INTELLIGENCE HIGHLIGHTS -- WEEK OF 13 JANUARY - 19 JANUARY 1948

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01082A000100010037-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 12, 2016
• Document Release Date: June 20, 2001
• Sequence Number: 37
• Publication Date: January 19, 1948
• Content Type: PERRPT

25X6
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OFFICT3 OF REPORTSATD 3STIYVES, CIA
PAR EAST/PACIFIC B?AnTE
INTE,LLIergCE EIGELIGIITS ';i1r,EX OF 13 JANUARY-- 19 JAV4-1*,Y )Ci 4-2>
altilMAL ,
Southeast Asia League 22.....ala mid-February meeting,.
The Southeast Asia League? which vas formed in Bangkok last September
by "representatives"' of Siam, Vietnam,- Laos, Cambodia, Indonesia, 1Va1ays. '
and Burma, is reported as still planning to hold a mid-February !nesting
Bangkoko The League, an?Alnofficial associatiou? apparently'aima toward the
establishment of an offieial Southeast Asian Federation which would represent
the governments of the area, its original motivation seems to have oome
from the Free Thais and "free" Indochinese groups, but now that the Free
Thai-dominated government of Siam h6.4 been ousted, the Siamese members of the
League have dropped out and the Indochinese groups have assumed leadership.
If the present Siamese Government proves hostile it is likely that the
League Will moveto Rangoon where it NO already been invited.
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%ape JAPAN
Inflation in Japan. The progressiveln increasing issue of currency in
Japan is leading to fears of uncontrolled inflation. By 21 December 1947,
note issue had reached the staggering figure of 219,142,000,000 yen. This was
just about double the note issue at the beginning of the fiscal year on 31 March
1947$ and compares with approximately 12 billion yen in circulation in March 1946.
It is reported that a note issue of 300. billion yen is expected by April. 1948.
aith industrial production at only about 40 percent of the 1930-34 level
and shoWing little sips of substential improvement, the increasing currency
circulation is causing deep concern. This is particularly aggravated because
of a large part of the increase in circulation is passing into the hands of
the urban merchants, who are more likely to continue the notes in circulation,
instead of the farmers who would be more likely to hoard the notes thus keeping
them out of circulation.
Contributing to the inflation is the deficit financing of the government.
The general account of the budget is approximately in balance but this is a
misleading picture. Special accounts and prefectural balance are far in arrears.
Denands by the Reconstruction Finance Bank whose major purpose is the financing
for rehabilitation is also causing a substantial increase in currency*
Japan is undergoing a controlled inflation. Until the present time, this
inflation has been serious but not as yet catastrophic.' Although there has been
some weakening of faith in the currency, flight of currency to available goods
has not as yet become extraordinary. However, with prospects of increasing note
issue, the danger of currency collapse increases. Unfortunately, there appears
to be no imeediate outlook for substantial output of goods which can "soak up"
the currency. Unless the Government renders more effective its inflation controls
Japan faces an economic crisis.
Fifty-one new conmoners. One of the historic events of postwar Japan tack
place recently when 31 members of 11 Jsrare:se Imperial families became commoners,
thereby undoing another of the steps taken by Japan's empire builders. At the
tips of the Restoration (1868) the crown rested on the 16 year old Yeiji,
son of the Emperor and a commoner. Despite the common Imperial practice of
adoption and the keeping of concubines, there were no other members of the dynaatY
who could ascend to the throne in the case of :7eiji's death. Japan's empire
builders needed a strong dynasty, so in addition to promptly marrying off the
boy eeperor, eleven families were raised to inperial status. Nine of these families
were descended from r. Fushimi Funiiye whose vague claim to Imperial status was
based on descent from the 102nd Emperor, twenty-two generations earlier.
Japan's expansionists used these families to further their plans for
aggression. The daughter of the last Tokugawa Shoeun VAS married to a prince,
thus binding the Shogun and his followers to the throne. Ifter the Government
had suppressed the civil war launched in 1877 by the 8atsuma Clan in Kyushu and
its cohort, the King of the Faukyus, daughters of the head of the Clan and the
King were married to Princes. Nagako, granddaughter of the Kinn of the Yarukyus,
became airohito's Empress. After the annexation of Korea, the heir to the -throne
was brought to Japan and married to an Imperial Princess as a means of helping
absorb Korea into the Etpire.
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The Imperial "second string", who have led secluded lives as virtual
prisoners of the empire builders, are now thrust out to earn a livine, shorn
of their titles and 'lost of their wealth. Those with eilitary erperienCe are
subject to the same purge directives as other comeoners. ?embers of the group
have apparently had ambitions to replace' the Elder Statesmen and the Privy
Council* however,. it is not anticipated
that the new commorers will_becone powers behind the throne.
le()A1
011.110.11011110....
Sihenificance of new rtiehti st "National Counci 1". ecteryc . reeert s indicate
that rEq oo has abandomd his intrigue for a coalition vi th N:-Ortta Korean leaders
for the establisheent of a unified Korean Governeent and has ;ieined fo?-ces eelth
;bee eSyngean in the latter' s claror for the eerie elect; oe e see ere' e South
Korean Government. Ki7ils "trial?balloon" effort et a North?South "coalition"'
indicated that solid itiehtist eapeort for this 7neere would not be forthcoeine.
Hence, Kir Wes ahle to perceive that he would. not have sufficient strereth
to
oust the Northern Comeunists froe the future "coalition rev rreent. Kim then
parently decided to melee; his "Zaticeal Congrees" with Thee's. "',.ep re se h te1.1 ve
Assent-ay" in the formati On of the now "National Council". The prohable ale of
this new 1rht1st coalition is to cooperate with the 171.! Co eei setore in an etteee t
to induce the Co-emission te.1 held ihrnediate elections- in SoUth Korea alore in the
probable e,,ent of Soviet refusal to cooperate. Fehind this sueeort, however, is
the thinly?veiled threat to the US, that if ,Soviet :Oostanace: results in ere traeted
delay of a settlement on the part of the til?7, the "National Councii will conotitute
itself the, leeal eovemment of South '