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May 29, 1952
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Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 COPY NO. -r SECURITY INFORMATION titiAMO COPT RECORD gat NATIONAL INTELLIGENCE ESTIMATE .ECORD Can THE PROBABLE FUTURE ORIENTATION OF JAPAN NI E-52 Published 29 May 1952 DOM M ENT NO. ./ NO CHANGE N CLASS. L X DECLASSIFIED CLASS. CHANGED TO: TS S C NEXT REVIEW DATE: ALITH: R 70- DATE REVIEWER; CENTRAL INTELLIGENCE AGENCY Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 WARNING This document contains information affecting the na- tional defense of the United States within the meaning of the Espionage Act, 50 U.S.C., 31 and 32, as amended. Its transmission or the revelation of its contents in any manner to an unauthorized person is prohibited by law. A Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 teeMSEggfir DISSEMINATION NOTICE 1. This copy of this publication is for the information and use of the recipient designated on the front cover and of individuals under the jurisdiction of the recipient's office who require the information for the performance of their official duties. Fur- ther dissemination elsewhere in the department to other offices which require the in- formation for the performance of official duties may be authorized by the following: a. Special Assistant to the Secretary of State for Intelligence, for the Depart- ment of State b. Assistant Chief of Staff, G-2, for the Department of the Army c. Director of Naval Intelligence, for the Department of the Navy d. Director of Intelligence, USAF, for the Department of the Air Force e. Assistant to the Director, FBI, for the Federal Bureau of Investigation f. Director of Intelligence, AEC, for the Atomic Energy Commission ? g. Deputy Director for Intelligence, Joint Staff, for the Joint Staff h. Assistant Director for Collection and Dissemination,-CIA, for any other De- partment or Agency 2. This copy may be either retained or destroyed by burning in accordance with applicable security regulations, or returned to the Central Intelligence Agency by ar- rangement with the Office of Collection and Dissemination, CIA. DISTRIBUTION: Office of the President National Security Council National Security Resources Board Department of State Office of Secretary of Defense Department of the Army Department of the Navy Department of the Air Force Atomic Energy Commission Joint Chiefs of Staff Federal Bureau of Investigation Research and Development Board Munitions Board ligmsw Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 eiotemer NATIONAL INTELLIGENCE ESTIMATE THE PROBABLE FUTURE ORIENTATION OF JAPAN NIE-52 The intelligence organizations of the Departments of State, the Army, the Navy, the Air Force, and the Joint Staff participated with the Central Intelligence Agency in the preparation of this estimate. All members of the Intelli- gence Advisory Committee concurred in this estimate on 22 May 1952. Declassified and and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 SaiaglIffir THE PROBABLE FUTURE ORIENTATION OF JAPAN THE PROBLEM To analyze the various factors ? both internal and external ? which are likely to determine Japan's future foreign policy; and to assess in the light of these factors Japan's probable future orientation in the East-West conflict. CONCLUSIONS 1. We believe that Japan will seek to achieve its national objectives by a pro- Western orientation, at least during the next two or three years. 2.- We believe that the essential conserva- tism of Japanese society, the strongly entrenched position of conservative polit- ical parties and groups, and the weak- nesses of major leftist forces, make the continuation of conservative control of Japan almost certain, at least through 1954. If, however, the Liberal Party should lose its present majority position, divisions within the conservatives might weaken the Japanese Government. 3. We believe that the basic national objectives of Japan will be to rebuild its national strength and to enhance its posi- tion in the Far East. Because of Japan's economic and military deficiencies, and because Japanese conservatives share a broad identity of interest with the US in containing Communist expansion, prog- ress toward the realization of these objec- tives will almost certainly require close cooperation with the US, at least during the next two or three years. Even during this period, however, Japan is likely to seek to develop at least economic rela- tions with Communist China and the USSR. 4. The degree of Japanese cooperation with the US, in both the short and long term, will depend largely on the extent to which the Western alignment not only meets Japan's needs for security and foreign trade opportunities but also satis- fies its expectations for economic and military assistance and for treatment as a sovereign equal. Adverse developments in any of these respects would in- crease existing pressures for independent courses of action in Asia and make Japan more vulnerable to Communist tactics of conciliation and threat. 5. As the most probable long-term pros- pect, we believe that as Japan grows in strength and bargaining power, it will seek to increase its freedom of action in Asia within the framework of a generally pro-Western orientation. Japan will probably attempt to readjust its relations with the US, seeking to eliminate the basing of US troops in Japan and seeking to attain increased influence and leader- ship in Asian affairs of joint US-Japanese concern. Japan will inevitably attempt to expand economic and political rela- tam& 1 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 riaToft1LP1" tions with Communist China, and proba- bly with the USSR, to the extent possible without jeopardizing its domestic stabil- ity and will seek at the same time to avoid a basic alteration in its pro-Western foreign policy. 6. If, however, Japan is unable to solve its economic problems, it will be particu- larly vulnerable to economic and diplo- matic pressures from the Soviet Bloc and will be tempted to seize opportunities for 2 closer economic and political relations with the Bloc. Even in this situation a conservative government would seek to avoid courses of action that would be likely to lead to Japan's absorption into the Bloc. Serious internal pressure in Japan would be more likely to result, at least initially, in a trend toward tradi- tional authoritarian measures rather than in the rise of a pro-Communist regime. DISCUSSION FACTORS AFFECTING JAPAN'S FOREIGN POLICIES Geographic Position 7. Japan's position as a small island country close to the Asian mainland has made Japan susceptible to political and cultural influences from the mainland. In modern times the en- croachment of strong maritime powers in the western Pacific and the activities of strong powers on the northeast Asian mainland in- creased the concern of the Japanese over their national security. The postwar increase in the power of Communist China and the USSR has exposed Japan to Communist influence and pressures, and concern for Japan's secu- rity has received new emphasis. On the other hand, the Japanese have been and are con- scious of the strategic importance of their geo- graphical position astride the approaches to Korea, North China, and Siberia. Economic Factors 8. Japan's foreign policies in the post-treaty period will be strongly influenced by economic pressures. As in the past, there will be a critical need for imported food and raw mate- rials to support its expanding population and industrial production and to provide for the development, and support of armed forces. 