the notorious
Tanaka policy of world conquest, whether genuine or merely opportun-
istic, in and of itself brands Hatoyama as one of those who deceived and
misled the people of Japan into militaristic misadventure.

"4. Accordingly, in view of these and other considerations not herein
recited, the Imperial Japanese Government is directed to bar Ichiro Hato-
yama from membership in the Diet and to exclude him from Government
service, pursuant to SCAPIN 550," GJELQ, Summation, May 1946.

fjo Japan Enemy or Ally?

including Yoshinara Kawai, Minister for Education;
Tanzan Ishibashi, Minister of Finance; Keinosuke Zen,
Head of the Economic Stabilization Board; and Tsunesiro
Hiratsuka, Minister for Transportation. The Democratic
Party, which replaced the Progressive Party in March
1947, and later came into the Katayama Coalition Gov-
ernment, met a serious reverse in the first weeks of its
life when several of its most influential leaders were
barred under the purge. The new party was formed on
March 31, and by the end of April half of its Supreme
Committee had been disqualified under the purge for
their past activities or associations. The purgees were
Yoshinari Kawai, Ken Inukai, Wataru Narahashi, and the
Secretary-General, Takeshiga Ishigure. It may well be
that the purge has sometimes been used by the Japanese
screening committees for party purposes, and that some
of the purged politicians have records no worse than those
who have escaped disqualification. Some of the purgees
may have come to regret their past policies. It is still
significant that so many prominent political leaders of
the Occupation period should be considered by GHQ or
the Japanese Government's Screening Committee dis-
qualified from public office owing to their past ultra-
nationalistic or militarist activities. This strongly suggests
that the historical continuity of the Japanese political out-
look has not been broken. And it must be remembered
that these men who have been purged have not been
imprisoned or exiled. They usually remain active and
influential behind the scenes. In Japan most important
political decisions are made behind the scenes.

The Katayama Government

By the end of 1946 it was becoming clear that the
authority of the Yoshida Government had become pre-

Japanese Instruments of Control 71

carious. It was the target for new assaults from three
directions: from the political parties in Opposition, from
the trade unions, and from the press.

Until December 17, 1946, the Social Democrats, the
leading Opposition party, with 99 House seats, maintained
a tacit truce with the two Government parties. The
liberals (with 148 seats) and the Progressives (with 111)
had an absolute majority in a House of 464 members,
but they, nevertheless, seemed to rely greatly on the tem-
porary immunity the Social Democrats had granted them.
However, the Social Democrats brought the truce to an
abrupt end on December 17, when their leaders in Parlia-
ment launched a no-confidence motion that was synchro-
nized with street demonstrations demanding the immediate
resignation of the Cabinet. The Social Democrats' attacks on
Yoshida have been eagerly supported by the Cooperative"
Democrats, with 45 House seats.

In a New Year's Day broadcast, Yoshida expressed the
view that labor disputes were fomented by lawless and
irresponsible union leaders; that Japan could not survive
without help; and that the Allies would hardly desire to
continue to help an economy disrupted by strikes. This
broadcast exacerbated the union resentment against the
Premier and his Cabinet, and this resentment was built
up into the threat of the "general" strike on February i.

The more influential newspapers, which appeared to
reflect moderate opinion, rapidly became more critical
of the Yoshida Government. In a Nippon Times editorial
it was stated that Yoshida's New Year's Day broadcast was
"bound to enrage the labor elements" and that "the trend
of the Yoshida Government to wage battle from a de-
cidedly conservative position, therefore, seems unmistak-
able" (January 9). The Mainichi, the Asahi, and the
Tokyo Shimbun, with other papers, had been attacking

72 Japan Enemy or Ally?

the Yoshida Cabinet for its impotence and incapacity, its
lack of good faith and its conservatism.

Faced with this widespread hostility, Yoshida made
repeated attempts to broaden the base of his support. In
particular, he attempted, with the persistent private en-
couragement of GHQ, to form a coalition with the Social
Democrats. The last effort to get Social Democrat col-
laboration failed on January 29. The Social Democrats
insisted on the resignation of Ishibashi, the Finance
Minister, as the first prerequisite for a coalition. Yoshida
refused to sacrifice Ishibashi. The following day, January
30, Mainichi made the following comment on this situa-
tion:

It is clear that the position of the Finance Minister now is
next in importance to that of the Premier, and it is only nat-
ural that this post should become an important issue. But the
fact that the final key to the political situation should now rest
with the question of the Finance Minister* cannot fully be ex-
plained merely by saying that his post is important. The prob-
lem goes deeper than that. Why are the Liberals and Progres-
sives ready to defend a Finance Minister, even at the risk of
inviting a political crisis? And why are the Socialists concen-
trating their attack on that one point?

To put the matter in a nutshell, the struggle now going on
is an offensive and resistance between the class that is profiting
from the present inflation and the one that is suffering from
it. This is the crux of the matter. We see no need of expound-
ing a theory of inflation here, but it should be noticed that in-
flation is decidedly profitable for capitalists and decidedly dam-
aging to the working class. But it is clear that the main props
of the Yoshida Cabinet are the capitalist class. From such a
point of view, Finance Minister Ishibashi is the god of the
dass that is profiting from the inflation.

On January 31 Mr. Yoshida announced a Cabinet re-
shuffle, which was primarily a shift further to the Right
Meanwhile trade union militance had reached its highest
point in the plan for a "general strike" on February i. It

Japanese Instruments of Control 73

seemed that some four million workers might be involved.
This project was killed by General MacArthur's direct
order. But nothing could give life or power to the Gov-
ernment. Then, on February 7, General MacArthur wrote
to Mr. Yoshida that there should be a fresh general elec-
tion soon after the close of the Diet session.

April 1947 was a month of elections. The Japanese
people went to the polls four times during the month: to
elect local governors, mayors and village chiefs; to elect
the new national House of Councilors, which was to
replace the House of Peers; to elect local legislators, and
to elect a hew House of Representatives. Naturally most
interest centered on this last election. 7

Its most striking feature was the success of the Social
Democratic Party, which increased its members from 98
to 143, and became the first party in the House. Four
weeks later Mr. Tetsu Katayama was elected Prime
Minister by the Diet, and by June i after five weeks of
party maneuvering formed a coalition Cabinet, based on
the support of the Democrats and the People's Coopera-
tives.

General MacArthur made two significant comments on
these events. On April 27 he issued a statement on the
general result of the elections. He pointed out that they
were the last in preparation for the new Constitution,
which reflected "one of the great spiritual reformations
of mankind." He went on to say:

7 Election of House of Representatives, April 25, 1947:

Gain or Loss

Social Democrats 145 +45

Liberals - 13* 8

Democrats (former Progressives) 126 19

People's Cooperatives ..., 5 1 3*

Communists ...., 4 2

Minor Parties ' 18 +14

Independents 12 -j- 3

Total 466

74 JapanEnemy or Ally?

The basic issue before tie electorate was a selection between
political philosophies. That of the totalitarian extreme Right
had already been discredited and rejected for its responsibility
for war and defeat and long suppression of the rights and
liberties of the masses. On the other hand, that of the extreme
Left, the Communistic philosophy, was still the issue, with its
leaders strongly bidding for the popular support. Since the in-
ception of the Occupation, when thousands of its adherents
were freed from the stern suppression of prison cells, this phi-
losophy and its leaders had been given the fullest liberty and
freedom of political action in open and fair competition with
democratic forces and beliefs. It thus had its full chance, and
on the merits has failed. The Japanese people have firmly and
decisively rejected its leadership and overwhelmingly have
chosen a moderate course, sufficiently centered from either ex-
treme to ensure the preservation of freedom and the enhance-
ment of individual dignity. 8

On May 24 the Supreme Commander made the follow-
ing comment on Mr. Katayama's election as Prime
Minister:

It is significant, too, from a broad international viewpoint
that three great Oriental countries now have men who embrace
the Christian faith at the head of their Governments Chiang
Kai-shek, in China, Manuel Roxas, in the Philippines, and
Tetsu Katayama, in Japan.

It bespeaks the steady advance of this sacred concept, estab-
lishes with clarity and conviction that the peoples of the East
and West can find common agreement in the spirituality of the
human mind and offers hope for the ultimate erection of an
invincible spiritual barrier against the infiltration of ideologies,
which seek by suppression the way to power and advancement.
This is human progress. 9

^Summation of Non-Military Activities in Japan, April 1947. It seems
likely that one of the reasons why the Communist Party lost some electoral
support was that at this time the Truman doctrine was arousing intense
interest in Japan. The opponents of Communism took every opportunity
to drive it home that Japan could only expect American aid to the extent
that she was a bulwark against the spread of Communism from East Asia.
* Summation of Non-Military Activities in Japan, May 1947.

Japanese Instruments of Control 75

The Katayama Government not only had the sympathy
and moral support of SCAP, but at the beginning ap-
peared to have a wide support among the people. Yet it
was already clear, on its formation, that it would not be
able to carry out a socialist policy, and that it was doubtful
whether it would be able to set up and enforce the
economic control measures so urgently needed.

Despite the electoral success of the Social Democrats,
they were heavily outnumbered in the Diet. They held
only one-quarter of the seats, and clearly conservative
groups outnumbered them two to one. Indeed, the Social
Democrats were in a minority of one in the Cabinet itself,
in which they had eight members, the Democrats seven,
and the Cooperatives two. Moreover, the other elections
of April, particularly those for the executive heads of local
governing bodies, had generally been conservative vic-
tories, though in the local elections conservative candi-
dates often ran as "independents." This meant that any
radical control measures which the National Government
might launch would be administered throughout the pre-
fectures, cities and villages by officials who, in the
majority, were conservatives and bureaucrats.

In any case, the circumstances in which the Katayama
Government was formed seemed to preclude it from the
outset from effecting the firm and comprehensive controls
which SCAP had told Mr. Yoshida were essential. Mr.
Katayama was only able to scrape a Cabinet together by
publicly jettisoning most of the radical and distinctive
planks of his party. The Liberal Party had refused to
support him unless he excluded all Left-wing members
not merely from the Government, but from the party.
Mr. Katayama was not able to agree to that, for, although
the Left-wingers were perhaps less than a quarter of the
Social Democrats' Diet strength, they gave the party its
plurality. He did exclude them from the Cabinet.

tjQ Japan Enemy or Ally?

On May 12 the Social Democrats had adopted a six-
point program to which both wings subscribed. It pro-
vided for a "state-controlled economy" and "democratic
state control of vital key industries." It was noteworthy
that it did not include the suspension of interest on state
bonds or the freezing of the new yen, two measures which
the party had previously sponsored. The Social Democrats
were clearly prepared to compromise in the effort to lead
a Government. The Cooperatives responded by urging
that key industries should be state-controlled "only when
necessary." The Democrats supported the Cooperatives in
this. Under pressure, the Social Democrats compromised
further. They explained that the key industries to be
controlled included only coal, steel, fertilizer, shipping
and electric power. They had no intention of nationaliz-
ing banking or insurance, or of putting them under state
management. At last, in a desperate effort to get leader-
ship in a Coalition Cabinet, the Social Democrats agreed
with the Liberals, Democrats and Cooperatives to a ten-
point "policy agreement." The Social Democrats agreed
that there should be state management of key industries
"only when necessary to effect a concentrated industrial
policy for increasing production," that there should be
financial controls "only when necessary," that the new
yen would not be frozen or blocked, and that interest
payments on war bonds should not be suspended. It will
be seen that the Social Democrats had to water down their
policy to an extent that made it hardly distinguishable
from the policy of their conservative opponents. It was
more like capitulation than compromise.

The subsequent history of the Katayama Government
is easily understandable if these circumstances of its origin
are borne in mind. The story of its frustrated efforts to
control critical materials, the black market and inflation
is again a story of how projects, begun in compromise,

Japanese Instruments of Control 77

ended with capitulation. Perhaps the history of the Tem-
porary Coal Mines Control Bill gave the clearest proof
that the Katayama Government was powerless to do what
it originally set out to do, and what, to many non-political
observers, it seemed necessary to do if Japan were not to
come near to economic collapse.

. During the Occupation the shortage of coal has held up
the whole program of industrial recovery. Coal was nearly
as important to the Japanese as food. To increase produc-
tion was a primary and urgent task for the Katayama
Government. It realized this, for, on June i, it announced
its intention to put the coal industry immediately under
state control as an emergency measure. After long wran-
gling between the, three Government parties, and major
concessions by the Social Democrats, the Cabinet reached
agreement on a Draft Bill on August 10. But this met
with stiff opposition from the mine owners, who suc-
ceeded in forcing several amendments protecting their
interest. At last, the BUI was brought down on September
25 and at once referred to the House of Representatives
Mine Industry Committee, made up of nine Social Demo-
crats, nine Democrats, eight Liberals, two Cooperatives,
one member of the Dai Ichi Club, and one of the Farm-
ers' Party. The conservatives had a big majority on this
Committee, and it was not surprising that it rejected the
whole measure. The Government then attempted to by-
pass the Committee by referring the Bill back to the
House. The debate there produced repeated disturbances,
described by the Japanese press as "pandemonium" and
"hooliganism." The pandemonium produced further
amendments, and the Bill was passed by the House of
Representatives on November 25 and the House of Coun-
cilors on December 8. But it was not to come into opera-
tion for six months, and the Social Democrats had agreed
to so many amendments, pressed on them by their con-

7 g JapanEnemy or Ally?

servative colleagues, all directed to weaken the control
provisions, that its final passage seemed pointless. A
Nippon Times leading article seemed to size up the situa-
tion accurately:

In name it provides for state control of the coal mines. In
fact, however, it has been so watered down as to mean practi-
cally nothing. From the very first the Social Democrats, de-
spairing of getting any legislation passed which would establish
full Governmental control over the coal industry, drew up a
Bill full of compromises designed to win the adhesion of the
Democratic Party. But the inability of the Democrats to make
up their minds caused the Social Democrats to seek to lure
them with more and more concessions, until, as the result of
the deals of the last few days, the Bill has reached a form in
which virtually nothing remains of its original characteristics. 10

The struggle over coal control set the general pattern
of the Social Democrats' difficulties. The conservative
parties always called the last tune. These parties depended
for their support on the classes who were profiting by the
inflation. The wage and salary earners that had voted for
the Social Democrats, in the hope that they would improve
their lot, became steadily disillusioned. It was, therefore,
not surprising that, by the end of 1947, the Katayama
Government found itself in a precarious position. Mr.
Katayama's dismissal of Rikizo Hirano from his post of
Minister for Agriculture and Forestry widened a split
within the party. On January 6, 1947, sixteen Right-wing
members of the Diet left the Social Democratic Party.
This threatened the party plurality in the Diet. Mean-
while, the Asahi Public Opinion Poll for December
showed that the Katayama Government was rapidly losing
popular support. Of those polled, only 15.9 per cent
supported the Government, while 53.1 per cent opposed
it, and 31 per cent were undecided. In its early days the

M Nippon Times, November 15, 1947.

Japanese Instruments of Control 79

Government had had the support of over 50 per cent of
those who took part in these polls. 11

In this discussion of the Yoshida and Katayama Gov-
ernments, I have been attempting to show the immense
difficulties that faced SGAP, in using them as instruments
of social-economic reform. Th Yoshida Government was
unwilling, and the Katayama Government unable, to take
any decisive steps to transform a feudal economy into a
welfare economy.

The Diet

Though the Diet has staged some able debates, it has
in general been a confused and ineffective body. The
initiative has always been in GHQ, SCAT, or in the
Cabinet, and Parliament has mainly been a disquieting
mirror of party and personal feuds, with feverish bouts
of "processing" measures, which it has not seriously
examined or debated. Again, to quote from a leading
article from the Nippon Times: **

Barely meeting its midnight deadline Tuesday night with no
more than one minute to spare, the first Diet session to be held
under the new Constitution has finally brought its long de-
liberations to a dose. For those who axe interested in records,
this Diet session stands out as a notable historical event. Not
only was it the first Diet to be held under the new Constitu-
tion, its session was the longest in the Parliamentary history of
the nation. It disposed of more than 130 Bills, the largest num-
ber of Bills to be acted upon by any Diet in Japanese history.
It received more petitions than any previous Diet It passed the
largest budget in the history of the nation. It engaged in more
extended debate, necessitating more voluminous records of its
proceedings, than any other Diet in the nation's history.

But these records, while interesting, are not the most signifi-
cant facts about this session of the Diet To the average citizen,

11 The Katayama Government resigned on February 10, 1948,
^Nippon Times, December ij, 1947.

g Japan Enemy or Ally?

despite all the "firsts" and other records, this Diet has left the
impression of unprecedented disorderliness and ineffectiveness.
Although the Diet passed a record number of Bills, the over-
whelming proportion of the Bills was presented by the Cabinet
and did not initiate with the Diet itself. It is true that the
Cabinet was slow in presenting many of these Bills, but the
Diet was even more dilatory in handling them; and, after
seemingly interminable and futile wrangling, they were then
hurriedly rammed through at the eleventh hour under Gov-
ernment pressure.

Even more distressing is the fact that for several days virtual
pandemonium prevailed in the Diet chambers, when there
should have been dignified and enlightening deliberation. Even
in the less disorderly meetings, the frequent noisy heckling
made it apparent that many of the Diet Members considered
the Diet as a place for partisan demonstrations, rather than a
place for deliberating on the highest affairs of the nation as a
whole. The disorderliness of the Diet session, which received
much unfavorable publicity, both at home and abroad, has left
the average citizen with the impression that the new Diet, if not
an outright failure, is at least nothing to be particularly proud
of. Some may even have doubts, judging from this perform-
ance, as to whether Japan is really capable of operating demo-
cratic political institutions successfully.

The article goes on to list achievements to the Diet's
credit, and concludes:

All in all, therefore, the achievements of the first Diet session
must be considered as being more than reasonably creditable.
There is much that should be improved about the Diet, but
the Diet certainly does not present itself as a hopeless problem.
It is to be hoped that the Diet, which has now technically gone
into its second or regular session, will profitably make use of
the past extraordinary session as a point of departure for prog-
ress and improvement.

It is doubtful, however, whether the Diet, or the
Cabinet, is the repository in fact, and not only in form,
of political power. It seems more likely that the real hold-
ers of power in Japan today keep behind the scenes as

Japanese Instruments of Control 81

far as possible. In the last quarter of 1947, just after I had
left Japan, a great press publicity was given to "revela-
tions" about the existence of a "hidden government/'
which worked behind a "black curtain." It seemed to me
unfortunate that these stories should have been so highly
dramatized and taken the form of a "revelation." They
can only have been that to superficial observers who had
been led to believe that, under the Occupation, the
Japanese people had suddenly abandoned habits ingrained
for hundreds of years.

In Japan, more than in most countries, the most im-
portant deliberations and decisions take place behind
the scenes. In Japan, as in all countries suffering from
acute shortages and inflation, groups of black marketeers
seek to exploit others without scruple. To do this effec-
tively on a national scale considerable organization is
necessary. It is also highly desirable, if the black mar-
keteers are to prosper, that every effort be made to corrupt
politicians and public servants. Japan is not the only
country in which this sort of thing happens; it is simply
that the social habits of the Japanese provide an atmos-
phere that fosters this sort of extralegal or illegal organiza-
tion. The oyabun-kobun system is a very old and basic
feature of Japanese life. It was inevitable that GHQ
should find it an obstacle to "democratization." That
presumably explains why Colonel Kades, Deputy-Chief
of the Government Section of GHQ, decided in October
1947 to try to arouse public opinion against the oyabun-
kobun system. Colonel Kades is reported to have said that
every Japanese political party received most of its funds
from secret organizations. A more detailed description
of GHQ's concern with this system was published on
November 27, 1947. Mr. Howard Handleman, the Far
East Bureau Manager of International News Service,
reported, inter alia:

gg Japan Enemy or Ally?

SCAP officials' meeting on September 12 reported the fol-
lowing instances of oyabun-kobun activity:

"Industry Division. Oyabun activity has disrupted produc-
tion and hampered distribution of critical industrial materials
into black-market works. The black market provides much of
the funds on which the system exists. Oyabun have sent their
men into the coal mines of Kyushu to terrorize miners on the
job. Oyabun organize construction companies, obtain contracts
for Occupation work and buy construction materials from
themselves at inflated black-market prices. The Government
pays.

"Anti-Trust and Cartels Division. Oyabun hold monopo-
listic control in the field of construction and among stall ven-
dors. In Tokyo alone there are 45,000 street stall vendors, all
of whom must pay exorbitant rents, dues, service charges and
even official city taxes to the oyabun. Most street stalls are on
public sidewalks, owned by the city, but the vendors must pay
rent to the oyabun. The division said information has been
obtained showing connection between the oyabun in this field
and certain of the political parties; that ranking oyabun. have
run for public office in large numbers of cases; that the oyabun-
kobun system extends into all types of construction, transpor-
tation and other industries.

"Collect Taxes. Finance Division: Oyabun collect taxes for
the Government. Officially they receive two per cent of their
collections. Unofficially they receive much more, as they pay
the Government on an estimate basis, which assumes that only
half the street stalls, for instance, operate each day.

"Government Section. 'Our investigation indicates extra-
governmental controls are exercised by a number of political
oyabun upon the National Government, both in the Diet and
in the Ministries, and also upon local governments/

"Labor Division. In 1946 American authorities found 20,000
enslaved Japanese working coal mines in Hokkaido, under
guard day and night. Under American prodding, the slave-labor
gangs were broken up. Labor Division said, 'Apart from the
slave-labor system, the oyabun control the black-market rice
aad use it as an economic weapon to force new kobun to join
and organize and remain out of any labor union. 1

"Eighth Army Procurement.-'The cost of Occupation [to
the Japanese Government] has been increased materially, due

Japanese Instruments of Control 83

to the fact that no inquiry has been made into the cost o pro-
curement of materials by the contractor/ It is dear, it was
repeated, that no inquiry was made, because of the link between
the gangsters, turned contractors, and the political bosses, who
get both economic support and the votes of the kobun by their
work with the contracting oyabun.

"Stevedore Monopoly. Transportation Section: It was found
that every port in Japan has a stevedore monopoly, organized
by oyabun.

"Natural Resources Section. Both on land and sea the
oyabun-kobun relationship is the rule. Landlords customarily
were the oyabun, who controlled village politics and the all-
important agricultural society, which controlled fertilizer, ra-
tioning and marketing. The land reform law, designed to limit
the area of any farm to the amount the owner and his family
can cultivate, has tended to break the system on the farm, al-
though it is still strong. Oyabun-controlled associations hold
wide fishing rights, forcing individual fishermen into the in-
ferior kobun position.

"Public Safety Division, G-2. Gangs in the cities are divided
into three groups gamblers, strong-arm men and street-stall
associations. 'The police are severely hampered by the fact that
the kobun are often well armed, and because political pressure
often prevents effective police action. Furthermore, the police
are involved, being paid off by the system. In many cases, the
only way that the police can arrest a criminal at large in an
area controlled by an oyabun is to ask the oyabun to turn over
the criminal. Detailed investigations indicate the oyabun-kobun
system extends into politics, controls black market activities,
controls the price of every-day commodities, controls the flow
of goods through regular channels, and performs local govern-
mental functions in the issuance of licences and the collection
of taxes. 18

I think it impossible for Allied officers in Japan to assess
with any accuracy the strength and significance of "under-
ground" organization. There are too few officers with a
mastery of the language to make possible the study o
more than a few small patches of Japanese life. There is

18 Nippon Times, November 27, 1947.

8 4 Japan Enemy or Ally?

the traditional reluctance of Japanese, however friendly,
to take foreigners into their confidence on "purely
Japanese" questions.

The military government teams are more closely in
touch with what is actually happening in the prefectures
and villages of Japan than any other group of Occupation
officers. GHQ must rely mainly on their reports for its
knowledge of how the directives issued in Tokyo affect
the lives of ordinary people. These teams contain many
intelligent and enthusiastic people, and in some areas they
are doing good and notable work. But in number and in
training the military government teams, through no fault
of their own, find themselves quite unequal to their task.
Military government has a total strength of about 3,500
Americans. That means that each American military
government officer or enlisted man is responsible for the
surveillance and supervision of over 30,000 Japanese. Few
of these officers have more than a nodding acquaintance
with the language, and most teams, therefore, rely on local
Japanese for all interpretation and translation. This places
an extraordinarily heavy strain on the interpreter's
loyalty to his American employers. It would not be surpris-
ing if patriotism and the ties that bind him to his relatives
and local leaders sometimes produced an elastic linguistic
conscience. Most members of the military government
teams have had little or no previous experience in prob-
lems of government, and there is a very high rate of turn-
over in their ranks. During 1946 the rate of replacement
was reported to be about 90 per cent.

In these circumstances, it is clear that "revelations"
about the Japanese underground are exceedingly hard to
check with any precision. It must, however, be accepted
that powerful underground organizations exist, and that
tteir activities enormously complicate Allied efforts to
control Japan through the established Japanese Govern-

Japanese Instruments of Control 85

ment. For the Government's power is everywhere limited
by these "hidden" forces.

The Bureaucracy

In the political life of Japan, from the Restoration of
1868 until the surrender of 1945, power was never the
monopoly of a single group or organization. There was
nothing, even in the war years, to parallel the one-party
rule that existed in Germany under the Nazis or Italy
under the Fascists. Final decisions in Japan were the
product of the prevailing distribution of power between
four groups the armed forces, loosely called the mili-
tarists; the big business interests, the Zaibatsu; the
political parties; and the bureaucrats. The Emperor was
the fulcrum round which these groups revolved. Changes
in policy could be traced to shifts in the continuously
changing balance of these four bodies.

The Tojo period was one in which the militarist group
enjoyed unusual strength, but, even at the height of his
power, Tojo was compelled to make concessions to the
other three elements, temporarily subordinate in the
national coalition. The place of the bureaucrats in this
four-power system was always strong. The Japanese public
service has often been likened to a feudal guild for its
exclusiveness and for the iron discipline it exercised over
its members. Its responsibility to its political heads was
generally nominal; it had its own policy, directed to
strengthening its own entrenched interests; its senior
members usually held key Cabinet posts, where they
jostled for position with the other three groups. 14

General MacArthur was aware that this feudal state
machine, if left to itself, could sabotage all reforms. Its
old rivals had fallen on evil days. The militarists were

i* See the excellent article, "Japan as a Political Organism,' 9 by T. A.
Bisson, Pacific Affvirs, Vol. XVH, No. 4.

86 Japan Enemy or Ally?

largely discredited and their organizations dissolved. The
Zaibatsu was forced to lie low. The political parties were
rent with discords. This might be the great opportunity
for the bureaucrats to achieve unchallenged predomi-
nance. And, in fact, I think, of all the four former groups,
the bureaucrats have undoubtedly had most success in re-
taining their power. It could hardly have been otherwise.
It is true that the purge has skimmed off most of those
senior public servants who had blatantly and overtly
supported Japan's ultra-nationalism and aggression. But
the purged officials are only a small percentage of the
public service. The whole process of government would
have been brought to a standstill if the purge had been
applied too drastically. 15

GHQ has sponsored ambitious and comprehensive
measures for the reform of the bureaucratic system;
among them is the decision to abolish the Home Ministry
and decentralize administration. Some of these measures
have already been "processed" by the Diet and are now
law. But the Japanese have the gift of postponing, for
"regrettable, unavoidable and unforeseen circumstances,"
the carrying out of these reforms. And they have a gift
for "democratizing" an institution by changing its name
and reshuffling its personnel without changing its nature.
Hence the real reform of the public service is likely to
be one of the toughest tasks of the future.

Conclusion

To sum up these reflections on the Japanese instru-
ments of Occupation policy: It was decided that we should

December 10, 1947, the Japanese Government announced that
the public service purge could be regarded for all practical purposes as
completed by December 7. Central and local screening committees had
exsumned the records of 663,989 officials and "designated 6,965 as falling
under the purge directive." (Nippon Times, December 11, 1947)

Japanese Instruments of Control 87

use the Emperor and the Japanese administrative ma-
chinery and, mqst important, that SCAP should control
Japan, not by direct military government, but through
the Japanese Cabinet Since April 1946, the Cabinet has
had the majority support of a Diet elected by universal
suffrage. But both free elections in April 1946 and April
1947 have produced strong conservative majorities. The
conservative parties have won their support from the in-
dustrialists and businessmen, from farmers and fishermen,
from the black marketeers and from those who have assets
to sell. These are the people profiting from the inflation.
Such people stubbornly resist the introduction of eco-
nomic controls which would deprive them of their chance
to exploit the present situation. It is easy to say that
General MacArthur should force the Japanese Govern-
ment to adopt the control measures necessary for economic
efficiency and social justice. But no Japanese Government
has been able or willing to put such measures into effect.

The decision to work through a freely-elected Japanese
Government has been the main key to the Occupation.
It is likely to be equally important after the peace settle-
ment. It may, therefore, be worth while to examine the
implications of this decision more carefully. These im-
plications can be brought out clearly by considering the
problem that has faced SCAP, in its efforts to provide food
for Japan.

When I arrived in Japan in April 1946, this food ques-
tion appeared to be the major problem facing GHQ and
the Japanese Government. It was repeatedly stated that
millions of Japanese were faced with the threat of starva-
tion between April and September. On April 27, 1946,
the Economic ?md Scientific Section of GHQ issued a
report in which it estimated that for the five months,
May-September, there would be only enough indigenous
food to give the rationed population (about 44 million),

88 Japan tinemy or Ally?

from both official and unofficial sources, an average of
471 calories a day. Yet it was believed necessary to provide
a minimum of 1,550 calories a day to prevent disease and
unrest, which would endanger the Occupation forces and
frustrate the purposes of the Occupation. On the basis
of these estimates, SCAP requested authority to import
2,600,000 tons of food in rice equivalents. The Japanese
Government had asked for imports of over three million
tons.

In actuality, because of world shortages, only about
600,000 tons of rice equivalents were imported from May
through October. This was less than one-quarter of the
quantity SCAP had requested. But it seems clear that
throughout this period the average consumption by the
rationed population was between 1,500 and 1,800 calories
a day. The greatest shortage was in August and Tokyo
was one of the most poorly supplied areas, yet a SCAP
report, "Food Situation During the First Year of the
Occupation," estimated that average consumption in
Tokyo in August was 1,828 calories a day.

This food question shows clearly the three great dif-
ficulties and dangers produced by SCAP's dependence
on the Japanese Government. First, GHQ has to rely on
the Japanese Government for its information. Japanese
official statistics are notoriously inaccurate. This is partly
due to inefficiency, but in many cases there are excellent
reasons for deliberate concealment or falsehood. There
was a strong temptation to farmers to underestimate their
production, since whatever stocks they could hold back after
delivering their quota to the Government could be eaten
l>y their own families, used for barter, or sold at very
high black-market' prices. There was a strong temptation
for the Government to underestimate home production,
TO the effort to get large imports. And GHQ was forced
to work ofc the Japanese figures, because, at least in 1946,

Japanese Instruments of Control 89

it did not have the resources to make any effective in-
dependent survey of the indigenous food available.

By 1947 the small, but very efficient, Natural Resources
Section of GHQ was in a much better position to detect
falsities in Japanese reports, but was still dependent on
these reports in many ways. The colossal errors in die
SCAP estimate of the food situation in 1946 remain an
outstanding example of the risks involved in relying on
Japanese official information.

Second, the food question shows the frustrations in-
volved in depending on the Japanese Government's ad-
ministrative machinery. In 1946 there was enough home-
produced food in Japan to avert any starvation if the food
produced had been properly collected and equitably dis-
tributed. It would be foolish to expect full efficiency and
justice. Japan is not the only country with a black market,
or where farmers try to evade Government controls. Yet
this maldistribution of the available food was so gross that
it was hard to credit the Japanese Government with even
a reasonable minimum of efficiency and earnestness in its
food administration.

Thirdly, when SCAP, in its desire to avert disease and
unrest, due to food shortages, imported food from the
United States for distribution by the Japanese Govern-
ment, it was unavoidable that it should thereby give
political aid to the conservative forces on whidi the
Government relied for its existence. Food shortages irre-
spective of the cause produce political unrest. The mass
demonstrations in Tokyo in May 1946 were clamors by
city wage-earners for more food.. The distribution of im-
ported food helped the Government to avoid some of the
political penalties of its own inefficiency. Food is a po-
litical weapon. We must have an established authority for
the control of Japan, If we decide that this authority shall
be a duly-elected Japanese Government, then we must

go Japan Enemy or Ally?

protect that Government's authority. And if, for whatever
reasons, the Government depends on conservative forces
for its continuance, we cannot support the Government
against 'lawlessness" without thereby indirectly support-
ing the conservatives against their political opponents.

4- DEMILITARIZATION

IN TOKYO IN THE SUMMER OF 1947 1 WAS TALK-
ing privately with an American general about Australia
and Japan. He was anxious to know, for one thing, why
Australia seemed to be having difficulty in providing
Japan with the quantities and types of wool she had asked
for. I was trying to explain Australia's difficulties, when
my friend cut in sharply. "When, for Pete's sake, will you
seven million Australians realize the importance of hav-
ing seventy million allies in this country?" The general's
views were dear-cut and logical. He felt that Australia
was thinking and acting as though it were still 1945, not
1947. He deplored the two years' time lag. In 1945 Japan
was a hated and still-dangerous enemy. In 1947 it was the
general belief that there was only one enemy, the Soviet
Union. He could not quite understand Australia's slow-
ness in adapting herself to the changed situation.

I believe that we must face the question the general put
if we are to be realistic about security in the Pacific. We
must be clear whether we still hold to the objectives we
stated in 1945, or whether, in the light of the changing
situation, we want to amend or abandon them. What pre-
cisely do we mean by the demilitarization of Japan, and
what exactly do we want to do about it? This question
has three sides. First, physical or material demilitariza-

91

g2 Japan Enemy or Ally?

tion, which includes the demobilization of the Japanese
armed forces and the destruction or removal of arms and
ammunition. Second, economic demilitarization, depriv-
ing Japan of primary and secondary war industries. It is
clear, for example, that during the iggo's the feverish de-
velopment of the steel and shipbuilding industries was
mainly for war purposes, and unnecessary to provide the
peaceful needs of the Japanese people. Third, there is the
problem of moral or psychological disarmament. Do we
want a Japan that is not merely temporarily unable to
make war, but also permanently unwilling to make war?

