PROBABLE DEVELOPMENTS IN JAPAN OVER THE NEXT DECADE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01012A005800010001-8
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 23
• Document Creation Date: December 23, 2016
• Document Release Date: May 31, 2013
• Sequence Number: 1
• Publication Date: September 27, 1955
• Content Type: NIE

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NIE 4 1 ? 5 5
27 September,1955
NATIONAL INTELLIGENCE INTELLIGENCE ESTIMATE
NUMBER 41-55
(Supersedes NIE 41-54)
PROBABLE DEVELOPMENTS IN JAPAN
OVER THE NEXT DECADE
Submitted by the
DIRECTOR OF CENTRAL INTELLIGENCE
The following intelligence organizations participated in the
preparation of this estimate: The Central Intelligence Agency
and the intelligence organizations of the Departments of
State, the Army, the Navy, the Air Force, and The Joint Staff.
Concurred in by the
INTELLIGENCE ADVISORY COMMITTEE
on 27 September 1955. Concurring were the Special Assistant,
Intelligence, Department of State; the Assistant Chief of
Staff, G-2, Department of the Army; the Director of Naval
Intelligence; the Director of Intelligence, USAF; and the
Deputy Director for Intelligence, The Joint Staff. The Atomic
Energy Commission Representative to the IAC, and the Assist-
ant Director, Federal Bureau of Investigation, abstained, the
subject being outside of their jurisdiction.
DOCUMENT NO.
NO CHANCE !N 7A. ASS.
CLASS.
NEXT REV!E?is'
AU TH: HR 2
DATE: _ nr?,_11 REVIEWER ? 0065142
COPY NC 327
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CENTRAL INTELLIGENCE AGENCY
DISSEMINATION NOTICE
1. This estimate was disseminated by the Central Intelligence Agency. This copy
is for the information and use of the recipient indicated on the front cover and of per-
sons under his jurisdiction on a need to know basis. Additional essentialdissernintion
may be authorized by the following officials within their respective departments:
a. Special Assistant to the Secretary for Intelligence, for the Department 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
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f. Director of Intelligence, AEC, for the Atomic Energy Commission
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partment or Agency
2. This copy may be retained, or destroyed by burning in accordance with appli-
cable security regulations, or returned to the Central Intelligence Agency by arrange-
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3. When an estimate is disseminated overseas, the overseas recipients may retain
it for a period not in excess of one year. At the end of this period, the estimate should
either be destroyed, returned to the forwarding agency, or permission should be re-
quested of the forwarding agency to retain it in accordance with IAC-D-69/2, 22
June 1953.
WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
DISTRIBUTION:
White House
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Department of State
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Operations Coordinating Board
Atomic Energy Commission
Federal Bureau of Investigation
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!I
41.
1
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PROBABLE DEVELOPMENTS IN JAPAN
OVER THE NEXT DECADE
THE PROBLEM
To analyze recent trends in Japan and to estimate probable developments in Ja-
pan over the next decade, with particular emphasis on its international position and
orientation.
ASSUMPTION
No US-Chinese Communist hostilities.
CONCLUSIONS
1. Japan is facing serious political and
economic problems and it is unlikely, dur-
ing the period of the estimate, to develop
sufficient power and prestige to play a
major role as a leader or defender of the
non-Communist Far East. Given favor-
able international circumstances, how-
ever, it should make gradual progress and
become a valuable adjunct to free world
power in the Far East. (Para. 85)
2. We believe that Japan will remain bas-
ically aligned with the US, primarily be-
cause of its security and economic needs.
But in its quest for a more independent
position it will become more assertive to-
ward the US and will seek to improve its
relations with the Communist Bloc and
with the countries of free Asia. (Paras.