1 The historical background for this section is presented in Appendix A. 9. Japan's 1940 population of 73 million in- creased to 85 million by 1951 and, according to present estimates, will reach 90 million by 1955 and 111 million by 1975. Domestic food production, which cannot be increased signifi- cantly, provides only 85 percent of current consumption; by 1955, as a result of the popu- lation growth, Japan will produce less than 80 percent of its food at present per capita con- sumption levels. If present strong social and political pressures for increased levels of per capita food consumption are to be satisfied, even larger food imports will be required. (See Appendix B.) 10. In 1951 Japanese industry in most fields surpassed 1932-1936 levels of production by an. average of 35 percent. Japan's present production level is estimated to be about 60 percent of capacity. (See Appendix C.) The achievement of the levels of production pro- jected for 1953 ? expanding production to about 70-75 percent of existing plant capacity ? would make possible the attainment of a standard of living at least comparable to the prewar period (present living standards are estimated to be at 80-85 percent of prewar levels) while supporting moderate rearma- ment and capital investment programs. The Japanese also have the technological and fi- nancial capadity to improve and add to their existingindustrial plant. Manpower would be adequate to meet the requirements of an ex- panded industrial activity, and further ration- Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 (vaat. alization in the use of industrial labor would increase both the pool of available manpower and the efficiency of industry. However, Ja- pan's industrial production depends on sub- stantial imports of most basic raw materials, particularly coking coal, iron ore, raw cotton, and crude petroleum. (See Appendix D.) 11. The restoration of Japanese levels of con- sumption to prewar levels by 1953 and the support of moderate rearmament and capital investment programs would require a level of imports in the order of those presented below: Selected Japanese Imports Net Imports Projected Import Requirements (Thousands of Metric Tons) 1951 2 1953 Rice (brown rice equivalent) 896 1,043 Wheat 1,677 2,450 Sugar 596 640 Raw Cotton 399 527 Coal 1,778 3,125 Iron Ore 3,500 5,310 Crude Petroleum 18,000 26,000 (1,000 barrels) 2 partially estimated. 12. Japan's ability to obtain imports of this order will depend in part on production levels in source areas and in part on the extent to which political considerations permit Japan access to these sources. The most important factor, however, will be the extent to which Japan is able to earn sufficient foreign ex- change from exports and other sources to pay for required.imports. 13. Over the next two years at least, with large US procurement and military expendi- tures in Japan, Japan's prospects are favor- able for obtaining the necessary foreign ex- change. Japan's commercial exports have ap- proximately doubled in value each year since 1946; current trends indicate that these ex- ports will continue to expand, though at a re- duced rate. (See Appendix E.) The rapid re- building of the Japanese overseas merchant marine will have a substantial favorable ef- fect on the foreign payments balance. It is estimated that in 1953 Japanese commercial exports and net earnings from shipping will 3 bring in about 2 billion US dollars worth of foreign exchange out of a total of 2.6 billion needed to pay for imports. Expenditures in Japan by Allied Forces and US and UN pro- curement agencies, plus relatively small re- ceipts from tourists and foreign business in- vestors, will contribute nearly 0.9 billion, largely in US dollars. This will cover the esti- mated deficit on trade and shipping account and leave Japan with a net favorable balance of about 0.3 billion, a small part of which would represent a net increase in Japanese holdings of US dollars. (See Appendix F.) 14. Japan's rapid postwar economic recovery and satisfactory short-run economic outlook, however, are based on abnormally high dollar earnings incident to the occupation, the- Ko- rean war, and present US security arrange- ments. When the level of such earnings falls, Japan's continued economic viability will de- pend on finding a market for still larger ex- ports and on getting more imports from non-dollar sources. Considerable progress in this direction has been made. Only 33 percent of Japan's imports came from the US in 1951 as compared with 98 percent in 1946. Non-Communist Asia provided 31 percent of Japanese imports in 1951. 15. The Japanese postwar economic recovery has taken place without significant trade with the Communist Bloc. Largely as a result of Japanese investment and emigration, Japa- nese trade with mainland China (including Manchuria) was at a high level during the prewar and war years. In 1941, mainland China (including Manchuria) supplied about 17 percent of Japan's total imports, and took about 27 percent of Japan's total exports. Mainland China supplied more than half of Japan's total coal imports, about a quarter of iron ore imports, and three-quarters of its soy- bean imports by quantity. Japanese trade with the Soviet Union and its East European Satellites has never been important. How- ever, South Sakhalin, a part of the USSR since 1945, was an important supplier of coal and wood pulp to Japan before 1945. 16. There is a tendency among the Japanese to overestimate the benefit that Japan under present circumstances would derive from SIOSMINSIW Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 trade with the Communist Bloc. Mainland China can provide little or none of such vital Japanese imports as sugar, rice, raw cotton, crude petroleum, bauxite, manganese, and copper. Moreover, since the Japanese have lost their investment position in the area and political considerations now exert an impor- tant influence on this trade, Communist China is not likely, at least for some years, to provide Japan with either markets or raw materials on a scale comparable to that of the prewar period. 17. Access to Communist China's markets and cheaper raw materials (particularly coal and iron ore) and access to coal and fishing grounds in the Soviet Far East would some- what improve the competitive position of Japanese exports, ease Japan's balance of pay- ments problems, and might improve prospects for expanded industrial activity. But such trade is not essential th Japan's continued economic growth so long as Japan can con- tinue to develop large-scale trade with dollar and sterling areas, and particularly with Southeast Asia. 18. There are a number of serious obstacles to a further significant expansion of Japan's trade with non-Communist Asia such as the political instability of the area, the inconvert- ibility of sterling, and the present limited capacity of the area to produce the resources Japan requires. Over a period of time, these difficulties can be overcome, particularly if economic development programs in the coun- tries concerned are undertaken on a large scale. But over the next few years, the pros- pects for a significant expansion of Japan's trade with non-Communist Asia are not bright. 