Physical Demilitarization

We seemed to be quite clear about what we wanted in
1945. In the Potsdam Declaration it was agreed in para-
graph 9 that "The Japanese military forces, after being
completely disarmed, shall be permitted to return to their
homes with the opportunity to lead peaceful and produc-
tive lives." In the United States Initial Post-Surrender
Directive it was provided in Part I (b) that "Japan will be
completely disarmed and demilitarized . . ." and in Part
III that "Disarmament and demilitarization are the pri-
mary tasks of the Military Occupation and shall be car-
ried out promptly and with determination. . . . Japan is
not to have an army, navy, air force, secret police organi-
zation or any civil aviation. Japan's ground, air and naval
forces shall be disarmed and disbanded, and the Japanese
Imperial General Headquarters, the General Staff and all
secret police organizations shall be dissolved. Military and
naval material, military and naval vessels and military
aud naval installations, and military, naval and civilian
aircraft shall be surrendered and shall be disposed of as
required by the Supreme Commander." Let me first give
my impressions of the progress of this program.

Demilitarization 93

Demobilization

The demobilization of the Japanese fighting forces has
on the whole been carried out very smoothly and effi-
ciently by the Japanese High Command. This work was
at first entrusted to the First (Army) and Second (Navy)
Demilitarization Ministries. Early in 1946 it was seem-
ingly felt that the retention of these Ministries was un-
desirable, even though their ostensible purpose was now
restricted to demobilization. In June 1946 they were re-
placed by a Demobilization Board, with Mr. Shidehara, a
civilian, as head. The Demobilization Board, however,
was divided into two bureaus. The first was headed by
Yoshio Kamitsuki, the former First Mobilization Vice-
Minister, and the second by Vice-Admiral Minoru Maedo.
In October 1947 SCAP made a further change in this or-
ganization. The Second, or Navy, Bureau was abolished,
since the demobilization of sailors had been Virtually
completed, and the work of the First Bureau was trans-
ferred to the Welfare Ministry.

These organizational changes were an interesting ex-
ample of the way in which it was so readily assumed dur-
ing the Occupation that a change of name meant a
change of nature. It has been pointed out in several meet-
ings of the Allied Council by General Derevyanko that
the officers in charge of demobilization were former high-
ranking General Staff officers. These officers seemed to
carry on their work unperturbed by the changes in the
names of their organizations. It was natural and inevitable
that SCAP should rely on senior staff officers to demobi-
lize the Japanese fighting forces. I think it highly prob-
able, nevertheless, that the admirals and generals who
demobilized their forces so smoothly will have taken every
care to ensure that immobilization may be carried out with
equal smoothness, if this should become practicable or

g^ Japan Enemy or Ally?

necessary. Some of the members of these demobilization
bureaus were under suspicion for war crimes, and many,
if not all, consistently sabotaged the efforts of Allied pros-
ecutors to pick up war crimes suspects. It may have indi-
cated some uneasiness in SCAP about the activities of the
demobilization bureaus that, in directing the abolition of
the Second Bureau, SCAP ordered the Japanese Govern-
ment to "undertake a complete and comprehensive study
and survey ... of all boards, bureaus and agencies of the
Japanese Government now engaged in, or charged with,
responsibility for demobilization, repatriation, investiga-
tion or research of matters pertaining to the war or per-
sons serving or connected with Japanese military organi-
zations.

During 1946 it was reported that the destruction of
Japanese arms and ammunition had been completed.
There can be little doubt that this work was carried out
effectively insofar as it was directed to destroying Japan's
actual military resources. It has since become clear, however,
that the Japanese authorities have astutely evaded SCAP di-
rectives on the disposal of large quantities of army stores.
It was only in November 1947 that GHQ officers became
aware of the secret disposal, through illegal channels, of
something like 100 billion yen worth of war goods which
had been accumulated during the war in Osaka arsenal, Ja-
pan's largest war goods depot. This discovery was given
great prominence in the Japanese press, and was described
as "the biggest scandal in Japanese history." It is further
evidence of the way in which GHQ, through shortage of
skilled personnel, was unable to keep itself informed
about the actual course of events in Japan.

Demobilization was closely linked with repatriation. At
the time of the surrender there were more than three mil-
lion servicemen, and another three million Japanese civil-
ians, abroad. The repatriation of these people was carried

Demilitarization 95

out with great promptitude and efficiency. The United
States provided the ships, and they were mainly operated
by the Japanese. I would fully concur with the official
claim that this repatriation has been one of the most effi-
cient mass migration movements ever organized. There
has, however, been one major difficulty. Russia seemed
very reluctant to release .the Japanese, nearly a million in
number, whom they held in custody in North Korea,
Manchuria and Eastern Siberia. This provided fuel for
bitter exchanges in the Allied Council between the Amer-
ican and Russian members. However, in December 1946,
Russia agreed to send these people home at the rate of
50,000 each month. This undertaking seemed to be car-
ried out satisfactorily until December 1947, when Russia
announced that it would be necessary to suspend repatri-
ation for about four months, owing to the climatic con-
ditions in the northern ports. The Soviet authorities
reminded SCAT of a clause in the agreement of December
1946, by which both parties reserved the right tempo-
rarily to suspend repatriation if unforeseen circumstances
arose.

It was inevitable that the Soviet announcement should
have aroused SCAP's indignation and suspicion. SCAP
pointed out that in the winter months of 1946-47 Russia
had apparently not experienced the same climatic diffi-
culties in carrying out the program. General MacArthur
offered to send ice-breakers to the Soviet's northern ports
to make a path for the repatriation ships, and alterna-
tively suggested that the repatriates might be brought to
warm-water ports. He pointed out that there were still
more than 800,000 Japanese in Soviet-controlled areas,
and he undertook to provide the means for bringing them
back to Japan in five months. This offer was coldly re-
ceived by the Soviet representative in Tokyo.

This repatriation question is actively exacerbating

o6 Japan Enemy or Ally?

American-Russian relations. SCAP officers claim, and, I
believe, on good evidence, that the Soviet authorities are
trying to indoctrinate selected groups of Japanese in their
custody with militant Communist convictions, in the hope
that when they return home they will sow the seeds of
Communism throughout Japan. In an effort to meet and
control this movement, GHQ has called in the help of
former members of the Kempeitai and Japanese secret
police to help them in "processing" repatriates. Naturally,
the Japanese Government is gratified that American au-
thorities should value the collaboration of their own ex-
perts in maintaining a common front against Communist
infiltration. The Japanese are well aware that, while
American Intelligence Officers concentrated their atten-
tion during the early months of the Occupation on the
investigation of Japanese suspected of militarism or ultra-
nationalism, by 1947 these officers were almost wholly pre-
occupied with the investigation of Communist activities.

Economic Demobilization and Reparations

In Paragraph XI of the Potsdam Declaration it was
provided that "Japan shall be permitted to maintain such
industries as will sustain her economy and permit the ex-
action of just reparations in kind, but not those which
would enable her to rearm for war." In the Initial Post-
Surrender Policy the economic demilitarization of Japan
was laid down in Part IV:

The existing economic basis of Japanese military strength
must be destroyed and not be permitted to revive.

Therefore, a program will be enforced containing the fol-
lowing elements, among others: the immediate cessation and
future prohibition of production of all goods designed for the
equipment, maintenance or use of any military force or estab-
lishment; the imposition of a ban upon any specialized facili-
ties for the production or repair of implements of war, includ-

Demilitarization 97

ing naval vessels and all forms of aircraft; the institution of a
system of inspection and control over selected elements in Japa-
nese economic activity to prevent concealed or disguised mili-
tary preparations; the elimination in Japan of those selected
industries or branches of production whose chief value to Japan
is in preparing for war; the prohibition of specialized research
and instruction directed to the development of warmaking
powers; and the limitation of the size and character of Japan's
heavy industries to its future peaceful requirements, and re-
striction of Japanese merchant shipping to the extent required
to accomplish the objectives of demilitarization. The eventual
disposition of those existing production facilities within Japan,
which are to be eliminated in accord with this program, as be-
tween conversion to other uses, transfer abroad, and scrapping,
will be determined after inventory. Pending decision, facilities
readily convertible for civilian production should not be de-
stroyed, except in emergency situations.

The Far Eastern Commission's Basic Post-Surrender
Policy, published June 19, 1947, gives substantial support
to the aims of 1945.

This program presented the Allies with several nice
problems. At what level should the Japanese economy be
sustained? What would be a reasonable standard of living
for the Japanese people? How were their needs to be bal-
anced against just claims for reparations? How far was it
possible to separate the industries necessary to provide
peaceful needs from those that were mainly concerned
with the provision of war potential?

The answers we give to these questions will depend
mainly not on judgments of facts, but on judgments of
value. They will be the product of our underlying moral
and political attitudes. Should we try to sustain Japan's
economy at a level that will only allow Japanese to exist,
or at a level that will enable Japan to make important
contributions to the economic development of East and
Southeast Asia? And how are we to balance the needs of
the Japanese against the needs of the Chinese or Siamese?

g 8 Japan Enemy or Ally?

What the Japanese need will depend on what we want
them to do. If they are to staff "the workshop of East
Asia" they will need much more than if they are merely
to have a subsistence economy. The role we assign to Japan
will depend in turn on how we think our own national in-
terests can best be served in the Far East.

Until the end of 1945 Allied thinking about economic
disarmament and reparations was greatly influenced by
wartime emotions. It seemed just and desirable to transfer
a number of Japan's industrial plants, particularly in pri-
mary and secondary war industries, to the countries which
her armies had devastated. This would serve the double
purpose of disarming Japan and helping restore the
damaged economies of countries like China and the
Philippines. It was in this atmosphere that the Pauley
Reparations Commission carried out its work in Japan in
November-December, 1945. After a quick survey of Japa-
nese industry, Mr. Pauley recommended a comprehensive
program of interim reparations removals, including the
following:

(1) Half the capacity for manufacturing machine tools.

(2) All equipment in army and naval arsenals, in the air-
craft industry, in ball- and roller-bearing industries and
in plants making aircraft engines.

(3) All equipment and accessories in 20 shipyards, if not
needed to repair shipping essential to the Occupation.

(4) All steel capacity over 2.5 million tons a year.

(5) Half of coal-burning electric plants.

(6) All contact-process sulphuric acid plants, four large sol-
vay process soda-ash plants, and 20 out of 41 large modern
plants for caustic soda.

(7) All capacity for producing magnesium and alumina and
for reducing alumina to aluminum (except facilities for
processing scrap) and all finishing mills.

These recommendations were carefully studied by the
Far Eastern Commission. Its deliberations produced two

Demilitarization gg

main sets of policy decisions. First, it reached an agree-
ment on certain questions of principle. It agreed that the
peaceful needs of Japan should be defined as the level of
production necessary to give the standard of living that
was enjoyed by the Japanese people during the years
1930-34. It designated 1950 as the year in which the Japa-
nese might reasonably be expected to recover this stand-
ard. The FEG went on to lay down rules for selecting in-
terim reparations. First preference was to be given to
primary and secondary war industries. Priority should be
given to plants owned by Zaibatsu concerns. In this way,
reparations and economic disarmament would help to
contribute to SCAP's program for domestic economic re-
form. Secondly, the FEC prescribed the maximum pro-
duction levels which the Japanese should be permitted to
retain in certain key industries. 1 Its findings were a good
deal more generous to Japan than Mr. Pauley's earlier
recommendations. Mr. Patdey recommended that Japan's
steel production should be limited to 2i/ millions tons a
year. The FEC would allow 31^ million tons. Mr. Pauley
provided for a Japanese merchant fleet of one and a half
million tons gross tonnage. The FEC raised this to three
million tons. Mr. Pauley would have prohibited the pro-
duction of aluminum, magnesium and ball and roller
bearings. He would have allowed 12,500 tons of nitric
acid to be produced each year. The FEC recommended
a nitric acid production limit of 30,000 tons a year, and
provided for the manufacture of limited quantities of
aluminum, magnesium and ball and roller bearings. The
FEC has carried on its deliberations under increasing pres-
sure from the United States to scale down reparations.
In 1947 Mr. Clifford S. Strike took over the study of

i Activities of the Far Eastern Commission. Report by the Secretary-
General. U. S. Department of State, Far Eastern Series 24, Washington,
B.C.

100 Japan Enemy or Ally?

the reparations question, under the auspices of the United
States War Department. It is clear that Mr. Strike decided
that the FEC had not gone nearly far enough in its down-
ward revision of Mr. Pauley's recommendations. "We
must," he has written, "in my judgment, immediately
take steps to repeal those rulings of the Far Eastern Com-
mission which make it impossible for Japan to become a
self-supporting nation." 2

It is not necessary to review reparations discussions in
greater detail to recognize that the dominant trend has
been to scale them down to the minimum, perhaps to
abandon them altogether. The United States has taken
the lead in this movement, sometimes in opposition to
protracted resistance by other Allies. During the last
twelve months authoritative statements about reparations
in American official circles in Tokyo and Washington
have all pressed the case for their reduction or abolition.
It is pointed out that, since th$ whole world is economi-
cally interdependent, the real job of the victors is to re-
store the economies of the defeated countries, in order
that they may be able once again to make their distinctive
contributions to the economic welfare of the world. In
the case of Japan, it is pointed out that much of the in-
dustrial equipment coveted as reparations is obsolescent
by Western standards and would hamper rather than help
those Allied countries anxious to develop or extend their
industries efficiently. It is pointed out that the removal of
heavy industries is uneconomic and impracticable, partly
because of the physical difficulties in their transfer and
partly because they are so closely geared to associated in-
dustries that it is impossible to regard them as independ-
ent and transferable units. The countries that clamor
most insistently for heavy industries are usually those that
lack the highly-organized industrial context which gives
a The American Magazine, September 1947.

Demilitarization 101

these industries their economic value. It is usually con-
ceded that the light industries, such as textiles, are much
easier to transfer. They are not so dependent on associated
industries, and demand less technical experience for their
successful operation. Moreover, they produce with relative
ease and simplicity the kind of consumption goods so
sorely needed by the countries of East Asia. Yet American
official opinion produces powerful arguments against the
transfer of these industries. It is pointed out that only by
an early restoration of the exports of these industries can
Japan earn the foreign exchange necessary to buy food
and raw materials. It is to these industries that the Amer-
ican taxpayer must look first if he is eager that Japan
should .repay as soon as possible her heavy bills for Amer-
ican food and commodity goods. To strip Japan of her
light industries would be to deprive her of the chance to
become solvent. Lastly, it is argued that, if we are deeply
concerned with the needs of those East Asian countries
that suffered so much from Japan's aggression, the most
effective way to help them is to enable the Japanese to
provide the things they need. If Manchuria and China
and Korea will send food and raw materials to Japan,
Japan will be able to provide them with the consumption
goods much more rapidly than they could hope to do for
themselves. It is as Asia's workshop that Japan can help
Asia most. On all these counts, then, the case for repara-
tions and for the economic disarmament of Japan should
be reconsidered.

It would be foolish to make too hasty and critical a re-
action to this trend in American opinion. It certainly
represents a significant change in American foreign policy.
In 1945 the great emphasis was on reparations and dis-
armament. Today the trend is to subordinate both to the
restoration of Japan's prosperity.

The first reason for this change is the steady worsening

102 JapanEnemy or Ally?

of Soviet-American relations during the last two years.
The second reason is the changes which have taken place
in America's relations with China during the same period,
In 1945 the Soviet Union was still an ally. Today the
whole world is divided by the clash of interests and poli-
cies between America and Russia. America's growing fear
of Russia makes her increasingly anxious to find strong
and faithful allies. In East Asia, as in Europe, the end of
the war produced an immense increase in Russia's stra-
tegical strength. Not only were her frontiers pushed east-
wards in Sakhalin and the Kuriles, but her influence in
Mongolia, Manchuria and North China steadily increased.
In Korea, the Russian and American forces glower at each
other across the g8th parallel. In these circumstances the
United States has never had greater need for a good neigh-
bor in the Far East. In 1945 it was hoped that China
would form this "point of stability/' but China has been
a tragic disappointment. Not all of America's direct aid to
China, nor the indirect aid given through such organiza-
tions as UNRRA; not all the diplomatic power of General
Marshall, whose vast projects were underwritten by Mr.
Truman; neither warnings nor inducements prevailed to
give China economic stability or political unity. And so
China has been replaced by Japan as the power which,
with American support, is assigned the task of stabilizing
the Far East. Seldom can a defeated nation have had such
an important role allotted to it so soon after its defeat.

These are issues which involve the whole world and not
only the Far East. In relation to Japan they call forth
some important observations.

It should be clearly recognized that Japan's present eco-
nomic difficulties are mainly the result of the failures of
her own Government. In comparison with other defeated
nations, like Germany, and, indeed, in comparison with
many nations that were nominally victors in World War

Demilitarization 103

II, Japan's economic position since the surrender has been
fortunate. Even during 1946 she produced enough food
in her home islands to avert starvation. If a small number
of Japanese died from starvation in 1946, that was not be-
cause there was not enough food in Japan to save them,
but because the Japanese Government has been unable or
unwilling to prevent it being recklessly consumed in the
first few months after harvest by people with unlimited
money to spend. The food crisis of the Occupation has
been mainly a crisis of distribution, not of production.
Other commodities have been equally mismanaged. At the
surrender Japan had considerable stores of consumer-foods
and industrial materials, but a big proportion of these
were illegally transferred by Army and Navy heads into
the hands of the Zaibatsu, who proceeded to sell them on
the black market. 8 At the same time, industrial produc-
tion remained at about 30 per cent of the prewar level.
This failure to produce is attributed by Japanese indus-
trialists to uncertainty about reparations and the prospects
of importing raw materials. But these uncertainties do
little to explain the general inertia and the failure to use
industrial capacity and unemployed labor in the indus-
tries unaffected by reparations. Japan's failure to make a
determined attempt to restore her economy cannot be ex-
plained in purely economic terms. Comparisons with other
countries make that clear.

There is an apparent contrast between the countries of West-
ern Europe (including Italy, also a former enemy, subject to
reparations), which came out of World War II with great
physical destruction, and in the course of little more than one
year restored their industrial production to between two-thirds
and four-fifths of the prewar levels, and Japan, whose indus-
tries have been operating for months at around 30 per cent of
their 1931-33 level, despite their more limited damage. In a

3 Cf. T. A. Bisson's "Reparations and Reform in Japan," Far Eastern
Survey, December 17, 1947.

Japan Enemy or Ally?

world economy dominated by coal shortages, it is significant
to note that on the basis of prewar levelsa one-half supply
of coal in Western European countries is maintaining a two-
thirds or four-fifths level of industrial production, whereas
Japanese industries operate at less than one-third level, despite
a two-thirds or larger supply of coal. 4

In the face of this hoarding and black-marketing of
scarce commodities, and of the hold-up of industrial pro-
duction, Japan's Governments have persisted with reck-
less budgetary policies which have greatly aggravated the
inflation.

This is the background against which we should try to
assess the Japanese complaints about the overwhelming
burden of Occupation costs, and the pleas for foreign
loans and credits. The Japanese Government has shown a
singular unwillingness to undertake the kind of internal
reforms which might have added strength to its appeals
for external aid.

For my part, I am unable to escape the conclusion that
the economic and financial policy of the Japanese Govern-
ment has been carefully calculated to frustrate the Allied
aims of 1945. The facade of cooperation and compliance
is part of this policy. The Japanese political leaders had
studied carefully the stratagems pursued by Germany after
World War I. Overt resistance was ruled out, but short of
that they were determined to make it difficult for the Al-
lies to collect more than token reparations, and to make
it unpolitic for them to persist with the program of eco-
nomic disarmament. It was a risky game to play because,
although inflation brought great immediate profit to some,
it held the risk of producing a total economic disaster. But
Japanese leaders have come increasingly to count on the
United States to protect them from that disaster. They
have come to feel sure that America's fear of Russia would

4 Frank M. Tamagna, Politics and Economics in Far Eastern Reconstruc-
tion. Institute of Paciac Relations, Paper No. 5, New York, 1947.

Demilitarization 105

force her to prevent economic collapse in Japan. The
Japanese came to feel that they were indispensable to the
United States, and could, therefore, put a high price on
their indispensability.

It would seem that Japan's leaders have been very suc-
cessful. General MacArthur's declaration of March 1947,
that they must be saved from "economic strangulation" by
the Allies, was a sign-board to victory. Mr.Clifford Strike's
conclusions and the reported proposal that Congress
would be asked in 1948 for a grant of 500 million dollars
for Japan's industrial and trade recovery, together with a
larger relief appropriation, suggested that General Mac-
Arthur's projects for Japan's restoration will be carried out.
It is important to recognize that the Japan now asking
so successfully that reparations be reduced to a minimum,
that the cost of Occupation should be pruned, that the im-
plications of economic disarmament be re-examined, that
foreign loans and credits should be given her, is in all fun-
damentals the same Japan that we knew between 1931 and
1945- Can we be sure that, in emphasizing the role of in-
dustrial leadership for which Japan is equipped, and in
helping establish her as the "workshop of East Asia," and as
the "point of stability in the Far East," we are not helping
her to re-establish that economic imperialism which in the
war years we spent so much blood and treasure in an effort
to destroy? It would be strange if the Allies, under United
States leadership, were now to help Japan achieve those
ambitions which she failed to achieve by force of arms.

I am not arguing that Japan should be kept economically
weak. It is true that an economically healthy Japan, even
a prosperous Japan, is essential to the economic health of
East Asia. It is true that access to overseas markets and raw
materials is essential to Japan's economic health, and that
the restoration of Japan's foreign trade will depend, in its
early stages, on substantial foreign credits. All this is agreed.

10 6 Japan Enemy or Ally?

The crucial question is whether, in existing circumstances,
there is any reasonable assurance that Allied economic aid
will restore economic health to Japan. Is it not more likely
that Allied concessions and credits will be used, not for the
welfare of the Japanese people, but that the old guard,
which still controls Japan's economy, will use its new re-
sources to do what it formerly did: maintain a semi-feudal-
ism at home and extend an economic imperialism abroad?
Unless internal reform is made the condition of external
aid, it is likely not only to fail in its avowed economic pur-
pose, but to enable Japan's rulers to frustrate economic and
social reforms. If SCAP has not been able to prevent the
old and the new Zaibatsu from flagrantly misappropriating
available resources for selfish and sectional advantage dur-
ing the Occupation, what precautions are the Allies taking
to prevent continued misappropriation when the Occupa-
tion is over? That is why it is dangerous to make economic
concessions and grant economic aid unless this policy is
tightly geared with an effective program of economic and
social reform. Otherwise what purports to be economic aid
to the Japanese people may be a disguised subsidy to Japa-
nese reactionaries.

Moral Demilitarization

The psychological atmosphere in Japan everywhere sug-
gests that the armed forces are not dead, but dormant. The
Japanese are acutely aware of the hostility between the
United States and Russia. This clash of interests between
the two Great Powers sets the tone of everything that hap-
pens in Japan. The restoration of the Japanese fighting
forces in some form or other is sympathetically discussed at
Allied social gatherings, and this is well known to the Japa-
nese. It was, therefore, not surprising that early in 1947 the

Demilitarization 107

Japanese Foreign Office informally sounded out Allied rep-
resentatives on the prospects of being allowed a standing
army of 100,000 men and a small air force. It is sometimes
said that the Japanese have come to hate war and their war
leaders. I think it would be more correct to say that they
hate losing a war, and are glad to repudiate the particular
military leaders they blame for the defeat It was an Eng-
lishman, Jeremy Bentham, who said that vice was a mis-
calculation of chances. The Japanese today disown Hideki
Tojo and his friends, not for being militarists, but for their
blundering miscalculation of chances.

It would probably be false to assume that Japan's present
leaders desire another war. They have too fresh a memory
of the risks. Yet they are eager to exploit the atmosphere of
war, and in particular the American fear and suspicion of
Russia and Communism. It is often remarked that Japan,
under the Occupation, has become very pro-American. I do
not believe that the Japanese at bottom are either pro-
American or pro-Russian. They are pro-Japanese. In the
present situation it is elementary common sense to play
along with the United States. Two years ago the primary
political intention was to please General MacArthur, in
the hope that Japan might thereby achieve a gentle and
short Occupation. In the last two years the emphasis has
changed, but not the aim. The primary political purpose
today is to qualify for American aid in terms of the Truman
doctrine. A senior Japanese diplomat summed up the situ-
ation this way: "Well, we Japanese have been fighting
Communism in our part of the world since 1931, and it is
nice to know that the United States is now awake up to the
importance of helping us in the job/'

It will be recalled that in the new Constitution Japan
renounces forever resort to war and abolishes forever her
armed forces.

10 g Japan Enemy or Ally?

In its preamble the Japanese Constitution declares:

Desiring peace for all time and fully conscious of the high
ideals controlling human relationships now stirring mankind,
we have determined to rely for our security and survival upon
the justice and good faith of the peace-loving peoples of the
world.

And Article IX of the Constitution reads:

War, as a sovereign right of the nation, and the threat or use
of force, is forever renounced as a means of settling disputes
with other nations.

The maintenance of land, sea and air forces, as well as other
war potential, will never be authorized. The right of belliger-
ency of the state will never be recognized.

There are two interesting questions to ask about these
parts of the Constitution: What do the Japanese feel about
them, and what do Americans, as the representatives of the
Allies, feel about them?

I think there can be no doubt about what the Japanese
feel. They do not take this renunciation of war and of
armed forces with the least seriousness. During my stay in
Japan I noticed three phases of response when, in talking
to influential Japanese, I sought their reactions. In April
or May of 1946 the reaction was usually coy and pious. "We
rely for our safety on the high ideals of the United Na-
tions." Some months later the reaction changed: "Well, it
was made clear to us that we could not have any armed
forces, and that we would win favor by Voluntarily' re-
nouncing them. That seemed the sensible thing to do." And
the last phase I noticed showed another change of empha-
sis. "Japan is of such vital strategic importance to the
United States that we can rely on the Americans to defend
us. It is, therefore, unnecessary for us to have our own
armed forces. Of course, if the United States would wish

Demilitarization log

us to share the burden of defending this area, we should be
glad to do so, provided we are granted the means."

From reports I have had since I left Japan it seems that
the Japanese attitude towards demilitarization and pacifism
has continued to harden. I think the spirit in which Tojo
and his fellow prisoners presented their defense before the
International Military Tribunal for the Far East, and the
Japanese reactions to these defense pleas, strongly suggest
that Japanese penitence is not deep or durable. One of the
most interesting sidelights on Japanese psychology under
the Occupation is the way in which the major war crime
suspects have gradually been regaining a place in public
esteem. At the opening of the major war trial in mid-1946,
the general tendency among the Japanese I met was to disr
own the accused. The Japanese were still shocked by defeat,
and it may have been a natural impulse of self-defense to
offer up the Tojo group as scapegoats. But as time went on
and relations between America and Russia grew worse,
Japanese were not so eager to repudiate their former war
leaders. Had not those leaders after all been waging a war
against Communism in the Far East since 1931? No doubt,
it was wrong and foolish of them to go to war with the
United States, but if the United States at that time failed
to appreciate the menace of Communism in East Asia, it
was hard for Japan's leaders to avoid war. That was the
trend of Japanese talk.

It was, therefore, not surprising that Tojo's defense
seemed to win a respectful response throughout Japan,
however reticent in expression. The Nippon Times, which
has close, if unofficial, links with the Japanese Foreign
Office, gave ten columns of its four-page issue on December
27, 1947, to reporting Tojo's statement. The six leading
Japanese-language dailies in Tokyo gave most of the front
page to the Tojo story and played up his contention that
the war had been one of self-defense forced on Japan. None

110 Japan-Enemy or Ally?

of these papers brought out the angle emphasized by most
Allied reporters: that Tojo's affidavit was reminiscent of
Japan's wartime propaganda. Tojo took little trouble to
conceal the note of quiet defiance. He said, inter alia:

May I reiterate that the policy of Japan, and certainly the
choice of her duly-constituted officials of state, involved neither
aggression nor exploitation. Step by step . . . our country finally
was brought face to face with stark reality, and to us, who at
that period were weighted with the duty of deciding the fate
of our nation, a war of self -existence was our only alternative.
... I believe firmly and will contend to the last that it was a
war of self-defense and in no manner a violation of presently-
acknowledged international law.

I believe that that faithfully expresses the beliefs still
held by at least ninety per cent of the Japanese people.

For some time the Japanese Foreign Office has had senior
officers engaged in formulating Japan's aims at the Peace
Conference. Towards the end of 1947 a Foreign Office doc-
ument fell into the hands of the press. This document
suggested that the northern Kuriles, which were given to
the U.S.S.R. as part of the Yalta Agreement, should be
claimed by the United Nations and put under trusteeship.
The document did not disclose whether Japan's eagerness
to join the United Nations as soon as the Treaty comes
into force was partly due to a desire to qualify as the trus-
tee for this area. The document went on to indicate that
Japan should resist by all means in her power the setting
up of any Allied Supervisory Commission to ensure the ful-
fillment of the Treaty. If some Allied Commission were
unavoidable, Japan was to push for a council of the heads
of the diplomatic services of the Big Four, and the func-
tions of this council were, if possible, to be limited to "ob-
servation." Japan should ask for a merchant marine of four
million tons and some aircraft for "control patrol work."
Most significant of all, it was urged that SCAP directives

Demilitarization in

issued during the Occupation should, when the Treaty
comes into force, become null and void, and Japanese legis-
lation giving effect to these directives should be subject to
repeal in the ordinary way.

It is not possible to know whether the policy set forth in
this Foreign Office document had been examined and ac-
cepted by the Japanese Government or whether it repre-
sented merely a list of proposals prepared by senior offi-
cials. Apparently GHQ wished to play down the document.
It was reported that General MacArthur had not seen it
and did not propose to read it. 5 Nevertheless, it gives an
interesting glimpse of how some members of the "purged"
bureaucracy feel about the Occupation and the peace set-
tlement.

* Nippon Times, December 14, 1947.

5. "DEMOCRATIZATION": ECONOMIC

Rural Land Reform

THE EMANCIPATION OF THE PEASANT MUST
be the first and most important step in any program for the
economic and spiritual emancipation of the Japanese
people. Nearly half of the Japanese people live in farm
households. Their importance lies not only in their num-
bers, but in the fact that they represent what is most back-
ward in Japanese society. Much more than any other class,
they show the spirit and the habits of feudalism. No de-
mocracy can be built on a foundation of agricultural serf-
dom.

It is true that at the surrender the farmers found them-
selves in a peculiarly favorable position. Their homes had
not been destroyed and the countryside was undamaged.
They had always been able to keep enough of the food they
grew to feed themselves, and after the surrender the Gov-
ernment was unable or unwilling to enforce rice deliveries.
So the fanners ate their fill and still managed to sell a pro-
portion of their produce on the black market at fabulous
prices. It was a curious reversal of the traditional situation.
But it had all the marks of being temporary, since every
ton of food imported weakened the fanner's bargaining
position, and it was to be expected that in any restoration
of Japan's foreign trade, food imports would play a promi-

112

"Democratization": Economic 113

nent part. Moreover, the shortages of fertilizers, implements
and consumer goods emphasized the artificial and precari-
ous nature of this wave of comparative prosperity. Yet this
period of high food prices did enable many owner-fanners
to reduce or pay off immense burdens of debt, and it did
give the more successful tenant farmers their first oppor-
tunity to buy land for themselves, if any could be made
available at something like "normal" prewar values. It was
a situation which in no way reduced the need for rural
reform, but rather presented a favorable opportunity for
the launching of a comprehensive program.

It was against this background that SCAP issued a direc-
tive on December 9, 1945, ordering the Japanese Govern-
ment "to exterminate those pernicious ills which have long
blighted the agrarian structure of a land where almost half
the total population is engaged in husbandry." The direc-
tive went on to state that one of the "more malevolent" of
those ills was that "more than three-fourths of the farmers
in Japan are either partially or totally tenants, paying rentals
amounting to half or more of their annual crops."

SCAP, therefore, ordered the Japanese Government to
submit on or before March 15, 1946, a program of rural
land reform which would do four things: (i) It was to pro-
vide for the transfer of the land owned by absentee owners
to local residents who would themselves work the land. A
great deal of agricultural land had fallen into the hands of
businessmen, money lenders and others as a result of farm-
ers' bankruptcy. SCAP wanted to restore the ownership
of farms to farmers. (2) It was to provide means by which
the tenants could buy land from non-operating owners at
equitable rates. (3) It was to provide a method by which
tenants could pay by small annual installments commen-
surate with their incomes. (4) It was to provide methods
for prohibiting tenant buyers from being forced back into
a tenancy status.

H4 Japan Enemy or Ally?

It should be kept in mind that there were four groups
directly involved in this program. Absentee owners were
those who lived outside the district and played no pan in
cultivation. "Non-operating" owners were those who lived
in the district, but were "non-operating" to the extent that
they left the cultivation of part or all of their land to ten-
ants. Owner-tenants were those who worked as tenants for
a landlord, in addition to working their own small parcels
of land. Lastly, there were the "pure" or landless tenants.

In obedience to the SCAP directive, the Japanese Gov-
ernment duly submitted its reform program. Its proposals
were submitted by SCAP for the advice of the Allied Coun-
cil. I expressed the view that these proposals were very
unsatisfactory and would fail to fulfill the aims of the
SCAP directive for the following reasons:

(a) The average limit of five cho of tenant-cultivated
land allowed per landowner was too high and would mean
Chat 70 per cent or more of tenant land would not be avail-
able for purchase by tenants.

(b) The provision whereby "farm lands which, though
being possessed by non-operators at present, are expected
to be operated by the owner in the near future" would be
excluded from transfer, would allow landlords a convenient
means of defeating the reform.

(c) The proposed machinery of transfer of tenant land
was cumbersome and against the interests of tenants. Direct
negotiation between landlord and tenant favored the land-
lord, while the Local Rural Land Commission seemed to
be weighted heavily in favor of the landlords' interests.
The composition of Prefectural Rural Land Commissions
was described in vague terms, and there was no evidence
that the tenants' interests would be safeguarded at this
level either.

(d) The expectation of the Japanese Government that
70 per cent^pf the purchase funds would be provided by

"Democratization": Economic 115

the Government and 30 per cent by the tenants might mean
that tenants who could afford to provide 30 per cent of the
purchase price would be given preference over tenants who,
though capable farmers, were unable to make this deposit.

(e) No provision was made for periodical reappraise-
ment of the obligations of buyers to protect them against
insolvency through falling land values.