74-83)
3. The Japanese must expand their econ-
omy considerably to sustain a large and
growing population at tolerable levels of
consumption and employment. The req-
uisite export expansion will depend im-
portantly on factors beyond Japan's con-
trol such as the level of world trade, the
reduction of trade barriers, and the rate
of economic growth in underdeveloped
areas. Japan must also take internal
measures to improve its competitive po-
sition. Because of its imbalance in dol-
lar trade, Japan will need US assistance
for at least the next few years. (Paras.
40-58, 82)
4. We believe that Japan will continue to
rely on the US for strategic security but
will seek an equal voice in arrangements
for the defense of Japan, and is unlikely
over the long term to agree to the contin-
1
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AMEN&
uation in Japan of bases under exclusive
US control. It will strengthen its own
defensive forces, with emphasis on the air
force and navy, but its over-all effort will
be limited. (Paras. 59-73, 83)
5. Some combination of conservative par-
ties will probably remain in office during
the next decade, except possibly for brief
interludes of socialist control. The con-
servatives will probably maintain an es-
sentially parliamentary system. How-
ever for some time to come their ability
to provide strong and effective leadership
will be hampered by persisting factional-
2
ism and the strength of the left opposi-
tion. (Paras. 32-39, 82)
6. Prolonged economic distress would
radically alter the foregoing general pros-
pect. It would weaken moderate politi-
cal forces, encourage extremist parties of
both right and left, and probably lead
eventually to an ultranationalist resur-
gence. In the event of an imminent
threat of general war, even if Japan re-
tained its general alignment with the US,
it might attempt to assume a neutral po-
sition in an effort to avoid nuclear de-
struction. (Paras. 83-84)
DISCUSSION
1st strength increased slightly, the combined
conservative vote still exceeded that of the
socialists by a ratio of two to one. Extremist
parties had little public support in these
elections. The Communists placed only two
candidates in the Lower House and nearly all
candidates who may be characterized as ex-
treme rightists were defeated. In provincial
elections socialist supported candidates won
only four of the 21 gubernatorial contests and
less than 600 of the 2,459 prefectural assembly
seats. Conservative predominance was even
more strongly asserted in municipal elections.
9. As a result of the Lower House elections,
the Liberal Party, which had held office con-
tinuously from 1949 until its resignation in
December 1954, was ,replaced as the leading
conservative party by the newly organized
Democratic Party. The Democrats under
Hatoyama won 187 seats to 112 for the Liberal
Party now headed by Ogati, Taketora. With
the relative positions of these two parties
reversed, the Democrats formed another mi-
nority government whose tenure and ability to
enact legislation, like that of conservative
governments since 1953, continued to be con-
tingent upon the attitude of the conservative
opposition.
I. INTRODUCTION
7. Three years after independence and 10
years after the close of World War II, Japan
has regained little of its former influence and
prestige. It is only now beginning to play
an active role in world affairs and it does not
exhibit the cohesion, drive, and initiative that
were characteristic of the prewar period. The
Japanese domestic scene is still marked by
factionalism, uncertain leadership, and a lack
of purpose. Japan faces severe competition
as well as political and economic restrictions
in international markets. Despite recent im-
provement, its balance of payments situation
remains unsatisfactory, and the volume of its
trade must be considerably increased to main-
tain economic growth. Japan continues
highly dependent on the US for its security
and economic solvency.
