740.00119 FEAC/8–547: Telegram
The Secretary of State to the Political Adviser in Japan (Atcheson)
305. FEC 25. Interim Import-Export Policies for Japan29 (FEC–032/24 which should now be at GHQ SCAP30). At Steering Committee July 22 UK member moved deletion of clause in paragraph 16 c “provided this would not prejudice the defraying of the costs of [Page 425] occupation and the maintenance of a minimum civilian standard of living, in accordance with the principles of FEC–219/7.31” Motion carried by 8 to 1 (US opposed) and amended paper sent to Commission. Following discussion during next two days US Government consented to deletion provided US position made clear to effect “first charge” principle in paragraph 4 of Basic Post-Surrender Policy32 should apply to stocks of precious metals and stones. Paper with deletion therefore approved by Commission on July 24 and General McCoy made statement for record that understanding of US Government was that disposition as reparations of stocks of gold, silver, etc. is covered by provisions of controlling document, Basic Post-Surrender Policy, as follows:
“The reparations shall be in such a form as would not endanger the fulfillment of the program of demilitarization of Japan and would not prejudice the defraying of the cost of the occupation and the maintenance of a minimum civilian standard of living.”
In view of US statement, UK member then stated that understanding his government was that paragraph 16 c as amended would provide for ultimate disposition of stocks of gold as reparations and that while being preserved for this ultimate disposition they would not be available for transfer to trading account. Later he amplified this by giving as his understanding that 16 c provided that stocks of gold or equivalent in acceptable currency would be preserved for ultimate disposition as reparations and would not be dissipated in trading operations. In private talks with UK member it developed that British fear that fund established on basis of stocks of gold would gradually be dissipated by unprofitable trading transactions, leaving little or nothing for eventual disposition as reparations. It appears, therefore, that without bringing up question of defraying of costs of occupation, UK took this method of serving notice that they expect that fund will be used only for sound transactions which can be expected to return to fund amount equivalent to that taken out, thereby preserving value of fund.
In view of fact that FEC decision makes available to SCAP badly needed revolving fund for revival of Japanese economy and in view of fact that it probably will not be necessary in any event to utilize Japanese gold stocks for defrayment of occupation costs until end of 1948, State and War Departments with concurrence of General McCoy agreed that it would be inadvisable at present time to endeavor to reach meeting of minds with UK in regard to ultimate disposition of gold stocks or their equivalent. In meantime SCAP will be advised [Page 426] not to utilize gold stocks to defray costs of occupation pending receipt of further instructions.
Temporary Retention of Electric Steel Furnaces. FEC July 24 approved policy33 of retaining 300,000 tons additional electric steel furnace capacity with integrated rolling mills until June 30, 1948.