(f) The subsidies of 220 yen per tan of paddy fields and
130 yen per tan of upland fields seemed to raise the total
purchase price of lands too high. These prices would be
nearly 100 per cent above prewar levels.

(g) Outright purchase would require heavy credit ad-
vances, which were undesirable in existing conditions of
inflation, unbalanced budgets and monetary instability.

(h) A period of five years for the acquisition of the lands
seemed to be unnecessarily long.

(i) No adequate provision was made for the checking of
excessive rents or for written tenancy contracts specifying
rent payable and length of tenure. 1

I went on to submit to the Allied Council a ten-point
program for rural land reform. The program was as fol-
lows:

i. The maximum average area of tenant-cultivated land
which any non-operating landowner may own should be
reduced to one cho (2.45 acres).

The maximum area of tenant-cultivated land which may
be owned by any non-operating landowner determines prin-
cipally the area of land which shall be subject to purchase
by tenants. To illustrate this point, the following figures
are estimates of the maximum amount of land which would
be available for transfer with different areas of tenant land
owned by non-operating landowners. They are rough esti-
mates, since the data available will not permit very accu-

i Minutes of Allied Council for Japan, Sixth Meeting.

n6 Japan Enemy or Ally?

rate calculations. In practice the area actually realized
would almost certainly be less than these estimates.

Estimated area of
Average maximum land available for

land owned by transfer from Land available for Percentage

non-operating non-operating transfer from ab- Total area available -

Landowner!

landowners

sentee landowners

for transfer

tenant 1

(cho)

(ooo cho)

(ooo cho)

(ooo cho)

5

770

130

goo

32

3

1100

130

1230

44

i

1800

130

1930

69

o-5

1900

130

2030

73

A maximum of one cho of tenant land for non-operating
landowners would probably make nearly 70 per cent of all
tenant land available for sale. The Japanese Government's
plan would free only 30 per cent or less. I suggest that one
cho would, on the average, provide a living for a Japanese
family. I feel it would be precipitous to advocate the aboli-
tion of tenancy, and so long as tenants remain it is impor-
tant that they should have the right to work on an area
large enough to maintain a family.

2. The maximum area which any landowner may own
should be three cho, on the average, for the Islands of
Honshu, Kyushu and Shikoku and 12 cho for Hokkaido.

Only about 3 per cent of farms in Japan are three cho
and over, so that restriction of ownership to this area
would not cause fragmentation of the unit of cultivation
to the detriment of efficiency. On the other hand, the rela-
tively small number of landowners (about 71^ per cent of
the total) who own three cho and over possess together
nearly 50 per cent of all cultivated land. Stipulation of a
maximum area of three cho would probably assure the
transference of approximately 1,000,000 cho and prevent
(in addition to legislative prohibition to be proposed later)
owners of large estates from expelling their tenants and

"Democratization"; Economic

nominally working their estates themselves to avoid com-
pulsory transfer.

3. Tenants should be limited to the purchase of family
maintenance units of land.

The size of the family maintenance unit would vary from
district to district, but probably would not exceed one cho
on the average. Restriction of purchases to such units
would enable the maximum number of tenants to purchase
land. The number of pure tenants in Japan is approxi-
mately 1,400,000, and a transference of 65 per cent of ten-
ant lands would provide sufficient land to absorb all of
these at an average holding of one cho per family, and still
leave approximately 400,000 cho for distribution among
part-tenants.

4. A Land Acquisition Board should be established to
administer the land transfer program. It should be under
the chairmanship of the Minister for Agriculture and For-
estry, and include equal representation of landowners and
tenants. Prefectural and local Land Commissioners, repre-
senting equally the interests of landowners and tenants,
should be appointed to administer the program at prefec-
tural and local levels.

Under the above proposal the local commissions would
determine, subject to the ultimate approval of the Land
Acquisition Board, the land to be made available for trans-
fer in each locality and would receive application for land
from tenants. There would be no direct negotiations be-
tween landlords and tenants.

5. The Land Acquisition Board should purchase land
for resale to tenants. The purchase price should be paid
in Government bonds, to be redeemed periodically over
a period of 24 years, as repayments are made by tenants,

1 1 8 Japan Enemy or A lly?

but with provisions for earlier redemption if circumstances
are favorable.

Purchase, of land by the Government for resale to ten-
ants through the Local Land Commissions would provide
the best means of ensuring that the tenant received land
under fair conditions and at the official price. Payment to
landowners over a number of years would prevent an
undue expansion of credit, which would be undesirable
while monetary instability continues. It might be con-
venient at a later date to redeem all bonds before maturity.

6. Tenants purchasing land should be protected against
the consequences of any future fall in land values by peri-
odical reappraisements of their commitments.

Falling land values, subsequent to purchase, have
quently caused the failure of land settlement and purchase
schemes. In the absence of provision for the adjustment of
debts, tenant purchasers are likely to be forced into in-
solvency.

7. The provisions of the program should be applied to
the land situation, as at December 8, 1945, and all subse-
quent sales of land and substitution of nominal owner op-
eration for tenant cultivation should not be recognized.

A provision of this nature is necessary to prevent land-
lords from evading the reform by "dummy" sales, and
nominally reducing their tenant land before the program
is put into effect.

8. The time in which the transfer is to take place should
be reduced from five years to three years.

It should be possible to carry through the acquisition of
the land from landowners within three years.

"Democratization": Economic ng

9. Consolidation of holdings should be carried on, as far
as possible, at the same time as the transfer of land from
landlords to tenants.

Many farms in Japan are composed of small scattered
pieces of land. Such fragmentation of areas is a major bar-
rier to more efficient working of farms. With the transfer
of a large amount of land through Government bodies, an
excellent opportunity for consolidation of holdings is pro-
vided. Where necessary, tenants should be encouraged to
purchase consolidated areas.

10. Provision should be made for rent ceiling and writ-
ten tenancy contracts guaranteeing security of tenure to
tenants and rights in any improvements they make.

It is envisaged that 30 per cent or more of existing ten-
ant lands will remain as such, and it is, therefore, impor-
tant that conditions of tenancy should be improved.

This program was warmly supported by the Chinese
member, who moved some minor amendments which were
useful and acceptable, particularly an amendment reducing
the time limit for transfer from three to two years. The
Russian member also expressed his support for my pro-
gram, though he went on to make certain supplementary
proposals, some of which were inconsistent with mine. Gen-
eral Derevyanko proposed, for example, that compensation
for land acquired should be paid on a decreasing scale, so
that a landlord with a large area of land would receive the
full rate of payment for the first three cho of alienated
land, half rates for the fourth, fifth and sixth cho, and after
that nothing at all. This last feature of the Russian mem-
ber's plan was strongly opposed by the American member
on the ground that it involved confiscation. He claimed it

120 Japan Enemy or Ally?

essential that SCAP should not countenance any abroga-
tion of the rights of private property. 2

In October 1946 the Diet passed two Government bills
which included most of the substance and much of the
detail of the ten-point program I had submitted to the
Allied Council, though only, I believe, under persistent
pressure from GHQ. This legislation provides compulsory
means to enable about two million tenants, or three-quar-
ters of all fanners, to acquire the land they work. It also
seeks to improve conditions of tenancy for the remaining
quarter.

Absentee landlords must sell all their land; non-operat-
ing landlords living in the local community must sell all
land in excess of one cho, except in Hokkaido, where they
may keep four cho. (Farming in Hokkaido is largely pas-
toral, and land values are only about a quarter, on the
average, of what they are in the other three islands.) Farm-
ers who work their own land are limited to the average
ownership of three cho (12 cho in Hokkaido), plus the one
cho allowed non-operating landlords. This means that the
average fanner cannot own more than ten acres: 7^
worked by himself and family, and 21^, which he may
lease to tenants.

Land is to be bought at a fixed price, and tenants may
buy by installments over 30 years, at 3.2 per cent interest.
The annual installments, plus taxes and other ownership
obligations, are not to exceed one-third of the value of the
crop of the purchased land.

Considered as reform legislation, the Land Reform Acts
are generally very satisfactory. There may be some loop
holes, such as the provision that an owner-operator may be
allowed to have more than three cho if he can show that a
reduction of the area worked by himself and family would

Minutes of AlUed Council of Japan, Sixth, Seventh and

"Democratization": Economic 131

be likely to reduce the productiveness of the land. The real
test of the reforms, however, will be in the way they are
administered by the Local Land Commissions, set up to
supervise the transfers. There are some 10,000 of these
commissions, made up of elected representatives of ten-
ants, owner-operators and landlords, in the proportion
5:2:3. There are two stages in the process of transferring
the land to the tenants. First, the "surplus" land is bought
by the Government, acting through the local commissions,
and then this land, after efforts at consolidating small strips,
is resold to the tenants. Considerable progress has been
made with the first stage, and GHQ officials anticipated
that during the first quarter of 1948 resales to tenants
would be possible on a big scale, and that the whole pro-
gram of transfer would be completed by the end of 1948,

It is too soon to measure the success of the program.
There has been plenty of evidence of the landlord's resist-
ance. From the date of the surrender, landlords, anticipating
reform measures, tried to dispossess tenants and distribute
the land they worked among relatives and friends. From
August 15, 1945, to June 10, 1946, there were 23,809 dis-
putes arising out of landlords' demands for the return of
tenant farms. In the Local Land Commissions at the end of
1946 there was evidence of improper pressure by landlords
iri a number of areas. In October 1947 a group of landlords
on Tochigi Prefecture contested the constitutionality of
the Land Reform Acts. Yet in some districts the commis-
sions appear to be working with enthusiasm and efficiency
in their effort to meet the needs of eager buyers.

The difficulties and delays in carrying out the program
may sometimes be due not to the obduracy of the owners,
but the inertia of the tenants. A proportion of tenants may
feel that the legislated reforms in the tenancy system re-
duce the relative advantages of ownership. The new laws
lay down that rents are henceforward to be paid in cash,

122 JapanEnemy or Ally?

not in kind, and in accordance with written contracts, in-
stead of the verbal contracts which previously gave the land-
lords too great a sense of security. Moreover, the new rent
ceilings, fixed by law, reduce the old rates by about half;
rent is limited to 25 per cent of the value of the crop on
paddy fields (wet cultivation) and 15 per cent of its value
on upland fields (dry cultivation). 8

It would be foolish to hope for too much from these re-
form measures, even if they are carried out according to
plan. By enabling a tenant to become an owner-farmer you
improve his condition by increasing his rights, particularly
his right to a larger share of what he produces. But you do
not necessarily increase the volume or value of his prod-
ucts. It is often said that farming is very efficient in Japan.
This is true in the sense that the Japanese are expert in
getting the maximum product from a given area. But the
meticulous exploitation of every cultivable square yard is
only carried on by the reckless expenditure of human labor.
The basic problem of Japanese agriculture is economic-
there is so little land and so much labor. At present more
than two-thirds of the farms of Japan are of less than two
and a half acres in area, and more than one-third of less
than one and one-quarter acres. The average farm house-
hold is made up of about three adult farm workers, plus
old people and children. The only permanent way to re-
lieve the poverty and overcrowding of Japanese farms is to

The Diet passed legislation in November 1947 to dissolve the wartime
Agricultural Control Associations and enable farmers whether owners or
tenants-to form their own Cooperative Associations along democratic lines.
This legislation was described by Lt.-Col. H. G. Schenck, Chief of the
Natural Resources Section, GHQ, as of "far-reaching significance to the
farmers of Japan" and "the second great step toward agrarian reform."
Cpi Schenck declared that the Agricultural Control Associations, being
dissolved, had been "a vicious monopoly, exercising dictatorial control over
every Sphere of the agricultural economy." The new law would "restore
to farmers the power to determine the destinies of their economic efforts
through associations voluntarily organized and completely farmer-con-
trolled," Nippon Times, November 9, 1947.

"Democratization": Economic 123

reduce the number of farmers. An increasing number must
be absorbed in secondary and tertiary industries. This
would make possible a consolidation of farm holdings, an
increase in their size, and the introduction of more modern
and mechanized agriculture. This would, in turn, imply
the development of Japan's foreign trade and considerable
food imports. It is only along these lines that Japanese
farmers can hope to achieve the material basis for civilized
living.

The Dissolution of the Zaibatsu

The term Zaibatsu, meaning literally "money group/*
is sometimes restricted to the four great business organiza-
tions Mitsui, Mitsubishi, Sumitomo and Yasuda but usu-
ally it is extended to include other leading families and
combines, sometimes called the "lesser Zaibatsu." * In this
chapter I use the term in this inclusive sense.

Before the surrender there was a good deal of difference
of opinion among Western experts on Japan about what
should be done with the Zaibatsu. There was an impressive
body of opinion in Britain which opposed any plan to
break up the Zaibatsu organizations. It was urged that the
extreme concentration of economic power which these con-
cerns represented was an integral feature of Japan's pecul-
iar economic development, and that it would not be pos-
sible to destroy the Zaibatsu organization and leadership
without dislocating the whole economy. It was claimed that
the Zaibatsu represented the "moderate" forces, and that
they had shown themselves often to be in strong opposition
to the militarists. They stood for economic expansion, not
for territorial aggression. Moreover, if Japan's peaceful

* Following its investigation of the "Big Four/' SGAP called for informa-
tion on the assets of ten "lesser Zaibatsu" families Rikawa, Asano, Furu-
kawa, Kawasaki, Matsushita, Nakajima, Nomura, Okochi, Okura and
Shibusawa.

124 Japan Enemy or Ally?

economy were to be restored, she could not dispense with
the managerial ability of the Zaibatsu leaders.

Nevertheless, in 1945, the opposing school of thought got
its view officially accepted. The Initial Post-Surrender
Policy instructed General MacArthur "to favor a program
for the dissolution of the large industrial and banking com-
binations, which had exercised control of a great part of
Japan's trade and industry."

There were several reasons for this 1945 decision to dis-
solve the Zaibatsu. It was felt that during the war years the
Zaibatsu and the militarists had been rivals rather than
enemies. They had differed not so much, if at all, in their
national objectives; their differences had mainly been on
strategy and tactics. The Zaibatsu could, consequently, not
be cleared of war responsibility. It was felt that the con-
tinued concentration of economic authority in a few hands
was an essential feature of a totalitarian and expansionist
policy. To tolerate its perpetuation would be to leave in-
tact the industrial basis of Japanese militarism. Moreover,
the continued concentration of wealth and power seemed
inconsistent with the principles of democracy and social
justice. This motive was reinforced by the traditional
American aversion to trusts and monopolies. The aim wa&
not to destroy or weaken the institution of private prop-
erty, but to protect and enlarge it by ensuring that its o\m-
ership should be more widely and equitably distributed.

I shall not attempt to recount in any technical detail the
vicissitudes of SCAP's dissolution program. I shall limit
myself to describing the main lines of policy, to describing
the difficulties in its formulation and supervision, and
pointing to the problem still to be solved if, as now seems,
questionable, the Allies still want the program to be com-
pleted.

The Zaibatsu exercised their power mainly through hold-
ing companies, which held securities in subsidiaries in

"Democratization": Economic 125

nearly all branches of industry and commerce. The first
task, therefore, was to dissolve these holding companies.
This was a project of baffling complexity. The first essen-
tial was full information about the ramifications of the
Zaibatsu organization. GHQ did not possess this informa-
tion, and, even if it had, it did not possess the trained staff
capable of mastering it. SCAP, therefore, approached the
task with understandable caution. It was suggested that the
Zaibatsu themselves, in consultation with the Japanese
Government, should work out a scheme for their own de-
struction and submit it to SCAP for approval. This proce-
dure was followed. The first schemes put forward did not
satisfy GHQ, which put pressure on the Zaibatsu to submit
something more radical. In response, the Yasuda Holding
Company formulated a plan on behalf of the "Big Four."
SCAP approved this plan, and in an important directive of
November 6, 1945, instructed the Japanese Government
to supervise its operation. The Government was to set up
a Holding Company Liquidation Commission. This Com-
mission was to take over the securities held by those hold-
ing companies designated for dissolution, beginning with
Mitsui, Mitsubishi, Yasuda and Sumitomo. These holding
companies were then to be dissolved. The securities were
to be sold to the public under conditions intended to pre-
vent individuals or families from obtaining controlling
blocks. In liquidating the Zaibatsu assets, the Commission
was to safeguard the interest of small shareholders, and the
employees of the companies were to be given preference in
the sale of the shares. The Zaibatsu owners of the securities
were to be paid compensation in Government bonds, non-
maturing and non-negotiable for at least ten years, to the
selling value of the securities, less the costs of dissolution.
There was a good deal of delay in getting this program
started. SCAP rejected as inadequate the first draft of the
Imperial Ordinance, No. 233, creating the Liquidation

Japan Enemy or Ally?

Commission. After revision, it was finally approved by
SCAP in a directive of July 23, 1946. The Liquidation
Commission held its inaugural meeting on August 27, 1946.

There are certain features of this program, and of the
machinery for carrying it out, which raise doubt whether
its declared objectives can be achieved.

The first need, as I have already mentioned, is that Allied
supervisors should possess comprehensive and accurate in-
formation, not only on the anfractuosities of Zaibatsu or-
ganization, but on the financial and commercial situation
of perhaps thousands of companies. The Liquidation Com-
mission, for example, must seek to determine the "fair
value" of Zaibatsu-owned shares in the holding companies,
To do this, it must be able to appraise the assets, liabilities
and earnings of the subsidiaries. In September 1947 the
subsidiaries of the holding companies already marked for
dissolution numbered more than 1,200. Independent in-
vestigation of the affairs of all these companies is out of the
question. Hence the Liquidation Commission and SCAP
officers must mainly rely on reports from the companies
themselves, which must have great temptation, as well as
great opportunity, to sidetrack inquiries.

It is important, moreover, that the program .for dissolu-
tion was formulated by the best brains the Zaibatsu could
muster, men of great industrial and political experience.
These Zaibatsu leaders were accustomed to criticism from
the militarists on the one hand and from radicals on the
other. They had become expert in meeting it and in de-
fending their position against rivals and revolutionaries.
They would have been well aware of the anti-trust feeling
in the United States, and, as defeat drew near, it would be
surprising if they did not work out plans for meeting Allied
efforts to overthrow them.

It is perhaps equally important that the responsibility
for controlling the firms and families whose assets have been
frozen rests with the Japanese Government. SCAP officers

"Democratization": Economic 127

"hope" that the Government is doing this faithfully and
efficiently. The Japanese Governments since the surrender
have relied for their support on the most conservative
forces in Japanese society. The Government's record in at-
tempting to carry out effective controls in other sections of
the economy does not encourage confidence in its eager-
ness or competence to control the Zaibatsu. On the techni-
cal side, Japanese official auditing and accounting is no-
toriously loose.

The character and outlook of the members of the Liqui-
dation Commission is a crucial factor. I do not pretend to
any firsthand knowledge of this. It is interesting, though,
that Susayama, the chairman, was employed by Yasuda from
1926 to 1931, and that he was later president of the Indus-
trial Bank of Japan, a "national policy" concern now dis-
solved. 8 Moda, the liaison officer with GHQ, was formerly
head of the Mitsui interests in the United States. I was
sometimes told, without supporting evidence, that the
Liquidation Commission was purely an Occupation-period
front for the Zaibatsu, whose interests it was carefully pro-
tecting. On the other side, the GHQ officers directly con-
cerned claimed that the Commission was doing an honest
and courageous job. Only the future can provide conclusive
evidence either way.

SCAP recognized that the strong family ties among the
Zaibatsu might provide unofficial chains of control after
the official chains had been broken. In an attempt to meet
this danger, the Japanese Government was ordered to ex-
clude from policy-making positions in holding companies
and their subsidiaries "blood relatives to the third degree"

The Japanese Government at first proposed Mauji lijuma as chairman.
He was not acceptable to SCAP. This was not surprising, in view of his
published statement: "It is a great mistake to say that the Zaibatsu
must be destroyed." lijuma was later purged for having, by writings and
in other ways, shown himself an active supporter of military aggression.
Summation of Non-military Activities, July, 1946.

The significant thing was that the Japanese- Government should have
considered lijuma a suitable chairman for the Liquidation Commission.

JapanEnemy or Ally?

of those officials who had been purged. The intention of
this regulation is clear, but it is doubtful whether it will
be effective. The executives in Zaibatsu concerns may re-
main under the personal influence or domination of the
Zaibatsu families. This is all the more likely if the young
men feel that their elders are only in temporary eclipse.
I had personal knowledge while in Japan of some "purged"
presidents who continued to direct their companies from
their homes, where their former subordinates would re-
spectfully gather daily to make their reports and get in-
structions.

Such considerations illustrate the difficulties in the way
of destroying the Zaibatsu power. But perhaps the greatest
obstacle lies not in the resistance of the Zaibatsu, but in
the general economic conditions in Japan. It is one thing
for the Liquidation Commission to take over Zaibatsu hold-
ings; it is another thing to find some useful way to dispose
of them. It must be remembered that the positive aim of
the program is to disperse ownership. The difficulty is to
find suitable people who can buy the Zaibatsu securities.
Inflation increases inequalities of wealth in favor of prop-
erty owners and businessmen at the expense of wage and
salary earners. Wage and salary earners have been forced
to use their savings, where they existed, to meet their cur-
rent needs. It is true that large incomes are being made in
commerce, and on the black market, but it is hardly useful
or desirable to take special steps to transfer economic power
from an old to a new Zaibatsu. If it is not possible to dis-
tribute these securities widely among the "little men," the
program will fail in its positive purpose. I know of nothing
pointing to a solution of this major problem. 6

The Zaibatsu holdings might be made available to foreign investors.
Mr. Edward C. Welsh, Chief of SCAP's Anti-Cartel and Trust Division,
has pointed out that foreign investments would produce firmer prices for
Zaibatsu stock and bring technological and other advantages to the
Japanese economy. Nippon Times, October 5, 1947.

"Democratization": Economic 129

There are some indications that the United States Gov-
ernment will not press for the completion of the Zaibatsu
program. On December 27, 1948, Mr. Robert Lovett,
Under-Secretary of State, told a news conference that the
Government was restudying the whole Zaibatsu picture,
with a view to revising its views on future ownership and
control, in the light of the fact that Japanese wartime con-
trol of these concerns had already been broken, and, in
that respect, the Occupation aim had been achieved.

On January 6, 1948, Mr. K. C. Royall, U.S. Under-
secretary of the Army, developed this line. He pointed out
that in 1945 the main American interest was to prevent any
possible future Japanese aggression. The well-being of
Japan, or her strength as a nation, was a secondary consid-
eration. But, since then, Mr. Royall pointed out, new con-
ditions have arisen in world politics. Hence the need to
re-examine America's attitude towards Japan. These
changes have produced "an inevitable area of conflict
between the original concept of broad demilitarization and
the new purpose of building a self-supporting nation."
Mr. Royall went on to say that:

at some stage extreme deconcentration of industry, while
further impairing the ability to make war, may, at the same
time, destroy manufacturing efficiency of Japanese industry
may, therefore, postpone the day when Japan can become
self-supporting.

Another border-line situation between demilitarization and
economic recovery is presented in the case of personnel. The
men who were the most active in building up and running
Japan's war machine militarily and industrially were often-
the ablest and most successful leaders of that country, and
their services would in many instances contribute to the eco-
nomic recovery of Japan.

It is noteworthy that Mr. Royall spoke on the assump-
tion that the earlier program for land reform and the dis-

1S o JapanEnemy or Ally?

solution of the Zaibatsu were completed, or in process of
completion. "Land reform," he said, "would be completed
by the end of 1948"; the power of the Zaibatsu "has now
been virtually abolished." 7

Mr. Royall's speech helps explain why SCAP did not
intervene to prevent the Diet from watering down the pro-
visions of the Economic Power Decentralization Bill in
December 1947. This Bill, as originally drafted, was to have
been complementary to the measures for dissolving the
Zaibatsu.

The change in the U.S. attitude is, no doubt, largely due
to a clearer perception of the real difficulties in the way of
carrying out the original program. It appears also to reflect
an anxiety, in the light of the international situation, not
to destroy too impetuously the "stabilizing" influences in
Japan's economy. There has lately been some criticism
from Allied business circles that SCAP has been too severe
and too radical in pushing measures for the reform of Japa-
nese economic institutions.

Conclusion

I believe that the two most significant features of the sit-
uation at the end of 1947 were, first, the steadily returning
confidence of the wealthy and powerful Japanese, whose
interests SCAP's economic reforms appeared to threaten,
and, second, a marked drop in the reformist impetus of
GHQ.

The returning confidence of the conservative group
began to find expression about the time of the announce-
ment of the Truman doctrine. It was well expressed in a
leading article in the Oriental Economist of March 29,
1947:

*Tbe full text of Mr. RoyalTs speech was printed in Nippon Times,
January 17, 1948.

"Democratization": Economic 131

In Greece and Turkey, Leftist and Rightist influences are
being pitted against each other, with the former having an
apparent edge over the latter. The situation in Japan is differ-
ent. It is true that Leftist influence has begun to manifest
itself through a phenomenal development of the labor move-
ment, and its advance may become further accentuated if
Japan's economic conditions worsen. For all that, the Leftist
influence in Japan at present is still small and insignificant,
compared with the overwhelming superiority of the Rightist
influence. Such Rightist influence has not shown itself on the
surface, although its dormant power is considered enough to
overwhelm the Leftist influence once the weight of the Occu-
pation forces is removed. The deep-rooted ideas of imperialism
and militaristic patriotism, cultivated for years since the Meiji
Restoration, and strengthened, during the ten-odd years fol-
lowing the Manchuria Incident, are not easily wiped away.
Those adhering to such ideas are believed to be far larger in
number than those upholding Leftist ideas and ideologies.

The loss of drive in GHQ's reform program has not been
clear-cut and consistent, but the trend from 1945-48 is
unmistakable. The program SCAP outlined in 1945 and
early in 1946 would, if completed, produce fundamental
changes in Japan's economic organization, and a great shift
in the balance of economic powers. Indeed, if only the two
measures discussed in this chapter land reform and the
dissolution of the Zaibatsu were to be carried out thor-
oughly, they would amount to a social-economic revolu-
tion. There were officials in GHQ who planned and worked
for this sort of revolution, and these Americans had the
sincere support of a small group of Japanese radicals. But
the senior officers in SCAP did not always share the re-
formist enthusiasms of their subordinates. General Mac-
Arthur's purpose in directing reform measures seems to
spring mainly from the desire to eliminate those features
of Japan's economy that are inconsistent with the philos-
ophy of American individualism. He tends to equate what
is un-American and what is undemocratic. Land reform

Japan Enemy or Ally?

was a blow at feudalism; the Zaibatsu program a blow at
monopoly: both un-American concepts. But further than
that General MacArthur seems reluctant to go. It is tni e
that he has from time to time directed the Japanese Gov-
ernment to enforce certain economic controls, but he is
usually careful to express the view that controls are in
themselves evil, and only necessary as temporary and ex-
ceptional measures. This attitude came out clearly in his
message to the Japanese people on New Year's Day, 1948:

So long as your needs continue to be greater than your
productive capacity, controls upon your internal economy will
be essential, lest the weaker segments of your population
perish. Such controls must, however, only be temporary, and
subject to ultimate removal in favor of free enterprise.

Economically, Allied policy has required the breaking open
of that system which in the past has permitted the major part
of the commerce and industry and natural resources of your
country to be owned and controlled by a minority of feudal
families and exploited for their exclusive benefit. The world
has probably never seen a counterpart to so abnormal an eco-
nomic system.

It permitted exploitation of the many for the sole benefit
of the few. The integration of these few with government was
complete and their influence upon governmental policies in-
ordinate, and set the course which ultimately led to war and
destruction. It was, indeed, so complete a monopoly as to be,
in effect, a form of socialism in private hands. Only through
its dissolution could the way be cleared for the emergence of
an economy conducive to the well-being of all the people-
an economy embodying the principle of private capitalism,
based upon free competitive enterprise; an economy which
long experience has demonstrated alone provides the maxi-
mum incentive to the development of those fundamental re-
quirements to human progress: individual initiative and indi-
vidual energy.

General MacArthur here gave dogmatic expression to
the widespread American view that individualism in eco-
nomics is inseparable from democracy in politics. This

"Democratization": Economic 133

view inevitably breeds reluctance to sponsor any measures
which smack of a controlled economy or of socialism. In
expressing it, General MacArthur officially aligned himself
against the declared policy of the Japanese Social Demo-
cratic Party, and of the Prime Minister, Mr. Katayama.

I am not suggesting that controls are necessarily reforms,
nor that "socialism" is intrinsically superior to "individ-
ualism." It remains true that in several Allied countries,
including the United Kingdom, Australia and New Zea-
land, there are freely-elected Governments which believe
that a controlled economy is consistent with democracy,
and may, in certain economic circumstances, be necessary
for democracy to survive. It is, therefore, interesting that
General MacArthur, in his capacity as Supreme Commander
for the Allied Powers, should warn the people of Japan
that a regime of "private capitalism, based upon free com-
petitive enterprise," is indispensable to their well-being.

The Short-Term Problem of Stabilizing
Wage-Price Relationships

In the preceding paragraphs I have confined myself to
a discussion of fundamental long-term economic reforms.
Yet during the Occupation Japan's primary need has been
for urgent short-term measures. General MacArthur con-
sulted the Allied Council about these measures in April
1947, when he asked for its views on the stabilization of
wage-price relationships. I expressed the view that the
actual problem was mainly political, not economic; not to
discover the sort of controls needed, but to find a Japanese
government with the will and authority to impose them.
Since, however, the Supreme Commander appeared to
wish for fairly detailed recommendations in economic and
administrative terms, I submitted the following analysis
and recommendations.

Japan Enemy or Ally?

ALLIED COUNCIL FOR JAPAN, TOKYO

Office of the Member representing jointly the United
Kingdom, Australia, New Zealand and India

STABILIZATION OF WAGE-PRICE RELATIONSHIPS

Summary of Conclusions and Recommendations

(i) The destruction and wastage of war and the dislocations
of defeat present the Japanese Government with a series of
major economic problems.

(ii) Japan today is faced with a twofold task. First, to restore
capital equipment for the production of peacetime goods, and,
second, to ensure that the goods produced are justly distrib-
uted. Efficiency and social justice must be the keynotes of eco-
nomic policy.

(iii) Inflation must be stopped. It has produced inefficiency,
since available resources have been wasted in non-essential
uses. It has caused injustice by throwing the main burden of
sacrifice on wage and salary earners, while other sections of
the community have profited.

(iv) While the immediate cause of inflation is the un-
balanced budget, a more fundamental cause is the failure to
make price control effective by strict control over the distribu-
tion of raw materials and consumer goods.

(v) The control of raw materials must be enforced to make
price control effective and to ensure that materials are reserved
for essential uses. It should be based on a permit system.
Permits should be necessary for both the purchase and trans-
port of controlled materials. Records for Government inspec-
tion of movements of controlled materials should be kept by
suppliers, merchants, carriers and users.

(vi) Rationing of essential consumer goods is necessary to
ensure just distribution and should be controlled by a coupon
system.

(vii) Prices should be fixed to restrict profits to a minimum.
Control of prices to prevent profiteering is more important
than fixing a particular level of money wages, since, in the
present circumstances of Japan's economy, increases in wages
staply raise costs and prices and do not increase real wages.

(viii) Provided profiteering is eliminated by price control,
wages should be pegged as an additional safeguard against

"Democratization": Economic 135

excessive increases in costs and prices. These pegged rates
should, however, be periodically reviewed and raised as pro-
duction efficiency increases.

(ix) Every effort must be made to ensure that Government
revenue keeps pace with expenditure. Taxes should be based
on current income. Returns of business and professional in-
comes should be made at intervals of less than one year, if
possible each quarter, so that taxes may be adjusted to current
earnings.

(x) Government expenditure should be pruned to eliminate
all but the most essential items. Accounts submitted by Gov-
ernment contractors should be carefully audited to prevent
excessive charges.

The Nature of the Problem

1. This problem is an integral part of the question of
over-all economic policy for Japan in its present stage and
I propose to deal with it in that setting, leading up to spe-
cific recommendations.

2. The basic problem facing Japan today is to find just
and efficient means of restoring her capital equipment in
peacetime industries, and in such forms for direct use of
her people as housing, hospitals and schools. Restoration
of peacetime industries is essential to lay a basis for in-
creased production. Without increased production there is
no possibility of any permanent increase in living stand-
ards in Japan. But restoration of physical capital is the
necessary first step.

3. Reconstruction involves sacrifices because production
in Japan is at present at such a low level that only the bar-
est essential needs of consumers can be met, if any margin
is to be left for the building up of capital assets. Produc-
tion is so low that, even if no margin were left for recon-
struction, living standards in Japan would be much lower
than the people have been accustomed to. But even this
level could only be maintained temporarily, since it would

Japan Enemy or Ally?

have to be attained at the expense o a further wastage of
capital assets, and would result in reduced production later
on. Such a trend has actually taken place in Japan since
the surrender. Production recovered fairly rapidly, particu-
larly in consumer goods, until the middle of 1946, then
became stagnant, and finally appears to have fallen in re-
cent months. Valuable stocks of raw material were wasted
in non-essential production instead of being reserved for
essential reconstruction. Such dissipation of resources must
be stopped if extreme hardship is to be avoided. The in-
evitable restriction of living standards can be minimized
if only essential goods are produced.

4. Because of the sacrifices involved, the means adopted
must be just, so that the burden does not fall mainly on a
limited section of the population. To date, the restriction
of consumption, made inevitable by the wastage of the war
and such reconstruction as has already been carried out,
has been accomplished by inflation. This is the most unjust
means, since the burden falls mainly on wage and salary
earners, whose incomes lag behind prices and whose sav-
ings depreciate in value. On the other hand, some sections
of the population have benefited from a situation in which
all should have borne the sacrifices involved. Inflation
profiteers not only make large gains, but find it relatively
easy to preserve them against taxation, since taxes on busi-
ness income and property are based on income and valua-
tion at least one year before the tax is paid. By this time
the currency has depreciated and payment is a relatively
slight matter. Tax evasion is also relatively easy with this
kind of income. The tendency, therefore, is to shift the
burden on to a limited section of the population and make
the distribution of wealth more uneven.

5. The means adopted must also be efficient, so that re-
sources may be devoted to the most essential purposes and
the period of restricted living standards made as short as

"Democratization": Economic 137

possible. So far, the absence of effective controls over the
distribution of resources, and the consequent inflation, have
resulted in a severe lowering of living standards for some
sections of the population, but have not caused the re-
sources accumulated in other hands to be devoted to essen-
tial reconstruction. Instead, scarce raw materials have been
wasted in non-essential production and building.

