JAPANESE PRIME MINISTER SATO'S NEW LEASE ON LIFE

• Document Type: CREST
• Collection: Library of Congress
• Document Number (FOIA) /ESDN (CREST): LOC-HAK-18-4-19-7
• Release Decision: RIPLIM
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: January 11, 2017
• Document Release Date: February 26, 2010
• Sequence Number: 19
• Publication Date: November 23, 1971
• Content Type: MEMO

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INFORMATION
November 23, 1971
.ORANDUM. FOR. MR. KISSINGER
FROM: JOHN H. HOLDRIDGE
SUBJECTS Japanese Prime Minister : .to's
New Lease on Life
At Tab A is a memorandum prepared by Jack Froebe of your
staff, revising our estimate on Japanese Prime Minister Sato's
political hold on his position. Based on Embassy Tokyo's re-
vised. estimate of ato's, political position, Mr. Froebe's Memo-
randum predicts that into will almost certainly be able to see
the Okinawan Reversion package throes h the current special
session (scheduled to end next month), and that he aright also be
able to Mill his hopes of prresidi eg over the Okinawan Reversion
ceremonies *out July.
This estimate is contingent, however, on Sato's not having to
additional severe shocks, either from within or without.
Sa-to's ability to hold on until tho middle of next year will also
depend on his handling of Japaaan'a China policy and the country's
current economic downturn. This in turn will strongly influence
his ability to insure that Foreign Minister Iukudaa succeeds hire
Liberal Democratic Party President and Prime ,Minister.
J1I3.JAF:pam:11/22/71
.
"EGRET
ON-FILE NSC RELEASE
INSTRUCTIONS APPLY
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Japanese Prime Minister Sato Gets a New Lease on Life
Our Embassy in Tokyo has revised its earlier prediction that Prime
Minister Sato might well not survive the year. It now believes he will
almost certainly have no problem staying through the Diet action on
the Okinawan Reversion package (to be completed within the next
month), and ventures that he might even be able to fulfill his hopes of
presiding over the Okinawan Reversion ceremonies in mid-1972. The
Embassy pegs its prognosis to the assumption that Sato will not be
saddled with further shocks such as (a) extremist attacks on Diet
during current Okinawan Reversion session of such proportions that
Sato would have to "assume responsibility" a la Kishi in the 1960
Mutual Security Treaty session, or (b) any IT. S. - PRC agreements
emerging from the President's visit that would overleap current
Japanese China policy.
The Embassy explains Sato's improved fortunes by:
- Japanese have pretty much gotten over their initial highly
emotional reactions to the series of shocks that began in July, and are
adjusting to the results. Particularly in the economic area, they recog-
nize that our New Economic Policy affected other nations as well and
that they were not discriminated against. In addition, factional leaders
in Sato's Liberal Democratic Party (LDP) do not want to pick up the
current responsibility for negotiating solutions to problems raised by
our NEP.
-- Sato has shown a resurrected decisiveness in handling Chirep
and the textile problem, and has thus deprived his critics of a prime
argument.
-- LDP Secretary General Hori has been able to isolate Party
dissidents through carrot and stick techniques, threatening Diet dissolu-
tion and elections when Party rebels publicly challenge Sato's leadership,
while promising sizable campaign contributions to those who accept
Party discipline. Together with the above two factors, Hori's effective-
ness probably accounts for the LDP's holding intact, as for example on
the defeat of the two no-confidence ,motions in the Lower House of the
Diet October 27. (One was against Foreign Minister Fukuda for the
Chirep defeat, while the other was against International Trade and
Industry Minister Tanaka for the U. S. - Japan textile agreement. )
SL-1-'D VM
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Sato's Continuing Challenges
While it is now safe to assume that Sato will ride out the current
Diet session on Okinawa, whether or not he can fulfill his ambition
of presiding over the formal reversion ceremonies next July is
problematical. His survival quotient will probably derive chiefly
from his handling of two major problems now facing him -r- China
policy and Japan's current economic downturn. His success on
these two will also affect importantly a third major problem he has
before him -- the choice of his successor as LDP President and
consequently Prime Minister.