19. Therefore, the Japanese Government will be subjected to strong internal pressures to de- velop economic relations with the Communist Bloc, particularly trade with Communist China. Serious popular resentment is likely to develop in Japan if, following an armistice in Korea and in the absence of other Commu- nist attacks, Japan's Western orientation should preclude efforts to develop economic relations with the Communist Bloc. Resent- 4 ment would be particularly strong if Japan, in response to US pressures, severely limited trade with Communist China and then found that individual Western Powers adopted less restrictive policies with regard to their own trade with this area. In addition, any of the following possible developments would greatly increase the pressure upon the Japanese to trade with the Communist Bloc: a. Communist acquisition of Southeast Asia, which is assuming increasing impor- tance to Japan as a replacement for China in its external trade. b. A general economic depression prevent- ing the expansion of Japanese exports to the non-Communist world. c. A return to the restrictive trade policies of the 1930's on the part of non-Communist countries, notably the US and UK. To offset these pressures, the Japanese Gov- ernment will almost certainly seek sufficient US aid so that economic expansion can be con- tinued without becoming dependent on Com- munist China for a significant portion of Ja- pan's foreign trade. Current Trends in the Distribution of Political Power 20. Background. Prior to V-J Day, political control in Japan was concentrated in three major groups ? the military, the civilian bureaucracy, and the financial and industrial interests. The role of parliament, political parties, and organized labor was generally slight, and the real struggle for power took place within and among the three major power groups. The military occupied a posi- tion of particular strength because of its tra- ditional prestige and its direct access to the Emperor, the titular source of all authority, and focus of national loyalty. 21. Occupation Policies. The occupation au- thorities, in compliance with the initial US post-surrender directive, attempted to estab- lish the foundation for responsible, constitu- tional government and to broaden the base of political power and diffuse its exercise. Gov- ernmental changes initiated to this end in- cluded: (1) the granting of universal, adult Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 (aAs faait or suffrage and the provision of constitutional guarantees of basic rights of political activity and organization; (2) the establishment of a parliamentary system insuring cabinet re- sponsibility to the Diet; (3) the reduction of the Emperor's legal position to that of "sym- bol of the State and of unity of the people"; and (4) the encouragement of local auton- omy, particularly with regard to local govern- ment, the police power, education, and taxa- tion. Other measures, such as the barring of wartime leaders from public office, the en- couragement of popularly supported political parties, the fostering of trade unionism, the land reform program, and the program to break up the great, family-controlled financial monopolies (Zaibatsu) , aimed to develop new leadership and interest groups and to broaden popular participation in Japan's political life. 22. Present and Probable Future Political In- fluence of Major Japanese Institutions and Groups a. The Emperor. A deep and abiding rever- ence for the Emperor institution as the symbol of stability in national life and of an ordered social structure continues to exist. In the past, the makers of modern Japan relied upon the prestige of the Emperor institution in exe- cuting their programs. Proposals to eliminate the Imperial institution, advanced by Japa- nese Communists and some Japanese intel- lectuals, have met with little or no popular support. In the short run, it is unlikely that any change in the constitutionally powerless position of the Emperor will be effected. If the prestige of the Imperial institution grows, however, the importance of the throne as a symbol of national unity and moral authority may again enable special interest groups to use the institution in their efforts to attain power. b. The Military. One of the most signifi- cant postwar changes in domestic political re- lationships has been the destruction of the political power of the military. The military group was forced into the background, both by the stigma of defeat and by the terms of the occupation. Under the new Japanese consti- tution the military was deprived of its former power to overthrow a cabinet or block the for- 5 mation of a cabinet. The present political leadership, moreover, appears determined to maintain firm control over the military. Al- though the rearmament of Japan, together with actual or threatened hostilities in the Far East, would gradually enhance the power po- sition of the military class, this group will probably not attain its former supremacy ex- cept possibly under conditions of prolonged domestic or international stress. c. The Bureaucracy. The power of the bureaucracy has geen greatly circumscribed by the predominant position given the Diet in the new constitution and by the decentraliza- tion or elimination of some of the bureauc- racy's functions. On the other hand, the rela- tive power position of the bureaucracy was in- creased by the elimination of the military group and by the anti-Zaibatsu measures. Moreover, the occupation policy of working through Japanese governmental agencies whenever possible served to maintain the po- sition and influence of this group, many of whom have attained prominence within the Diet and political parties themselves. Finally, the traditional tendency of the Japanese peo- ple, both in and out of government, to rely, upon the trained bureaucracy as the reposii' tory of experience and skill in public admin- istration will tend to sustain or increase the political influence of the bureaucracy. d. Financial and Industrial Groups. At the outset, the occupation authorities in Japan, implementing US post-surrender policy, at- tempted to break up the family (Zaibatsu) financial and business monopolies. The heads of these monopolies were excluded from the business and public life of the country on the ground that they, in alliance with the mili- tary, had been responsible for Japanese ag- gression. Shortly after its initiation, the pol- icy of destroying monopolies was modified on the grounds that its complete execution would dangerously postpone the economic recovery of Japan. Subsequently, the severity of the purge of business executives was also moder- ated. It is almost certain that dominant groups in Japanese business will soon succeed in modifying or abolishing most of the anti- monopoly legislation and that the trend will Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 be to monopoly organization and close ties between government and business. Financial and business interests will also influence gov- ernment policy through their ties with the conservative political parties. e. Labor. Although unionization proceeded rapidly after V-J Day, labor's political influ- ence has been limited by a lack of cohesiveness and by factionalism in the labor movement, and in the left-wing political parties. Al- though organized labor will probably continue strikes and demonstrations, its political influ- ence will probably decline at least through 1954. f. Rural Society. The social stability and reliance on traditional patterns which char- acterize Japanese conservatism have histori- cally drawn strength from Japan's rural soci- ety. Moreover, the land reform program has strengthened rural conservatism and stability by removing a major source of unrest and broadening the base of private land owner- ship. g. Position of Political Parties. The placing of supreme executive and legislative power in the popularly elected Diet in postwar Japan has provided much greater opportunities for popular influence on national policy. How- ever, while party leaders have dominated Ja- pan's postwar politics, public opinion has had only limited influence on the political parties, in part because public opinion has been er- ratic. The parties continue to exhibit such prewar characteristics as factionalism, reli- ance on personal relationships, and neglect of grassroots organization. There are already indications of decreasing popular interest in party politics as the province of the relatively few. If these trends continue, the Diet will tend to revert to its prewar status as a politi- cal trading ground for dominant special groups. h. The Press. The press has become an in- dependent and articulate institution in the post-surrender period and will resist attempts of the government to institute pre-surrender control. So long as the press remains inde- pendent it will remain as a check on the arbi- trary exercise, of governmental power. 