6. Therefore, if justice and efficiency in reconstruction,
and a more equal distribution of wealth and economic op-
portunity in Japan are to be achieved, the present infla-
tionary trend must be halted.

Basic Factors in the Inflation

7. The principal immediate cause of the present infla-
tion has been the unbalanced budget and the finance of
the deficit by bonds and treasury bills taken up by the
Bank of Japan. So long as this continues, in the situation of
scarcity such as prevails in Japan today, there is no possi-
bility of achieving stability of prices and wages. The budget
cannot be balanced, however, by mere arithmetic. There
is an intimate and mutually dependent relationship be-
tween the budget deficit, prices and wages. The budget
largely reflects other factors which produce inflationary
pressures. The basic factors are mainly:

(a) A shortage of commodities, leading to

(b) Scarcity prices and profiteering;

(c) Rising wage rates, in an attempt to keep up with
prices;

(d) Higher costs and higher prices because of higher
wage rates;

(e) Increased Government expenditure because of higher
prices and wages;

(f) Failure of revenue to keep up with Government ex-
penditure because of lag in tax assessments and tax
evasion;

JapanEnemy or Ally?

(g) A budget deficit, financed by the central bank, be-
cause of the unwillingness of the public to take up
Government loans while currency is depreciating;

(h) Increase in currency and money incomes throughout
the community.

All of these mutually dependent factors form the "vicious
cycle."

8. The nature of the solution, as I see it, can best be
illustrated by dealing with each of these factors and asso-
ciated topics in turn.

Shortage of Commodities

9. The shortage of commodities can only be overcome
when Japanese industry is restored. This is the main pur-
pose of the policy being outlined here.

Scarcity Prices and Profiteering

10. Scarcity prices arise because the supply of essential
commodities is much below the demand produced by cus-
tomary standards of living. Scarcity prices enable large
profits to be made by certain classes of manufacturers,
farmers, merchants and speculators, because prices received
are much above cost of production or buying prices. The
aim in this case should be to restrict prices to levels which
cover, on the average, cost of production, plus a minimum
profit. Suppliers and speculators should not be permitted
to make exorbitant profits at the expense of the rest of the
community. This involves fixing official prices and enforc-
ing controls over the use of raw materials and the rationing
of consumer goods. Controls and rationing must be effec-
tive to restrict the amount of raw materials and finished
goods which manufacturers and consumers may purchase.
Otherwise competitive bidding arises, prices break through

"Democratization": Economic 139

the ceiling, and the fair distribution of available supplies,
which is possible through rationing, is destroyed.

Control and Rationing

11. The following I consider to be the essential princi-
ples of an effective system for the control of raw materials
and the rationing of consumer goods:

(a) Materials should be sold only -against a permit or
allocation certificate, issued by the controlling author-
ity, and stating, at least, the quantity authorized and
the purpose for which the materials are to be used.

(b) Manufacturers should keep an order-book, showing
persons or corporations to whom materials have been
sold, the quantities sold in each case, and the num-
bers of the respective permits or allocation certificates.
Such books should be inspected regularly by officials
of the controlling authority.

(c) Materials subject to control should not be trans-
ported by rail, sea or road unless the allocation cer-
tificate is produced. The carrier should keep a record,
for inspection, of the names of consignees and the
numbers of the appropriate allocation certificates.

(d) Merchants should not be permitted to buy controlled
raw materials for stock, but only for specific orders
covered by allocation certificates.

(e) Rationing of consumer goods should be based on a
coupon system, the value of coupons being based on
the ratio between essential requirements and the
supply available.

12. The above principles are not intended to constitute
a complete plan for the control and rationing of raw mate-
rials and consumer goods. There are obviously other prin-
ciples and rules which can only be formulated by those
dosely in touch with actual administration. I do feel, how-
ever, that the principles I have listed should be a part of
any scheme for effective economic control in Japan today.

140 Japan Enemy or Ally?

13. Strict enforcement of such controls can prevent one
of the major causes of instabilityscarcity prices and elimi-
nate the major injustices and wastages of the situation
which has existed since the surrender. It is the major step
to be taken if economic stability and a fair sharing of sac-
rifices are to be achieved.

Wage Rates

14. Wage rates occupy a particularly important position
in the Japanese economy today. Since the price level in
Japan is not influenced by world prices, it is determined
solely by local factors, and of these the basic factor is wage
rates. A change in wage rates influences the price of prac-
tically all goods and services. So long as wages increase
prices increase also, provided, perhaps, there is no increase
in the efficiency of production at the same time through
other factors. Unless there is an increase in production,
scarcity, or black-market, prices will increase as wages in-
crease, because workers have more money to spend with
only the same amount of goods to buy, and "official" prices
will increase also, because increased wage rates will mean
increased production costs. If "official" prices are not in-
creased, more goods will probably go through illegal chan-
nels, at black-market prices. Real wages cannot be increased,
in these circumstances, simply by raising money wages,
because wages and prices are so closely linked.

15. The maximum real wages, in the present situation,
can be obtained by eliminating scarcity prices by the means
outlined in the preceding paragraphs. The excess profit
which the seller at present obtains from scarcity prices is
thereby transferred to the consumer. Because of the close
link between wages and prices, no useful purpose is likely
to be served by attempts to determine a money wage which
will secure a certain desired minimum standard of living.

"Democratization": Economic 141

Such estimates can only be made on the basis of existing
prices, and if, for example, it is decided that money wages
should be raised to obtain a higher real wage, the result
will be not a higher real wage, but higher prices and the
same real wage. Unless there is an increase in production
and a lowering of unit costs, no increase in money wages,
in Japan today is likely to result in higher real wages.
There may, of course, be room for adjustment of wages in
some trades, relative to others, but not a general rise.

16. The essential measure, therefore, is to eliminate
scarcity prices and profiteering by controls and rationing.
By this means wage and salary earners may obtain the maxi-
mum possible share of consumer goods.

17. Elimination of scarcity prices will not by itself, how-
ever, prevent a rising price level, except insofar as it re-
duces the pressure for wage increases. If wage increases are
still substantial, prices will continue to rise, though the
rise will be controlled, and it will be difficult to avoid
budget deficits. Wage earners will not necessarily suffer, so
long as price control is effective, but those on incomes which
rise more slowly, such as salaried workers, will. In order to-
secure complete stability of prices, therefore, it would be
necessary to peg wages, after controlled prices have been
fixed and made effective. After wages have been pegged,,
or "frozen," they should be reviewed periodically, say,
every six months, and allowed to rise in accordance with
any increases in productive efficiency. As production in-
creases, efficiency should rise, and, in these circumstances,
increases in wage rates need not necessarily result in higher
costs and prices. The essential condition is that controlled
prices, closely related to costs of production, should be
effective.

18. Wage rates, however, should only be pegged after
price control has been made effective and the wage earner
can obtain his needs at official prices. Otherwise it would.

i 4 2 JapanEnemy or Ally?

be unjust to control the incomes of one class, while another
was allowed to make excessive profits.

19. As it was pointed out in the Partial Staff Study on
this question, the wage structure in Japan is extremely
complex. A revision of the structure to standardize at least
the relationships between basic pay and supplementary al-
lowances would be necessary before an effective system of
wage regulation could be applied. Regulation of the basic
wage only should be necessary and the wage system so de-
signed that other payments would be adjusted automati-
.cally to any movements in the basic wage.

Government Revenue

20. Budget deficits are difficult to avoid when prices are
rising, because revenue tends to lag behind expenditure.
In these circumstances taxes should be levied as much as
possible on current earnings and deducted at the source.
This is relatively easy to do with wages and salaries, but
the problem is complicated with business and professional
incomes. However, it is essential in Japan today that pro-
gressive income tax should be effectively levied on business
and professional incomes. This is necessary to prevent large
budget deficits, and to prevent the injustice of one class
being taxed heavily and another class escaping its due
share. Until prices are stabilized, therefore, extreme efforts
should be made to tax business and professional incomes
on the basis of current earnings. To make this possible, tax
returns for these types of incomes should be made more
frequently than annually. Quarterly might be taken as the

ipfmrmmri period,

Government Expenditure

21. Government expenditure should be reduced to the
minimum level consistent with the proper exercise of the

"Democratization": Economic 143

Government's functions. All items should be scrutinized to
eliminate all but the most essential expenditure. In par-
ticular, accounts submitted by contractors for Government
work should be thoroughly checked to eliminate inflated
charges. The principal determinant of Government ex-
penditure, however, will be the extent to which other con-
trols, outlined above, have been made effective. This, and
the effectiveness of tax collection, will determine whether
the budget can be balanced and finance by bonds and treas-
ury bills avoided.

s/W. MACMAHON BALL.

April 14, 1947

6. "DEMOCRATIZATION": POLITICAL

DEMOCRACY, IN ITS MODERN, WESTERN FORM,

is built on a belief in the individual. The rights of the in-
dividual are its starting-point; the self-realization of the
individual is its goal. The insistence that the individual
must be always the center of political gravity is a compara-
tively recent development in the history of the West. In
Britain the idea made its way steadily from the seventeenth
to the nineteenth centuries; in France and in the United
States it achieved explosive expression in the last quarter
of the eighteenth century. The French and the Americans
then put the idea on paper in a way the British had appar-
ently never thought of doing. In the Virginian Declaration
of Rights of June 12, 1776, the American Declaration of
Independence of July 4, 1776, and in the French Declara-
tion of the Rights of Man and of Citizens of 1889, we have
the basic texts of this modern Western faith.

This democracy is not only a body of ideas: it is also the
expression of these ideas in distinctive laws and institu-
tions. The primary idea is that the individual has inalien-
able rights the right to liberty, the right to equality, and
the right to pursue happiness. But protection of these rights
depends on the adoption of a certain method of govern-
ment and of a certain body of basic laws. The general right
to equality, for example, involves the political right to an

144

"Democratization": Political 145

equal and universal franchise, and the civil right to equal-
ity before the courts. Since all men are equal in their rights,
political power must no longer depend on birth or wealth
or age or sex: it must rest equally with all the people. In
practice this will mean representative government, con-
trolled by the will of the majority. Yet democracy is much
more than majority rule. It is rule by a majority under
conditions to which the minority consent. Both majority
and minority must enjoy the same political and civil rights.
Otherwise the rule of the majority might be the worst
tyranny of all.

These ideas and institutions that we call democracy have
become accepted in countries like Britain, France and the
United States as a result of certain internal changes which
brought about a redistribution of economic and political
power. Democracy was the spontaneous and indigenous ex-
pression of a process of social development. It was organic
to a particular stage of national growth. Nevertheless, the
converts to democracy, like most converts, generally be-
lieved that their new faith was not only the way to salva-
tion for Englishmen, or Frenchmen, or Americans, at a
particular stage of their history, but the true faith of all
mankind. It was easy to overlook here an important dis-
tinction. It is one thing to believe that political progress is
always and everywhere marked by a growth of respect for
the individual, and increased provisions for his develop-
ment; it is another thing to believe that the particular laws
or institutions which further individual development in
Britain in the nineteenth century, or America in the twen-
tieth century, will necessarily serve the same purpose in all
places at all times. For, if laws and institutions are to be
good, they must be related not only to their final purpose,
but to prevailing circumstances. They are means to an end,
not ends in themselves.

No one with these ideas in mind could believe it an easy

146 JapanEnemy or Ally?

thing for its conquerors to bring democracy to Japan. It
would not be easy to win assent to the idea of equality in
a nation saturated with inequalities. There were the un-
equal rights of the sexes, learned from infancy. In Japan a
mother will call out to her small daughter, who has barely
learned to walk, to keep behind her brother as they go
along the road. There were the unequal rights of age.
There is no word for brother or sister in Japanese: only
words for elder brother or younger brother, elder sister or
younger sister. There were the inequalities of birth, with
the Emperor descended, "in a line unbroken from ages
eternal/' at the sacred pinnacle. Even the inequalities of
wealth still a prominent feature of Western democracies-
tended in Japan to have a stable and inevitable character,
owing to the tradition of feudalism in the countryside, and
to the marriage of the Zaibatsu with the nobility. The Im-
perial family was a major Zaibatsu concern. Throughout
the national life, in the capital, in every prefecture, and
village and household, authority belonged to an established
hierarchy, and, at least with the Emperor and the head of
the household, this hierarchy was sanctified by religion.

Such was the problem set for the Allies. In the circum-
stances, it was not surprising that there was some uncer-
tainty and perhaps some inconsistency in the formulation
of our objectives. In the Potsdam Declaration it was pro-
vided, in paragraph 10:

The Japanese Government shall remove all obstacles to the
revival and strengthening of democratic tendencies among the
Japanese people. Freedom of speech, of religion and of
thought, as well as respect for the fundamental human rights,
shall be established.

And in paragraph 12:

The Occupying forces of the Allies shall withdraw from
Japan as soon as there has been established, in accordance

"Democratization": Political 147

with the freely-expressed will of the Japanese people, a peace-
fully-inclined and responsible Government

The Initial Post-Surrender Policy elaborated this. 1
It would seem that at Potsdam and in Washington it was
recognized that, if democratic reforms were to be demo-
cratic in fact, and not only in form, they would have to
represent the "freely-expressed will of the Japanese people."
These reforms were to be "permitted," "encouraged,"
"favored," and the use of these words would suggest that
the Allied authorities were to foster, but not to force, the
reforms. Yet certain rights "shall" be established, certain
laws "shall" be abrogated and repealed, the legal system
"shall" be reformed.

The Allies faced the eternal dilemma. We wanted good
laws and institutions to be the free choice of the Japanese
people, but we also wanted to make sure that, in any case,
they were given good laws and institutions. If Japan, at
the surrender, had been a nation in which a politically-
conscious and freedom-loving majority was enslaved by a
ruling minority, our problem would have been compara-
tively simple. Once we had overthrown the "militarists,"
demobilized the army and cleansed the police force, the
oppressed masses could have claimed their inheritance. But
the situation was not like that. The enslavement, as we re-
garded it, of the Japanese people was not the product of
police coercion. The police only dealt with a tiny minority
of "dangerous thinkers." It was the product of long years

iPart HI, Political.-"Laws, decrees and regulations which establish
discriminations on ground of race, nationality, creed or political opinion
shall be abrogated; those which conflict with the objectives and policies
outlined in this document shall be repealed, suspended or amended as
required; and agencies charged specifically with their enforcement shall
be abolished or appropriately modified. Persons unjustly confined ^by
Japanese authority on political grounds shall be released. The judicial,
legal and police systems shall be reformed as soon as practicable . . .
and, thereafter, shall be progressively influenced, to protect individual
liberties and civil rights."

148 JapanEnemy or Ally?

of conditioning by teachers, parents and rulers. Hence the
Allies were faced not only with the opposition of the minor-
ity, whose privileges were threatened, but with the political
inertia of the majority, the product of subservience and
superstition. What, then, were we to do? Were we to wait,
in hope and patience, until education opened the eyes of
the people and made them demand their democratic rights?
That might mean a very long wait. Or were we to insist
firmly, despite official opposition and popular inertia, on a
number of revolutionary changes in laws and institutions
to make them consistent with those of the Western de-
mocracies? 2

We decided on this second course. There were, perhaps,
two main reasons. Laws and institutions are not only die
external expression of ideas; there is constant interaction
between them. Men make institutions, and the institutions
tend to remake men. If the Japanese people were given
democratic institutions which represented their real inter-
ests, they might come to learn their value. Perhaps the best
way to get them to care for democratic rights was to give
them to them, so that they could the more quickly come to
appreciate them. More important, it was felt that these
reforms would provide the indispensable conditions for
the growth of a spontaneous liberal movement in Japan. It
was recognized that the liberal forces in Japanese politics
were not powerful, and if they were to increase their in-
fluence they would need full freedom to organize and to
propagate their beliefs. They could only do this under a
new constitution and a new body of laws.

The new Constitution is the basic feature of the reform
program. This document has been very widely explained
and discussed in recent periodicals, and the text is printed

a For an interesting analysis of the different problems that faced the
Allied Occupation in Germany, see W. Friedmann's The Allied Military
Government of Germany, Chapter VII,

"Democratization": Political 149

as an appendix to this study. I shall not, therefore, attempt
to discuss its details. It gives the Japanese people the kind
of representative institutions and the kind of civil rights
that have been established in Western democracies. It trans-
fers sovereignty from the Emperor to the people. It strips
the Emperor of all political authority by providing that he
can only act on the advice of the Cabinet. It makes the
Cabinet fully responsible to Parliament. Parliament is di-
rectly elected by the people on the basis of equal and uni-
versal adult franchise. The judiciary is made independent
of the executive, and the Supreme Court has power to "de-
termine the constitutionality of any law, order, regulation
or official act." The Constitution includes, in Chapter III,
a Bill of Rights:

All of the people shall be respected as individuals. Their
right to life, liberty and the pursuit of happiness shall, to
the extent that it does not interfere with the public welfare,
be the supreme consideration in legislation and in other Gov-
ernment affairs. (Article 13.)

All the people are equal under the law, and there shall be
no discrimination in political, economic or social relations
because of race, creed, sex, social status or family origin.
(Article 14.)

Specific articles protect freedom of thought, freedom of
religion, freedom of assembly and association, and academic
freedom.

T^he Meiji Constitution also purported to protect indi-
vidual rights, but only "within the limits of the law." This
meant that it was possible to abrogate these rights at any
time by ordinary legislation or Imperial Decree. The new
Constitution provides that these rights can only be limited
by considerations of public welfare. It would presumably
rest with the Supreme Court to decide whether legislation
restricting these rights was justified by such consideration.

It would be unreal to analyze the text of the new Con-

150 Japan Enemy or Ally?

stitution too narrowly. It may exhibit some technical de-
fects, but there can be no doubt that, taken as a whole, it
gives the Japanese people the apparatus of government and
the civil and political rights that mark the Western democ-
racy. The circumstances in which the Constitution was
adopted, and the way the Japanese feel about it, is much
more important than its verbal content.

The Allied peoples now generally know what the Japa-
nese people knew from the beginning: that the Constitu-
tion is essentially an American product. General MacAr-
thur's first efforts to persuade Japan's political leaders to
make a radical constitutional revision were unsuccessful.
In the last quarter of 1945 Prince Konoye, "at the com-
mand of the Emperor," set up a committee under Toji
Matsumoto to recommend revisions. The work of this com-
mittee failed to satisfy SCAP, mainly because it so strongly
resisted any serious reduction in the Emperor's powers.
General MacArthur, consequently, decided that the real
work had to be done in his headquarters, if it were to be
done at all. The draft which the Japanese Government
published in March 1947 was a Japanese translation of the
document written in English in GHQ. It bore in every
line, in its ideas and wording, the marks of its origin. The
ideas had been expressed in almost the same words in 1776,
though, in order to leave a niche for the Emperor in an
American type of political system, it was necessary to in-
clude the British idea of a constitutional monarch.

I have already referred to the Japanese reaction to this
alien gift. 8 The ordinary people were quite disinterested.
The political leaders, compelled by circumstance to father
this unwanted child, did not succeed in concealing their
real feelings. It was the responsibility of Mr. Yoshida, then
Prime Minister, and Mr. Kanamori, the Minister of State,
in charge of constitutional revision, to ensure that the Gov-
*See Chapter n.

"Democratization": Political 151

eminent draft, already publicly applauded by General
MacArthur, should be passed by the Diet without substan-
tial amendment. It was a heavy and distasteful responsi-
bility. Mr. Yoshida repeatedly reminded the Diet that the
new Constitution was required by Japan's acceptance of
the Potsdam Declaration, and by the "present international
exigencies," which deprived the Japanese Government of
its freedom in these questions. He argued that the change
from the Meiji Constitution was not really so great as might
appear on the surface. Mr. Kanamori put emphasis on this
issue of historical continuity. He repeatedly insisted that
the "national policy" was in no way changed by the new
Constitution, though later, under pressure, he wrapped
this thesis in ambiguity. The official translation of Mr.
Kanamori's final commentary on the Government draft is
a good example of this ambiguity and evasiveness, from
which I quote the following paragraphs:

Popular sovereignty should be considered a change in recog-
nition of the people. Inadvertently speaking, the idea of
popular sovereignty is not an entirely new one. The fun-
damental will of the nation was heretofore decided upon
along this line, as seen in history. Sovereignty should be con-
sidered the very source of national will. However, in the past
we failed to realize this fact, because of too much emphasis on
mysterious myths regarding the origin of our country. Now
this veil has been lifted and actualities have been made dear.
It should be considered, therefore, that popular sovereignty
is no more than a change in the recognition of the people.

Position of Emperor in system in which veil of mysticism
has been Z/ted. Heretofore, the Emperor was considered as
having the ability to function as the very source of national
will, and, in consequence, certain mysterious characteristics
were attached to his position. However, the fact that the Em-
peror has such a mysterious character is impossible. The source
of national will should lie within the entire populace. There-
fore, the new Constitution stipulates that the position of the
Emperor is based on the general will of the Japanese people.

Japan Enemy or Ally?

Thus a drastic change has been made in the people's recogni-
tion of the position of the Emperor. The change in itself is not
essential, but its effects are important. A definite change in
such spiritual matters is virtually an essential one. However,
a calm examination of the matter should show that no essen-
tial change has been made, except for the clarification, along
national lines, of the heretofore vague conception of the posi-
tion of the Emperor. It is from this point of view that I main-
tain that the Emperor is a symbol of Japan, instead of the
source of our national will.

Symbolic position of Emperor in accord with his intrinsic
character. The position of the Emperor as a national symbol
should be interpreted to mean that the Emperor has a legal
position through which any one of the people can conceive
of Japan as a nation in thinking of him. In addition, it is
stipulated in the new Constitution that the Emperor is the
symbol of national unity. The reason the words "national
unity" are introduced in it should be to correct the past
evil that individuals, who ultimately form a nation, were all
too rarely recognized because of too much importance at-
tached to the nation as a whole. The nation being clearly stipu-
lated as a gathering of individuals, I do not believe that the
Emperor's position as a symbol of the nation is without
foundation, because fundamentally he has an intrinsic char-
acter as a national symbol.

The idea that Japan, as a body of the Japanese people,
may be conceived more clearly in thinking of the Emperor,
should be based on the fact that he constitutes the center of
national adoration. True, emblems and the national flag are
also symbols. However, the difference in significance between
the symbol, essential to the Emperor's position, and such
artificially-attached ones, should be clearly realized.

I have quoted this statement at some length because it
is such a superb expression of the Government's equivoca-
tion. Yet it seems to me that the least equivocal parts of the
statement are those in which Kanamori insists that no es-
sential change has been made either in the national char-
acter or in the position of the Emperor.

In these circumstances it is the more important that so

"Democratization": Political 153

much of the Constitution is rather a declaration of prin-
ciples than a statement of legally-enforceable rights. "All

people shall have the right and the obligation to work

Children shall not be exploited" (Article 27). It is also
important that a constitution which guarantees the eternal
enjoyment of so many rights can itself be amended with
exceptional ease. Amendment only requires a two-thirds
vote of both Houses of the Diet and confirmation by simple
majority at a referendum. This feature of the Constitution
would seem to stultify a major purpose of constitutional
reform, to protect the rights of those liberal and radical
groups still in a minority in Japan. In principle, the pres-
ent Diet could pass amendments against all resistance of
the Social Democrats, and, assuming no major change in
electoral feeling, should have no difficulty in getting its
amendments confirmed by a simple majority of tie people.

The new Constitution is inconsistent with a great body
of Japanese law, particularly with many of the provisions
of the Civil and Criminal Codes. During the last year there
has been a spate of implementing legislation, but the full
program of revision necessary to bring other laws into line
with the Constitution may take some years. Meanwhile,
some parts of the Constitution will remain ineffective.

If the new body of laws are to give a larger measure of
freedom to the Japanese people, much will depend on how
they are administered by local authorities. It is not very
useful for the Diet in Tokyo, under SCAP direction, to
remake the Civil and Criminal Codes unless this legislative
reform at the center produces a new spirit and kind of
behavior among the policemen and municipal clerks in the
towns of Hokkaido and Kyusha. SCAP has fully recognized
the need for the reform of local government, reform "at
the grass roots." There have been two main lines of re-
form, provision for the direct popular election of local
legislators and executives, and a comprehensive program

154 Japan Enemy or Ally?

of decentralization. The first local election under the new
system took place in April 1947. The results were disap-
pointing, since, in most cases, the people elected the old
guard of bureaucrats who had previously held office by
appointment of the National Government. Hence the first
result of the electoral reform of local government was to
give conservatives and bureaucrats an authority and pres-
tige they had never had before. They could now claim that
their power rested on the free consent of the local people,
not on the favor of the Home Ministry. The second line of
reform, decentralization, hoped to correct the evils that
flowed so heavily in the past from "Tokyo control." Until
the Occupation, all high officials in local government, down
to the policeman and school teacher in the smallest village,
were appointed by the Home Ministry. This extreme cen-
tralization was an effective technique for drilling the na-
tion for war. It produced uniformity and discipline, and
ensured that the patterns drawn in Tokyo would be firmly
stamped on every farm and village in Japan. SCAP recog-
nized, rightly and wisely, that if the Japanese were to learn
to govern themselves, they could learn best in the local
community, where problems were comparatively simple
and where people were in intimate daily contact with their
local officials. The devolution of powers from national to
local bodies would not only increase the ordinary people's
sense of responsibility and give them experience in the
ways of democracy; it would forestall the return of national
regimentation in the interests of militarism.

There was great weight behind SCAP's reasoning. The
ultimate objective was right. Yet the decentralization pro-
gram tended to clash with other aims. During the Occupa-
tion reforms have necessarily been initiated at the center
in Tokyo, and it is hard to see how they can be effectively
carried out throughout the islands without central direc-
tion and authority. It may, in principle, be a good thing to
foster a particularist and self-dependent spirit in the pre-

"Democratization": Political 155

features, but these distinctive tendencies may mean major
deviations from Occupation policy. It is good to have a
variety in secondary issues, but on the primary issues we
cannot afford local dissent. SCAP is pitifully short of man
power; it is easier to exercise authority at one central point
than at an immense number of local centers. In my own
view, some form of Allied control of Japan will be neces-
sary for many years. We can be sure there will be a great
shortage of man power for this. In these circumstances, I
feel that some of the present measures of decentralization
are probably premature, however necessary to the achieve-
ment of our final aims. It is necessary to remember that
the towns and villages are the strongholds of feudalism and
superstition in Japan. To weaken the opportunities for
education and control from the center may merely enable
backward rural communities to live on, undisturbed by
the stream of ideas that SCAP has brought to Tokyo.

In this discussion of political reform, I do not want to
suggest that the new legal structure has made no change
in political habits. I believe that the legal provision of new
political and civil rights is supremely important. But its
importance lies in what it makes possible for the future,
rather than in what has been achieved until now. The hope
of progress is that liberal and progressive Japanese will use
their new freedom to produce a real change in the eco-
nomic and social structure. In the last analysis these changes
can only be made by the Japanese themselves. They now
possess the legal right to make them. But it is doubtful
whether the legal right is enough unless Allied economic
and political policy creates the extralegal conditions favor-
able to fundamental change.

Trade Unions

It is perhaps possible to get an idea of how much and
how little the possession of legal rights can help to produce

156 Japan Enemy or Ally?

economic and social results by briefly considering the situ-
ation of the Japanese trade unions.

The Initial Post-Surrender Policy laid down that "en-
couragement should be given and favor shown to the devel-
opment of organization in labor ... on a democratic basis."
Trade unions had never been deeply rooted in Japan. A
few unions showed bursts of activity in the twenties and
early thirties, but the idea of union organization was alien
to the great majority of Japanese workers. From the mid-
dle thirties unions were ruthlessly suppressed in prepara-
tion for war. During the war labor was organized by the
Government in two labor fronts or industrial armies.

Under pressure from SCAP, these wartime organizations
were dissolved on September 30, 1945. On October 4 the
directive which ordered the removal of all restraints, on
political and civil liberties opened the way for the forma-
tion of trade unions. The Labor Union Law, passed on
December 21, 1945, gave specific rights to the unions the
right to organize, to bargain and to strike. This Law was
a great advance on any prewar labor legislation in Japan.

(Nevertheless, when the Diet passed the Labor Rela-
tions Adjustment Law nine months later, on September
20, 1946, it put restrictions on the right of government
workers to strike, and public utility workers, very broadly
defined, were prohibited from striking for thirty days after
appealing for mediation.)

With these new legal opportunities, and under eager
encouragement from GHQ officials, trade unions had
a mushroom growth. A year after the surrender more than
18,000 unions, representing four million members, had
been registered. The local unions are mostly organized in
national industrial unions, which are in turn grouped in
three federations the Congress of Industrial Organiza-
tions, the General Federation of Labor Unions and a new
and small All-Japan Council of Trade Unions.

"Democratization": Political 157

It is sometimes claimed that this huge and rapid growth
of union organization is evidence of the speed with which
Japan has been "democratized." I think it would be pre-
mature to make this inference. It is much easier to count
the number of trade unions than to assess their achieve-
ments. They have been faced with two major and related
issues during the Occupation: First, to what extent should
union action be restricted by the needs of the Occupation
forces, and, second, should "political" strikes be permitted,
and not only those directed towards the improvement of
economic conditions in a particular industry.

It is clear that any strike which affected public utilities
and seriously inconvenienced a large section of the Japa-
nese people would automatically inconvenience Allied
forces and perhaps impede them in their work. I remem-
ber well the inconvenience I felt personally when a strike
in the electrical industry meant that my Tokyo house was
blacked out at intervals for some weeks, since we drew
light and power from a Japanese main. Sometimes the
consequences were much more serious than this, for it was
not always practicable for the strikers to give Allied people
immunity from actions that were aimed against their own
employers or their own Government. It would make a
military occupation a little ridiculous if the occupiers were
to be deprived, from time to time, of lighting, heating,
communications and transport. That was the first check
on union militance, and it was very hard to remove in the
circumstances.

The more serious restriction on union activities was that
GHQ and the Japanese Government took the line that the
right to strike did not include the "political" strike, since
this did not properly fall within the trade union field. The
Far Eastern Commission has agreed that Japanese unions
"should be allowed to take part in political activities and

Japan Enemy or Ally?

to support political parties." 4 Yet in the preceding para-
graph of the same policy decision the Far Eastern Com-
mission provides that strikes may be prohibited "only when
the Occupation authorities consider that such stoppages
would directly prejudice the objectives or needs of die
Occupation." This leaves wide discretion to General Mac-
Arthur and brings us back to the questions discussed in
Chapter II. The Japanese Government is SCAP's main
instrument for controlling Japan. Strikes, which under-
mine the authority of the Government, automatically im-
pair SCAP's authority. It is not surprising that General
MacArthur should discountenance or prohibit this type of
strike.

On the other side, it must be recognized that if strikes
which seek to influence government policy are labeled
"political" and, therefore, banned, it will hardly be pos-
sible for industrial unions to use the strike weapon effec-
tively. It is impossible to separate politics and economics
in this way. In most countries today, certainly in Japan,
the unionist's economic conditions are mainly determined
by political policy. It is the Government, not his employer,
that has the last word on his standard of living. The criti-
cal problem for Japanese unionists has been to try to
make wage increases keep pace with price increases. Nomi-
nal wage increases are useless. But it is Government policy,
and not his employer's policy, that mainly determines the
price level. In June 1947 the official prices for foodstuffs
in Japan were more than three times higher than in June
1946. Black-market prices were up to twenty times higher
than official prices. Families spent about three-quarters of
their income" on food, and during some months about
three-quarters of this expenditure was on the black market
In this race of prices and wages, the wages failed to keep

* Far Eastern Commission policy decision, December 6, 1946. Principles
for Japanese Trade Unions, pars. 5, 6.

"Democratization": Political 159

the prices in sight. Here was the real source of industrial
unrest. It was a situation which could only be dealt with
by political action on a national scale. Only the "political"
strike could put pressure on the Government, and the
Government action alone could achieve the desired eco-
nomic ends.

Trade union militance reached its highest point at the
end of January 1947, in the plan for the February i "gen-
eral" strike. On January 28 about 400,000 Tokyo workers
took part in a mass demonstration to demand the immedi-
ate overthrow of the Yoshida Government. It was esti-
mated that about 2,600,000 workers in government and
public services would strike. A number of national trade
unions outside the public services declared that they would
strike in sympathy, so that on the morning of January 31
it seemed that something like four million workers would
be involved.

The government workers demanded something like a
threefold increase in wages, in a desperate pursuit of prices.
It was hard to see how the Government could possibly
have agreed to these demands, and it was certain that, even
had it done so, the strikers would have won only an illu-
sory relief, while inflation continued.

The "general" strike was killed at 2:30 p.m., Tokyo
time, on January 31, when General MacArthur issued the
following statement:

Under the authority vested in me as Supreme Commander
for the Allied Powers, I have informed the labor leaders, whose
unions have federated for the purpose of conducting a general
strike, that I will not permit the use of so deadly a social
weapon in the present impoverished and emaciated condition
of Japan, and have accordingly directed them to desist from
the furtherance of such action.

It is with greatest reluctance that I have deemed it necessary
to intervene to this extent in the issues now pending. I have
done so only to forestall the fatal impact upon an already

160 JapanEnemy or Ally?

gravely threatened public welfare. Japanese society today oper-
ates under the limitations of war defeat and Allied Occupa-
tion. Its cities are laid waste, its industries are almost at a
standstill, and the great masses of its people are on little more
than a starvation diet.

A general strike, crippling transportation and communica-
tions, would prevent the movement of food to feed the people
and of coal to sustain essential utilities, and would stop such
industry as is still functioning. The paralysis which inevitably
would result might reduce large masses of the Japanese people
to the point of actual starvation, and would produce dreadful
consequences upon every Japanese home, regardless of social
strata or direct interest in the basic issue. Even now, to pre-
vent actual starvation in Japan, the people of the United States
are releasing to them quantities of their own scarce food re-
sources.

The persons involved in the threatened general strike are
but a small minority of the Japanese people. Yet this minority
might well plunge the great masses into a 'disaster not unlike
that produced in the immediate past by the minority which
led Japan into the destruction of war. This, in turn, would
impose upon the Allied Powers the unhappy decision of
whether to leave the Japanese people to the fate thus recklessly
imposed by a minority, or to cover the consequences by pour-
ing into Japan, at the expense of their own meager resources,
infinitely greater quantities of food and other supplies to sus-
tain life than otherwise would be required. In the circum-
stances, I could hardly request the Allied peoples to assume
this additional burden.

