Foreign Relations of the United States, 1977–1980, Volume III, Foreign Economic Policy

212. Memorandum of Conversation¹

Washington, May 3, 1979, 8 a.m.

Breakfast with Prime Minister Ohira

PARTICIPANTS

• GOJ:
• Prime Minister Masayoshi Ohira
• Foreign Minister Sunao Sunoda
• Ambassador Fumihiko Togo
• Deputy Chief Cabinet Secretary Koichi Kato
• Government Representative for External Economic Affairs Takeshi Yasukawa
• Deputy Vice Minister for Foreign Affairs Masuo Takashima
• Deputy Vice Minister (MITI) Toshikazu Hashimoto
• Deputy Vice Minister for Finance Takehiro Sagami
• Director General, Economic Affairs Bureau, Agriculture Ministry Yoshio Imamura
• Director General, Economic Affairs Bureau, Foreign Affairs Reishi Teshima
• Deputy Director General, Coordination Bureau, Economic Planning Agency Seichiro Tanaka
• Executive Assistant to the Prime Minister, Yasuyoshi Sato
• Executive Assistant to the Foreign Minister, Yukio Sato
• USG:
• Secretary Blumenthal
• Chairman, Board of Governors, Federal Reserve System, G. William Miller
• Secretary of Agriculture Bob Bergland
• Secretary of Commerce Juanita Kreps
• Secretary of Energy James Schlesinger
• Special Representative for Trade Negotiations Robert Strauss
• Ambassador Mansfield
• Under Secretary of State Richard Cooper
• Under Secretary Solomon
• Ambassador Owen
• Notetakers:
• Richard W. Fisher
• Deputy Assistant Secretary of State Erland Heginbotham
• NSC Staff Member Jim Cochrane

Prime Minister Ohira

Good morning. Let me say just a few words to start. I feel indeed honored that all of you could attend this breakfast. First, I am very happy to be able to report to you that I had a truly friendly, informal meeting with President Carter.² Thanks to the truly personal effort of the President it was a success.

Through the meeting with President Carter, we were able to reach a meeting of minds as to how best to manage U.S.–Japan relations. This I find personally gratifying, and gratifying to the Japanese people. It is my firm determination to do my utmost to work toward improved relations. I ask for your understanding of this effort. We have some pending issues remaining. But a direction and framework has been achieved for solving these; we would like to solidify this direction and framework so that we can pave the way for improved relations.

I look forward to taking advantage of so many influential economic leaders, to hear very candid and frank advice as to what Japan should do, etc. We have with us some representatives of our more colorful Ministries—you may have heard of the conservative nature of the Finance Ministry, the notoriety of the MITI, the obstinacy of the Foreign Ministry. (laughter and applause)

Secretary Blumenthal

We all appreciate the opportunity to exchange with you views on the economic side of the relationship, now and in the future. With your permission, I would like to provide a brief overview and then call on my colleagues, particularly Ambassador Strauss, Ambassador Owen and Mr. Cooper.

We tend to think of the economic relations and problems between us in terms of immediate short-term problems and longer-term problems. The shorter-term problems must, of course, be solved between us in order to assure a stable relationship. We are encouraged that your discussions with President Carter will help set in motion a framework for agreement.

On the immediate problems, we have the issue of the MTN. Ambassador Strauss will no doubt deal with this issue in his remarks. Secondly, there is the problem of the need for continued progress toward Japan’s eliminating its large current account surplus, not only to assist international monetary stability but also to demonstrate to the E.C. as well as to us, the progress made by Japan toward playing a full role in the world economy and world markets.

On the current account, we are gratified by the progress that has been made. But we note:

1) that the progress has been assisted by emergency imports. We look for a further reduction of the current account without this kind of short-term measure;

2) the rapid decline in the value of the yen relative to the dollar. The progress we have made to improve the international financial situation might be threatened by too rapid a depreciation of the yen. And the progress made on the current account might be put at risk.

While we, of course, do not wish to peg or manage the yen/dollar rate, we do collaborate with the Japanese authorities and we do hope that with your encouragement, the current situation will not place us in a difficult posture next year.

The other remaining issues are:

a) the Summit, and in that context, energy matters. Mr. Owen will comment on this.

b) providing assistance to the developing countries. Mr. Cooper will elaborate.

In this area, I was interested to listen to your remarks to the President yesterday that Japan is assuming a heightened role in the world.³ We hope that you will take an increasing share of the World Bank effort, and of other programs such as IDA. We hope that Japan will be able to take at least 15% of the IDA VI replenishment.