6 23. Present Political Situation. The current strength of the various Japanese political par- ties and factions in the Diet elected in 1949 is indicated below: Japanese Diet (As of 15 March 1952) Lower House: Upper House: Liberals 284 Liberals 82 Progressive Party 68 Ryokufukai 53 Right-Wing -Wing Socialists 30 ,Left Socialists 31 JCP 23 Right-Wing Left-Wing Socialists 30 Socialists 16 Democratic Club 17 Dai San Club 5 Progressive Party 14 Labor-Farmer 4 Dai Ichi Club 10 Farmers Labor-Farmer 5 Cooperative 3 Socialist Democrat 3 JCP Independents 3 Independents 2 Vacancies 27 Vacancies 3 466 250 a. Conservative Parties. Party names and party affiliations are constantly changing in Japan, but the dominant conservative party, the Liberals, has demonstrated a considerable degree of unity and party discipline. The Lib- erals now hold a safe majority in the Lower House. Although the Liberals have only a plurality in the Upper House, they are gener- ally supported by the Ryokufukai, the Demo- cratic Club, the Progressive Party, and the Dai Ichi Club, all of which are conservative fac- tions differing little in their basic principles from the Liberals. Conservative strength in the Diet, in the light of existing social and political trends, will probably be maintained and even increased in the national elections required by January 1953, although shifts in the relative strengths of conservative parties May necessitate the formation of coalition governments. Conservative party support is found among all classes in Japan but is par- ticularly strong in business and industrial groups, in the small towns and countryside, in the bureaucracy, and among former military personnel. Many present-day conservative leaders are the "liberals" of prewar Japan and are strong supporters of parliamentary gov- ernment. In times of crisis, however, Japan's conservatives would not hesitate to adopt au- thoritarian political and economic measures. senziaro?T. Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 a Declassified and Approved For Release 2012/09/20 :.CIA-RDP79R01012A001600010002-3 SECRET b. Other Non-Communist Parties. The Jap- anese Socialists, the strongest group between the conservatives and the Communists, cur- rently are split and disorganized over the is- sues of the peace settlement, rearmament, and Japan's orientation in the East-West struggle. Their support is drawn from organized labor, white-collar workers, students, intellectuals, and, to a lesser extent, small and medium businessmen. Because of their opposition to proposed modifications of occupation-spon- sored economic and political reforms, the So- cialists have been supported by these groups, largely urban, whose stake in the mainte- nance of such reforms is largest. In addition, many of their supporters among students and intellectuals, while not in sympathy with So- viet Communism, are impressed by the theo- retical aspects of Marxism as an explanation of Japan's history and as a key to its future development. In general, however, support for the Socialist movement has been preju- diced rather than strengthened by the fre- quently doctrinaire approach to current prob- lems particularly as advanced by left-wing Socialist leaders. Internal factionalism is likely to continue among the Socialists. More- over, the development of strong and effective middle-of-the-road and moderate leftist par- ties is hampered by the strength of the tradi- tional political and social organization of Ja- pan on which conservative power is based. c. Ultranationalist Groups. On the ex- treme right, numerous small and thus far in- effective ultranationalist societies have ap- peared in Japan in recent years. Their mem- bers include ex-military personnel, bureau- crats, and former administrators of Japan's overseas possessions. They have rallied little support and they will probably be unable to exert significant influence so long as the pres- ent leaders can make progress in rebuilding Japan's economy and in attaining a respected position in the Far East. d. The Communist Party. The Japanese Communist Party has steadily lost popular support since its peak in early 1949, and has emerged from nearly two years of internal dis- sension and confusion as a disciplined party with approximately 50,000 registered mem- bers. The Soviet-sponsored party policy in- 7 itially seeks to undermine the Yoshida govern- ment and the US position in Japan. Overtly the party seeks broad popular support by play- ing upon Japanese nationalism, exploiting the problems arising from Western orientation ? particularly those relating to the presence of US troops in Japan, US control over the Ryukyus, and limitations on trade with Com- munist China. However, its increasing em- phasis on underground organization and re- sort to violence will probably lead to increas- ingly repressive counter measures by the Japa- nese Government and will probably further reduce popular support for the party. A para- mount Communist objective within Japan is to develop a para-military force meanwhile ex- panding its influence in left-wing labor by forcing it to choose between acquiescing in governmental suppressive measures or siding with the Communists. The Party has consid- erable capabilities for sabotage, espionage, and subversion. It does not have the capacity for seizure of power by violence, and future accre- tions to its strength will be overbalanced by strengthening of police and security forces. Nationalism 24. Defeat in World War II discredited aggres- sive nationalism in Japan and ,for a time weak- ened national feeling. Many Japanese sup- ported the concept that Japan was to be the Switzerland of the Orient, and the constitu- tional limitation on armaments still has strong popular support. The idea of neutral- ity remains attractive to many Japanese who fear the consequence of Japan's involvement in the East-West struggle. It may be expected that ultranationalists, Socialists, and Com- munists will exploit neutralist sentiment. 25. Conservative groups in Japan are now en- couraging the revival of nationalism, and most of the Japanese people are coming to accept the necessity for alignment with the West and for defensive armament as a protection against possible Soviet aggression. Probably the memory of defeat and the changed power situation in the Far East will prevent a re- vival of the aggressive nationalism of the pre- war period and slow the pace of rearmament at least for the next few years. However, most SECRET Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 SECRET Japanese believe that the future of their coun- try is inextricably tied to the fate of Asia and that Japan's political and economic capabili- ties entitle it to leadership in Asia. Given an opportunity, it is probable that aggressive na- tionalism and pan-Asianism would revive in Japan. Japan's Position as a Power in the Far East 26. Japan was able to pursue an independent and aggressive policy in the Far East prior to World War II because her industrial capacity, modern military forces, geographical posi- tion, and strong nationalism gave Japan a power position far stronger than that of the other states of the Far East, and because the attention of the other great powers was con- centrated on Europe. 27. Following the defeat and occupation of Japan in 1945, Japanese military forces were disarmed and demobilized. At present, Japa- nese security forces, comprising the National Police Reserve (75,000) , the Autonomous and National Rural Police (125,000) , and the Mari- time Safety Board (16,000) , are capable of maintaining internal order, but would be un- able by themselves to defend Japan against external aggression. 