While I have taken this measure as one of dire emergency,
I do not intend to restrict the freedom of action heretofore
given labor in the achievement of legitimate objectives. Nor
do I intend in any way to compromise or influence the basic
social issues involved. These are matters of evolution which
time and circumstances may well orient without disaster as
Japan gradually emerges from its present distress.

It will be noticed in General MacArthur's statement
that he gave his instructions direct to union leaders, not
through the Japanese Government; that the emphasis was
on the needs of the Japanese people, not on the needs of

"Democratization": Political 161

the Occupation; that, in General MacArthur's view, the
movement behind the strike came from a small and un-
representative minority, and that Allied assistance to Japan
could hardly be expected unless Japanese trade unions
refrained from planning this kind of strike.

In the following months a number of trade unionists
told me that the officers of GHQ and of the Military Gov-
ernment teams privately advised them that certain pro-
jected "local" strikes would fall under General Mac-
Arthur's prohibition of the "general" strike. I was not
able to check these reports. However, for whatever reasons,
after February i, 1947, there was a very marked reduction
in the number of strikes or projected strikes.

Trade union activity has presented General MacArthur
with a major problem of "democratization." Every strike
dislocates industry and holds up the production of those
goods and services Japan needs so urgently. They may
thereby put heavier burdens on the American taxpayer.
Moreover, a successful strike raises the prestige of the
"militant" unionists. At least some of these leaders are
Communists. It is, therefore, understandable that SCAP
should seek to discourage the use of the strike weapon.
Yet we need to remember that the strike has traditionally
been the unionists' most effective weapon. In the circum-
stances, it is unlikely that trade unions in Japan will dis-
play vigor and aggressiveness, despite the immense in-
crease in their nominal membership.

The Purge

The Potsdam Declaration laid down, in paragraph 6,
that "there must be eliminated for all time the authority
and influence of those who have deceived and misled the
people of Japan into embarking on world conquest." The
United States Government greatly elaborated and ex-

162 Japan Enemy or Ally?

tended this general program. It directed General Mac-
Arthur to "prohibit the retention in, or selection for, posi-
tions of important responsibility or influence in industry
finance, commerce or agriculture of all persons who have
been active exponents of militant nationalism or aggres-
sion, and of any who do not direct future Japanese eco-
nomic effort solely towards peaceful ends." In the absence
of evidence to the contrary, he was directed to "assume
that any persons who have held positions of high respon-
sibility since 1937 in industry, finance, commerce and agri-
culture, have been active exponents of militant national-
ism and aggression."

This was a very comprehensive program, and SCAP
has been carrying it out, or rather directing the Japanese
Government to carry it out, since the first weeks of the
Occupation. In October 1945 steps were taken to purge
the police force and the teaching profession. On January
4, 1946, SCAP issued the since-famous "Purge Directive,"
which was to make a clean sweep of all militant and ultra-
nationalist organizations and exclude from public office
all people who, either from the positions they held or the
views they had expressed, were active and influential in the
practice or preaching of militarism or ultra-nationalism. 6
The term "public office" applied to all public servants of
the Chokunin rank or its equivalent. The Chokunin is the
second highest rank in the public service. The directive
had immediate and spectacular consequences for the elec-

* Removal from office was automatic for all persons who:

i. Have held important posts in ultra-nationalistic, terroristic or secret
patriotic societies; in the Imperial Rule Assistance Association or the
Political Association of Great Japan, or any of their affiliates;

a. Have held important posts in financial and development organiza-
tions involved in Japanese overseas exploitation;

$. Have held important offices in occupied territories;

4. Have been members of the top military organizations;

5. Have ever been commissioned officers in the regular army or navy,
or in the special volunteer reserve;

6. Have been connected in any capacity, civilian or military, with any

"Democratization": Political 163

tion of April 1946. Only about fifty Diet members were
eligible as candidates. The Progressive Party found that
about 200 of its 272 Diet members would be barred from
running again. Altogether it is estimated that the purge
directive excluded about 200,000 persons from public

office.

Exactly twelve months later, on January 4, 1947, the
Japanese Government, under SCAP direction, launched
the "purge extension." The new scope of the purge was
laid down in Imperial Ordinances, Nos. i, 2 and 3, and
in the Cabinet and Home Ministry Ordinance, No. i, of
1947. The idea was to extend the purge to all local govern-
ment executives and legislators, and to all persons in re-
sponsible positions in business and publishing. It also
embraced the chief officeholders of political parties. On
paper this made the purge policy extremely drastic and
comprehensive. It meant, for example, that all who had
held senior executive positions between July 7, 1937, and
September 2, 1945, in the biggest businesses were to be
automatically dismissed.

It was not surprising that this vast extension should
have aroused dismay and resentment among Japan's lead-
ers, and that this was reflected in some criticism in the
United States. 6

military or naval police, or with any secret intelligence organizations;

7. Have held important positions in the Ministry of War or Ministry
of Navy.

And the following were to be excluded from office:

i. Any person who has denounced or contributed to the seizure of
opponents of the militaristic regime;

a. Any person who has instigated or perpetuated an act of violence
against opponents of the militaristic regime;

3. Any person who has played an active and predominant governmental
part in the Japanese program of aggression, or who by speech, writing
or action has shown himself to be an active exponent of militant national-
ism and aggression.

6 Particularly in an article in Newsweek, January ay, 1947. On January
31 General MacArthur replied to this criticism. See Summation of Non-
Military Activities, January 1947, pp. 35'3 6 -

164 Japan Enemy or Ally?

Yet the new ambitious program does not seem to have
been carried out according to plan, and there are many
indications, including the statement by Mr. Royall
(quoted on pp. 129-30) that the United States Government
feels that GHQ was rather too enthusiastic about purging
forgetful that conditions and viewpoints had changed since
the purge policy had been first formulated in 1945. A mere
reading of the provisions of the purge directive or or-
dinances would, therefore, give a misleading impression
of the actual course of events.

What results would it be reasonable to expect from
the purge, and what results have, in fact, been achieved? 7

The responsibility for carrying out the purge rests with
the Japanese Government. The huge task of screening
hundreds of thousands of people was beyond GHQ's re-
sources. In earlier chapters I have tried to show that the
Japanese Government has relied for its support on the
most conservative forces in Japan. I have argued that its
policy has been the silent sabotage of the Allied objectives
of 1945. 1 think, therefore, that it would be naive to expect
the Government to carry out the purge in good faith. It is
hard to see how it could possibly have done so when so
many Cabinet Members, at least up to the middle of 1947,
themselves fell under the purge, as a consequence of be-
lated scrutinies of their past records.

If SCAP's forced reliance on the Japanese Government
has been the main practical difficulty, there were other
difficulties rooted deeper in Japan's character and history.
A purge assumes that it is possible to separate the sheep
from the goats; the "moderates" and "liberals" from the
"undesirables," the innocent followers from the wicked
leaders. No such dichotomy is possible in Japan. The

* In the five months following the "purge extension" the Central
Screening Committee examined the records of 20,648 persons, including
those in business and publishing. Of these, 341 were removed from office
and 817 excluded from office; Le., less than *y per cent.

"Democratization": Political 165

nation is exceptionally homogeneous. Indoctrination in the
ways of nationalism and war has permeated every stratum
of society. You cannot change the outlook of a group-of a
party, or a school, or a business by dismissing its leaders.
The new leaders will carry on the old tradition, though
with great circumspection under the exigencies of the Oc-
cupation. I am aware that this generalization needs quali-
fication. There were real liberals and revolutionaries in
Japan, mostly in jail. But they were too few and inexperi-
enced in executive responsibility to assume leadership. In
any case, it is doubtful whether SCAP would have encour-
aged their ambitions, since their past experiences had
driven so many of them to the "extreme Left." The root
problem of the purge is that it cannot be consistent with-
out overreaching itself. You cannot purge a whole nation.

I have said that you do not change the outlook of a
group by dismissing its leaders. But, in practice, when you
purge the leaders, you do not destroy their personal leader-
ship. You merely deprive them of titular authority. It is
impossible, in a country like Japan, where most important
decisions are made at "unofficial" meetings and in family
councils, to deprive leaders of their power by removing
them from office. There may be dangers in creating an
embittered group of able men from whom you have
stripped privilege but not power.

Perhaps the most important question today is not
whether the purge has succeeded, but whether the United
States now wishes it to succeed. The plain fact is that
American aims in Japan today are different from what
they were at the surrender. The ideas behind the purge,
certainly those behind the "purge extension," are an over-
lap from 1945. This comes out most clearly in connection
with the economic purge. Since the middle thirties the
privately-owned industries of Japan have all been organ-
ized for war. For various historical reasons, the control

166 Japan Enemy or Ally?

of these industries has been highly centralized. All senior
executives were, in a sense, involved in "monopolistic" or
"militarist" enterprises. If, in accordance with the purge
extension, they are to be removed from all positions of
influence, this will deprive Japan of the managerial skill
that would seem indispensable if she is to become the
"workshop of East Asia" and a safe field for American
loans and credits. There are many signs that Americans
realize this, 8 and Japanese leaders have been quick to
exploit this situation. In December 1947 the Japanese
Government was able to announce that the purge was "vir-
tually complete."

* Cf. statement by Mr. Royall, pp. 129-30.

7- MAJOR DEVELOPMENTS IN 1948

DURING 1948 AMERICAN POLICY TOWARDS
Japan, and events in Japan, have surprised some observers.
Yet the most recent developments were clearly foreshadowed
during 1947. In 1947 the United States authorities were
reticent and tentative about amending or reversing the
Allied policies of 1945; during 1948 the new American
policy has been crystallized, publicized and developed.

America now aims to help Japan regain her prewar
position as the workshop of East Asia. She seeks to do this
in four main ways. First, she wants to permit Japan to
retain industrial plants which the Allies had previously
intended to remove as reparations. Second, she wants to
give Japan direct financial help to restore her secondary
industries, to re-equip her plants, to secure overseas raw
materials and overseas markets. Third, America wants to
restore to the large Japanese business groups many of the
freedoms of which SCAP had earlier intended to deprive
them. And, fourth, she wants to contract some of the new
freedoms which SCAP had previously given to Japanese
trade unions.

It was Mr. Kenneth Royall, Secretary of the Department
of the Army, who on January 6, 1948, first gave a dear
indication of the new trend of American policy. 1 In Chap-

i See above, p. 129.

168 JapanEnemy or Ally?

ter 5 I have already discussed the main features of his
statement. Subsequent events were clearly foreshadowed
when he said, "We are not averse to modifying programs
in the interests of our broad objectives. A bill recently
submitted to the Japanese Diet setting up procedure for
deconcentration of excessive economic power was changed
before the final enactment changed with a view of giving
added weight to the economic needs of Japan."

The report, commonly called the Strike Report, made
for the United States Department of the Army by Overseas
Consultants Incorporated, confirmed the new trend of
influential American opinion. 2 The report contains a good
deal of technical detail, but its main theme is clear and
simple. In assessing Japan's economic needs it takes 1953
as its "target" year. It is concerned to discover the means
by which Japan might regain by 1953 the living standards
she enjoyed in the years 1931-1937. It estimates that by
1953 Japan's population will have risen to 85,800,000 and
that the non-farm population, that is, the proportion of
the population that does not grow its own food, will be
60 per cent higher than in the early thirties. Japan has lost
all her invisible income from foreign sources, the interest
and dividends on foreign investments, returns from ser-
vices abroad and from her overseas shipping services. The
market for Japan's one important raw material export, raw
silk, has been greatly reduced by the competition of nylon
and improved rayon fabrics. Hence, the Strike Report con-
tinues, Japan's future exports must be almost wholly manu-
factured goods, and, in view of the reduction of her income
from other sources, she must export a much greater
volume of these in 1953 than in the 1930*5, if she is to
maintain her increased population at the former level. But
she can do this only if she has the factories to do it. She

2 See the official summary issued by the Department of the Army, Wash-
ington, March s, 1948.

Major Developments in 1948 169

consequently needs more and not less industrial capacity
than she has at present. The Strike Report concludes: "Re-
moval of productive facilities (except primary war facili-
ties) which can be effectively used in Japan would hurt
world production; would reduce the likelihood of her be-
coming self-supporting, and in any case increase the time
required for accomplishing this objective; would be expen-
sive to the American taxpayer, and, in our opinion, would
not be in the best interests of the claimant nations."

The Strike Report was followed by an even more
authoritative statement by Mr. W. H. Draper, Under-
secretary of the United States Department of the Army, to
a press conference in Tokyo on March 26. Mr. Draper said
that the United States would give Japan extensive financial
aid to become self-supporting, and that the United States
wanted to permit Japan as high an industrial level as pos-
sible without threatening peace. Mr. Draper took with him
to Japan an advisory group of prominent American busi-
nessmen (including Mr. Paul Hoffman) under the chair-
manship of Mr. Percy H. Johnston. Mr. Johnston's influen-
tial group urged in its report that the United States should,
in its own interest, now assist in the industrial recovery
of Japan. It repeated the Strike recommendation that any
equipment which could help this recovery should be left
in Japan. It emphasized the importance of encouraging
Japan to increase its merchant shipping both by new build-
ing and by chartering available bottoms. Finally, the John-
ston group warmly supported the program sponsored by
the Army and the State Department, which would call for
the provision of $220,000,000 over twelve months for aid-
ing the recovery of Japan, Korea, and the Ryukyu Islands. 8

8 Press release issued by Mr. Johnston, April 6, 1948. For the text of the
report of the Committee, issued in Washington by the Department of the
Army on May 19, 1948, see Appendix II below, pp. 211-38. For an appraisal
of the Strike and Johnston reports see Jerome B. Cohen's article, Japan:
Reform vs. Recovery," Far Eastern Survey, June 23, 1948-

170 Japan Enemy or Ally?

Meanwhile General MacArthur has continued to re-
shape Occupation methods. In particular he restated his
attitude towards trade unions and towards the Zaibatsu.
In a letter dated July 22, to Mr. Ashida, the Japanese
Prime Minister, General MacArthur dealt with the "exist-
ing inadequacies" in the National Public Service Law. 4 He
urged that the law be amended to prohibit strikes and, in
effect, any collective bargaining by public servants or work-
ers in government industries. He distinguished sharply
between "employee relationships in government and labor
relations in private industry." To allow government work-
ers the right to collective bargaining, with the reserve
power to strike, would be to subordinate the interests of
the whole community to those of a section, to undermine
popular sovereignty, and put the Government's authority
at the mercy of a militant minority controlling a trade
union. Hence government workers could not be given the
same freedom as workers in private industry. At the same
time General MacArthur emphasized that it was the re-
sponsibility of the Government to ensure that its workers
were granted fair and proper conditions. They must con-
tinue to enjoy the right to express their views and griev-
ances, individually or collectively, but must be deprived of
the right to push their claims by the threat to cease work.
General MacArthur's letter produced the immediate res-
ignations of the chief of his Labor Division, Mr. James E.
Killen, and of the deputy-chief, Mr. Paul Stanchfield. In
announcing his resignation Mr. Killen said, "I cannot
adjust myself to the new SCAP policy which denies the
right of collective bargaining to the legally constituted
unions of government employers." 5 Commenting on this
statement Mr. Elaine Hoover, the chief of SCAP's Civil

< The full text of the letter was published in the Nippon Times, July 24,
1948-
Stars and Stripes, August 3, 1948.

Major Developments in 1948 171

Service Division, said that it was "complete nonsense." Mr.
Hoover stated that General MacArthur had been forced to
intervene to forestall "a paralyzing strike of Government
workers announced for August 7, which in Japan's impov-
erished condition would have resulted in starvation and
disaster to large sections of the Japanese people." General
MacArthur's letter was designed "to bring the relationship
of government and public servants in complete consonance
with American policy and practice." 6

Meanwhile, on July 31, the Japanese Cabinet issued an
order to implement the principles set out in General Mac-
Arthur's letter. The order stated that the Government did
not recognize the right of the workers to conduct collective
bargaining on an equal basis; that the existing labor con-
tracts would be considered invalidated and that conse-
quently the labor-government consultative council would
be dissolved. This order aroused bitter opposition from the
trade unions and left-wing political leaders. But it was
made clear that any violation would be treated as direct
defiance of the Supreme Commander, so that, despite
earlier threats, the unions made no serious resistance.
There was, however, a good deal of "job desertion" by
government workers. It was reported that during August,
1,963 government railway and communications workers
deserted their jobs; that 400 of these had been arrested,
and warrants issued for the arrest of 515 others. 7 On
September 10 Mr. Charles L. Kades warned the trade
unions that Article 61 of the Criminal Code provided that
anyone who instigated another to commit a crime should
himself be considered a principal, and this applied to the
instigation of strikes among government workers.

The revision of the National Public Service Law has
been the occasion of the most serious conflict yet to develop

Nippon Times, August 5, 1948.
f Nippon Times, September a, 1948.

Japan-Enemy or Ally?

between the trade unions and the Japanese Government.
General MacArthur's insistence that essential public serv-
ices should not be interrupted can be fully appreciated, for
the reasons explained earlier. 8 Yet it may be noticed in
passing that government workers in Japan are a much
larger class than public servants in most capitalist coun-
tries, since they in.clude workers in a number of public
utilities like the railways; that government wages and sal-
aries have generally lagged a good deal behind those paid
in private industries; and that no satisfactory methods of
conciliation and arbitration have yet been established. For
all these reasons General MacArthur's stand, and the con-
sequent actions of the Japanese Government, have been a
serious set-back to a very large and important group of
wage and salary earners. It may be that a number of the
government workers' unions have come under the influence
of a Communist minority, but in Japan, as in other Eastern
countries, Communists appear to have won influence owing
to the lack of unity among those with more moderate
views. Often the Communists have seemed to be the only
people with enough courage and determination to accept
the responsibilities of leadership. And insofar as Commu-
nist leadership aims at tangible improvements in the
worker's living standards, it has genuine mass support,
whatever ulterior motives its leaders may cherish. It is
unlikely that the enforcement of an amended public serv-
ice law which weakens the bargaining power of the govern-
ment workers will improve the quality of their work, un-
less positive steps are taken simultaneously to remove the
causes of their strongest discontents.

The present SCAP tendency to contract rights earlier
given to workers' organizations goes hand in hand with a
tendency to permit big business to continue to enjoy free-
doms which SCAP had previously planned to restrict. I

See Chapter VI, pp. 159-60.

Major Developments in 1948 173

have referred to Mr. Royall's statement that the Economic
Power Deconcentration Act of December 1947 had been
amended after submission to the Diet in the effort to avoid
the disruption of efficient business organizations. During
1948 SCAP showed increasing reluctance to interfere with
the prewar organization of big business. It should be re-
corded that SCAP officials maintain that there has been no
basic change, still less reversal, of the original Occupation
policy on the deconcentration of industrial control. This
may be legally correct, since the principles laid down in
the Deconcentration Act were shaped in very general terms,
which allowed great latitude of interpretation. What seems
certain is that during 1948 SCAP, in applying the decon-
centration principles, has reversed the earlier expectations
of Japanese big business, and removed many of its fears.
The sense of relief has been freely expressed in the Japa-
nese press. At the beginning of July it was announced that
70 per cent of the 325 companies earlier designated as "ex-
cessive concentration" would, after examination, not be
required to undergo any structural changes. The five great
banks, Mitsubishi, Sumitomo, Teikoku, Sanwa and Yasuda,
were reprieved early in August. Mr. Edward C. Welsh,
chief of the SCAP Anti-Trust and Cartels Division, pointed
out that some large concentrations had not been broken
up since they had "the efficiency advantage of large-scale
production or well-integrated operations." 9

On September 11 the SCAP Deconcentration Review
Board laid down four new basic principles which seemed
to mark a further retreat from earlier objectives. 10 For
example, the Board laid down that the mere possession of
non-related lines of business did not bring a company
within the scope of the deconcentration law; that the claim
that a large company restricted competition must be based

9 Nippon Times, July i, 1948.

10 Nippon Times, September is, 1948.

JapanEnemy or Ally?

on evidence of "concrete facts"; that the Liquidation Com-
mission must no longer take the initiative in ordering a
company to reorganize, but deal only with reorganization
plans submitted by the company itself. The announce-
ment of these basic principles obliged the Liquidation
Commission to re-examine the position of a number of
large companies previously ordered to reorganize.

It should be remembered that the plans for the decon-
centration of business control were intended to comple-
ment the plans for the redistribution of ownership, which
was to have been achieved by the liquidation of large hold-
ing companies. But difficulty is still being experienced in
reselling the securities which the Liquidation Commission
took over from the holding companies. It had been planned
to sell them to the public in a way that would disperse
ownership and prevent individuals or families from acquir-
ing controlling blocks. 11 Altogether there are many reasons
why the Zaibatsu should be now throwing oft the deeper
anxieties they felt during the early stages ot the Occupa-
tion.

The most significant official indication of the new Amer-
ican attitude came on December 9 when the United States
member of the Far Eastern Commission announced that
his Government was formally abandoning its earlier pro-
posals for industrial deconcentration in Japan, as embodied
in the well-known, controversial plan known as FEC 230,
submitted some nineteen months earlier but never offi-
cially ratified. In announcing the decision, 12 the Ameri-
can member maintained that the deconcentration plan had
now become unnecessary mainly because of SCAP's success
in carrying out a program of reorganization of industrial
ownership and control and because of the Japanese Gov-
ernment's enactment of an anti-trust law. He emphasized

u See p. 125.

For text see Appendix HI below, pp. 239-43.

Major Developments in 194% 175

that this did not mean that the deconcentration program
had been completed but that there was no longer any need
for the development of a policy on the subject.

It is hardly possible to assess the significance of these
changes in United States policy, nor to speculate on their
likely results, without considering other salient features of
the Japanese scene in 1948. To get a clear picture it is
necessary to consider not only what is changed and what
unchanged in American policy, but what is changed and
what is unchanged in Japan.

On the third anniversary of the Japanese surrender in
Tokyo Bay, General MacArthur made an encouraging
statement he had made two years before. 18 He said, inter
alia, "There need be no fear concerning the future pattern
of Japanese life, for the Japanese people have fully demon-
strated both their will and their capacity to absorb into
their own culture sound ideas, well tested in the crucible
of Western experience, in lieu of those concepts responsive
to the myths and legends which have so handicapped their
task. And today those practical weapons needed to repel
the totalitarian advance liberty, dignity and opportunity
now safely rest in every Japanese hand, and the nation has
thereby become an asset upon which the free world can
confidently count."

Some observers were doubtful, however, how far three
years of occupation had produced fundamental change in
the Japanese outlook. Mr. Russell Brines, chief of the
Tokyo bureau of the Associated Press, wrote, "Headquar-
ters has dropped its previous contention that democracy
has arrived. Now the phrase is 'wait and see/ "

There is no doubt that important progress has been
made in some fields. Perhaps the most notable success has
been the carrying out of the land reform program. This
program aroused strong opposition from the landowners,

ia See pp. 10-12.

1^6 Japan Enemy or Ally?

and in its early stages seemed to have poor prospect of
success. 14 During 1948, however, very rapid progress was
made. The Land Reform Laws had provided that the
Japanese Government should buy from the landowners
about 80 per cent of the fields cultivated by tenants, an area
o about five million acres, and resell this land to the ten-
ants. According to Mr. W. I. Ladejinsky, an American au-
thority on Japan's rural economy, the Government had
bought the whole of the land marked for transfer, and
resold three-quarters of it to tenants, by the end of July
1948. 15 This is a remarkable achievement. It is due, in my
view, chiefly to the exceptionally high quality of the ex-
perts in the SCAT Natural Resources Section responsible
for formulating and enforcing the reform. It does not
detract from the greatness of the achievement to point out
that whether the reform measures bring permanent benefit
to the farmers will depend on the future policy of the
Japanese Government. A future conservative government,
if freed from SCAT control, would be able, if it desired,
to frustrate the purposes of the reform in a variety of ways.

Other features of the Japanese scene, as revealed in 1948,
are less pleasant. It seems that the series of ambitious and
comprehensive reforms which SCAP has imposed on the
political and industrial structure have generally failed to
gain Japanese support.

Despite the new Constitution and the electoral reforms,
political life has been disrupted by a series of major "scan-
dals." Perhaps the most spectacular was the Showa Denko
case, which finally brought about the fall of the Ashida
Cabinet in October, after nine months of uneasy and bar-
ren office. Investigations showed that the Government,
through its Reconstruction Finance Bank, had granted the

14 See pp. 112-23. Also Andrew J. Grad, "Land Reform in Japan," Pacific
Affairs, June 1948, and William J. Gilmartin and W. I. Ladejinsky, "The
Promise of Agrarian Reform in Japan," Foreign Affairs, January 1948.

w Nippon Times, July 29, 1948.

Major Developments in 1948 177

Showa Denko Company a loan of nearly 3,000 million yen.
This was about two-thirds of the total sum the Govern-
ment was authorized to lend the fertilizer industry, although
the Showa Denko produces only about 15 percent of the
national output. A number of leading politicians, public
servants and businessmen, including leaders of the three
parties who formed the Ashida Government coalition,
were later charged with bribery and corruption, and on
December 8 Dr. Ashida was jailed pending a trial, In the
Arms Disposal case it was shown that the Japanese authori-
ties were able to account for only 10 percent of the war
stores handed back to them by SCAP for civilian disposal.
In the Coal Mines case a number of coal owners were
charged with spending large sums to bribe members of
Parliament to oppose the Katayama Government's Bill for
the public control of the coal mines. 16

There is also evidence that state prosecutors and the
courts have in some cases been influenced by political pres-
sure, which includes the pressure of the bureaucracy. On
July 6 Mr. Frank E. Hays, of the SCAP Government Sec-
tion, warned that "an insidious effort to undermine the
procurators who are loyal to the interests of the people by
the bureaucratic clique which does not consider itself to be
the servant of the people still continues and must be
crushed." Mr. Hays went on to say that the purge had left
untouched the legal and political bosses, "who adminis-
tered one law for the rich and powerful and another for
the poor and weak." 17 As I pointed out earlier, the Japa-
nese bureaucracy has almost certainly succeeded better
than any of the other old ruling groups in retaining its
power. 18 The senior classes of the public service seem still
to be dominated by a clique of graduates of Tokyo Im-
perial University.

In relations between capital and labor there seems also
is See pp. 77-8. Nippon Times, July 7, 1948. " See p. 86.

JapanEnemy or Ally?

to have been a general failure to act in accordance with
either the letter or the spirit of the new "democratic" regu-
lations. A Japanese Labor Ministry survey recorded that in
the February-June period of 1948 there were 122,095 viola-
tions of the Labor Standards Law. There was considerable
discussion in the Japanese press of the reasons for these
defaults. The general press opinion seemed to be that they
were due partly to ignorance and partly to an inability of
both wage-earners and employers to free themselves from
ingrained feudal sentiments. Employers seemed to feel no
obligation to shoulder new responsibilities where they
could evade them, and workers were generally subservient
and submissive even when they realized that their employ-
ers were breaking the new regulations.

To sum up, Japanese domestic developments during
1948 provide, in my view, further evidence that earlier
claims that a social and spiritual revolution had occurred
in Japan were inconsistent with the available facts. There
has been no appreciable change in the basic social and
mental habits of the Japanese people.

The policy of the Soviet Union and of the Japanese Com-
munist Party has, however, changed significantly in the last
quarter of the year. General Derevyanko, my former col-
league on the Allied Council, returned to Tokyo on Sep-
tember i. General Derevyanko had been the official head
of the Soviet Mission in Japan since the surrender, but he
had been away a good deal. At the end of 1945 he was
recalled to Moscow because, according to Mr. Stalin's re-
port to Mr. Byrnes, General MacArthur had been treating
him like a "piece of furniture" and refusing to let him
share in framing Occupation policy. Derevyanko was re-
called again in August 1947 and it was generally believed
in Tokyo that he would not return. Since his return home
he has been active in the struggle between Russia and
America for the loyalty of the Japanese people. The Soviet

Major Developments in 1948 179

Mission has strongly protested against the SCAP restric-
tions on the rights of trade unionists, and ardently sup-
ported radical trade union leadership. The Japanese Com-
munist Party simultaneously issued a call for an early peace
treaty with Japan, a reversal of its previous policy. It pro-
tested against the American intention to develop Japan as
a military base, and asked for an immediate withdrawal of
Occupation forces. It urged a peace settlement which would
give Japan "full independence without any obligations
impairing her sovereignty," and asked for the return of
adjacent islands "which could be considered nationally
and historically as belonging to Japan." On September 25
the Soviet representative on the Far Eastern Commission,
Ambassador Panyushkin, announced Russia's desire for an
early peace treaty. He urged, moreover, that no limits
should be set to the expansion of Japan's peace-time indus-
try, nor of Japanese exports, since this would help the
physical well-being of the Japanese people. There should,
however, be careful control to prevent the development of
war industries, and this control should be enforced "by
those powers most interested in prevention of Japanese
aggression." 19

I can only speculate on the reasons for this change in
Soviet policy, but I think it is possible to speculate with
some confidence. Until lately the Soviet had hoped to
increase her influence in Japan despite the American Occu-
pation, and, partly indeed, because of the Occupation. The
early Occupation policy was to give full freedom to all
political organizations and trade unions. Leftist leaders,
including the most active Communists, were freed from
prison or allowed to return to Japan from exile. The
Communists hoped to use their new freedom to organize

"This Soviet proposal was rejected on December 9 by the Far Eastern
Commission by a vote of ten to one, mainly on the ground that the plan
was either superfluous because of present policies of the Commission or
because it raised issues which could only be decided in a peace treaty.

x8o JapanEnemy or Ally?

a social revolution along party lines. The very slow rate of
economic recovery; the inflation, which embittered the
wage and salary earners; the earlier SCAP resolve to weaken
the hold of big business on Japan's economy; all these
factors seemed to make an atmosphere that, as Lenin would
have said, was "friendly to revolution." But the picture
rapidly changed. The United States showed increasing de-
termination to hold fast to her controlling position in
Japan. She had resolved that Japan should be rebuilt, on
the basis of private capitalism, as the workshop of East
Asia. Meanwhile the American Army has been building
large modern airfields in Japan, capable of taking the
heaviest types of long-range bombers, and has been arming
Occupation aircraft. American economic aid had enabled
conservative Japanese governments to postpone or avert
the worst political and economic consequences of their
own sabotage and inefficiency. Faced with these develop-
ments the Soviet Union apparently began to fear that it
was fast losing position in its struggle to control Japan. It
seems therefore to have radically revised its tactics.

Meanwhile the old guard in Japan is jubilant at receiv-
ing American backing for suppressing its own radicals and
militants. It hopes for great things from being taken into
American partnership in the fight against Communism
and Russia. The militant radical groups are becoming in-
creasingly sullen and resentful, though they still shrink
from overt defiance of the Occupation. And the ordinary
people of Japan, who have learnt in the desolate wastes of
their ruined cities what to expect from war, carry on with
dumb fatalism, wondering whether it will now be long
before some new terror enflames their skies.

8. THE FUTURE OF JAPAN

IN THIS LAST CHAPTER I SHALL TRY TO SUM-
marize my argument and show its main implications for
future Allied policy in Japan.

My argument rests on two basic propositions. First, since
1945 there has been a far-reaching change in the attitude
of the United States towards Japan. The hated enemy has
become the coveted ally. Second, during the same period
there has been no fundamental change in Japan's social
structure or in the political outlook of her leaders.

In 1945 America wanted to demilitarize and democratize
Japan. Demilitarization meant not merely the elimination
of armaments and armed forces, but the attempt to edu-
cate the Japanese to renounce war as an instrument of
national policy. Democratization was not to be restricted
to law and politics, but to involve revolutionary changes
in Japan's social and economic structure. Japan was to be
"permitted to maintain such industries as will sustain her
economy and permit the exaction of just reparations in
kind, but not those that would enable her to re-arm for

war.

.

But that was in 1945. Since then, as I have tried to
show, much has happened to bring solace to Japan's rulers.
The United States has tried to persuade the other Allies

i Potsdam Declaration.

181

Japan Enemy or Ally?

that reparation claims should be reduced to the minimum,
if not abandoned. The Allies, in response to American
persuasion, have greatly raised the levels of permitted pro-
duction in secondary war-industries, such as steel, alum-
inum, magnesium and shipbuilding. Washington has.
quietly put the brake on the "democratization" program,
particularly on the purge and the dissolution of the Zai-
batsu. On the positive side, American policy aims at estab-
lishing Japan as the "workshop of East Asia." American
loans and credits are being provided for the restoration of
Japanese industry and foreign trade. 2 There is no secret
about the reasons for America's changed outlook. There
is the simple and understandable wish to make Japan self-
supporting and not a permanent burden on the American
taxpayer. But the root motive is political. It is fear of
Russia and Communism. America desires a strong and
prosperous Japan as a backing against the extension of
Russian influence in the Far East and the growth of
Japanese Communism.

American policy in Japan is a regional expansion of
her world policy. This policy crystallized in the first half
of 1947. It was authoritatively formulated in the Truman
Doctrine on March 12 and the Marshall Plan on June 5.

It was partly because the United Kingdom was so rapidly
reducing her foreign commitments that America felt

2 The change in United States policy in Japan runs parallel to its
change in Germany; e.g., in the Allied agreement of March 28, 1946,
Germany was to be permitted a level of production about 55 per cent
of her 1938 output. In the Anglo-American agreement of August 28,
1 947' Germany is to be allowed to produce 80 per cent of her 1958 output,
or the equivalent of her 1936 output. The United States recognizes that
in Japan, as in Germany, economic recovery is not possible without the
.restoration of industrial production. According to Professor Edward D.
Mason, "the shift in American opinion away from economic disarmament
and toward a substantial measure of economic rehabilitation in Germany
is the result o a growing conviction that economic disarmament is both
ineffective and unnecessary." American Policy Toward Germany, Foreign
Policy Report, November i, 1947, Foreign Policy Association, New York.

The Future of Japan 183

obliged to assume many new responsibilities abroad. It
was not until February 24, 1947, that the British Ambassa-
dor told the United States Government that Britain would
be unable to go on giving economic help to Greece and
Turkey after March 31, or to maintain British forces in
Greece much after that. The United States felt the im-
mediate need to sustain the interests Britain had been
supporting in the Eastern Mediterranean against Soviet
encroachment. This led to the appeal to Congress for
"emergency aid" to Greece and Turkey, and the formula-
tion of the Truman Doctrine.

