470 Ball to Evatt

1. I had a long talk with MacArthur last night about his letter to Yoshida [2] insisting on early elections.

2. I said I was surprised at so much importance being attached to his action since I had assumed that elections would, in any case, be held not later than May and that was apparently the earliest date at which he felt it practicable to hold them.

MacArthur replied that he too had until the last few days assumed the elections in May, but has now discovered that Yoshida had made no plans for the elections. That was the first reason why he acted. The second reason was that MacArthur felt that if he, rather than Yoshida, took the decision that the elections must be held this would rob Yoshida of the advantages his Government might gain from itself selecting the date and issues of elections.

3. I told MacArthur that while I agreed that the elections should be held as early as possible I was anxious about what was going to happen between now and May. If the Yoshida Government remained in office without changing its policy this might produce something like disaster in March/April. I felt the important thing was not so much a change of Government but an immediate change of policy.

Yoshida was clearly unable and/or unwilling to replace his policy of a 'free economy' with a directed economy.

MacArthur replied that he agreed completely with my views. He felt that the Yoshida Government must go. He felt the Ishibashil [3] financial policy was disastrous. He had urged Yoshida to replace Ishibashi, who, in MacArthur's view is completely incompetent and wrong headed. But Yoshida had told MacArthur that he was compelled to retain Ishibashi 'as a symbol'.

I told MacArthur that I felt that the Ishibashi economic policy endangered the aims of occupation in the same degree as he would endanger it if he were pursuing a political policy of Fascism.

MacArthur again agreed.

MacArthur said he fully recognised the need for a directed economy here for immediate and direct controls of materials, prices, wages, etc. He had worked out such a plan. This was 'top secret' but he would send it to me today and be most grateful for my advice about it.

MacArthur went on to say that his biggest problem was to find a Japanese political leader who would carry out closely his plan. He knew the Yoshida Government would not do so. But he did not know where to find the leaders to replace them.

If he could not find alternative Japanese leaders he was forced [4] with the dreadful prospect of direct military government. But Washington would not give him the personnel or resources for such a task.

I formed the impression that MacArthur was deeply concerned about the present situation, and would perhaps be grateful to share responsibilities with the Allied Council, now that his difficulties have increased.

I hope to study his economic plan today.