28. Several basic changes in the power situa- tion in the Far East will affect Japan's ability to regain its prewar power position. a. Japan cannot build military forces ade- quate for defense without extensive foreign aid. Japan now has the economic capability to maintain at least 8-10 divisions with sup- porting troops if this force is initially equipped by the US. On the other hand, the develop- ment of strong sea and air power would be a long-range project and would require substan- tial foreign economic assistance and, initially, foreign technical assistance as well. Diver- sion of materials to naval construction in the short run would seriously retard rebuilding the merchant marine and further complicate the foreign trade outlook. Thus Japan will re- quire foreign military support even for defense and will be unable, for the predictable future, to develop with its own resources military forces capable of supporting an aggressive foreign policy. 8 b. Mainland China is controlled by a strong central government backed by formidable mil- itary power; Soviet power in the Far East has increased; and Communist China and the USSR are closely allied. The US has under- taken major political and military commit- ments in the western Pacific. c. The wartime experience of most Far East- ern countries with Japanese occupation un- dermined Japan's prestige with the result that Japan has little appeal as an example or leader in Asia, and Communist China and India now contend for leadership in Asia. While these considerations do not preclude the re-emergence of Japan as a strong Asiatic power, they do make such a re-emergence very unlikely in the foreseeable future except with the support of some other power. PROBABLE DEVELOPMENTS THROUGH 1954 Economic Developments 29. Irrespective of the level of trade with the Communist Bloc, economic output in Japan is likely to continue to expand through 1954. The major forces making for the expansion in- clude the probable high level of US expendi- tures in Japan for special procurement and for Korean rehabilitation and the increasing rate of armament procurement for the use of Japanese forces. In addition there will be in- creasing capital investments directed toward the development of Japan's electric power re- sources, the merchant marine, nonresidential construction, and modernization and improve- ment of existing plant and equipment in Ja- pan, and toward the development of sources of foodstuffs and industrial raw materials in South and Southeast Asia. Although Japan's dollar income and acquisition of other foreign exchange through 1954 will be enough to fi- nance essential imports, continued pressure for increased consumption during this period of rising employment and incomes may make it politically difficult for Japan to get from domestic sources alone the funds required to finance investment and rearmament. Japan will therefore almost certainly seek US eco- nomic assistance. The Japanese Government may also resort to a reduction of consumption levels through inflationary deficit financing, SECRET Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 SECRET the traditional Japanese method of financing rearmament and investment programs. It is also likely that as the rearmament and in- vestment programs claim an increasing share of Japan's resources, increased economic con- trols on the use of raw materials and man- power will be required. Internal Political Developments 30. Through 1954 political conditions in Ja- pan will probably remain generally stable largely as a consequence of the essential con- servatism of Japanese society reinforced by the effects of land reform. The weakness of Japan in face of the growth of Communist power in Asia and the danger of Communism within Japan will encourage existing trends toward the revival of traditional ideals and traditional cultural and political patterns. It is also likely that the conservative govern- ment of Japan will repeal or make substantial modifications of occupation-sponsored meas- ures ? notably those affecting public safety, labor, business organization and practices, and education. These modifications are cer- tain to provoke opposition of varying degrees from labor and from other elements generally supporting the Socialist parties, but their ef- fect will generally be to reinforce the position of the dominant conservative groups. While the structure of government is likely to be lit- tle changed, it is probable that in its operation increasing recourse will be made to the pres- tige of the Emperor to win popular support for government policies. The bureaucracy and the financial-industrial interests are likely to be the major dynamic groups in Japanese pol- itics and within the conservative political par- ties. The Socialist parties and organized labor will probably remain relatively weak. At least in the short run the left-wing Socialists are likely to become increasingly isolated in the Diet, supported by a narrowing sector of the electorate. The right-wing Socialists are likely to remain a liberal opposition party seeking support from disaffected elements to their right and left. The Communist Party, whether or not suppressed, will probably fail to regain significant popular support al- though it may expand its capacities for sub- 9 versive action and extend its influence in the ranks of left-wing labor. 31. Thus conservative and generally effective government is likely to be continued through 1954. If, however, in the national elections which must be held by January 1953, the Lib- eral Party should lose its present majority po- sition, divisions within the conservatives might weaken the Japanese Government. Any conservative government will be the target of popular resentment that may develop over such issues as the presence of US troops in Japan, US control of the Ryukyus, and con- trols on trade with Communist China. Exploi- tation of this resentment by opposition parties could develop considerable popular support and weaken .the effectiveness of the govern- ment in its implementation of foreign policy. National Objectives of the Japanese Government 32. The Japanese Government under conserv- ative control will have as its basic objective the restoration of Japan to a position of independ- ence and power. Specifically, the government will undertake to: (a) stimulate a unified national spirit; (b) expand the domestic econ- omy and foreign trade; (c), develop military forces; (d) regain control of the Ryukyus, and at least the southern Kuriles; and (e) contain Communist power in Asia. Foreign Policies 33. Orientation toward the West. At least for the next few years the rulers of Japan will al- most certainly recognize that progress. to- wards its foreign policy objectives and the na- tional security of Japan require close relations with the US within a Western orientation. The degree of effective Japanese cooperation within this alignment, however, will be con- tingent upon satisfaction of its expectations for significant economic and military assist- ance, confidence in effective US aid in case of attack, compromise of the inevitable conflicts of US and Japanese policy, and treatment as a sovereign equal. Undoubtedly Japan will attempt to exploit its strategic position in the Far East to exact such terms from the US. SECRET Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 SECRET 10 34. The Communist Bloc, aided and abetted by the Japanese Communist Party, may be expected to exploit every opportunity to hin- der Japanese rearmament efforts, to encour- age anti-US and anti-Western sentiments, and to hold out the prospect for profitable eco- nomic and political relations between Japan and the Soviet Bloc. The military capabilities of the Communist Bloc represent a formidable and immediate threat to Japanese security; at the same time, the development of commer- cial relations with Communist countries rep- resents to many Japanese an attractive alter- native to economic dependence on the non- Communist world. Japanese susceptibilities to Communist overtures or threats, however, are overshadowed by the prevailing Japanese belief that its national interests are best served by close relations with the West. Con- sequently, during at least the next two or three years, Communist efforts to influence the future orientation of Japan are not likely to attain significant success. 