In the Far East the transfer of responsibility from Brit-
ish to American hands was more gradual and aroused less
public attention, but the same process was taking place.
The strength of the British Commonwealth Occupation
Force was steadily reduced, and an Occupation, which had
from the beginning been predominantly American, tended
to become exclusively American. There is a tendency in
some quarters in the British Commonwealth to present
the extension of American influence in Europe and the
East as an American effort to "push out" the British. This
is not only unjust and ungenerous, but inconsistent with
the historical record. It was only when the British with-
drew that the Americans moved in. Naturally, some Amer-
ican circles feel satisfaction in the consequent extension of
American power and prestige. If non-Americans keep the
circumstances in mind, and also remember their long im-
patience with America's past isolationist policy, they would
be chary of criticizing too quickly the present foreign
policy of the United States. The United States Govern-
ment, with less experience than Britain in the conduct
of foreign relations, with a shortage of experienced officers,
and with a public opinion still capricious on world ques-
tions, is resolved to add to her foreign burdens those that
Britain has laid down.

184 Japan Enemy or Ally?

In these circumstances, British observers should try to
avoid "sniping" at the efforts of the United States. It is
still important, I believe, that we should not endorse them
uncritically. It seems to me that the soundness of America's
policy today depends in great part on the emphasis that is
put upon its different aspects. American policy is some-
times expressed in a negative and military form, some-
times in a positive and social-economic form. The program
of aid for Turkey was exclusively for military expenditure,
and it was quite clear that Turkey's defenses were being
strengthened only against Russia. The aid for Greece was
partly military defense against Communist threats from
across the frontiers and from Greek "guerillas," and partly
economic, to promote the welfare of the Greek people.
The projected aid for Japan is, at least ostensibly, purely
economic and positive, since Japan is disarmed. In an-
nouncing his proposals of aid for Europe, Mr. Marshall
tried to avoid the negative and military, and emphasize
the positive and economic aspects. "Our policy," he said,
"is not directed against any country or doctrine, but
against hunger, desperation and chaos." It aimed at "the
revival of a working economy in the world, so as to permit
the emergence of political and social conditions in which
free institutions can exist." 8

The basic drive behind American policy, whether in
Europe, the Middle East or the Far East, is resistance to
Russia and Communism. Yet a great deal, perhaps every-
thing, depends on the strategy of this resistance. If the
emphasis is consistently placed on the welfare and free-
dom of the ordinary people of the countries "threatened"
by Communism, and if every precaution is taken to ensure
that this objective will in practice be realized, American

*For an excellent summary of American aid programs, see American
Policy Toward Greece, by Winifred Hadsell. Foreign Policy Report,
September i, 1947, Foreign Policy Association, New York.

The Future of Japan 185

policy will win the widest acceptance in countries outside
the Soviet orbit, and have the best prospects of success.

Insofar as America's plans to restore Japan's economic
strength give good promise of raising the living standards
and enlarging the freedom of the Japanese people, they
should be fully supported. Yet there are great dangers that,
in the present situation, American aid will not only fail
in its positive purpose, but have dangerous consequences.
American aid to Japan with whatever supplementary con-
tributions other Allies are prepared to make will be given
through the Japanese Government. I have reiterated that
the Japanese Government represents the most conservative
forces in Japan, that its pre-surrender outlook is un-
changed, despite its gesture of cooperation with SCAP
authority. It is hardly possible for a Japanese Government
of different character to emerge in the near future. It is
my thesis that since the surrender the Japanese Govern-
ment, in response to the pressure groups that control it,
has sabotaged economic recovery in the effort to frustrate
the Allied aims of 1945, and that it has done this with
frivolous indifference to the sufferings it has brought to
the mass of the Japanese people. I can see no grounds for
the belief that such a Government will want to use Amer-
ican aid to construct a welfare economy and enlarge the
liberties of the working people. It seems nearly certain
that it will try to use its new resources to consolidate the
power and privilege of the ruling groups.

There is another immediate danger, perhaps less easy
to recognize. It is the difficulty of reconciling the Amer-
ican faith in individualism with a sound program for
Japan's economic reconstruction. It is possible for the
United States, because of its immense wealth, to resist the
kind of controls in economic life which other countries
have adopted, and still maintain an endurable or, by com-
parison with some other countries, a comfortable standard

i86 JapanEnemy or Ally?

of living for its poorest* classes. Other countries cannot
afford the wastes, or tolerate the inequalities, which such a
full measure of individualism invariably involves. Outside,
the United States it is widely accepted that a considerable
measure of political control in the economic field is neces-
sary or desirable. The degree and kind of control can only
be decided in terms of changing situations. It is not an
ideological battle between "individualists" and "socialists,"
in which the belligerents hurl nineteenth-century epithets
at each other. It is a practical problem of administration
whether, in a particular country at a particular time, there
should be public control of, say, the coal industry, and, if
so, what particular technique of control will produce the
best balance of economic welfare and personal freedom.
The Prime Minister of the United Kingdom (Mr. Atlee)
has recently described current British policy, not as diluted
individualism, or diluted socialism, but as a positive effort
to synthesize security and freedom. Such an approach
avoids the rigidity of both "socialism" and "individual-
ism." To those who hold this view, Russian policy smacks
of the "ektreme Left" and American policy of the "extreme
Right."

I have already referred to General MacArthur's insis-
tence that Japan must establish democracy through private
capitalism, under a regime of free competitive enterprise.
If that continues to be Allied policy in Japan, it must,
in my view, mean depression and want for the Japanese
masses, though perhaps with great wealth for the few. It
will perpetuate the sort of social and economic conditions
that favor the spread of Communism. It is perhaps not
surprising that Communists in Japan are at present so re-
strained in their activities. They are confident that time
is on their side.

I believe there is another great danger, though less im-
mediate, in the present American policy towards Japan.

The Future of Japan 187

It is that in helping Japan rebuild her industrial strength
and restore her foreign trade, the United States will en-
able Japan to establish an industrial and economic su-
premacy in East Asia which her leaders will once again
exploit for political purposes. Economic penetration is
the first step; political domination the second.

Japanese industrial technique will be vastly improved
by the lessons learned from the Americans during the Oc-
cupation. And not only in industry, transport and science,
but in medicine, hygiene and public health, the Japanese
are avidly absorbing American know-how. We can expect
that she will establish a long lead over other Asiatic coun-
tries in all these fields. Moreover, Japan's future trade
opportunities seem likely to depend increasingly on the
development of heavy and medium industries; that is,
in secondary war industries. Silk exports will continue to
diminish, owing to the competition of nylon and rayon.
The exports of textiles will almost certainly become of
less relative importance in Japan's trade, since other Asiatic
countries are eager and able to manufacture these goods. It
is, therefore, in the heavy and medium industries that
Japan's best prospects lie. These should assure her a domi-
nating position in the economy of East Asia.

It may be argued that there are no dangers in such a
prospect since Japan's leaders have learned to renounce
war, and will, in any case, be without the means to wage
it. I can see no reason why Japan will be less likely in
the 1950*5 than in the iggo's to want to use war as an
instrument of national policy. Imperialism and militarism
may well be the inevitable expression of the sort of eco-
nomic and social system that still stands in Japan. It is true
that at present Japan is disarmed. But we should remem-
ber that disarmament has meant the destruction of the
weapons with which Japan fought the last war. It is not
easy to be sure which weapons will be most useful if there

i88 Japan Enemy or Ally?

is another war. It will, therefore, be harder to continue to
prevent rearmament, and this difficulty will be increased
if Japan develops a great variety of manufacturing in-
dustries.

It may be true that, so long as the United States main-
tains her present strategic interests in the Far East, she
can easily forestall any hint of future Japanese aggression.
Yet the maintenance of American military and political
control in this area is likely to remain a considerable call
on American resources, with trivial commercial compensa-
tion. We cannot be sure that America will be prepared to
maintain these commitments indefinitely. An economic
depression in the United States might make Congress want
to reduce commitments abroad. Lastly, what happens in
Japan will depend in a hundred ways on what happens
in China.

In face of these manifold uncertainties, I believe it is
rash and dangerous to assume that Japan cannot in the
foreseeable future again become a danger to her neighbors.

For all these reasons, I think the first task for the peace-
makers is to establish firm safeguards against the renewal
of Japan's military power. I have referred to the proposal
that Japan should be permitted a small army, perhaps
100,000, for "police duties/' This proposal should be firmly
rejected. While a small, lightly-equipped army might not
in itself be a danger to any of Japan's neighbors, the pro-
hibition of every sort of military formation is psycho-
logically important. The army of 100,000 men permitted
Germany after World War I became a rallying point for
the revival of German militarism. We should not forget
that experience.

If the earlier plans for Japan's economic disarmament
are to be radically changed in the interests of her indus-
trial development, it is the more important that there
should be thorough and continuous Allied supervision of

The Future of Japan 189

Japan's imports, with the purpose of ensuring that the
import of raw materials, which might be used for war,
are no greater than necessary for the current output of
civilian products. This determination of the quantity and
quality of imports needed for Japan's peacetime industry
is a highly technical task and full of difficulties. What is
important to recognize is that the greater the quantity and
variety of imports permitted, the greater the need for
Allied controls. It should go without saying that all arms
manufacture should be prohibited.

There is one other condition which the Allies should
resolve to enforce. While any real reform in Japan's social
and economic life must come from the Japanese them-
selves, this is only possible if the Japanese reformers con-
tinue to enjoy the political and civil rights granted them
under the Occupation. I recognize that it would be im-
practicable, indeed impossible, to ensure that these rights
should be faithfully honored by every bureaucrat and
policeman in Japan. There are powerful forces which will
seek to abridge or destroy them. Yet it should be possible
for the Allied control authority to ensure, at the minimum,
that all political parties shall remain free to pursue then-
aims with freedom of speech and assembly, and that radical
leaders shall not be imprisoned for dangerous thoughts.

If the Allies resolve to do these two things to prevent
any form of rearmament and to sustain the "bill of rights"
it will be a great deal, and it is probably all that can be
effectively done.

There is some temptation for those who feel strongly
about the need for social and economic changes to urge
that the Allies should force the Japanese to make these
changes. This temptation should be resisted. The extent
to which the Allies will be able to use physical force in
Japan after the Treaty will be very limited, and the terms
of the Treaty should be consistent with these limitations.

igo Japan Enemy or Ally?

It is undesirable to extract -undertakings from Japan as
part of the peace -settlement, unless we have the will and
the resources to ensure that they will be carried out. That
would mean a devaluation of the whole settlement. In
practice the military enforcement of the Treaty will de-
pend on air power, based on Okinawa; sea power, deployed
in the Far East; and, possibly, on a token occupation force
inside Japan. It would be unreal to expect American war-"
ships to blockade the ports, or American aircraft to bomb
the cities of Japan, because the Japanese Government had
defaulted in some program of domestic reform. Moreover,
with every month that passes there will be an increasing
Allied reluctance to revert to "bayonet control." In any
case, reforms are unlikely to succeed in their purpose if
imposed by outside physical force.

There is a big difference between physical coercion
and economic inducement. Japan's economy is specially
dependent on the outside world. She cannot restore her
industries or regain her foreign trade without consider-
able outside aid by loans or credits, and her subsequent
failure or success will depend on access to foreign markets
and raw materials. Since the surrender, all of Japan's
foreign trade has been carried out under the supervision
of SCAP, to ensure that it would only be of a kind that
would promote the objectives of the Occupation. The re-
cent tendency is to encourage a return to "normal" foreign
trading and finance, that is, to restore these activities to
private firms working under the usual commercial incen-
tives. The kind and quantity of financial aid tends to be
determined by purely business considerations, without re-
gard for its social and political implications. This is likely
to result in a great strengthening of the position of the old
or the new Zaibatsu and retard economic reforms. I have
pointed out in an earlier chapter how food imports from
the United States in 1946 enabled the Yoshida Govern-

The Future of Japan 191

ment to avoid, or postpone, the political penalties of its
failures. When the Occupation is over, the same sort of
process is likely to take place on a much greater scale.

I think there is only one way to avoid this and that is
for the Allies to insist that economic and financial aid
will be always contingent on the Japanese Government's
domestic policy. The flow of external aid should be closely
geared to the rate of internal reform. I am arguing, if you
will, for the use of economic sanctions. And the aim of
these sanctions should be not only negative, to prevent
the establishment of war industries, but positive, to press
for fulfillment of the economic and social reforms initiated
under the Occupation. If this plan were to be adopted, it
would mean that all of Japan's foreign trade and finance
would be controlled by agreement of the Allied Govern-
ments. Private concerns would only be permitted to oper-
ate in accordance with the terms decided by the Allied
authority.

To carry out these controls it will be necessary to set up
an Allied control body in Japan.

It is probably undesirable to decide in advance the
precise period for which control will be necessary, since
that will depend on the progress of domestic reforms, and
particular controls should be relaxed or lifted when the
Japanese give evidence that they are no longer needed.
It seems probable, nevertheless, that strong controls will
be necessary for at least a generation, or, say, twenty-five
years. It is hard to believe that the re-education of the
Japanese and the consolidation of new leadership could be
achieved in a shorter period.

The first essential, if the Allied control body is to suc-
ceed, is that it should have the unqualified right to in-
spect and investigate anything happening in Japan. It
would normally work through a group of expert commit-
tees, each concerned with a particular section of Japanese

192 JapanEnemy or Ally?

activity. Each committee would keep the control body
continuously informed about what is happening in its
own domain.

It has been suggested that the Allied body should be
made up of the diplomatic representatives in Japan of
the Allied Powers. This idea should be firmly rejected.
It is a diplomatic tradition that embassies and legations
should spend a great part of their time and energy in
conscientiously entertaining one another, and, after the
Treaty, Allied diplomats in Japan will almost certainly
resume cordial official relations with the members of the
Japanese Government. In these circumstances, it would be
unreasonable to expect the diplomats to display the vig-
ilance and firmness necessary for the success of the Allied
body. The people responsible for controlling Japanese
authorities should be free from the inhibitions of protocol.

The administration of the control machinery should
be wholly American, if the United States is ready to under-
take that responsibility. For some time at least America
will be preponderant in Japan, and there would be in-
soluble problems of discipline and loyalty in the effort
to give non-Americans executive positions in a predomi-
nantly American administration, particularly if the non-
Americans should be Russians. The policy of the American
administration should be controlled by an Allied body.
There is much debate whether this commission should
represent the four Powers, with its decisions subject to
veto, or eleven Powers, with decisions taken by a two-
thirds majority. The Soviet Union wants the first, the
United States the second. The British Commonwealth
countries involved, and other Allies, support the United
States view.

There is, on principle, a very strong claim that all the
nations who played an active part in the Pacific war should
have a share in the postwar control of Japan. But the im-

The Future of Japan 193

portant issue is not whether there should be a four- or an
eleven-Power Council, but whether the Great Powers
should have the right of veto.

The strong Anglo-Saxon opposition to the veto in inter-
national councils is, at bottom, opposition to Russia's right
to veto. A good deal of nonsense has been written about
the veto. It is pointed out that it is inconsistent with demo-
cratic principles and so forth. Such criticism overlooks the
basic fact that the condition of democracy in any country
is that all groups should feel a fundamental identity of
interests. When the groups in a community are united on
primary issues they can agree to settle their secondary
differences by a majority vote. But this basis of agreement
does not exist, or, at least, it is not recognized, between
Russia and the Western nations. It is, therefore, useless to
concentrate attention on the veto as though it were a thing
in itself intrinsically evil. The evil thing is the disunity
between Russia and the Western world. In urging Russia
to surrender the veto, the Western Powers are asking her
to agree that the decisions of a majority of nations should
be treated as the decisions of all the nations; that the
Western Powers, by majority agreement, express the con-
science of the world. I think the Western Powers are
hardly likely to succeed in this.

I am not here concerned with the distribution of moral
responsibility for this clash between Russia and the West
I am aware of the stubborn and provocative, the almost
paranoiac, character of Russia's recent diplomacy. The
Soviet Union's suppression of freedom of thought wherever
its influence extends is the negation of all that is best in
Western civilization. At the same time, I doubt whether
Western civilization, and all that is good in it, can survive
a third world war. That means that the first task of West-
ern statesmanship today is to learn how to live in peace
with Russia.

194 Japan Enemy or Ally?

The situation in Japan is one part of that world-wide
problem. It is, therefore, supremely important that the
West should work with Russia in making the peace settle-
ment and in the subsequent control of Japan. Russia's
diplomatic intransigence may make the United States and
the British Commonwealth despair of cooperation, and go
ahead without her. In that event, it is particularly im-
portant for us to remember that we do not eliminate
Russia's influence in Japan by dispensing with the presence
of a Russian representative in Allied councils there. In
race, in culture, in economic interest, Japan is part of East
Asia. In Manchuria, China and Korea there are millions
of people living in misery, now stirred, however dimly,
with the resolve to win for themselves a better life. It is
these deeper social forces that will decide the future of the
Far East and of Japan, not the number of Allied troops,
whether American, British or Russian, that are stationed
there. In a word, if we want Japan as our ally, the way to
succeed is not by subsidizing reactionary governments, or
resuming trade relations with a disguised Zaibatsu, but by
giving firm friendship and effective help to the Japanese
people. At present the Japanese masses lack political con-
sciousness and experienced leaders; they are still sunk in
the past. But when they are without food or clothing or
shelter, they want radical change. Those who help them
achieve this change will be their friends; those who resist
the change will be their enemies.

APPENDIX I
THE CONSTITUTION OF JAPAN 1

We, the Japanese people, acting through our duly elected
representatives in the National Diet, determined that we
shall secure for ourselves and our posterity the fruits of
peaceful cooperation with all nations and the blessings of
liberty throughout this land, and resolved that never again
shall we be visited with the horrors of war through the
action of government, do proclaim that sovereign power
resides with the people and do firmly establish this Con-
stitution. Government is a sacred trust of the people, the
authority for which is derived from the people, the powers
of which are exercised by the representatives of the peo-
ple, and the benefits of which are enjoyed by the people.
This is a universal principle of mankind upon which this
Constitution is founded. We reject and revoke all constitu-
tions, laws, ordinances, and rescripts in conflict herewith.

We, the Japanese people, desire peace for all time and
are deeply conscious of the high ideals controlling human
relationship, and we have determined to preserve our se-
curity and existence, trusting in the justice and faith of the
peace-loving peoples of the world. We desire to occupy an
honored place in an international society striving for the

iText from Publication 2836, Par Eastern Series 22, U. S. Bept. of
State, Wash., D. C., 1947. The Constitution of Japan was promulgated
on November 3, 1946, and became effective on May 3, 1947.

195

196 Japan Enemy or Ally?

preservation of peace, and the banishment of tyranny and
slavery, oppression and intolerance for all time from the
earth. We recognize that all peoples of the world have the
right to live in peace, free from fear and want.

We believe that no nation is responsible to itself alone,
but that laws of political morality are universal; and that
obedience to such laws is incumbent upon all nations who
would sustain their own sovereignty and justify their sov-
ereign relationship with other nations.

We, the Japanese people, pledge our national honor to
accomplish these high ideals and purposes with all our
resources.

CHAPTER I. THE EMPEROR

Article /. The Emperor shall be the symbol of the State and
of the unity of the people, deriving his position from the will
of the people with whom resides sovereign power.

Article 2. The Imperial Throne shall be dynastic and suc-
ceeded to in accordance with the Imperial House Law passed
by the Diet.

Article 5. The advice and approval of the Cabinet shall be
required for all acts of the Emperor in matters of state, and
the Cabinet shall be responsible therefor.

Article 4. The Emperor shall perform only such acts in mat-
ters of state as are provided for in this Constitution and he
shall not have powers related to government.

The Emperor may delegate the performance of his acts in
matters of state as may be provided by law.

Article 5. When, in accordance with the Imperial House
Law, a Regency is established, the Regent shall perform his
acts in matters of state in the Emperor's name. In this case,
paragraph one of the preceding article will be applicable.

Article 6. The Emperor shall appoint the Prime Minister
as designated by the Diet.

The Emperor shall appoint the Chief Judge of the Supreme
Court as designated by the Cabinet.

Article 7. The Emperor, with the advice and approval of
the Cabinet, shall perform the following acts in matters of
state on behalf of the people:

Appendices

Promulgation of amendments of the constitution, laws,
cabinet orders and treaties.

Convocation of the Diet.

Dissolution of the House of Representatives.

Proclamation of general election of members of the Diet

Attestation of the appointment and dismissal of Ministers
of State and other officials as provided for by law, and
of full powers and credentials of Ambassadors and
Ministers.

Attestation of general and special amnesty, commutation
of punishment, reprieve, and restoration of rights.

Awarding of honors.

Attestation of instruments of ratification and other diplo-
matic documents as provided for by law.

Receiving foreign ambassadors and ministers.

Performance of ceremonial functions.
Article 8. No property can be given to, or received by, the
Imperial House, nor can any gifts be made therefrom, without
the authorization of the Diet.

CHAPTER II. RENUNCIATION OF WAR

Article 9. Aspiring sincerely to an international peace based
on justice and order, the Japanese people forever renounce
war as a sovereign right of the nation and the threat or use
of force as means of settling international disputes.

In order to accomplish the aim of the preceding paragraph,
land, sea, and air forces, as well as other war potential, will
never be maintained. The right of belligerency of the state
will not be recognized.

CHAPTER III. RIGHTS AND DUTIES OF THE PEOPLE
Article 10. The conditions necessary for being a Japanese
national shall be determined by law.

Article n. The people shall not be prevented from enjoying
any of the fundamental human rights. These fundamental
human rights guaranteed to the people by this Constitution
shall be conferred upon the people of this and future genera-
tions as eternal and inviolate rights.

Article 22. The freedoms and rights guaranteed to the
people by this Constitution shall be maintained by the con-
stant endeavor of the people, who shall refrain from any abuse
of these freedoms and rights and shall always be responsible
for utilizing them for the public welfare.

JapanEnemy or Ally?

Article 13. All of the people shall be respected as indi-
viduals. Their right to life, liberty, and the pursuit of hap-
piness shall, to the extent that it does not interfere with the
public welfare, be the supreme consideration in legislation
and in other governmental affairs.

Article 14. All of the people are equal under the law and
there shall be no discrimination in political, economic or social
relations, because of race, creed, sex, social status or family
origin.

Peers and peerage shall not be recognized.

No privilege shall accompany any award of honor, decora-
tion or any distinction, nor shall any such award be valid be-
yond the lifetime of the individual who now holds or hereafter
may receive it.

Article 75. The people have the inalienable right to choose
their public officials and to dismiss them.

All public officials are servants of the whole community and
not of any group thereof.

Universal adult suffrage is guaranteed with regard to the
election of public officials.

In all elections, secrecy of the ballot shall not be violated
A voter shall not be answerable, publicly or privately, for the
choice he has made.

Article 16. Every person shall have the right of peaceful
petition for the redress of damage, for the removal of public
officials, for the enactment, repeal or amendment of laws,
ordinances or regulations and for other matters; nor shall
any person be in any way discriminated against for sponsoring
such a petition.

Article 17. Every person may sue for redress as provided by
law from the State or a public entity, in case he has suffered
damage through illegal act of any public official.

Article 18. No person shall be held in bondage of any kind
Involuntary servitude, except as punishment for crime, is pro-
hibited.

Article 19. Freedom of thought and conscience shall not be
violated.

Article 20. Freedom of religion is guaranteed to all. No re-
ligious organization shall receive any privileges from the State,
nor exercise any political authority.

No person shall be compelled to take part in any religious
act, celebration, rite or practice.

Appendices

The State and its organs shall refrain from religious educa-
tion or any other religious activity.

Article 21. Freedom of assembly and association as well as
speech, press and all other forms of expression are guaranteed.

No censorship shall be maintained, nor shall the secrecy of
any means of communication be violated.

Article 22. Every person shall have freedom to choose and
change his residence and to choose his occupation to the extent
that it does not interfere with the public welfare.

Freedom of all persons to move to a foreign country and to
divest themselves of their nationality shall be inviolate.

Article 25. Academic freedom is guaranteed.

Article 24. Marriage shall be based only on the mutual
consent of both sexes and it shall be maintained through
mutual cooperation with the equal rights of husband and
wife as a basis.

With regard to choice of spouse, property rights, inheritance,
choice of domicile, divorce and other matters pertaining to
marriage and the family, laws shall be enacted from the stand-
point of individual dignity and the essential equality of the
sexes.

Article 25. All people shall have the right to maintain the
minimum standards of wholesome and cultured living.

In all spheres of life, the State shall use its endeavors for the
promotion and extension of social welfare and security, and of
public health.

Article 26. All people shall have the right to receive an
equal education correspondent to their ability, as provided by
law.

All people shall be obligated to have all boys and girls under
their protection receive ordinary education as provided for
by law. Such compulsory education shall be free.

Article 27. All people shall have the right and the obliga-
tion to work.

Standards for wages, hours, rest and other working condi-
tions shall be fixed by law.

Children shall not be exploited.

Article 28. The right of workers to organize and to bargain
and act collectively is guaranteed.

Article 29. The right to own or to hold property is in-
violable.

aoo Japan Enemy or Ally?

Property rights shall be defined by law, in conformity with
the public welfare.

Private property may be taken for public use upon just
compensation therefor.

Article 30. The people shall be liable to taxation as pro-
vided by law.

Article 31. No person shall be deprived of life or liberty,
nor shall any other criminal penalty be imposed, except ac-
cording to procedure established by law.

Article 32. No person shall be denied the right of access to
the courts.

Article 33. No person shall be apprehended except upon
warrant issued by a competent judicial officer which specifies
the offense with which the person is charged, unless he is
apprehended, the offense being committed.

Article 34. No person shall be arrested or detained without
being at once informed of the charges against him or without
the immediate privilege of counsel; nor shall he be detained
without adequate cause; and upon demand of any person
such cause must be immediately shown in open court in his
presence and the presence of his counsel.

Article 35. The right of all persons to be secure in their
homes, papers and effects against entries, searches and seizures
shall not be impaired except upon warrant issued for adequate
cause and particularly describing the place to be searched and
things to be seized, or except as provided by Article 33.

Each search or seizure shall be made upon separate warrant
issued by a competent judicial officer.

Article 36. The infliction of torture by any public officer
and cruel punishments are absolutely forbidden.

Article 37. In all criminal cases the accused shall enjoy the
right to a speedy and public trial by an impartial tribunal.

He shall be permitted full opportunity to examine all wit-
nesses, and he shall have the right of compulsory process for
obtaining witnesses on his behalf at public expense.

At all times the accused shall have the assistance of com-
petent counsel who shall, if the accused is unable to secure the
same by his own efforts, be assigned to his use by the State.

Article 38. No person shall be compelled to testify against
himself.

Confession made under compulsion, torture or threat, or

Appendices 201

after prolonged arrest or detention shall not be admitted in
evidence.

No person shall be convicted or punished in cases where
the only proof against him is his own confession.

Article 39. No person shall be held criminally liable for an
act which was lawful at the time it was committed, or of
which he has been acquitted, nor shall he be placed in double
jeopardy.

Article 40. Any person, in case he is acquitted after he has
been arrested or detained, may sue the State for redress as
provided by law.

CHAPTER IV. THE DIET

Article 41. The Diet shall be the highest organ of state
power, and shall be the sole law-making organ of the State.

Article 42. The Diet shall consist of two Houses, namely the
House of Representatives and the House of Councillors.

Article 43. Both Houses shall consist of elected members,
representative of all the people.

The number of the members of each House shall be fixed
by law.

Article 44. The qualifications of members of both Houses
and their electors shall be fixed by law. However, there shall
be no discrimination because of race, creed, sex, social status,
family origin, education, property or income.

Article 45. The term of office of members of the House of
Representatives shall be four years. However, the term shall be
terminated before the full term is up in case the House of
Representatives is dissolved.

Article 46. The term of office of members of the House of
Councillors shall be six years, and election for half the mem-
bers shall take place every three years.

Article 47. Electoral districts, method of voting and other
matters pertaining to the method of election of members of
both Houses shall be fixed by law.

Article 48. No person shall be permitted to be a member of
both Houses simultaneously.

Article 49. Members of both Houses shall receive appropri-
ate annual payment from the national treasury ha accordance

with law.

Article 50. Except in cases provided by law, members of
both Houses shall be exempt from apprehension while the

202 JapanEnemy or Ally?

Diet is in session, and any members apprehended before the
opening of the session shall be freed during the term of the ses-
sion upon demand of the House.

Article 51. Members of both Houses shall not be held liable
outside the House for speeches, debates or votes cast inside
the House.

Article 52. An ordinary session of the Diet shall be convoked
once per year.

Article 5^. The Cabinet may determine to convoke extraor-
dinary sessions of the Diet. When a quarter or more of the
total members of either House makes the demand, the Cabinet
must determine on such convocation.

Article $4. When the House of Representatives is dissolved,
there must be a general election of members of the House of
Representatives within forty (40) days from the date of dis-
solution, and the Diet must be convoked within thirty (30)
days from the date of the election.

When the House of Representatives is dissolved, the House
of Councillors is closed at the same time. However, the Cabinet
may in time of national emergency convoke the House of
Councillors in emergency session.

Measures taken at such session as mentioned in the proviso
of the preceding paragraph shall be provisional and shall
become null and void unless agreed to by the House of Rep-
resentatives within a period of ten (10) days after the opening
of the next session of the Diet.

Article 55. Each House shall judge disputes related to quali-
fications of its members. However, in order to deny a seat to
any member, it is necessary to pass a resolution by a majority
of two-thirds or more of the members present.

Article 56. Business cannot be transacted in either House
unless one-third or more of total membership is present.

All matters shall be decided, in each House, by a majority
of those present, except as elsewhere provided in the Constitu-
tion, and in case of a tie, the presiding officer shall decide the
issue.

Article 57. Deliberation in each House shall be public.
However, a secret meeting may be held where a majority of
two-thirds or more of those members present passes a resolu-
tion therefor.

Each House shall keep a record of proceedings. This record
shall be published and given general circulation, excepting

Appendices 203

such parts of proceedings of secret session as may be deemed
to require secrecy.

Upon demand of one-fifth or more of the members present,
votes of the members on any matter shall be recorded in the
minutes.

Article 58. Each House shall select its own president and
other officials.

Each House shall establish its rules pertaining to meetings,
proceedings and internal discipline, and may punish members
for disorderly conduct. However, in order to expel a member,
a majority of two-thirds or more of those members present
must pass a resolution thereon.

Article 59. A bill becomes a law on passage by both Houses,
except as otherwise provided by the Constitution.

A bill which is passed by the House of Representatives, and
upon which the House of Councillors makes a decision differ-
ent from that of the House of Representatives, becomes a law
when passed a second time by the House of Representatives
by a majority of two-thirds or more of the members present.

The provision of the preceding paragraph does not preclude
the House of Representatives from calling for the meeting of a
joint committee of both Houses, provided for by law.

Failure by the House of Councillors to take final action
within sixty (60) days after receipt of a bill passed by the
House of Representatives, time in recess excepted, may be
determined by the House of Representatives to constitute a
rejection of the said bill by the House of Councillors.

Article 60. The budget must first be submitted to the House
of Representatives.

Upon consideration of the budget, when the House of
Councillors makes a decision different from that of the House
of Representatives, and when no agreement can be reached
even through a joint committee of both Houses, provided for
by law, or in the case of failure by the House of Councillors
to take final action within thirty (30) days, the period of
recess excluded, after the receipt of the budget passed by the
House of Representatives, the decision of the House of Repre-
sentatives shall be the decision of the Diet.

Article 61. The second paragraph of the preceding article
applies also to the Diet approval required for the conclusion
of treaties. . .

Article 62. Each House may conduct investigations in rela-

204 Japan Enemy or Ally?

tion to government, and may demand the presence and testi-
mony of witnesses, and the production of records.

Article 63. The Prime Minister and other Ministers of
State may, at any time, appear in either House for the pur-
pose of speaking on bills, regardless of whether they are mem-
bers of the House or not. They must appear when their pres-
ence is required in order to give answers or explanations.

Article 64. The Diet shall set up an impeachment court
from among the members of both Houses for the purpose of
trying those judges against whom removal proceedings have
been instituted.

Matters relating to impeachment shall be provided by law.

CHAPTER V. THE CABINET

Article 6$. Executive power shall be vested in the Cabinet.

Article 66. The Cabinet shall consist of the Prime Minister,
who shall be its head, and other Ministers of State, as pro-
vided for by law.

The Prime Minister and other Ministers of State must be
civilians.

The Cabinet, in the exercise of executive power, shall be
collectively responsible to the Diet.

Article 6y. The Prime Minister shall be designated from
among the members of the Diet by a resolution of the Diet.
This designation shall precede all other business.

If the House of Representatives and the House of Coun-
cillors disagree and if no agreement can be reached even
through a joint committee of both Houses, provided for by
law, or the House of Councillors fails to make designation
within ten (10) days, exclusive of the period of recess, after
the House of Representatives has made designation, the de-
cision of the House of Representatives shall be the decision
of the Diet.

Article 68. The Prime Minister shall appoint the Ministers
of State. However, a majority of their number must be chosen
from among the members of the Diet.

The Prime Minister may remove the Ministers of State as
he chooses.

Article 69. If the House of Representatives passes a non-
confidence resolution, or rejects a confidence resolution, the
Cabinet shall resign en masse, unless the House of Representa-
tives is dissolved within ten (10) days.

Appendices 205

Article 70. When there is a vacancy in the post of Prime
Minister, or upon the first convocation of the Diet after a
general election of members of the House of Representatives,
the Cabinet shall resign en masse.

Article Ji. In the cases mentioned in the two preceding
articles, the Cabinet shall continue its functions until the time
when a new Prime Minister is appointed.

Article 72. The Prime Minister, representing the Cabinet,
submits bills, reports on general national affairs and foreign
relations to the Diet and exercises control and supervision over
various administrative branches.

Article 75. The Cabinet, in addition to other general admin-
istrative functions, shall perform the following functions:
Administer the law faithfully; conduct affairs of state.
Manage foreign affairs.

Conclude treaties. However, it shall obtain prior or, de-
pending on circumstances, subsequent approval of the
Diet.
Administer the civil service, in accordance with standards

established by law.