I. FACTORS AFFECTING JAPAN'S FUTURE
POSITION AND ORIENTATION IN ASIA
Political Situation and Prospects
8. The continued domination of Japanese
society and politics by conservative forces was
demonstrated again in national and local
elections held early in 1955. Although social-
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INDEPENDENTS
6 Seats -1.3%
JCP -2 Seats - 0.4 z
LABOR-FARMER PARTY
4 Seats -0.9%
JAPAN
DISTRIBUTION OF DIET SEATS
As of February 1955
LOWER HOUSE
(467 seats)
JAPAN DEMOCRATIC PARTY
184 Seats
39.5%
LIBERAL PARTY
115 Seats
24.6%
6 VACANCIES
2.4%
INDEPENDENTS
12 Seats-4.8%
JCP - 1 Seat-O.4%
LABOR-FARMER PARTY
2 Seats -0.8%
LEFT SOCIALIST PARTY
? 89 Seats
19.1%
RIGHT
SOCIALIST PARTY
67 Seats
14.2%
UPPER ? HOUSE
(250 seats)
LIBERAL PARTY
90 Seats
36.0%
JAPAN
DEMOCRATIC PARTY
23 Seats -9.2%
GREEN BREEZE (RYOKUFUKAI)
48 Seats
1-9.2%
RIGHT
SOCIALIST PARTY
24 Seats -9.6%
13403 7-54 (First Revision 9-55)
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JAPAN
COMPARISON OF ELECTORAL STRENGTHS
IN THE LOWER HOUSE
(1946-1955)
Percentage
of Popular Vote
6
50
40
31?
20
10
/N
/953
/94 :13j/: A:41?11491: \\ 1952Election years
/946
/955
NOTE: In the eorly postwor period many conservatives ron as independents or as
representatives of minor parties. Many of the independents and minor parties were
gradually absorbed as conservotive forces coalesced into two or three major groupings.
25035 9-55
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V:=Mgr
10. There are no major policy differences be-
tween the Democrats and Liberals. Both
parties draw their main support from business
and industry and from the conservative-mind-
ed rural electorate. The conservatives favor
economic programs that conform to the needs
of the major business and industrial interests.
Conservative leaders believe in civilian su-
premacy in the direction of government and
appear to believe that their own interests will
best be served by the preservation of Japan's
parliamentary institutions. Their program
calls for continued gradual rearmament, curbs
? upon the subversive activities of the left and
right, and revision of the constitution in order
to strengthen the powers of the central gov-
ernment. Their foreign policy calls for align-
ment with the West while seeking a more in-
dependent and influential role for Japan in
world affairs. While the Liberals criticized
Hatoyama's apparent lack of caution in the
initial phases of negotiations with the USSR,
and while the Liberals have tended to place
greater emphasis on the preservation of close
cooperation with the US, there are no basic
differences in foreign policy objectives in the
conservative camp.
11. Despite the strength of the conservatives
in the Diet and their basic agreement on policy
issues, they have continued unwilling or un-
able to provide strong direction to the nation.
They have been notably weak in championing
measures which they believe necessary, but
which are politically unpopular, such as re-
armament and internal economic austerity.
They have done nothing to assuage labor's
fears that they are seeking to turn back the
clock on its postwar economic and political
gains. Constitutional revision continues to
await improvement in the conservative posi-
tion, and the government has not yet risked
any effort to strengthen internal security
measures.
12. Because of the government's failure to
provide stronger leadership, the press and pri-
vate organizations have been able to exert un-
precedented influence on public opinion in key
areas of national policy. Many such groups
are conservative in orientation but the most
3
vocal are dominated by leftists, and some are
Communist fronts. Only recently has the
government sought to lead public opinion on
rearmament and on foreign policy.
13. The indecision and weakness of the con-
servatives are due in part to inexperience in
operating the new democratic pattern of gov-
ernment in which the Diet, political parties,
and public opinion, have assumed far greater
importance than ever before. The effective-
ness of the conservatives is also impaired by
the struggle for leadership which has become
more acute since the Hatoyama faction left
the Liberal Party in April 1953. Competition
for leadership often has no relation to issues
and is complicated by the importance of per-
sonal and family ties in Japanese political re-
lationships and party organization.
14. Serious efforts are underway to unite the
Democrats and Liberals, but the problem of
merger is complicated by the rise of new per-
sonalities who are eager to replace the still
influential generation of Yoshida and Hato-
yama. Although a merger may take place, it
is likely that competition for power among
these new personalities will hamper effective
unification of the conservative camp for at
least several years.