35. Areas of Independent Policy. As Japanese strength grows, however, Japan's national in- terests virtually dictate an increasing exer- cise of independent policy with respect to non- Communist Asia and to the Soviet Union and Communist China. Japan is likely to seek: (a) increasing economic and political ties with non-Communist Asia with the objective of at- taining ultimate leadership in the area; and, (b) at least limited contacts with the Soviet Union and Communist China. Even a profit- able relationship with the US is not likely to dissuade Japan from undertaking such inde- pendent courses of action. These courses of action will almost certainly be regarded by the Japanese Government as means of strength- ening its bargaining power with the West, providing both short- and long-run economic advantages, bolstering its internal and re- gional prestige, and increasing Japan's free- dom of action in the long run. Through 1954, Communist conciliatory and/or threatening tactics are not likely to alter Japan's funda- mental Western orientation. 36. In the unlikely event that a coalition gov- ernment with strong Socialist representation came to power, such a government would probably tend toward a "third force" position in Asia. In addition, it would probably seek to reduce Japan's commitments under the Security Pact with the US. LONG-RANGE TRENDS IN JAPAN'S ORIENTATION Major Influences 37. Beyond 1954, any Japanese government, whatever its political complexion, will be con- fronted by serious limitations upon its eco- nomic and military capabilities. A rising pop- ulation and the probable sharp reduction in special US spending in Japan will make neces- sary a steady expansion in foreign trade, and probably foreign economic assistance if living standards consistent with political stability are to be maintained. Japan will not be able for many years, without foreign assistance, to defend itself against attack ? much less to support an expansionist policy. Future Trends 38. If they can maintain progress toward re- storing Japan's economic and military strength and international prestige, conserva- tive elements such as those now in control of the Japanese Government will probably be able to remain in power. Since those elements recognize an identity of interest with the US in containing Communism, they may be ex- pected to continue a foreign policy generally consistent with US objectives. The degree of Japan's cooperation with the West will de- pend, however, on the military security, eco- nomic opportunity, national self-respect, and international position which a Western orien- tation offers. 39. Since Japan will aspire to an independent position of power in Asia, complete coinci- dence of Japanese and US foreign policies is unlikely. The US could expect most coopera- tion from a Japanese government that was successfully meeting its problems as a conse- quence of US economic, military, and diplo- matic support. 40. If, however, Japan is unable to solve its economic problems, it will be particularly vul- SECRET Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 91111416W.T., 11 nerable to economic and diplomatic pressures from the Soviet Bloc and will be tempted to seize opportunities for closer economic and po- litical relations with the Bloc. Even in this situation a conservative government would seek to avoid courses of action that would be likely to lead to Japan's absorption into the Bloc. Serious internal pressure in Japan would be more likely to result, at least ini- tially, in a trend toward traditional authori- tarian measures rather than in the rise of a pro-Communist regime. 41. The most probable long-term prospect lies between these two extreme cases of very close cooperation with the US and an attempt to pursue a neutralist foreign policy. As the Japanese bargaining power increases, Japan will attempt to increase its freedom of action as a great Asian power, within the framework of a generally pro-Western orientation. Japan will probably attempt to readjust its relations with the US, seeking to eliminate the basing of US troops in Japan and seeking to attain in- creased influence and leadership in Asian af- fairs of joint US-Japanese concern. Japan will inevitably attempt to expand economic and political relations with Communist China, and probably with the USSR, to the extent possible without jeopardizing its domestic sta- bility and will seek at the same time to avoid a basic alteration in its pro-Western foreign policy. 401mitongE.- Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 cAg=geffii?EF- 12 APPENDIX "A" JAPAN'S DEVELOPMENT AS A MODERN STATE Basic Prewar Influences on Japan's Orientation 1. Early National Objectives. The emergence of Japan as a modern power began in 1868 when a group of soldier-statesmen seized con- trol, restored the authority and prestige of the throne, and set out to make Japan secure against Western encroachments and to make Japan a great power. From their contacts with the West, these early Japanese leaders realized that to attain their objectives it was necessary to adopt Western political forms and to modernize Japan through the institu- tion of such programs as universal military training, universal education, and industrial- ization. They also were aware that Japan, an insular country with inadequate natural re- sources, would have to expand its foreign trade if these objectives were to be achieved. 2. The Growth of Nationalism. While empha- sizing modernization, Japan's leaders were careful to preserve the tightly integrated feudal loyalties and political hierarchy, redi- recting popular loyalty from feudal families to the imperial institution. Thus redirected, the totality of national loyalties and energies could be focused on support of foreign policies regardless of the material sacrifices imposed upon the mass of Japanese people. Through the educational system and universal military training, Japanese youth was indoctrinated to glory in Japan's military traditions and na- tional heritage. Within a few decades the average Japanese had developed an intense loyalty to the Emperor and a profound belief in the mission of Japan to bring order to Asia. 3. Development of Expansionism as a Na- tional Policy. Initially, Japan's leaders con- centrated on the development of normal in- ternational commercial relations, and the cre- ation of national strength. However, Japa- nese leaders, with their military background, strong nationalism, and appreciation of the weakness of China, were impatient to follow the 19th century example of Western im- perialism in the Far East. The war with China, started by Japan in 1894, signified the triumph of the policy of forceful expansion. From 1894 until the Washington conference of 1921-1922, which marked the end of the first period of Japanese expansion, Japan had acquired control over Formosa, Korea, the Pescadores, South Sakhalin, and the Man- dated Islands and had achieved recognition of a special position in South Manchuria. A fuller measure of Japan's expansionist ambi- tions was also revealed in the "21 Demands" served on China in 1915. 