Prepare the budget, and present it to the Diet
Enact cabinet orders in order to execute the provisions
of this Constitution and of the law. However, it cannot
include penal provisions in such cabinet orders unless
authorized by such law.
Decide on general amnesty, special amnesty, commutation

of punishment, reprieve, and restoration of rights.
Article 74. All laws and cabinet orders shall be signed by
the competent Minister of State and countersigned by the
Prime Minister.

Article 75. The Ministers of State, during their tenure of
office, shall not be subject to legal action without the consent
of the Prime Minister. However, the right to take that action
is not impaired hereby.

CHAPTER VI. JUDICIARY

Article 76. The whole judicial power is vested in a Supreme

Court and in such inferior courts as are established by law.

No extraordinary tribunal shall be established, nor shall

any oigan or agency of the Executive be given final judicial

judges shall be independent in the exercise of their

2o6 Japan Enemy or Ally?

conscience and shall be bound only by this Constitution and
the laws.

Article 77. The Supreme Court is vested with the rule-
making power under which it determines the rules of pro-
cedure and of practice, and of matters relating to attorneys,
the internal discipline of the courts and the administration
of judicial affairs.

Public procurators shall be subject to the rule-making power
of the Supreme Court.

The Supreme Court may delegate the power to make rules
for inferior courts to such courts.

Article j8. Judges shall not be removed except by public
impeachment unless judicially declared mentally or physically
incompetent to perform official duties. No disciplinary action
against judges shall be administered by any executive organ
or agency.

Article 7^. The Supreme Court shall consist of a Chief
Judge and such number of judges as may be determined by
law; all such judges excepting the Chief Judge shall be ap-
pointed by the Cabinet.

The appointment of the judges of the Supreme Court shall
be reviewed by the people at the first general election of mem-
bers of the House of Representatives following their appoint-
ment, and shall be reviewed again at the first general election
of members of the House of Representatives after a lapse of
ten (10) years, and in the same manner thereafter.

In cases mentioned in the foregoing paragraph, when the
majority of the voters favors the dismissal of a judge, he shall
be dismissed.

Matters pertaining to review shall be prescribed by law.

The judges of the Supreme Court shall be retired upon the
attainment of the age as fixed by law.

All such judges shall receive, at regular stated intervals,
adequate compensation which shall not be decreased during
their terms of office.

Article 80. The judges of the inferior courts shall be
appointed by the Cabinet from a list of persons nominated by
the Supreme Court All such judges shall hold office for a term
of ten (10) years with privilege of reappointment, provided
that they shall be retired upon the attainment of the age
as fixed by law.

The judges of the inferior courts shall receive, at regular

Appendices 207

stated intervals, adequate compensation which shall not be
decreased during their terms of office.

Article 81. The Supreme Court is the court of last resort
with power to determine the constitutionality of any law,
order, regulation or official act.

Article 82. Trials shall be conducted and judgment declared
publicly.

Where a court unanimously determines publicity to be
dangerous to public order or morals, a trial may be conducted
privately, but trials of political offenses, offenses involving the
press or cases wherein the rights of people as guaranteed in
Chapter III of this Constitution are in question shall always
be conducted publicly.

CHAPTER VII. FINANCE

Article 83. The power to administer national finances shall
be exercised as the Diet shall determine.

Article 84. No new taxes shall be imposed or existing ones
modified except by law or under such conditions as law may
prescribe.

Article 8$. No money shall be expended, nor shall the State
obligate itself, except as authorized by the Diet

Article 86. The Cabinet shall prepare and submit to the
Diet for its consideration and decision a budget for each fiscal
year.

Article 87. In order to provide for unforeseen deficiencies in
the budget, a reserve fund may be authorized by the Diet to
be expended upon the responsibility of the Cabinet.

The Cabinet must get subsequent approval of the Diet for
all payments from the reserve fund.

Article 88. All property of the Imperial Household shall
belong to the State. All expenses of the Imperial Household
shall be appropriated by the Diet in the budget.

Article 89. No public money or other property shall be
expended or appropriated for the use, benefit or maintenance
of any religious institution or association, or for any charitable,
educational or benevolent enterprises not under the control of
public authority.

Article 90. Final accounts of the expenditures and revenues
of the State shall be audited annually by a Board of Audit
and submitted by the Cabinet to the Diet, together with the
statement of audit, during the fiscal year immediately follow-
ing the period covered.

so8 Japan Enemy or Ally?

The organization and competency of the Board of Audit
shall be determined by law.

Article 91. At regular intervals and at least annually the
Cabinet shall report to the Diet and the people on the state
of national finances.

CHAPTER VIII. LOCAL SELF-GOVERNMENT

Article 92. Regulations concerning organization and opera-
tions of local public entities shall be fixed by law in accord-
ance with the principle of local autonomy.

Article 95. The local public entities shall establish assem-
blies as their deliberative organs, in accordance with law.

The chief executive officers of all local public entities, the
members of their assemblies, and such other local officials as
may be determined by law shall be elected by direct popular
vote within their several communities.

Article 94. Local public entities shall have the right to
manage their property, affairs and administration and to enact
their own regulations within law.

Article 95. A special law, applicable only to one local public
entity, cannot be enacted by the Diet without the consent of
the majority of the voters of the local public entity concerned,
obtained in accordance with law.

CHAPTER IX. AMENDMENTS

Article 96. Amendments to this Constitution shall be in-
itiated by the Diet, through a concurring vote of two-thirds
or more of all the members of each House and shall thereupon
be submitted to the people for ratification, which shall require
the affirmative vote of a majority of all votes cast thereon, at
a special referendum or at such election as the Diet shall
specify.

Amendments when so ratified shall immediately be promul-
gated by the Emperor in the name of the people, as an integral
part of this Constitution.

CHAPTER X. SUPREME LAW

Article gj. The fundamental human rights by this Consti-
tution guaranteed to the people of Japan are fruits of the age-
old struggle of man to be free; they have survived the many

Appendices 209

exacting tests for durability and are conferred upon this and
future generations in trust, to be held for all time inviolate.

Article 98. This Constitution shall be the supreme law of
the nation and no law, ordinance, imperial rescript or other
act of government, or part thereof, contrary to the provisions
hereof, shall have legsd force or validity.

The treaties concluded by Japan and established laws of
nations shall be faithfully observed,

Article 99. The Emperor or the Regent as well as Ministers
of State, members of the Diet, judges, and all other public
officials have the obligation to respect and uphold this Con-
stitution.

CHAPTER XI. SUPPLEMENTARY PROVISIONS

Article 100. This Constitution shall be enforced as from the
day when the period of six months will have elapsed counting
from the day of its promulgation.

The enactment of laws necessary for the enforcement of this
Constitution, the election of members of the House of Coun-
cillors and the procedure for the convocation of the Diet and
other preparatory procedures necessary for the enforcement of
this Constitution may be executed before the day prescribed
in the preceding paragraph.

Article 101. If the House of Councillors is not constituted
before the effective date of this Constitution, the House of
Representatives shall function as the Diet until such time
as the House of Councillors shall be constituted.

Article 102. The term of office for half the members of the
House of Councillors serving in the first term under this
Constitution shall be three years. Members falling under this
category shall be determined in accordance with law.

Article 103. The Ministers of State, members of the House
of Representatives and judges in office on the effective date
of this Constitution, and all other public officials who occupy
positions corresponding to such positions as are recognized
by this Constitution shall not forfeit their positions auto-
matically on account of the enforcement of this Constitution
unless otherwise specified by law. When, however, successors
are elected or appointed under the provisions of this Consti-
tution, they shall forfeit their positions as a matter of course.

APPENDIX II
REPORT OF THE JOHNSTON COMMITTEE 1

GENERAL ANALYSIS OF THE SITUATION IN JAPAN

Japan's prewar social and economic policy was developed to
serve political and military purposes. Growth in population
continued without regard to the limited resources of the four
islands which are the homeland of Japan. A large part of
Japanese working effort, capital and resources were absorbed
in the maintenance of armed forces and the construction of
arms plants. Part of the rest was used to develop railways,
mines, factories and other sources of supply in the conquered
lands Formosa, Korea, Manchuria and North China. Industry
was forced to conform to military needs and purposes and
became subject to government orders.

Economic development within Japan and peacetime needs
suffered; much of the effort, capital and resources that might
have served to improve industry and agriculture within Japan
proper were diverted. The stocks of gold, foreign exchange and
raw materials were expended in the same effort. Japan sup-
ported her expanding population by getting food, raw mate-
rials and the product of controlled labor from the countries
brought under its domination.

In short, Japan's economic life was shaped to fit its attempt
to become the dominating center of Asia and of the whole

i Released by the Department of the Army, Washington, May 19, 1948.
The Report is prefaced by a Summary and concludes with a few para-
graphs of notes on Korea, which are here omitted; otherwise it is repro-
duced verbatim.

210

Appendices

Pacific world. The working lives and prospects of the Japanese
people crowded on the home islands were put on the gaming
table of expansion and war. This reckless gamble was lost.

Defeat left Japan a ruined nation. The conquered empire
was lost; with it, the great investments which Japan had made.
Within Japan proper, there was great destruction of houses,
cities and factories. The merchant fleet, by means of which
Japan carried on its trade, was also lost. Remaining inven-
tories of raw materials, especially imported raw materials, such
as oil, cotton, wool, coking coal, rubber and salt were small.
Farm lands were neglected and supplies of fertilizer, seeds and
tools insufficient. Food production within Japan was insuffi-
cient to supply even a minimum subsistence for the increased
population; for, besides a rate of growth of about one million
per year, some five or six million Japanese were returned from
the lost territories. Coal production within Japan was com-
pletely inadequate for mi'Trimum needs of power, fuel and
transport.

Finances of the government were in disorder. The financial
situation of many banks and corporations was shattered be-
cause of the loss of assets abroad, war destruction, or deprecia-
tion of properties.

Such were the consequences of Japan's gamble in the use of
force as a way of building a satisfactory economic life. Such
is the situation which the Japanese people of today have
inherited.

It is needless to emphasize the great measure of sober under-
standing, hard work, endurance and patient cooperation that
will be necessary to correct it. In judging the Japanese effort
to do so, it should be borne in mind that success or failure will
not lie entirely within Japan's control. Peace and productive
progress in the outside world, especially in the rest of Asia,
will make Japan's task easier; a continuation of international
dissension and world-wide shortages of goods will make Japan's
task harder.

The American Government has accepted and is discharging
broad responsibilities as the occupying power. It has sustained
order without which the effort of recovery could not go on.
It has encouraged the adoption of a new basis of government
in which individual energies and abilities may find greater
growth and opportunity. It has prevented starvation and

2 1 2 Japan Enemy or A lly?

disease, making more generous appropriations for such essen-
tials as food, oil, fertilizers and seeds than any victor has ever
before given any conquered enemy. It is aiding the Japanese
people in their effort to adjust their economy to the circum-
stances that confront them. Congress is now being asked to
consider a program for providing Japan an essential minimum
of supplies, particularly raw materials, required to make prog-
ress toward self-support. This would be a new departure in
American policy in Japan. It is based on a common sense
approach: Some branches of Japanese industry could be mak-
ing goods that other countries need if these industries had the
raw materials; but Japan cannot pay for them now; we could
finance them; Japanese industry could convert them into fin-
ished goods; by selling part of these goods abroad it could get
the dollars to pay for the raw materials; the rest of the product
could remain in Japan where it is badly needed.

This program should be carried forward by the American
Government. The accepted responsibility has been to maintain
order, to stimulate reform, to prevent disease and unrest Now
we should concentrate upon the ways of revival and provide
certain minimum essentials without which Japan cannot be-
come self-supporting.

The first economic need of Japan is increased production.
The production of domestic industrial raw materials and fab-
ricated goods now is less than 45 per cent of what it was during
the years 1930-1934. Exchange of Japan's fabricated products
for such raw materials as oil of the Dutch East Indies, iron ore
of North China, sugar of Formosa, wool of Australia, rubber
of the Malay States, rice of Indo-China, all have almost ceased
for the time being. Domestic cereal production takes care of
only 80 per cent of Japan's current need. Fishing, the other
main source of food in Japan, is only half what it was; the
Japanese fishing fleet is reduced and unable to fish in many
waters hitherto open to it.

The Committee, therefore, looked into the present obstacles
to production to discern the means by which they could be
lessened. There are many deterrents and each affects the rest
But for the purpose of examination, they may be divided into
two main groups. One of these may be called physical, the
other institutional.

The three main deficiencies in the physical means available

Appendices 213

to Japan are:, (i) lack of essential raw materials, (2) the bad
condition of many existing factories, (3) the poor state of trans-
port. The deterrent effect of each of these upon production is
evident, but it may be useful to illustrate each briefly.

1. Because of a shortage of coking coal even such parts of
the Japanese steel industry as are in physical condition to oper-
ate, cannot do so fully. Cotton looms and spindles stood idle
because of lack of raw cotton until the United States provided
some. Without enough wood pulp, the rayon mills must re-
main largely without work; without enough hides, the shoe
and leather industries cannot resume satisfactorily; without
rubber, all branches of industry making vehicles suffer; with-
out enough salt, operations of the chemical industries cannot
provide the chemicals needed by other branches of manufac-
ture; without enough oil, machines cannot be lubricated, ships
cannot run, trucks cannot carry products from place to place.

The existing shortage of raw materials today is keeping
Japan's production much below its potentialities. Despite all
the other existing defects of the Japanese economic situation,
a marked improvement will result if and when raw material
supplies are more adequate. Processed and sold abroad, they
could provide the financial means for successive steps forward;
in contrast unless these raw materials are secured, trade will be
very small and Japan cannot avoid a long period of suffering
and dependency.

An increase in the production of all raw materials that can
be produced within Japan (such as coal, copper, brick, cement
and wood products) should be the first order of Japanese busi-
ness. There should be, as far as possible, an adaptation of the
Japanese economy and life to the use of local materials, since
even if trade grows rapidly, available imports are almost sure
to be less than the total needs of a fully employed Japan.

2. During the war, and since, equipment in many important
industries, suffered war damage, fell into disrepair, or had vital
parts broken or vital machinery removed. For example, the
present initial output of aluminum is handicapped by the
state of the lining of the furnaces; coal production is much
lower than it would be if the machinery at the mines were in
good shape. Next to the acquisition of raw materials, the re-
pair and modernization of such plants and equipment offers
the best and quickest contribution to recovery.

214 JapanEnemy or Ally?

3. Production is suffering many delays and interruptions be-
cause of the poor state of the railways and railway equipment
and lowered operating efficiency. Also contributing is the extra
burden placed upon the railways by the dearth of coastwise
shipping. Many branches of industry in the Tokyo region, for
example, recently were forced to suspend operation because of
the failure of charcoal shipments to arrive from other parts of
Japan; much cut timber is lying in the forests of Hokkaido,
waiting to be taken away; movement of badly needed iron
pyrites to the fertilizer plants has been delayed.

These physical deficiencies can be overcome gradually as
Japan makes fuller use of its natural resources, improves its
methods of production and rebuilds trade with the outside
world.

Despite all physical limitations, production could even now
be at a higher level, were it not for other deterrent influences
affecting adversely the desire to produce, work, plan and in-
vest. These mount up to a lack of reasonable assurance of re-
ward and incentive. The whole production effort is taking
place in an atmosphere of uncertainty, which affects workers,
managers and owners. It is causing production and effort to be
reduced, fitful and unsteady. This uncertainty must be elimi-
nated.

The Committee has studied its several causes attentively.
Some are the direct and unavoidable consequences of the war
and war settlements. Important enterprises in Japan suffered
great losses through war damage, cessation of arms production
or when their property outside Japan was lost. Their financial
bases have been weakened or destroyed and their organization
disrupted. The necessary financial reorganization of these en-
terprises should be carried out rapidly.

The threat of removal for reparations hangs over much of
Japan's industry, especially heavy industry. Owners and direc-
tors who fear that their property may be taken from them will
not exert themselves to bring that property back into produc-
tion or to use it fully. It is, therefore, imperative that decision
be reached promptly as to which excess Japanese plants and
equipment are to be subject to removal as reparations and that
the rest be given assurance that they will remain untouched.

Another element of uncertainty derives from the changes
being effected in the control of Japanese industry. A very large

Appendices 215

part of Japanese industry before the war was dominated either
by the government or by private monopolistic groups. Many of
the principal enterprises established in conquered countries
such as Formosa or Manchuria were creatures of the govern-
ment. A great part of Japanese industry, trade, shipping, and
banking were under the control of a few small family groups
collectively known as the "Zaibatsu." These and other interests
were linked together in many and dose associations and groups
to regulate production and control competition.

Japan has a well established social structure and code of eco-
nomic rights and duties, especially as between workers and
employers, quite different from that prevailing in the United
States. Some important industries, for example, carry out stages
of their production in thousands of small family workshops;
the organized handling of their products was customary and
in some ways useful. It was customary for some industries to
continue employment and wage payments to all employees,
whether there was work for them or not; and wages were
graded according to the personal and family needs of the work-
ers. These and other customary practices naturally led to lim-
itations on the intensity of competition. Such customs and prac-
tices cannot and should not be violently disregarded or abruptly
terminated and must be borne in mind when judging agree-
ments among employers.

But the practices of combinations, monopoly and concen-
trated control in Japan went far beyond arrangements required
to utilize the family workshops or maintain customary social
protection. As already observed, a small number of family
groups, through holding companies and controlled banks,
owned and directed a large part of all Japanese industry, ship-
ping and finance. In various basic fields such as steel and
paper, one company controlled 80 per cent or over of all pro-
duction, maintaining a suppressive monopoly. Such excess con-
centration of power and. ownership had bad economic, political
and social effects. They could, and sometimes did, dominate
the government. They could be inefficient and still survive.
They could and did repress the emergence of business ability.
This concentration of control lent itself to easy domination
over production for aggressive war.

For these reasons the Japanese Government, under the Allied
policy, is seeking to diffuse the ownership and control of Japan's

2 1 6 Japan Enemy or A lly?

productive plants more widely and to develop greater competi-
tion. This policy should, after the adjustments have been made,
bring greater and more effective production if care is taken in
carrying out the necessary measures of reorganization. But dur-
ing the process of deconcentration, which is now going on, un-
certainty is inevitable and may now be holding back produc-
tion in .some fields, since existing managements do not know
how to plan.

The period of uncertainty caused by this economic reform
should be made short and the area of uncertainty lessened as
rapidly as possible. The possible disturbing effects should be
allayed by care not to hurt production, and by limiting re-
organization to the minimum necessary to insure reasonable
competition. This we understand is the intention of the occu-
pation authorities and is further assured by their establishment
of an American review board to see that deconcentration plans
do not adversely affect production and the broad program to
achieve economic recovery. Care must also be taken that break-
ing up of the Zaibatsu monopolies does not lead to the growth
of governmental monopolies.

Such are some of the elements of uncertainty bearing on the
conduct of business enterprise. There is another of a general
character the serious inflation prevailing in Japan. Prices of
essentials (food, clothing, housing, fuel and light) are about
four times higher than they were at the beginning of 1946, de-
spite official controls and subsidies. The increase in prices and
the general level of costs of production would be much higher
still if the American government had not, under the relief pro-
gram, supplied large amounts of essential products such as
food, fertilizer, seeds and oil. These have made it possible to
prevent prices of food and other consumer goods and of goods
used in production from rising so greatly as to destroy trust in
the value of money. Paper money outstanding has increased
many more times than the volume of goods; in 1939 it was less
than four billion yen, at the end of the war it was about 55
billion yen, and in March 1948 it was about 220 billion yen.

This inflated price situation means that employees of fac-
tories and offices and farmers, whose money income has vastly
increased but who cannot buy many of the things they want,
live anxious lives. Their real return for work ceases to be re-
lated to effort and becomes subject to chance and sudden

Appendices

change. This discourages steady effort, diverts activities and
products to the black market where shrewdness and selfishness
count more than usefulness. It penalizes integrity and rewards
chicanery. Similarly, the managers of business, large and small,
often cannot tell whether they are making a profit or loss. Costs
become uncertain and long-term contracts impossible. Business
becomes dependent on the government or banks for working
capital. Interest rates become so high that only those who know
they can sell at an advanced price can borrow. Goods are
hoarded. The costs of government are forced up, revenues lag,
deficits grow, and the inflation and its demoralizing effects are
extended.

It has become imperative that the course of extreme inflation
within Japan be arrested. Moderate general price increases may
sometimes stimulate production; and relative increases in par-
ticular prices may stimulate the production of goods particu-
larly needed. But the price situation and trend in Japan is now
retarding industrial production and causing widespread anxiety
for the future.

The Japanese Government, encouraged and supported by
the American occupation authorities is making strenuous efforts
to curb the inflation and not without success in certain strategic
elements of the problem. Collection of foodstuffs has been much
better than before; the rationing system has become more effec-
tive; coal production has been substantially increased; tax col-
lections have improved and the will to restrain public spending
has strengthened. These are encouraging signs.

The Japanese people must adjust their supply of monetary
means of payment to their supply of goods. This can only be
done by ceasing to add to their supply of money and increas-
ing their supply of goods. Neither can be done entirely by
gentle means; each group, section and part of Japanese life will
have to reconcile itself to getting along with little until there
is more to share. There must be a government strong enough
to stand out against those who will not do so voluntarily.

Basically, the inflation is the result of the scarcity of goods.
But it has been cumulatively increased by meeting government
deficits by additions to the volume of currency. Even under the
present straitened circumstances the attainment of a balanced
budget, or substantial progress toward that goal, should be pos-
sible. The vast outlay previously carried by the Japanese Gov-

JapanEnemy or Ally?

ernment for military purposes is now saved although this is
partially offset by necessary occupation costs. Nonetheless, the
attainment of a budget balance will require the most stubborn
will, great political courage on the part of the government, and
great patience on the part of the Japanese people.

No matter how determined an effort may be made to limit
the supply of money, it is certain to fail unless Japanese pro-
duction grows. Reference has already been made to certain de-
terrents to this urgently needed increase in production. There
are still others to which attention might well be directed.

The output of workers in various branches of industry and
mining is lower than before the war. This is due in large part
to defective tools, interruptions in the supply of raw materials,
inadequate food, housing and clothing. Output will probably
increase when and as these conditions are improved. But in
some measure it appears to be caused by lessening of effort and
hindering rules or terms of work. Such tendencies appear when-
ever, as now, there is fear of lack of work to go around.

It is essential that the Japanese workers should during this
period of strain and scarcity labor hard and well, as they have
in the past. Japan needs their product, both to supply tite do-
mestic market and to provide the means of trade. To rebuild
the required volume of trade, Japanese industries will have to
meet external competition, and find their way into foreign
markets by offering goods on attractive terms. The alternatives
are for the Japanese people to endure an even lower standard
of living on their crowded islands, or to be permanently de-
pendent on outside charity.

Resumption of Japanese trade will be affected by the atti-
tudes and policies of other countries, their willingness to per-
mit Japanese shipping to carry a reasonable tonnage, and rec-
ognition that discrimination against Japanese trade would not
be in the long-range interests of world trade and prosperity.
Again, if production and trade of other foreign countries in-
creases, Japan's prospects will benefit; if they lag, Japan's task
of regaining balance and stability will be the harder. Recipro-
cally, an improvement in Japan's production and trade will
aid other countries if they make use of Japanese goods and
services.

The return of tranquility and settled political conditions in
those other Asiatic countries which are among Japan's natural

Appendices

customers would help greatly. An increase in total world sup-
plies of raw materials would help Japan by encouraging other
countries to enter into trade agreements with Japan and by
reducing the prices of needed materials. So also Japan's exports
sales would be aided if the present world-wide dollar shortage
is alleviated. For this reason the European Recovery Program
should benefit Japan as well as the countries directly helped.

In essence, it may be said that the three connected problems
that Japan must solve are: (i) to increase production, (2) to
end inflation, and (3) to develop trade. All will take time and
all originated in a condition of disturbance and scarcity. The
means of production are scarce. It is therefore necessary that
they be put to the best use, that available supplies of tools,
parts and raw materials be allocated to those who can make
them yield* most, and that food and consumers goods be fairly
and honestly shared.

This justifies the controls now being exercised by the gov-
ernment over the supply and use of such goods. But it places
upon the Japanese people and government the duty and bur-
den of seeing that the controls are intelligently and honestly
exercised.

Controls on prices are also necessary for the present to
combat the inflation and to promote the general welfare. Again
they call for moderation and patient acceptance by all. Con-
stant pressure by wage-earners for higher money wages will
either force constantly rising prices or require larger and
larger government subsidies. Unjustified demands by producers
of industrial goods for higher prices will intensify pressure for
higher wages and increase social unrest Cost-price relation-
ships in industry must give producers some incentive but no
excess gain. They cannot be expected to operate at a loss, as
some are doing at present; but they cannot expect to rebuild
their business or fortunes quickly in this time of scarcity.

The same comment applies to the farmers of Japan. Before
the war and before the reforms encouraged by the occupying
authorities they were an oppressed group within Japan. Mak-
ing up about 45 per cent of the Japanese people, they received
little more than 10 per cent of the national income. Now they
are comparatively much better off; it is roughly estimated that
they receive nearly 35 per cent of the reduced national income.
It is of first importance that they (i) continue to increase food

2 go JapanEnemy or Ally?

production, (2) deliver their products into regular channels,
and (3) recognize that higher prices for the food they produce
will only increase inflation.

Trade unions in Japan are being given a chance to prove
that they can protect the interest of employees without frustrat-
ing production. Business under government control is being
given a chance to prove that it can gradually reconstruct a
self-supporting and socially satisfying situation on the ruins of
war. Each is dependent on the other and both must accept
governmental controls on their private desires as long as they
are necessary. As scarcities diminish, these controls should be
relaxed or removed. They are, it is to be hoped, only tempo-
rary aids on the road to the establishment of a free enterprise
system.

Our Committee, in its studies of the Japanese economy, has
assumed that peace will continue, that the cooperative rela-
tionship between the Japanese and the occupation authorities
will be maintained, and that Far Eastern countries, along with
other areas of the world, will gradually recover from the dis-
location and shortages caused by the war. Discussion and spe-
cific recommendations dealing with the various subjects to
which the Committee addressed itself follow.

RAW MATERIAL AND FOREIGN TRADE

To achieve economic recovery, Japan must secure a far
greater volume of raw materials than at present. It can, by
careful planning and effort increase the supply of a limited
group of raw materials found within Japan: bituminous coal,
copper, lumber and other building materials. But most of the
products required by industry are not found within Japan.
These are too numerous fully to list: textile fiber and wood-
pulp for its cotton and rayon industries; iron ore, manganese
and coking coal for her iron and steel industry; bauxite for
the aluminum industry; rubber, tin, zinc, lead for the manu-
facture of vehicles, farm tools and machines; salt and other
chemicals for her fertilizer plants; copra for soap-making; oil
for the whole of her economy. To secure these Japan must
begin to trade again with the rest of the world on a large scale.
Hardly less important is Japan's need for certain essential
parts and components for its industrial plants, which Japan

Appendices

will have to import until its own industries are repaired and
reestablished.

The relatively meager revival of Japanese foreign trade has
until now been largely dependent upon raw materials and
supplies made available by the United States. Failure to press
vigorously for restoration of foreign trade would prolong the
expensive necessity of underwriting Japanese deficits.

SCAP has estimated that under favorable conditions and
with reasonable aid from the United States, a balance between
exports and imports should be attainable by 1953.

It has been estimated that Japan will require about
1 1,575,000,000 of exports each year (at current prices) to pay
for essential imports of food and raw materials (and necessary
invisible imports) to maintain a tolerable food ration and
standard of living at home. A balance of payments could, of
course, be maintained with lower exports and imports, but at
the cost of a lowered and perhaps unbearable standard of
living in Japan. An increase of at least eight to nine times
1947 exports is necessary to meet the goal set. Under favorable
circumstances of world and Japanese trade the Committee con-
siders that this goal may be attainable, although the realization
of these estimates is obviously subject to many uncertainties
both in Japanese and in world-wide economic and political
conditions.

During 1947, imports into Japan were $526,130,000 and ex-
ports were $173,568,000. Approximately 25% of the imports
were financed by foreign exchange created by the sale of Japa-
nese exports, the balance being the value of relief supplies
procured with United States appropriated funds. It will be
seen, therefore, that the most strenuous efforts will have to be
employed to reach the 1953 targets. The Committee makes the
following comments and suggestions which, if successfully car-
ried out, should assist materially toward this end. It recognizes
fully that the occupation authorities have been striving to
overcome many of the obstacles involved.

First, Japan's merchant fleet should be substantially en-
larged. Out of 5.75 million gross tons of steel vessels over 1,000
gross tons before the war, there are now afloat in the hands of
the Japanese 1.15 million gross tons of serviceable or repairable
vessels. Since a large number of these vessels are necessarily
engaged in domestic coastwise services, the reduction in vessels

222 JapanEnemy or Ally?

available for overseas foreign trade has been greater than the
overall 80 per cent loss indicated by this tonnage comparison.
Even if given every opportunity to increase merchant ship-
ping, by building, purchasing and bareboat chartering, it will
be many years before Japan's merchant tonnage can be reason-
ably adequate for its needs.

Prevailing costs of transporting goods to Japan are extremely
high. For instance, salt, which sells at $3.00 f.o.b. Mediter-
ranean port, costs $14.00 additional to land in Japan. Iron ore,
at $7.00 f.o.b. Hainan, costs $9.25 additional to land in Japan.
Coking coal,* at $12.00 f.o.b. Canada, involves a freight charge
of $14.00 to $16.00 to deliver in Japan. The Japanese have
always been effective ship operators and builders. Their ship-
building and ship operating costs have been low as compared
with other countries. They have the know-how and the man-
power. To the extent that they are able to employ domestic
shipping and shipbuilding facilities, they will be enabled to
reduce their substantial need for foreign exchange now re-
quired for shipping services.

Japan has valuable facilities for the construction of ships of
all sizes. Present restrictions on building vessels of six thousand
gross tons and more should be lifted to permit building for
their own use and on contract for foreign buyers. There are
indications that such orders would be available to them.

The argument has been made that Japan's shipping should
be limited because of its war potential. However, Japan's army,
navy and air force have been abolished so there should be
little fear of future Japanese aggression from the mere exist-
ence of a merchant fleet Also, it has been historically the
American position, and generally recognized by maritime
nations, that world trade and the long-range interests of all
nations are best served when the high seas are open to all.
Purely competitive considerations do not, in our opinion,
justify a prohibition that would prevent the Japanese from
developing tie necessary merchant shipping to assist in balanc-
ing their foreign trade.

Second, the Committee recognizes that by reason of the eco-
nomic upheaval stemming from war, Japan will, of necessity,
be forced to seek export business throughout the world. Be-
sides textiles, it is capable of producing modern machinery
and metal products of diversified character. Chemicals, rubber

Appendices

products, pottery, toys and handicraft all are potential exports.
Where its products are fairly competitive and it uses fair
methods of marketing, they should be admitted to the world's
markets.

It is important to the Japanese (and to the American tax-
payer) that we use our influence to overcome the understand-
able trade discriminations which are practiced against Japan,
especially in markets in which they have heretofore enjoyed
large trade. In the judgment of the Committee the countries
involved are impairing their own well-being by refusing to
trade with Japan and are retarding the reactivation of a poten-
tially valuable economic asset for the benefit of all Asiatic
countries. We, in the United States, have been called upon to
overcome deep and justifiable resentment in our attitude
toward Japan. Neighboring nations have much to gain by the
adoption of a new and more receptive attitude. The reciprocal
advantages ensuing are unmistakable.

Third, our financial assistance to both China and Japan can
be most productively employed if active trade between them
is resumed. However, China is not at present trading any
important volume of goods with Japan. Many raw materials
can be sold by China to good advantage in Japan; in turn,
Japan has many commodities and facilities which China needs.
United States trade policy is emphatically in accord with this
philosophy. The European Recovery Plan is based upon it.

Fourth, it would be advantageous if Japan could obtain the
foods it imports from nearby sources as in the past, rather than
from the more expensive dollar areas as at present. Perhaps
this cannot be arranged immediately, but, as these neighboring
countries move toward more normal production, restoration of
these trade patterns should be possible. This will be helpful
to both the Far Eastern and American economies.

Fifth, the Committee recognizes that, in a scarcity economy
requiring equitable allocations of available raw materials and
other products, government must continue to play an impor-
tant supervisory role over trade. However, the restrictions and
red tape now required by the Japanese authorities are un-
doubtedly hampering trade. Although the Committee has
been informed that both the Japanese Government and the
occupation authorities are taking steps to simplify and stream-
line the methods of handling business transactions, it urges

Japan Enemy or Ally?

that this be done quickly and thoroughly. Direct business con-
tracts between buyers and sellers should be encouraged. Liqui-
dation of the Foreign Trade Kodans (government buying and
selling monopolies) as soon as the acute need for raw material
allocations ends, and limitation of the operations of Boeki Cho
(government foreign trade agency) to the minimum, seem to
be well advised.

It is also desirable to establish direct contact between Japa-
nese businessmen and their potential customers by permitting
the movement of Japanese nationals to foreign markets.

Sixth, all export possibilities must be stimulated. As has been
already stated Japan historically has always been a processing
nation which purchased raw materials abroad, manufactured
them in Japan and sold a major portion of the finished prod-
ucts abroad to pay for its necessary imports of raw materials
and food. This economic pattern has been even more true of
Japan than of Great Britain or Western Germany, and must
be revived on a large scale for Japan to live.

Prior to the war textile products constituted 60 per cent of
Japan's exports. The remaining 40 per cent comprised mainly
machinery, metal products, chemicals, rubber products, pot-
tery, toys and handicraft articles.

The cotton textile industry represents a vital force in the
creation of a healthier Japanese economy. There is a present
demand for its products, but great difficulties have been expe-
rienced recently in making foreign sales in dollars because of
the world-wide dollar scarcity. Under existing circumstances,
attention should be given to three-way transactions, such as
shipment of cotton from the United States to Japan, manu-
factured textiles from Japan to the Netherlands East Indies
and tin from there to the United States in an amount sufficient
to repay the cost of the raw cotton. Normally, the cotton indus-
try is highly competitive; to operate successfully, Japan must
be in a position to adjust its marketing practices td this reality.