15. Conservative leaders have also suffered
from the general feeling of impotence which
seized Japan following wartime devastation,
defeat, and occupation. They have had to
deal with problems in both domestic and for-
eign affairs which are complicated by external
circumstances beyond their control. In this
situation, they have been unable to formulate
an objective for Japan in Asia that would have
sufficient mystique and appeal to overcome
the frustrations of defeat, restore self-confi-
dence, and serve to unite the people. For
these reasons their policies tend to be ad hoc,
rather than expressed in explicit long-term
programs.
16. In addition, the conservatives have had to
take into account the weakening of conserv-
tive and traditional forces in the postwar
period and the rise of a politically significant
left-wing. Organized labor, the socialists, the
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FsillitaEof
intellectuals, and the free press are deter-
mined to preserve their postwar gains, and
their combined strength has forced the con-
servatives to proceed with caution on many
issues. The conservatives are seeking to re-
duce the influence of these forces, in part by
constitutional revision and refurbishing of
traditional symbols, in part by administrative
action, and in part by adopting some of the
more popular policies of the left.
17. The socialist movement in postwar Japan
has derived its strength chiefly from organized
labor, small entrepreneurs, intellectuals,
youth, and women. The socialists rely more
heavily than do the conservatives upon the
urban electorate, although there has been a
slight increase in the socialist vote in rural
areas in recent years.
18. The socialists are still divided into Right
and Left Socialist Parties. Apart from dif-
ferences on rearmament, association with the
West, and relations with the Japan Com-
munist Party, the Right is essentially parlia-
mentary and evolutionary in approach, the
Left doctrinaire and revolutionary. In recent
years the Left Socialists have gained at the ex-
pense of the Right because they have had the
support of the stronger labor organizations
and have been more successful in recruiting
and developing young leaders. Even if pres-
ent negotiations to merge the two parties suc-
ceed, there would probably be continued quar-
rels over party position and policies, and at
least the conservative wing of the Right So-
cialists might soon split away.
19. Lack of unity has not prevented an in-
crease in socialist strength since ?the party
split in 1951, although the increase has been
at a declining rate in the last two elections.
In the 1952 Lower House elections the social-
ists commanded 21.4 percent of the popular
vote. This figure increased to 29.2 percent by
1955. This proportion compares with the
previous high of 26.7 percent received by the
socialists in 1947.
20. To a considerable degree the gradual in-
crease in the socialist vote probably represents
a protest against conservative administrations
4
rather than a positive approval of the social-
ist program. The electorate has been react-
ing against such things as continued scandals
in the government, neglect of small and medi-
um business interests, and conservative fac-
tionalism. The socialists probably have also
benefited from the irritations caused by the
US presence and influence in Japan since the
socialist program dwells heavily on foreign
policy. At the same time, there is evidence
that the socialists have been more successful
than the conservatives in attracting new
voters as they come of age. In the past, con-
servative politicians have depended heavily on
certain traditional and paternalistic relation-
ships with their constituents for a stable bloc
of votes. Recent elections suggest a weakening
of these traditional ties, and the conservatives
have been slow to develop an active political
organization at the local level. As a result,
the socialists have been better able to mobilize
their potential support especially in urban
areas.
21. Organized labor, whose membership re-
mains at about 6,000,000, exerts strong pres-
sure on Japanese politics. Many of its leaders
attach as much importance to labor's political
as to its economic objectives. These objec-
tives normally coincide with those of the so-
cialists, and labor provides the chief sources of
organized support for both socialist parties.
Labor's considerable role in the success of the
Left Socialist Party in the last election and
the election of trade union= officials under the
Left Socialist banner has increased the influ-
ence of labor in the political field.