4. The Interval of Peaceful Cooperation. By 1918, the control of Japan had passed from the hands of the above small group of aristo- cratic elder statesmen (Genro) , heirs of the past, who had created and guided the modern- ization of the Japanese State, to members of the new classes developed in the process of that modernization. The new leadership was found in the new bureaucracy, product of the new education; in the officer corps of the newly created National Army; and in the new business leaders, who as heads of the family controlled financial houses were still closely allied with the two powerful feudal clans that had engineered the Meiji restoration. the postwar surge of popular and national inter- est in the building of an industrial structure with world wide trading connections, and the fading out of the old feudal controls before the advancing competence of the new national bu- reaucracy, provided political parties and the Diet with a brief opportunity to exercise a fairly significant degree of influence in na- tional policy, at home and abroad. During the decade that ended with 1932, business leaders who exerted a dominant influence favored Japanese participation in world dis- armament. They were convinced that Japan possessed economic advantages that would make peaceful economic expansion more prof- itable than an expansion built upon armed Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 force. Under their influence and leadership Japan followed a course of peaceful interna- tional cooperation until 1931. 5. Return to Expansionism Following the De- pression. By 1930, however, international co- operation had been discredited in Japan, par- ticularly as a result of the world-wide depres- sion which hit Japan especially hard. To many Japanese, the only answer to Japan's problems of supporting its swollen population was a resumption of expansion by force. The discrediting of liberal policy and business leadership within Japan and the growing sup- port for policies of aggressive expansion facili- tated the return to power of the military class, this time unrestrained by the wisdom and world knowledge of the "Elder Statesmen." During the 1920's there had developed a new class of young officers, much influenced as to their outlook by the plight of the rural class from which most of them had sprung. They were chauvinistic, anti-capitalistic, anti-demo- cratic, and fanatically convinced that Japan's Emperor was being badly advised by self-seek- ing and corrupt politicians, and were com- pletely converted to the belief that aggressive expansion offered the only solution to Japan's domestic and foreign problems. This group, relying upon its traditional prestige as the loyal supporters of the Emperor, and its con- stitutional direct access to the Throne, terror- ized all opposition, renewed the indoctrination of the people in the ancient warlike and aus- tere virtues of the Japanese people, and em- barked on a program of expansion. The weak 13 reaction of the major powers to the initial Japanese act of aggression in Manchuria con- vinced these youthful leaders and the Japa- nese populace that the new policy was safe and profitable. Prewar Orientation 6. Japan's power position in the Far East was generally sufficiently strong to allow Japan to remain free from precise or restrictive alli- ances or commitments. Japan's orientation with respect to any particular major power was determined primarily by coincidence of interests, or by the other power's will and abil- ity to support a position in the Far East, rather than by any traditional relationship. Only Japan's relations with China and with Russia (both Tsarist and Communist) pro- vided significant exceptions to this generali- zation. Because of China's geographical proximity, raw materials, and market poten- tial, Japan traditionally regarded both China proper and Manchuria as its sphere of inter- est and the most suitable fields for expansion. The Japanese program, however, led to con- flict with Russian interests in Northeast Asia, and Russia ? Tsarist and Soviet ? was there- fore regarded as the greatest potential or actual threat to Japan's national interests. However, both powers for various reasons, at- tempted for some time to accommodate their interests on the Asiatic mainland. Japan re- garded such an accommodation as a prerequi- site to its expansion and consolidation in China and areas to the south. "aggeliga= Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 14 APPENDIX "B" FOOD REQUIREMENTS OF JAPAN BY PRINCIPAL ITEMS 1936-40, 1950, AND 1953 Commodity Total Supply Domestic Production Net Imports a 1936-40 1950 1953 1936-40 1950 1953 1936-40 1950 1953 (ay.) (in 1,000 metric tons) Rice (brown rice equivalent) b 12,387 10,390 10,543 9,861 C 9,652 9,500 P 2,526 738 1,043 Wheat 1,259 2,904 3,825 1,454 C 1,338 1,375 -195 1,566 2,450 Minor grains 2,150 2,880 3,500 1,838 2,162 2,500 312 718 1,000 Pulses 1,122 702 900 622 498 500 825 204 400 White potatoes 1,824 2,438 2,450 1,824 2,442 2,450 -4 Sweet potatoes 3,122 6,290 6,300 3,122 6,290 6,300 Sugar 1,166 453 640 150 g 1,016 453 640 Fish 3,749 3,075 3,310 3,713 g 3,202 3,500 36 -127 -190 Estimated daily per capita caloric intake 2,280 " 2,000 " 2,150 " a. During the year 1936-40, rice was obtained almost entirely from Korea and Formosa. Pulses (soybeans) were supplied by Manchuria and China. Principal sources for sugar were Indonesia, Formosa, and the Philippines. Minor grains were imported from a number of the countries in Asia. During 1950, rice purchases were made chiefly in Thailand and Burma with smaller quantities from Korea, Egypt, China, Mexico, and the United States. Wheat procurement was made largely in the US, Canada, Australia, and Argentina. Principal suppliers of minor grains were the US, Canada, Argentina, Australia, and the Middle Eastern countries. Chin a and the United States supplied all of the soybeans. Sugar was purchased almost entirely in Formosa, the Philippines, and Cuba. Projections for 1953 assume a pattern of procurement similar to that for 1950, with the exception that Communist China is not assumed to be a maj or trading partner of Japan. In general, the South- east Asian countries, Korea, and Formosa are expected to become increasingly more important to Japan as suppliers of rice. The US and Canada will supply the bulk of wheat and minor grains. The US will also supply the bulk of Japan's soybean requirements and possibly 200-300,000 tons of rice in 1953. b: Conversion factors used are as follows: 0.8 brown rice equals 1.0 paddy rice; and 0.91 milled rice equals 1.0 brown rice. Imports were assumed to be milled rice: c. The production of rice and wheat during this period was above the average for 1931-40. The average for rice during the years 1931-40 was 9,359,000 metric tons; and for wheat, 1,274,000 metric tons. d. The production of rice during 1950, because of favorable weather conditions, was above the average for the postwar years. Rice production in 1951 totaled 9,042,000 metric tons, brown rice equivalent. Aver- age annual rice production for the years 1946-1950 was 9,458,700 metric tons. e. The estimate for rice production in 1953 appears to be low as compared to the years 1936-40 and 1950, but this is only because of the very favorable weather conditions during these years, which resulted in bumper crops. The estimates for 1953 are based on the assumption that average weather conditions will exist in that year, that productivity per unit of land will improve only slightly over the postwar average, and expansion of cultivated acreage will be negligible. f. Data are for US fiscal year 1951. g. Data are for 1936. h. The estimated caloric levels per capita in the postwar years appear somewhat high in relation to the total supply of foodstuffs available and in consideration of the population increase. However, this arises from the fact that, in the postwar years, better and more complete usage of available supplies of food- gg:PIPINgf Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 15 stuffs has been made. For example, the milling rates for wheat are now somewhat higher than in the prewar years; non-food uses ? such as rice for sake (rice wine) , fish for fertilizer and other industrial uses ? have been cut down; storage facilities and marketing procedures are now more efficient. It is estimated that these various changes save about 5 percent of food on a per capita basis. Sources: The 1936-1940 and 1950 production and net import data are based on the Japanese Government 1951 