Aide-memoire CANBERRA, 11 May 1949

[matter omitted]

It is of essential importance to every nation interested in the
attainment of economic and political stability in the Far East
that the stabilization program now being inaugurated in Japan
succeed and that a firm basis for Japanese economic self-support
be established. The peaceful attitudes and democratic institutions
which we have emphasize that the United States maintains fully and
categorically its support of the principle that Japan's war-making
capacity should be eliminated. All of Japan's specialized war-
making facilities were some time ago destroyed. The United States
Government believes that all other equipment used for war purposes
in the past should, if retained in Japan, be fully converted to
purposes of and utilized in Japan's peaceful economy. Where this
cannot be done, the United States Government believes such
equipment should be scrapped.

Its review of the Japanese reparations question leads the United
States Government to the following conclusions:

1. Japan in the best of circumstances faces the extremely
difficult task of maintaining a larger population than it has ever
possessed before on the meagre resources of the Japanese homeland
alone. Facing this task it has no resources surplus to its
peaceful needs.

2. Current deficits in Japan's economy are being borne by the
United States. Resources removed from Japan in present
circumstances are in the last analysis contributed by the United
States taxpayer. The United States Government would find it
impossible to defend before the American people and the Congress a
program of further reparations from a destitute Japanese economy
whose deficits are being made up by the United States.

3. Further reparations from Japan would jeopardize the success of
the Japanese stabilization program to which the Japanese people
and Government have been directed to bend all their efforts and on
which the success of our common occupation objectives and the
progressive reduction of the United States aid burden in Japan
depend.

4. Japan has already paid substantial reparations through the
expropriation of its former overseas assets and, in a smaller
degree, under the advance transfers program.

5. Japan's industrial war-making capacity can and should be
effectively eliminated through conversion to peaceful purposes or
scrapping of all equipment not already destroyed which was
previously used for war purposes.

In the light of these conclusions, the United States Government
has decided that it must rescind its interim directive of April 4,
1947, thereby bringing to an end the advance transfers program. It
has also decided to withdraw its proposal of November 6, 1947 on
Japanese reparations shares. Finally, the United States Government
must make known that it has no intention of taking further
unilateral action under its interim directive power to make
possible additional reparations removals from Japan.

[matter omitted]

The United States Government's support of the principle that
Japan's capacity to make war should not be permitted to re-emerge
has already been emphasized. It is the considered view of the
United States that that objective does not require that Japan's
production for peaceful purposes be limited or that limitations be
imposed on levels of Japanese productive capacity in industries
devoted to peaceful purposes. This belief, coupled with the
evidence of Japan's present economic plight and the difficult
problems Japan will face in the future in attaining levels of
industrial production and foreign trade sufficient to support its
people even at minimum levels, render it clearly advisable in the
view of the United States that Japan be permitted to develop its
peaceful industries without limitation. The problem facing us is
not one of the Imitation of Japan's peaceful industries but of
reviving these industries to provide for the people's barest
wants.

The United States Government earnestly hopes that the Australian
Government will appreciate the considerations which have caused
the United States Government to adopt the position herein
described on the Japanese reparations and level of industry
questions and will be able to concur in proposals which the United
States plans shortly to submit to the Far Eastern Commission for
revision or amendment to existing and pending far eastern policy
papers to bring these papers into conformity with the position
here set forth.

A statement on the above lines will be made to the Far Eastern
Commission by the United States Representative at an early date,
possibly the regular meeting of the Commission on May 12. [1]