TOKYO

Trade Talks with Japan

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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