These matters are the bridges to the longer term; if we succeed here, we can better assume longer term success. The opportunity to review progress for structural changes in your country and longer run changes in the U.S. at the Sub-Cabinet level, as well as in the “Wise Men’s Group”,⁴ is a welcome one.

We think that the longer term problems include:

1) providing for continued stability in the current account situation;

2) the longer term restructuring of the Japanese economy;

3) playing a greater role in the providing of assistance to the developing countries.

That is the best way to counter protectionist tendencies in our two countries as well as elsewhere. We feel that progress on these fronts is necessary to counter rising protectionism and prevent the undoing of the progress that has been made between us and all nations.

Ambassador Strauss

I will be brief and candid. In this protectionist climate there has been one strong, clear force that has enabled us to resist strong protectionist action. And that force has been President Carter.

His dedication and determination that U.S.–Japan economic relations will continue to succeed has caused President Carter many political scars, because the American people feel that the Administration has not been responsive enough. This is the climate we face today.

In your distinguished career you have been many things, including a politician. So you understand what I mean. The President has come under attack because of his insistence to counter protectionism in the Congress and across the country.

This is why I have told Ambassador Togo and Minister Ushiba that the time for negotiation has passed. We have now a common problem which we must solve together.

We have jointly made tremendous progress in working together in the MTN. We have a few items remaining.⁵ But the greatest disservice I could do to President Carter and to you and to the people of Japan is to let you leave here without conveying the importance of solving these remaining items. If we can deal with the procurement issue and the issue of reciprocity, we will succeed in moving forward dramatically.

It is my personal judgment that we can conclude these items by the Summit. If we fail, the press will escalate the issue in the following few weeks, and I feel that we will be faced with protectionist legislation shortly after the Summit on a broad as well as a product-by-product basis.

Within the past twenty-four hours, Ambassador Owen and I have reviewed this with the President and he is in accord with our views. We have so much to gain. And so much to lose.

Ambassador Owen

Mr. Prime Minister, I would like to say a word of appreciation for Mr. Miyazaki⁶ who helped us draft the communique, as well as Mr. Owada who has been of great assistance in our progress on the procurement issue.

I turn now to the Summit. First, I’ll deal with energy. The recent energy pre-Summit group dealt with two issues:

1) whether the Summit countries could go beyond the IEA pledges and seek further restraint beyond 1980;

2) increase production of alternative forms of energy. We discussed increased cooperation in research and development. Second, we discussed a proposal of Mr. Solomon’s to create an international corporation to finance efforts beyond research;

3) to create a Coal Advisory Board which would advise governments in efforts to develop a world coal system.

On macro-economic policy. While you were meeting with the President, a group chaired by Charlie Schultze was meeting in London.⁷ They are focusing their efforts on:

1) short term policies, particularly growth and inflation. There the focus is on inflation in the U.S. and growth in Germany and Japan.

2) deepseated structural problems such as investment problems in the U.S. and productivity in all developed countries.

The third and final subject is North/South relations.

1) increased cooperation among Summit nations and developing nations in research and development for economic progress;

2) to help LDC’s develop alternative energy sources

3) in regard to food, we will seek:

a) to conclude successful negotiations for an international wheat reserve agreement supported by a concurrent buildup of national stocks;

b) emphasis on fulfilling obligations under the food aid convention;

c) use of IBRD consortium to expand R&D in world production;

d) attention to how we can expand the flow of development-financing resources to offset the increased reflow of repayments from earlier assistance.

In all three of these areas, energy, macro-economics and food, I think we will be able to come up with specific details of the kind you spoke with the President about yesterday.⁸

Under Secretary Cooper

I would like to start out by discussing the developing countries.

Two things:

1) we must keep our markets open;

2) we must keep up our flows of foreign aid.

Japanese foreign aid has increased dramatically in the past few years. Last year the GOJ made a commitment to double its foreign aid and is well on its way to doing that. America has also increased its aid, but not as dramatically. We all know the problems of increasing aid in a democratic society. This makes the Japanese effort all the more important.

The GOJ also made a commitment to untied aid. But we have yet to see the orders flowing to foreign countries from such action. We look forward to seeing indications that more GOJ aid money is being spent in Europe, the U.S. and other countries.