22. Factionalism is also present in organized
labor. Sohyo (Japan General Council of La-
bor Unions) , the largest federation with about
2.8 million members, is closely associated with
the Left Socialists. However, its leadership
has tended to pursue policies closely parallel
to those of the Japan Communist Party and,
in its preoccupation with political objectives,
to overlook the economic interests of the work-
ers. As a result, some member unions have
seceded, and there has been a continuing
struggle by more moderate elements to gain
control of the Federation. Most recently, the
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moderates appear to have gained some ground
when their candidate replaced fellow traveler
Takano Minoru as Secretary-General. The
chief support for the Right Socialists in or-
ganized labor comes from Zenro (All-Japan
Congress of Labor Unions) , organized in 1954
in part from Sohyo secessionists. However,
Zenro's membership is still only 670,000 and
it is unlikely that Sohyo's predominance will
be challenged over the next few years.
23. At present, we estimate that the prospects
for the development of a socialist opposition as
a serious alternative to the conservatives are
less than even. Although the socialists have
more than regained the ground lost after their
brief and ineffective hold on office in 1947, it
is unlikely that they can continue to gain
strength primarily as the focus of political
protest, particularly if the conservatives con-
tinue to steal their thunder as they have by
supporting normalized relations with the Bloc
and a more "independent" line toward the US.
Internal schisms in the socialist movement
will probably persist and weaken any united
party that may evolve. The doctrinaire ap-
proach of the socialists particularly in do-
mestic affairs has only a limited appeal in
Japan. Popular support is limited further by
the widespread distrust of their ability to
handle the practical responsibilities of govern-
ment. Organized labor will probably increase
somewhat in numbers, but it is organization-
ally and financially weak and subject to politi-
cal and economic coercion by industrial lead-
ers. Moreover, it is likely that conservative
goverments will take action in the next few
years further to limit the economic strength
and political activity of organized labor. Ex-
cept in the event of a reversion to authoritar-
ian government, however, organized labor will
probably remain a major opposition political
force with a significant potential for exerting
economic pressure on both management and
government.
Ultranationalist Forces
24. Extreme rightist and ultranationalist
movements continued during the past year to
be poorly organized and generally ineffective.
They have few representatives in the Diet
partly because they lack popular support,
partly because they cannot yet compete with
major parties and partly because they are dis-
dainful of parliamentary activities. Scattered
evidence suggests, however, that the move-
ments may be gaining some strength in local
areas. Although extreme rightists constituted
only a small percentage of successful candi-
dates in the local elections of April 1955, more
than half of the candidates representing
rightist organizations were successful.
25. Some extreme rightist organizations have
recently shown a tendency to return to ter-
rorist tactics; most, however, apparently con-
tinue to concentrate on propaganda and fund-
raising activity. Some progress was made
within the past year toward a revival of vet-
erans organizations. The most recent step in
this revival, which has gradually accelerated
since 1952, was the inauguration in June 1955
of the Japan Federation of War Comrades
Associations in an effort to unify the separate
veterans organizations which have sprung up
in almost every prefecture. The leadership
both of the new association and of a majority
of the prefectural groups is drawn largely
from the presurrender Imperial Reservist As-
sociation, once Japan's largest and most in-
fluential militaristic society. Espousing a
program directed to the revival of national-
istic values and institutions, the veterans
movement could serve as a powerful pressure
group in support of extreme rightist views
and could help to furnish leadership of a
quality that the extreme right now generally
lacks.
The Japanese Communist Movement
26. In accordance with international Commu-
nist strategy, the JCP has reoriented the party
program away from the violent and revolu-
tionary course adopted in 1950. The process
of rehabilitation as a peaceful political move-
ment with mass appeal was begun by the JCP
in mid-1952 and has been markedly acceler-
ated since late 1954. Major Communist lead-
ers who had gone underground to avoid occu-
pation controls came out of hiding and great-
ly increased their efforts to obtain united
action with other political groups.