Annual Report to the Food and Agriculture Organization of the United Nations, June 1951; SCAP, Natural Resources Section Report Number 143; Japanese Crop and Livestock Statistics, 1951; and SCAP, Japanese Economic Statistics bulletin No. 62, Section II, October 1951. The 1953 data are estimates of OIR/DRF, Department of State. IRMR?Z Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 alEafr APPENDIX "C" JAPAN'S INDUSTRIAL PRODUCTION 1936, 1951, 1953, AND CAPACITY 1951 16 1936 1951 1953 Commodity Production Capacity ?Production Production (In metric tons, unless specified otherwise) Pig iron 2,008,000 7,000,000 3,124,000 4,930,000 Crude steel 5,223,000 11,030,000 6,499,000 9,150,000 Aluminum 4,693 90,000 36,778 60,000 Copper refined 77,973 120,190 90,949 120,000 Cement 5,579,000 8,836,000 6,548,000 8,800,000 Ammonium sulphate 875,000 2,200,000 1,697,000 2,150,000 Petroleum products (bbls.) a 13,822,200 28,100,000 19,000,000 26,550,000 Cotton yarn 654,528 441,818 335,000 420,000 Cotton fabrics 3,495,000 3,901,000 2,178,000 3,380,000 b (1,000 sq. yds.) Rayon fabrics 1,044,000 1,920,000 810,000 1,200,000 (1,000 sq. yds.) a. Refinery output. b. Estimated on the assumption that total yarn production less yarn exports will be manufactured into fab- rics. Fabrics are calculated on the basis of 4 yards equaling 1 lb. of yarn. Source: The 1936 and 1951 data are based on SCAP reports; 1953 estimates are those of OIR/DRF, Depart- ment of State. Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 , StaKi it NIB df 17 APPENDIX "D" PRINCIPAL RAW MATERIAL REQUIREMENTS OF JAPAN, 1936, 1951, AND 1953 (IN 1,000 METRIC TONS UNLESS SPECIFIED OTHERWISE) Commodity Total Requirements 1936 1951 1953 Domestic Production 1936 1951 1953 1936 Imports , 1951 1953 a Raw Cotton 925 399 568 925 399 568 Raw Wool 100 69 79 negl. negl. negl. 100 69 79 Coal b 46,758 44,978 53,125 41,803 43,200 50,000 4,955 1,778 3,125 Salt 1,935 2,325 2,500 519 600 650 1,416 1,725 c 1,850 Iron Ore d 4,528 5,825 9,010 505 e 2,325 f 3,700 f 4,023 3,500 g 5,310 Copper Ore 113 50 120 65 50 60 48 negl. 60 (Content) Crude Petroleum 26,959 20,333 29,500 2,561 2,333 3,500 24,398 18,000 g 26,000 (1,000 barrels) , a. Principal sources for raw material imports are summarized below: Raw Cotton Raw Wool Coal About three-fourths of Japan's imports will probably be from the US; the re- mainder will be largely from Pakistan, Egypt, Mexico, and Africa. The bulk will be from Australia with smaller quantities from South America, Africa, and possibly the US. The US is likely to be by far the largest supplier, with smaller quantities com- ing from India and Goa. Communist China and Sakhalin are other potential suppliers. Salt The Near Eastern countries, followed by Southeast Asiatic countries - includ- ing Formosa - and Spain are likely to be the major suppliers. Mainland China potentially is a large supplier. Iron Ore The Malayan Union, the Philippines, Goa, and India will be the principal Asiatic suppliers; substantial quantities of US and Canadian iron ore will probably also be imported. Copper The US and Chile are primary sources. Petroleum The Near East and the US are principal sources. Indonesia may become im- portant in the future. b. Domestic production is largely bituminous grade; small quantities of semi-anthracite coal are also in- cluded. Imports consist largely of metallurgical grade coking coal; only several hundred thousand tons of anthracite coal are included. c. Estimated. d. Figures are given in terms of ore of which 60 percent is iron content. e. Includes only iron ore, as complete data for other sources of iron are unavailable. f. Includes all types of iron for pig iron production, such as pyrites, iron sands, etc. g. Estimated. Source: Data for 1936 are based on official Japanese statistics; data for 1951 are based on SCAP reports; estimates for 1953 are those of OIR/DRF, Department of State. 1511111RWINEL Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 esalibT APPENDIX "E" 18 JAPAN'S EXPORTS BY MAJOR CATEGORIES, 1936 AND 1951, AND ESTIMATES FOR 1953 COMMODITY 1936 1951 (in million US dollars) 1953e Foodstuffs and Beverages a 111.8 69.3 100 Textiles and Fibers b 506.8 554.2 885 Machinery and Metal Products C 158.0 428.1 600 Chemicals d 44.2 37.0 83 Miscellaneous 218.2 265.9 257 Total 1,039.0 1,354.5 1,925 a. Includes exports of minor cereals, vegetable and fish oils, vegetables and fruits, canned and other packed foods, tobacco, alcoholic beverages, and tea. b. Includes exports of cotton, rayon, wool, industrial fibers, and their manufactures. Cotton textiles are by far the most important in value: in 1936, they were valued at $185 million; in 1951 at $345 million; and es- timates for 1953 provide for $540 million. In 1936, raw silk and silk manufactures, valued at $140 million, were also of major importance. c. Includes exports of metals and ores, steel mill products, transportation equipment (water and land) , machinery and motors, and other metal products. d. Includes exports of chemical fertilizers, sulphur, caustic soda, and dyes and paints. e. Markets for Japanese exports, especially of textiles except for raw silk and fabrics, lie chiefly in Asia. It is estimated that about one-half of the value of Japan's total exports in 1953 will be sold in Asia, exclusive of Communist China; about one-sixth to the United States, Canada, and Mexico; and the remainder will be to the other areas of the world. Machinery and metal products, it is estimated, will find increasingly larger markets in Asia as well as in other areas of the world. Chemicals, particularly nitrogenous ferti- lizer, will find a ready market in Asia. Foodstuffs, such as marine products, canned foods, and tea most likely will be sold to the dollar areas, chiefly the US. Source: Prewar data are based on Official Japanese Trade Statistics and include exports to Korea and For- mosa; 1950 data are based on SCAP, Japanese Economic Statistics, No. 54, Section II, February 1951; estimates for 1953 are by OIR/DRF, Department of State. Meensior Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3 APPENDIX "F" JAPAN'S BALANCE OF PAYMENTS IN 1936 AND 1950 AND ESTIMATES FOR 1953 19 1936 1950 1953 (in million US dollars) Exports (f.o.b.) 1,034.9 911.2 2,025.0 a Imports (c.i.f.) -1,049.3 -969.9 2,600.0 Trade balance - 14.4 - 58.7 - 575.0 Non-monetary gold 38 Transportation and insurance 68.4 3.9 132.0 Investment income 50.8 - 6.8 - 9.0 Other services - 34.3 110.3 770.0 b Total goods and services 70.5 52.5 318.0 Private donations 36.9 39.6 10.0 Other - 93.8 e - 15.8 c _ 55.0 c d Total - 56.9 23.8 - 45.0 Errors and Omissions - 6.7 48.2 Surplus or deficit (-) 6.9 124.5 273.0 Compensatory official financing US appropriation 360.9 US credits . . . - 43.1 Short-term assets 15.7 -438.5 - 273.0 Monetary gold - 22.6 - 3.8 Total - 6.9 -124.5 - 273.0 a. Includes an estimated $100 million in UN procurement for the rehabilitation and reconstruction of Korea. b. This figure consists of $250 million for personal expenditure by Allied Forces in Japan, tourist receipts, and foreign investments in Japan; and $520 million for procurement and payment by the US for: (1) the maintenance of US Forces in Japan; (2) military construction in Japan; (3) the support of Japanese security forces; (4) the maintenance of the Republic of Korea (ROK) army; and (5) MDAP procurement for South and Southeast Asia. c. Includes private capital movements and official amortization. d. Includes reparations and restitution payments. e. Japan recently received a $40 million cotton revolving fund credit. Utilization of this credit can be ex- pected during 1953, but only the interest payments are considered in the table. Source: Data for 1936 and 1950 are based primarily on IMF International Financial Statistics, January 1952; estimates for 1953 are those of OIR/DRF, Department of State. g*;wipai, Declassified and Approved For Release 2012/09/20: CIA-RDP79R01012A001600010002-3