The Commodity Credit Corporation contract for the manu-
facture and sale of cotton yarn and goods produced from raw
cotton supplied by it has not yet been liquidated. All possi-
bilities of sale must be vigorously pursued. The large potential
United States market should not be excluded from this effort.
The possible volume of Japanese cotton textiles that might be
offered for sale in the United States would be only an insignifi-

Appendices 225

cant percentage of United States production and constitutes
no threat to American producers as long as present fair mer-
chandising methods are pursued.

It is obvious that unless a sufficient portion of the textiles
manufactured from American cotton to repay the cost of the
raw cotton is sold for dollars or for some commodity or cur-
rency which can be converted into dollars, Japan will be
unable to buy American cotton. Historically the Japanese used
a large percentage of American cotton and it is of great inter-
est to American cotton growers that this problem be solved
realistically so that the large potential Japanese market not
be lost.

We endorse the cotton credit now pending in the Congress;
it should include only sufficient limitations requiring direct or
indirect dollar sales of goods to assure repayment of the credit.
Japan should be permitted to accept sterling for that portion
of fabric and yarn sales not needed for dollar repayment, pur-
chasing therewith necessary imports from sterling areas. Japan's
textile manufacturers are at present unable to employ the
hedging facilities of the cotton futures markets, and this dis-
advantage should be overcome as soon as possible.

The expanded use of the woolen and worsted facilities of
Japan can produce substantial benefits and should be en-
couraged.

The rayon industry has been dependent in large measure
upon domestic pulp supply. Arrangements have been recently
completed for a substantial tonnage of Swedish pulp, with
which it is hoped to improve the quality and quantity of rayon
production. Inasmuch as Japan has no facilities to supply rayon
yarn in cone form, it is limited to skein packaging. This fact,
plus the fact of the comparatively inferior quality of the Japa-
nese product, puts it at a disadvantage in world markets, more
especially in countries equipped with high-speed processing
facilities. While the export of rayon yarn is desirable, too
much early hope should not be built up in this direction. The
relatively low price of rayon staple fiber throughout the world
and the fact that the Japanese product is not favored because
of its poor quality do not encourage the belief that they can
quickly develop large export demand. Therefore, in the judg-
ment of the Committee, rayon yarn and staple fiber produc-
tion should be planned with primary emphasis on spinning

226 Japan Enemy or Ally?

and weaving these rayon products in Japan. A large percentage
of this fabric production should be readily salable in this form
to foreign buyers.

Raw silk and silk products were one of Japan's chief prewar
trade assets. Export sales of raw silk for i935~39 ranged be-
tween 400,000 and 500,000 bales annually and those of silk
fabrics ranged between 75 and 125 million yards annually.
From the surrender to the end of December 1947 (over two
years) only 44,210 bales and 12.5 million yards were sold. Since
January i, 1948, with more realistic pricing and sales policies*
26,000 bales and approximately 5.2 million yards were moved.

Before the war, and increasingly during the war and since,
silk has lost favor. Growing nylon and rayon competition has
been largely responsible for this decline.

The Japanese are using all their ingenuity to overcome some
of the technical difficulties which the use of silk involves in
competition with other fibers. It is likely that the situation is
now at its worst and that gradual improvement both in raw
silk and silk fabric sales will be experienced.

In addition to gradually increasing textile exports, it is
planned to expand largely export sales of machinery and metal
products, ceramics, minerals, chemicals, drugs, handicraft, toys,
processed fish, and paper and wood products.

Fundamental to any successful export program is control of
inflation, which is dealt with in another section of this report,
and the supply of the necessary imported raw materials to get
the program under way.

We find a difficult circle of circumstances in the Japanese
productive economy. Insufficient necessary raw materials result
in insufficient production; insufficient production results in
insufficient exports; insufficient exports result in insufficient
foreign exchange to pay for the necessary raw materials. Until
this cirde is broken Japan's economy will remain prostrate and
dependent upon a food dole such as the United States is pres-
ently supplying. The best way to break the circle is by supply-
ing sufficient dollar exchange to enable Japan to purchase the
initial foreign raw materials.

REPARATIONS

Reparations policy toward Japan has been in the process of
development since tie surrender in August 1945. Reports of

Appendices

the Pauley Committee, the National Engineers Council, the
Special Committee on Japanese Reparations (Strike Report),
the Economic Analysis of the State Department, reparations
studies of SCAP, studies made by the members of the Far
Eastern Commission and finally the comprehensive report of
Overseas Consultants, Inc., all of which have contributed to a
better understanding and clarification of the problem.

These reports differ in many respects, yet all are in agree-
ment on these two premises:

(1) Japan's industries must be so demilitarized as to
prevent it ever again becoming a threat to the
peace of the world.

(2) Japan should be left sufficient industrial capacity
so that it will have an opportunity to develop an
economy which will provide a tolerable standard
of living.

In seeking to determine the amount and character of indus-
trial plants required to meet the objective stated in (2) above,
various estimates were offered. The earlier estimates differed so
widely that the occupying authorities decided that there was
need for an all-inclusive and detailed analysis of the Japanese
plant and its potential. Consequently, in June 1947, Overseas
Consultants, Inc., an organization of eleven distinguished in-
dustrial engineering and appraisal companies, was formed and
engaged by the Secretary of War to make such an analysis.

Its report, presented on February 26, 1948, consisted of two
major sections described as follows in a letter of transmittal:

"Section A presents designations of those plants and
facilities which should be retained and those which
should be made available for reparations under terms
of State-War-Navy Coordinating Committee 236/43,
together with estimates of the value of the facilities
available for reparations. These designations were
based upon a literal interpretation of original instruc-
tions, as amended, establishing the productive capaci-
ties in certain industries to be retained in Japan,
outlined in State-War-Navy Coordinating Committee
n this section we express no opinions in re-

Japan Enemy or Ally?

gard to the adequacy of such retained capacities for
achieving a self-sustaining civilian economy.

"In Section B, we make recommendations and name
plants and productive capacities which, in our opin-
ion, should be retained. These are the results of a
study of economic conditions in Japan, made by our
representatives, based upon data made available to us
by the Economic and Scientific Section, (hereinafter
referred to as ESS), the Natural Resources Section
and other divisions of SCAP, and by various Japanese
agencies, and upon our analysis of basic requirements
of food, clothing and raw materials, the need for
rehabilitation of industrial plants and utilities, and
the restoration of areas damaged during the war."

The report of Overseas Consultants, Inc., in effect advised
against the removal of productive facilities (except primary
war facilities) which might effectively be used in Japan; this
view was derived from the judgment that, only if Japan was
permitted to retain all facilities that might contribute to its
production and potential trade, could it by its own efforts
maintain a satisfactory minimum standard of living.

The value to the recipients of the industrial reparations
which would result from the new formula recommended by
Overseas Consultants, Inc., would be disappointingly small in
contrast to that which has been requested and expected by
some of the Allied Powers. It must be remembered that much
of the industrial plant within Japan was either destroyed or
badly damaged by the war and that actual productive excess,
except in a very few fields, is correspondingly small. In our
opinion, even if the Allied Powers received all the reparations
requested from the home islands of Japan, they would gain
little because experience has shown that the costs involved in
moving plants and equipment from a conquered nation and
reestablishing them in a victorious nation are high and that
the ultimate usefulness and value of such plants are small,
being poorly adapted to needs of the new owners. World War I
experience proved that reparations paid out of current produc-
tion were illusory and most difficult to collect; World War II

Appendices

is proving that reparations paid in the form of plant equip-
ment are also of dubious value.

Japan did have one form of assets of real value as repara-
tions. These assets were investments throughout the world and
particularly in Japanese territories and protectorates. They
have a value of many billions of dollars. Both Soviet Russia
and China have benefited from the billions in assets, undam-
aged by war, which Japan invested in Sakhalin, Manchuria,
North China and Formosa.

The cost in lives and treasure to bring about the surrender
of Japan was enormous. The United States bore a heavy share
of that cost. Since victory was achieved, military government
and relief costs have been borne almost entirely by the United
States. Until the new Japan, shorn of its empire, can become
self-supporting it will continue to be a burden. The loss of
plants, equipment or machine tools needed to help Japan
achieve a self-supporting basis would result in an increased
necessity for the United States to make up the deficiency or
lessen the chances of attaining economic solvency. Under such
circumstances, reparations become a direct charge on the
United States.

The United States is also paying a high price for delay in
the settlement of the reparations question. As long as uncer-
tainty prevails as to what is to be taken as reparations it is
impossible to plan intelligently for the rehabilitation of Japan's
industry. The Congress of the United States is considering an
appropriation of some $144,000,000 for the economic revival
of Japan, in addition to nearly $400,000,000 for general relief
purposes for the fiscal year of 1948-1949. Accordingly, an early
definitive and authoritative action on reparations problems is
imperative; the success of the entire recovery program will be
affected thereby.

During the past two and one-half years, the Far Eastern
Commission has agreed to but few policies affecting certain
phases of the reparations program. An "advanced delivery pro-
gram" was adopted by the United States to provide foreign
nations with some badly needed equipment. To this date this
program has made available 19,032 machine tools and 3423
pieces of laboratory testing and measuring equipment

The Committee has given careful consideration to studies

Japan Enemy or Ally?

and recommendations made by the various groups heretofore,
and, after carefully considering on-the-scene data, recommends
that:

(i) External assets formerly owned by Japan be for-
mally released to the countries holding jurisdic-
tion over the territories in which these assets were
located at the time of the Japanese surrender.

(*) There be made available as reparations from the
home islands of Japan the machinery and indus-
trial equipment in all government-owned arsenals
except for (a) such equipment as is deemed neces-
sary by SCAP for the Japanese economy or for
occupation use, and (b) such non-armament facil-
ities (fertilizer, fuel, oil storage, etc.) as were
exempted from the interim reparation program
by the FEC policy decision of 13 May 1946.

(3) There be made available for reparations certain
other plants and equipment in amounts as listed
by industries at the end of this section.

(4) These recommendations be made effective at the
earliest possible moment by appropriate direc-
tives to SCAP, which directives should include
(a) percentage shares of the total to be allotted to
each FEC nation or a limiting date prior to which
those nations should settle the division between
them of the total available items, (b) a limiting
date for the acceptance by each nation of the items
allocated to it, and (c) a statement that these
directives supersede all previous directives on the
same subject

(5) No industrial equipment in addition to that in-
cluded in these recommendations be made avail-
able for reparations: Provided, however, that
SCAP should be authorized to substitute for any
item specified in those recommendations any
other item of equivalent productive capacity.

If the above recommendations for a final reparations settle-
ment are carried out, the amount of plant equipment and the
number of machine tools available for reparations will be

Appendices 231

reduced below the level recommended by Overseas Consult-
ants, Inc. Our major purpose in recommending this reduction
is to retain for the rehabilitation of Japan's peacetime industry
a substantial number of machine tools of modern design. Only
by retaining such tools can the peace-time industry of Japan
quickly be rehabilitated on an efficient basis. In view of the
developments of the last two years and the continuing deficit
economy, there is, in our opinion, a cumulative urgency for
the rapid rehabilitation of Japan's industry.

Paramount to all other considerations is the need for prompt
and final action. Further delay in the settlement of the repara-
tion problem will not help the claimant nations and will hurt
Japan greatly.

RECOMMENDED REMOVALS FOR REPARATIONS

Industry

Nitric Acid
Synthetic Rubber
Shipbuilding
Aluminum and Mag-
nesium Fabricating
Magnesium Reduction

Sub total
Primary War Facilities

Total

Annual Capacity

Metric tons 82,000
Metric tons
Gross tons

Metric tons
Metric tons

i5**3

50,000
480

Value

19)9 Yen

8,000,000

10,000,000

50,000,000

81,688,000

12,559,000

102,247,000

560,000,000

662,247,000

Nora: Only those primary war facilities in government owned arsenals
should be made available for reparations. Those facilities within the gov-
ernment owned arsenals designated by the Supreme Commander for the
Allied Powers, as essential for the rehabilitation of Japan's industrial econ-
omy, should be exempted.

THE POSITION AND PROSPECTS FOR FOREIGN INVESTMENT

The present situation in Japan as to capital needs is some-
what obscured by the uncertainty about reparations. However,
assuming a reasonable and prompt settlement of that problem,
Japan would retain sufficient industrial plant and machine
tools for the production of a volume of most products needed
to meet internal needs and provide a surplus for export. A
very different situation prevails as to working capital. Most

Japan Enemy or Ally?

Japanese concerns, both industrial and marketing, because of
operating losses and inflation, are hampered by a dire lack of
funds to purchase raw materials, to replenish inventories and
for similar purposes. This is a problem chiefly of foreign cur-
rency needs which could best be met by equity investment
Unfortunately, almost no new foreign investment is permitted
in Japan at the present time.

Foreign private commercial representatives have recently
been authorized by SCAP to enter Japan to seek restitution of
prewar holdings and to engage in export-import trade. They
may now work out arrangements under which raw materials
are shipped into Japan and finished products shipped out, the
object being to provide an opportunity for profit both to its
suppliers of raw materials and the Japanese economy. They
may also send in management or technical personnel for dis-
cussion with Japanese firms in which investments might be
made later, and supply these firms with a knowledge of modern
management methods and technical know-how.

SCAP has been considering proposals which would permit
foreign nationals to engage, on a non-discriminatory basis with
Japanese nationals in foreign trade with the Boeki Cho (the
Japanese Government foreign trade agency), and in those spe-
cific business activities in Japan which positively aid in Japa-
nese economic rehabilitation or provide a source of foreign
exchange for Japan or are otherwise in furtherance of occupa-
tion objectives.

Any acquisitions of business property from Japanese na-
tionals should be permitted under adequate supervision and
only if the Japanese Government certified that the acquisition
was not made under conditions of fraud, duress or undue
influence attributable in any way to the occupation. Conver-
sion of yen return on investment into foreign currencies would,
under existing circumstances, be permitted only under special
SCAP license, but it is not proposed that such permission be
granted for the time being.

Your Committee recommends that the Department of the
Army and SCAP approve proposals of this type.

Various obstacles to foreign private investment remain which
must be removed before any substantial flow of such invest-
ment can be anticipated. The absence of a peace treaty is one
of the most difficult of these. Prior to the completion of a

Appendices 233

treaty or thereupon if the Japanese Government desires to
attract large scale foreign private investment, its laws and
policies should, in our judgment, provide:

(1) Protection of foreign investments from confisca-
tion and discriminatory taxation.

(2) Reasonable freedom of export of dividends and
profits.

(3) A tax structure which would permit the earning
and payment of reasonable profits.

(4) Permission to foreign nationals to control enter-
prises proportionately to their investments.

While the United States Government is supplying with its
funds the necessary food and other imports, it is obviously too
early to consider granting permission to export foreign ex-
change.

As a practical matter, the first important inflow of foreign
capital may well be for factoring purposes under which im-
ported raw materials and inventories would be financed. Capi-
tal of this type has contributed most importantly to building
up of new industries in the United States and elsewhere. If
investment funds used for factoring earn a satisfactory return,
that fact would serve to acquaint investors with the potentiali-
ties of the Japanese economy and encourage the making of
funds available in increasing volume and later lead to invest-
ment and equity financing.

BUDGET AND FOREIGN EXCHANGE POLICY

The Japanese Government has failed to balance its budget
since the fiscal year 1930-31. The more serious excess of expend-
itures over revenues began to appear in the fiscal year 1937-38
and reached a peak in the fiscal year i945~4 6 hen expendi-
tures approximated six and one-half times revenues.

The unbalanced state of the Japanese budget is an integral
part of the inflationary processes which dominate the economy
today. The origin of the inflation goes back to wartime excesses
and distortions. By .the summer of 1945 prices had risen to
about fifteen times prewar levels. The economic collapse of
Japan immediately following the surrender powerfully stimu-
lated this inflation. When the American forces arrived in

j>34 JapanEnemy or Ally?

September 1945, the economy was highly disorganized. Produc-
tion was almost at a standstill, the distribution process had
broken down and governmental machinery, including the tax
collection organization, was disrupted. The task of restoring
order in all these fields devolved upon the occupation forces,
but it was some little time before the necessary measures began
to have some effect. Thus, inflationary pressure continued to
grow in strength and by February 1948, prices were more than
seven times the September, 1945, levels.

As a consequence of this immense rise in prices and the
growth of government outlay (partly for extraordinary ter-
mination of the war purposes) the budget deficit has been
great. It has been met by the issuance of currency, which has
in turn carried the inflation forward.

SCAP has been fully aware of the desirability and necessity
of achieving a balanced budget. Five principal factors have
interfered with the achievement of this objective.

(1) The number of personnel employed in national
and local government enterprises, at continu-
ously mounting money wages, has approximately
doubled since 1945. Reemployment of former
employees released from the armed forces and
employment of repatriates from the colonial pos-
sessions account for much of this increase.

(2) Increasing subsidies have been paid to agriculture
and industry, directly and indirectly, for the pur-
pose of holding down prices and the cost of living
and assuring the masses of poor Japanese of
minimum essentials. Similarly, the services of
government enterprises, such as transportation
and conununications, are rendered at prices
which fail to provide sufficient income to meet
expenses. This also is a subsidy but in different
form.

(3) Taxes have not been satisfactorily collected be-
cause of an inefficient and antagonistic tax col-
lecting agency and failure of the authorities to
force those who file income tax returns (as op-
posed to those wage-earners whose taxes are with-
held) to report their full incomes.

Appendices $35

(4) The usual lag exists in obtaining increased tax
revenues to meet rising costs accompanying the
inflationary spiral.

(5) Occupation costs have constituted a substantial
percentage of total governmental expenditures.

The Committee recommends that:

(1) Efforts should be continued to establish a bal-
anced budget at the earliest possible moment.

(2) The Japanese should be encouraged to take ad-
vantage of every opportunity rapidly to reduce
governmental expenditures.

(5) The occupation authorities should continue their
efforts to reduce occupation costs.

(4) Controlled prices should be adjusted, as expedi-
tiously as possible, to costs of production. Many
basic industries now operating with losses are
being supported by subsidies and government
loans. Continuation of such subsidies is justified .
only to the extent that they are essential during
this period of scarcity to keep living costs from
rising to a point which would cause further
inflation.

While, normally controls hamper recovery and
should be eliminated, the Committee recognizes
that the existing scarcities make their continua-
tion necessary for those few commodities basic to
the existence of the great majority of the Japa-
nese people. This applies particularly to the
allocations of scarce raw materials and the ration-
ing of food.

Cost of services rendered by most government
enterprises should be established on a basis which
will permit them to cover expenses.

So long as price controls are retained, wage
controls are essential.

(5) Military teams should continue vigorously to
insure that Japanese tax collecting forces main-
tain and augment collection of taxes. These
efforts recently have shown marked success.

(6) Greater effort by the Japanese should be made to

236 Japan Enemy or Ally?

reach the undisclosed income undoubtedly pres-
ent among those groups who file their own tax
returns and do not have their taxes withheld at
the source. Substantial profits made in black
market operations largely escape their fair share
of tax burden.

The Committee recognizes that the present foreign exchange
situation is unsatisfactory and that a definitive exchange rate
is badly needed. Judgment as to the appropriate solution is
difficult, not only because of its inherent nature, but also
because of the advisability of relating American foreign ex-
change policy in Japan to American policy in general. It is
understood that the United States Government and SCAP are
at present considering the questions involved.

The Committee, therefore, limits itself to recommending
generally that:

(1) Policy should be directed toward the establish-
ment of a definitive exchange rate as soon as
monetary and economic conditions become suffi-
ciently stable, which in the Committee's opinion
is not yet the case.

(2) Foreign trade, now carried on almost exclusively
by the Japanese Government, should be returned
to private channels as soon as feasible, recogniz-
ing that this cannot be fully accomplished until
an effective commercial exchange rate has been
established.

($) The present rate of fifty yen to the dollar, known
as the "military exchange rate," should be modi-
fied to reflect more nearly the relative purchasing
power of the yen, and its use should be extended
to buyers of yen for educational and missionary
purposes, for private and personal remittances,
for authorized yen expenditures of foreign enter-
prises doing business in Japan, and to new for-
eign capital which may desire to make authorized
investments in Japan. It is recognized that such
a modification in rate involves various important
governmental financial policies and that the posi-

Appendices

tion of the Washington authorities, including the
Treasury Department, is not known to the Com-
mittee.

CONCLUDING COMMENTS

The Committee is confident that Japan's economic difficul-
tiesgreat as they are at present are manageable; that Japan
can in due course find the ways and means to sustain its people
by peaceful pursuits at levels equivalent to those which pre-
vailed in the past; and that the Japanese people are capable
of making an orderly transition to a more democratic kind of
life and economy.

The task will be hard and the required effort and talent
great; Japanese self-help is demanded to work out their own
salvation. Continuation of support and guidance by the Ameri-
can occupying authorities is essential; willingness of other
countries in the Pacific area to permit Japan to resume trading
and shipping activities is hardly less so.

Our recommendations result mainly from our interest in
seeing a revival of economic activity which can contribute to
the revival of the Far Eastern area and provide the Japanese
people with a tolerable livelihood, workmen in Japan and
elsewhere with employment, business interests with fairly
earned profits while diminishing as rapidly as possible the
burdens that have fallen upon the United States.

The program of the Department of the Army, approved by
the Department of State, provides the key to increased produc-
tion by making available the initial imported raw materials
required to augment production quickly and to restore trade
relations. It is indispensable to reviving the economy so that
the burden on the American taxpayer for providing the bare
essentials to prevent "disease and unrest" may be decreased
at an early date and, eventually, eliminated.

We express our conviction that a recovering and hopeful
Japan will be more inclined to be a good neighbor and to
contribute its share to the general welfare of the world and
to the maintenance of peace.

Accordingly, the Committee recommends prompt enactment
by the Congress of pending bills carrying out this recovery
program.

APPENDIX III

U, S. STATEMENT ON JAPANESE INDUSTRIAL
DECONCENTRATION 1

Some months ago, my Government suspended its participa-
tion in discussions in the Far Eastern Commission of a United
States policy proposal which was then under active considera-
tion in the Commission. This proposal, designated as FEC 230,
presented an extremely detailed plan for the implementation
of a general policy which already had been stated in existing
directives to the Supreme Commander. That policy, which
called for the dissolution of certain Japanese combines and a
widening in the distribution of the income and ownership of
Japanese industry, was then and continues to be, in the view
of my Government, a fundamental objective of the Occupa-
tion.

The action of the United States in suspending consideration
of its proposal, however, has led to certain questions among
the members of this Commission and among the Japanese
people. The purpose of this statement is to clarify the position
of the United States with respect to FEC 230.

Since the very first weeks of the Occupation, the Supreme
Commander has devoted a considerable part of the time and
resources of his staff to the problem of reorganizing the finan-
cial and industrial institutions of Japan. This program which
has been based upon the Post Surrender Directive issued De-
cember 6, 1945 and on the Far Eastern Commission's own

i Presented by General Frank McCoy, United States Member, to the Far
Eastern Commission, Washington, December 9, 1948.

238

Appendices 239

Basic Post-Surrender Policy for Japan, was designed to make
possible the early development of democratic and peacefully-
inclined economic institutions in Japan. To bring about that
result, plans were immediately developed and put into effect
to dissolve the control of Japanese finances and industry which
rested in the hands of a few powerful Japanese families.

As a part of this program, the Supreme Commander directed
the Japanese Government to adopt various laws and to create
certain governmental bodies charged with the responsibility of
undertaking a major reorganization of the ownership and con-
trol of Japanese industry. In the brief span of three years sub-
stantial progress has been made by these bodies. The assets of
the fifty-six persons who comprised the heads of the ten major
zaibatsu families and the assets of the eighty-three holding
companies controlled by these persons have been acquired by
the Government and are in process of being sold to the Jap-
anese public. A much larger number of companies have been
compelled to divest themselves of holdings in and control over
smaller enterprises. Such control was exercised through inter-
corporate stockholdings, interlocking directorates and similar
devices. Contractual arrangements to which these Japanese
enterprises were parties which had the effect of placing the
control of production or trade in the hands of such enter-
prises have been declared void. The innumerable Control As-
sociations through which Japanese enterprises exercised their
collective authority are being liquidated. Action is being taken
and is well-advanced toward reorganization of former savings
banks, trust companies and governmental banking institutions,
making possible the emergence of a significant number of new
commercial banks, to compete with and supplement the few
large banking combines which formerly dominated Japanese
credit sources. Finally, some scores of Japanese companies
whose present state may constitute a threat to competitive en-
terprise are being scrutinized, one by one. Where necessary,
these combines will be subjected to such reorganization as may
be required to remove the existing threat

To insure that the dispersion of economic control which is
developing from these measures will not likely be reversed in
the years to come, substantial revisions have been effected in
the basic economic legislation of Japan. To begin with, an
Antitrust Law has been adopted and a Fair Trade Commission

240 Japan Enemy or Ally?

set up to enforce the Law. In general, the Law seeks to restrain
the development of new combines, excessively large or power-
ful, by outlawing agreements which restrain production or
trade, by placing limitations upon intercorporate stockhold-
ings, interlocking directorates, and similar devices for the con-
centration of corporate control, and by setting up procedures
and penalties for the enforcement of these provisions. Other
legislation now requires Japanese corporations to make con-
siderably more information available to their stockholders and
the public than heretofore has been the case and generally
requires the management of corporations to adhere to much
higher standards of public responsibility in the managements
of their enterprise.

Moreover, many existing laws which tended to centralize the
control of Japanese industry within a small group have been
abrogated outright. Others have been modified drastically. The
Fair Trade Commission and other Government agencies are
analyzing still other Japanese laws to eliminate provisions
which confer special privilege or tend to restrain or eliminate
competition. Various laws relating to the conduct of Japanese
banking have been placed under particularly careful scrutiny.
One of the principal objectives of the revision of Japanese
banking laws is to create a climate in which the undesirable
prewar concentration of Japanese credit in a few hands could
not recur.

In all this, the Japanese Government has demonstrated a
commendable ability to comprehend Allied objectives and has
cooperatively fulfilled its obligations. The Japanese Fair Trade
Commission has prosecuted a significant series of cases against
Japanese businessmen who were violating one provision or
another of the statutes which seek to prevent new concentra-
tions of Japanese industry. The Japanese Holding Company
Liquidation Commission has made a careful study of the
structure of the larger Japanese combines and, in close coopera-
tion with the Supreme Commander, is currently developing
plans for such reorganization of these combines as may be
needed.

As the occupation and the economic situation have devel-
oped, there has been a corresponding evolution in the decon-
centration program. For example, it has proved possible and
desirable to dissolve most of the wartime control associations.

Appendices 341

As new sources of credit have been created through the con-
version of other financial institutions to commercial banks, it
has been possible to reconsider the need for the actual dissolu-
tion, once believed necessary, of Japan's biggest banks which
under earlier circumstances had dominated the credit struc-
tures of Japan.

With the daily growth of indication that the Japanese pro-
pose to enforce their fair trade laws vigorously and effectively,
it has been possible to reconsider the standards to be used in
the dissolution of some of the combines still existing. These
changes in emphasis have been responsive to changing circum-
stances and have represented relatively minor alterations in
a program which basically remains unchanged. That program,
adhering to the broad purposes of the directive of the Far
Eastern Commission, seeks to achieve in Japan an economic
climate conducive to the development of a democratic society.
It seeks to prevent the resurgence of economic power in the
hands of a few who recognize no responsibility to the Japanese
people or the world at large.

When the United States suspended its participation in the
discussion of FEC 230 in the Far Eastern Commission, that
decision was based upon the growing realization that the guid-
ance for the Supreme Commander and the Japanese envisaged
therein had largely been overtaken by events. The major
points of procedure set out in that document already had been
implemented in Japan. Other details believed necessary to the
accomplishing of the major objectives either had been faith-
fully adopted or had become unnecessary or inappropriate.
Useful as the paper might have been at an earlier stage of the
Occupation, that usefulness no longer appeared to exist.

That the paper has become outmoded in so brief a period
is a singular tribute to SCAP and the Japanese Government.
Procedures which it was thought would take years to carry out
in many cases have been accomplished in a matter of months.
Major technical obstacles have been overcome and the demon-
strated determination of the Supreme Commander to carry
the program through has elicited a gratifying degree of coop-
eration from the Japanese themselves. Accordingly, upon a
careful re-survey of the deconcentration program now well
advanced in Japan, the United States now believes that, as a
practical matter, there is no need to lay down policies for the

242 JapanEnemy or Ally?

guidance of the Supreme Commander with respect to any re-
maining significant aspect of the program. Indeed, to do so in
the outmoded terms in which FEC 230 is cast might well do
more harm to the program than good. Hence, the United
States has withdrawn its support of FEC 230 as a proposal
upon which the Far Eastern Commission could act with benefit
to the Occupation.

This does not mean that the deconcentration program has
been completed. Considerable amounts of securities still re-
main in the hands of the Government and must be disposed of.
Ingenuity and vigor must be brought to this task. Existing
banking legislation will undoubtedly be elaborated and re-
fined in consonance with the objectives of this program. Those
remaining Japanese combines whose existence may constitute
a threat to competitive enterprise will, where necessary, be
reorganized as required to remove such threat. But these pro-
grams no longer call for the development of policy. They call
largely for a practical application of judgment, energy and
enterprise in implementing a program whose philosophy and
objectives are dearly understood by the Supreme Commander
and the Japanese Government, as they have already convinc-
ingly demonstrated.

INDEX

Ailied aims, changes since 1945, 3, 4;
U.S. Initial Post-Surrender Policy,
92, 96-7, 124, 147. 156; U.S. policy
in 1948, 99-106, 128-30, 165-6, 167-
88; U.S. Statement on Japanese
industrial deconcentration, text of,
Appendix III, 238-43

Allied Council for Japan, circum-
stances in which established, 19-
23; terms of reference, 20-1

Arms Disposal Case, 177

Ashida, Hitoshi, 66, 177

Atcheson, George, 3in v 32, 38-42

Australia, aims in Japan, 5-6, 91

Brines, Russell, 175

British Commonwealth Occupation

Force (B.C.OJF.), 9
Bureaucracy, 85-6, 110-11, 177
Byrnes, James F., 23, 44-5

Censorship, 17-19, 36

Central Liaison Office (Japanese), 14

Coal Mines Case, 177

Coal Problem, 77-9, 177

Communist Party (Japanese), posi-
tion of, 179; see also Elections

Constitution, 51-3, 108-9, 1 49'5S;
text of, Appendix I, 195-209

Demilitarization, 91-2, 177, 187-9
Demobilization, 93-6
Derevyanko, Kuzma, 23, 25-7, 33-5*
93,119-20,178

Ciet^The,
Draper, W. H., 169

Economic conditions and policies,
12-13^59-62, 93-6, 190-1, 168-9

Economic Power Deconcentration
Act, 173

Elections, 56-8, 73-4, 87

Emperor, The, 43-56, 146, 151-2

Far Eastern Commission, 20-1, 97-

100, 157-8

Fine, Sherwood, 61, 62
Food situation, 87-90
Foreign Office (Japanese), 14, 110-11

Germany, parallels with Japan, 6
GHQ, SCAP, 9, 14-19; Civil Service

Division, 170; Labor Division, 170;

National Resources Section, 176;

Public Relations Section, 17-19
Government employees, right to

strike of, 170-2

Handleman, Howard, 81
Hatoyama, Ichiro, 67-9
Hays, Frank E., 177
"Hidden government," 80-4
Hirano, Rikizo, 78
Hiratsuka, Tsunesiro, 70
Hoover, Blaine, 170-1

lijuma, Mauji, 127*1.

244 Index

Inukai, Ren, 70
Ishibashi, Tanzan, 60, 70, 72
Ishigure, Takeshige, 70
Iwata, Chuzo, 69

Johnston, Percy H. f 169
Johnston Report, 169; text of, Ap-
pendix II, 810-38

Rades, Charles L., 171
Kanamori, Tokujiro, 150-7
Katayama, Tetsu, 66, 133
Ratayama Government, 70-9
Rawai, Yoshinari, 70
Rillen, James ., 170
Ronoye, Fumimaro, 150

Labor Standards Law, 178
Land reform, 112-23, 1 75-fi
Liberals, 66-8

Liquidation Commission, 127, 174
Local government, 153-5
Lovett, Robert, 129

MacArthur, General Douglas, and
Allied Council for Japan, 22-5,
27-33; Australian attitude to-
wards, 22; and Big Business, 173-4;
and Constitution, 150; and eco-
nomic policy, 59-63, 131-3, 186;
and Emperor, 44; his three basic
convictions, 10-13; Japanese atti-
tude towards, 8, 17-18; and Rata-
yama Government, 73-5; and
press, 35-9; and the Purge, 163;
on third anniversary of surrender,
174; and trade unions, 156-61, 170,
172; and Yoshida Government,
63-5

Mason, Edward D., 182

Marshall Plan, 182-5

Marquat, W. F., 24, 26, 3111.

Matsumoto, Toji, 150

Military Government teams, 14, 84

Moscow Declaration, 20

Narahashi, Wataru, 70
Nasu, Shiroshi, 69

National Public Service Law, 172

H.N. -:1 - - , j

Oyabun-kobun system, 80-3

Pauley Commission, 98-100

Peace Settlement, 3-8, 110-11, 188-94

Potsdam Declaration, 3, 44-6, 48, 91,

96, 146-7, 161

Press and Radio (see also Censor-
ship), 35-9
Purge, 56, 161-6, 177

Reparations, 98-106
Repatriation, 94-6
Royall, Renneth C., 129-30, 167-8*
173

Schenck, H. G., i22n.

Showa Denko Case, 176

Strike, Clifford S., 99-100, 105, 168-9

Strike Report, 168-9

Tojo, Hideki, 107-10
Trade unions, 71, 72-3, 155-61, 171
Truman Doctrine, 7471., 107, 130-1,
182

ILS. Statement on Japanese indus-
trial deconcentration, text of, Ap-
pendix IH, 238-42

U.S.S.R., and Allied Council for
Japan, 19-21, 33-5; and Allied
policy, 178-80; and Peace Confer-
ence, 193-4; and repatriation of
Japanese, 95; US. attitude to-
wards, 10, 22-3

Wages (and Prices), 133-43
, War, Japanese attitude towards, 167- >
V, m

War Crimes, 48-9

Welsh, Edward C v 12871., 173

Whitney, Courtney, 18-19, *5' 8

Yoshida, Shigeru, 53, 58, 66, 72, 150-1
Yoshida Government, 58-72

Zaibatsu, 15-16, 123-30, 173-4
Zen, Reinosuke, 70