1, China Policy.
Sato is caught between several pressures on China policy -- our
China policy; Peking's stiff-arming Sato's attempts to open direct
official contacts with it while it manipulates Japanese business and
opposition groups*; Sato's desire to maintain relations with the
Republic of China (ROC), for which the older conservative LDP main-
stream group members have particular sympathy; and the resulting
attempts by Sato's political opposition to exploit his dilemma in the
context of the choice of his successor.
For the short run, Embassy Tokyo believes that Sato will make
no major change in Japan's China policy beyond the recent modifica-
tions induced by our own China initiative -- Sato's decision to find a
means to open direct governmental contacts with Peking and to set the
objective of the resulting talks as the normalization of relations with
the PRC. The basic reason cited for the GOJ's delaying further major
change is that it still holds its relationship with the U. S. to be the
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cornerstone of its foreign policy, and U. S. policy toward any other
country to be the critical consideration in Japan's own policy to-
ward that country. . The Embassy bases its estimate, however, on
the assumption that the President's visit to Peking will not result
in agreements on major substantive issues that would overleap Japan-
ese policy, and that we will not compromise our defense commitment
and ties to Taiwan, without which Japan would not feel capable of
retaining its relationship with the ROC.
Another factor that would possibly move Sato toward major change
in his China policy is inadequate consultations on the President's
Peking trip. Should Sato fear our lack of consultation presaged the
conclusion during the trip of major substantive agreements bearing
on Japan's interest, he might attempt, in order to protect his domestic
political flank, to preempt our suspected move by a dramatic initiative
of his own.
A final factor weighing on Japan's China policy is Taipei's re-
action to Tokyo's current moves in this field. Should the ROC break
its recent silence and give vent to its resentment of the Japanese
actions (for example by recalling its ambassador or threatening
economic retaliation), then the ROC's conservative friends in Sato's
LDP mainstream group would find, their ability to preserve the Japan-
ROC relationship severely undercut.
Embassy Tokyo discounts the Sato Government's seemingly forth-
coming statements on China policy during the recent Diet debate as
designed to create the impression of flexibility and movement in his
policy. (Sato, carefully couching his words in ambiguity, reiterated
his position that "China is one, " announced that the "PRC represents
China, " and added that he is willing "to discuss" the 1952 ROC-Japan
Peace Treaty, which the PRC demands be abrogated.)
Thus, for the short run the most important outside influence on
Japan's China policy will be that of ours. ROC actions also will figure
importantly. Peking, however, so long as it continues to insist on its
three conditions concerning Taiwan as pre-conditions for direct
official contacts with the GOJ, will not be able to induce a change in
Japan's policy in the short run -- provided that Sato's hand is not
forced by either of the first two factors and that his domestic political
position otherwise remains stable. Sato does not on his own seem
desirous of making radical departures in his China policy at this point
-- given his interest in Taiwan, his preference to keep in tandem with
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our policy, his'having gotten domestic criticism on this score at
least temporarily under control, and the Japanese preference for
moving slowly, cautiously, and only after a new concensus has been
developed. He continues, however, to be faced with the problem of
keeping the lid. on pressures from those in his own and opposition
.parties, in business, and within his own bureaucracy who are trying
to move the government toward rapid expansion of ties with Peking.
2. Jan's Economic Downturn.
Prime Minister Sato's second major immediate problem is bring-
ing Japan out of its current economic downturn. The growth of Japan's
GNP in real terms has been very slow since mid-1970: for the current
year it is projected at only 5. 5%, having fallen to only 2. 5% in the
third quarter following on our New Economic Policy. The Government
predicts that the rate of growth will rise 'to 5% if domestic stimuli
currently being applied are successful, but this would still be substan-
tially below the 10% growth rate to which the country has become
accustomed over the past five years and more. Stock prices and new
export contracts have declined sharply in the wake of our August 15 new
economic program, and many Japanese firms are now reducing their
investment plans.