Secretary Blumenthal invited me to speak on other economic issues. Let me draw your attention to the issue of civil aviation. Fares across the Pacific are about the highest in the world. That works to the disadvantage of your citizens and ours. We recognize the problems you’ve had in opening Narita airport and in keeping it open.⁹ We can make a small step, however, if the GOJ will agree to fare decreases across the Pacific. In return we’re ready to improve routing of Japanese airlines coming into the U.S.

Prime Minister Ohira

I wish to thank the four speakers for the concise and constructive summary of the cross section of U.S.–Japan relations. We would like to study the record on how to best deal with these problems. There are two points to note:

1) The question of the issue Mr. Strauss has referred to. I agree that we have passed the point of negotiation. We must solve these problems. I will be going to the Congress today and I feel like a novice in yoga who has to sit on a mat of pointed needles! But, this will be a good chance for me and my party to experience this firsthand.

2) The question of the value of the yen as referred to by Secretary Blumenthal. Last year we lived through seemingly interminable uncertainty. We then achieved a period of relative calm. Now we are faced with a record weakening of the value of the yen. I feel that we are required to spend great effort in resolving this problem in coming months. This cannot be achieved without instilling confidence in the world economy. This should be addressed at the upcoming Summit. And again it is important for the monetary authorities to continue to cooperate. I am asking Secretary Blumenthal and the others here to help us cooperate.

1. Source: Carter Library, National Security Affairs, Staff Material, Special Projects File, Henry Owen, Box 23, Memcons: 5–11/79. Confidential. Prepared by Blumenthal’s Assistant Richard W. Fisher who signed on the last page. The meeting took place at Blair House. Ohira made an official visit to Washington April 30–May 4. On April 30, Strauss, Owen, Kreps, Solomon, Platt, Cooper, Weil, Mansfield, and other STR, Department of State, and NSC Staff officials met to discuss strategy for Ohira’s visit; a memorandum of conversation is in the Carter Library, National Security Affairs, Staff Material, Special Projects, Henry Owen, Box 22, Memcons: 1–4/79.
2. Memoranda of conversation of Carter’s May 2 morning and afternoon meetings with Ohira are in the Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 37, Memcons: President: 4–5/79. During their morning meeting, from 10:43 a.m. until 12:25 p.m., Carter and Ohira discussed U.S.-Japanese bilateral economic relations, among other topics; during their afternoon meeting, from 2:30 until 3:15 p.m., they discussed Carter’s forthcoming visit to Japan and the Tokyo G–7 Summit, among other issues. For the joint communiqué issued on May 2, see Public Papers of the Presidents of the United States: Jimmy Carter, 1979, Book I, pp. 763–768.
3. Apparently a reference to Ohira’s remarks to Carter during their meeting on the morning of May 2. See footnote 2 above.
4. In the May 2 joint communiqué, Carter and Ohira announced their decision to establish a Wise Men’s Group, composed of “distinguished persons drawn from private life” who would offer their “recommendations concerning actions that the group considers would help to maintain a healthy bilateral economic relationship between the United States and Japan.” See Public Papers of the Presidents of the United States: Jimmy Carter, 1979, Book I, p. 766.
5. In a May 2 memorandum to Blumenthal, Solomon noted that on May 1, the Japanese “rejected a U.S. proposal to reopen the stalled trade negotiations between Japan and the United States on the outstanding bilateral trade issues, especially government procurement,” describing the proposal as “essentially a ‘framework for agreement’, i.e. an agreement to principles to guide negotiation of the actual agreement.” Talks would continue, but the details of the U.S.-Japanese agreement would not be negotiated until after the Tokyo G–7 Summit. (Carter Library, Anthony Solomon Collection, 1977–1980, Chronological File, Box 6, 5/79)
6. Japanese Deputy Foreign Minister for Economic Affairs Hiromichi Miyazaki.
7. Telegram 116432 to Tokyo, Bonn, London, Ottawa, Rome, Paris, and Brussels, May 8, summarized the May 2–3 meeting in London, called “to prepare an economic overview paper for the Tokyo Summit.” (National Archives, RG 59, Central Foreign Policy File, D790169–1907)
8. Apparently a reference to Ohira’s remarks to Carter during their meeting on the afternoon of May 2. See footnote 2 above.
9. In May 1978, New Tokyo International Airport opened in Narita, Japan, some 37 miles outside of Tokyo. The airport was vigorously opposed by local and leftist groups. (Henry Scott-Stokes, “New Tokyo Airport Finally Opens With 13,000 Policemen on Hand,” The New York Times, May 20, 1978, p. 1)