Sato is trying to bring about this upturn principally through fiscal
stimulation of domestic demand -- increased government infrastructure
expenditures, adjustment of interest rates, and reduction of personal
income taxes. To the extent he is successful, he will in addition to
reviving the economic growth rate also reduce Japan's dependence on
exports (now running at about 10% of GNP), and thus reduce his foreign
policy problems. In the process, however, he is continuing to en-
counter several related economic problems, each of which generates its
own political problems:
-- Infrastructure demands. There is rapidly growing pressure
in Japan for long-delayed improvements in the quality of life and a faster
rise in the general standard-of-living (at the expense of investment).
Although a part of government infrastructure expenditures will stimulate
new investment and production, a sizable proportion will be in the
educational, social, and cultural fields, which will detract from
immediate additions to the economic growth rate.
-- Industrial realignment. Japan is moving away from labor-
intensive toward high technology industry -- a prominent example of
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which is textiles -- which puts a squeeze on both business and labor
in the fields being phased out. On. the other hand, the more Japan
moves into high technology and depends on export markets in doing
so, the greater her frictions with other high technology nations such
as ourselves.
-- Foreign economic pressures. Even though Sato is stres-
sing the stimulation of domestic demand, Japan cannot make the shift
quickly enough to avoid current and possibly growing pressures from
ourselves and other nations whose home markets are being penetrated
by still expanding Japanese exports and investment. Foreign pressures
on Japan are exacerbated in such cases as our own where foreign busi-
ness and industry does not have equal access to the Japanese market.
Japan is beginning to make its peace with and adjust to the effects
of our new economic policy, the emotional intensity of the initial
Japanese reaction to our program have largely passed. Japan's larger
firms are sufficiently competitive to maintain satisfactory trade levels,
although smaller firms in the more traditional labor-intensive industries
appear to be badly hit. The long-festering textile question between us
has been solved, and the government is helping this particular labor-
intensive industry adjust through massive subsidies. The Sato Govern-
ment is in the process of working out with us a resolution of the
currency revaluation problem and the surcharge, and it is slowly re-
sponding to our pressures for liberalization of imports and investment.
The latter will require a long-term reorientation of Japanese business
philosophy, which is reinforced by an archaic marketing structure that
disadvantages. imports. Most important for Sato here will be that we,
in.maintaining steady pressures for a resolution of these basic bilateral
economic problems, avoid applying this pressure through a succession
of blunt ultimatums.
3. Succession as LDP President and Prime Minister.
Prime Minister Sato is vitally interested in controlling the third
major problem before him --- succession to the LDP Presidency and
therefore the Primemini ste r ship -- in order to try to insure the con-
tinuity of his policies and his continued influence in the government and
party (his current term as LDP President does not actually end until
November 1972). His choice is Foreign Minister Fukuda. Sato can
probably swing this succession if (a) he promises Minister of Interna-
tional Trade and Industry Tanaka that he will support Tanaka for the
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Prime Minister post at a future date, and (b) Tanaka is willing on
this basis to throw his support to Fukuda rather than former Foreign
Minister Ohira. (Ohira rather than Fukuda as Prime Minister,
however, would not be likely to make a significant difference to our
relationship. )
The Embassy and State continue to believe that we would affect
the succession question only if a contretemps were to develop between
us that resulted in Sato's resignation. This could scotch Fukuda's
chances and incline Sato's successor toward more independent policies
vis-a-vis our own. I would argue that this does not constrain what we
do as regards Japan in the areas of economic relations and China
policy nearly so much as how we do it -- that we not leave Sato stranded
at home politically in the way we broach initiatives, and that we avoid
applying our pressures through blunt ultimatums.
Concurrence:
Mr. Hormats
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