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27. A reorganization of the party structure
was completed by July 1955, when a long de-
layed announcement of the death of Tokuda,
Japan's leading Communist for three decades,
and the concurrent abolition of his post of
secretary-general suggested the adoption of
committee-type rule along the recent Soviet
pattern. Nosaka Sanzo has probably succeed-
ed Tokuda as the leading Japanese individual
Communist. A majority of the new Central
Committee and all of the new Standing Execu-
tive Committee ? which appears to have re-
placed the Politburo.? were formerly mem-
bers of the highest echelon of party control
when underground, and there is no evidence
that the JCP is now threatened by the serious
factionalism at the highest level which afflict-
ed the party, particularly in the period 1948-
1951. A primary effort of the new organiza-
tion however, is likely to be centered in the
difficult task of maintaining internal party
discipline and sense of mission in the relaxed
atmosphere of legal and united front activity.
28. The significance of these recent develop-
ments on over-all JCP strength and potential
is difficult to estimate. There is no firm evi-
dence to indicate any significant change in
JCP membership or in the strength of its
active and passive supporters., JCP efforts
to form a united front with the socialist par-
ties have not been successful, although there
probably has been some cooperation at the
local level, particularly for the purposes of
election campaigning. Reports that the JCP
is in the process of dismantling its covert
structure, including the paramilitary appa-
ratus, must be viewed with caution. More-
over, despite recent emphasis on legal activity,
the covert organization of the JCP retains a
substantial capacity for sabotage and low level
espionage throughout Japan. Both at the
overt and covert levels of party organization,
primary emphasis appears to be not upon
further expansion but upon consolidation and
upon tempering of the hard core of party
1 Party membership is estimated to range between
80,000 and 85,000. Active and passive supporters
under various conditions may range from 500,000
to 1,000,000. In the February 1955 election, the
JCP polled 774,0'00 or 2.1 percent of the total vote.
6
leaders and membership through a program of
tightened party discipline.
29. Present JCP tactics will probably continue
so long as the Communist Bloc emphasizes
the normalization of international relations.
The JCP will encourage Japanese economic
and political relations with the Bloc, agitate
for the withdrawal of US forces, and seek to
penetrate and influence non-Communist mass
organizations.
30. The JCP will probably remain an impor-
tant political force in Japan in terms of its
ability to exploit local grievances and popular
causes. It will continue to infiltrate and in-
fluence, though not control, organized labor.
It will continue to attract university students
and 'intellectuals. In periods of economic
stress, its popular support might grow con-
siderably. The JCP cause will be assisted by
the fact that the principles of Marxist and
socialist economics will probably continue to
have wide influence in university circles.
Moreover, many intellectuals, significant ele-
ments of the press, and the Left Socialists will
probably continue to oppose government
measures which they fear would threaten civil
liberties even though these measures were
designed primarily to curb sabotage and es-
pionage.
31. A prolonged period of relaxed tensions
might give the JCP opportunities to throw
off its stigma as an agent of the USSR, in-
crease its mass support, and infiltrate organ-
ized labor, the government, and the armed
services. We believe, however, that most po-
litical leaders will continue to recognize the
JCP as an instrument of the USSR and that
most of the socialists will continue to reject
united front tactics. The government will be
alert to infiltration in the armed services and
the bureaucracy, and to Communist influence
and propaganda in the schools. As a peace-
ful party, the JCP will continue to have prob-
lems of internal discipline and factionalism
arising from personal as well as theoretical
and tactical differences. Some of its popular
issues will lose their appeal as conservative
governments increase contacts with the Com-
munist Bloc and as direct US influence on Ja-
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pan decreases. As in the past, the JCP is un-
likely to make any significant headway in
rural areas. The Japanese sense of national
pride and respect or devotion to the Emperor
appear incompatible with Communist pro-
grams. These circumstances, and the general
social conservatism of the Japanese people,
make it unlikely that the Communists can
develop a mass party or following in Japan.
Political Prospects
32. We believe that the moderate conserva-
tives will dominate the government over the
next few years. They will continue their pres-
ent policies of achieving economic strength,
of pursuing a gradual program of rearmament
with US assistance, of undercutting the
strength of the political left, and of strength-
ening the central government and traditional
institutions. We believe that the conserva-
tives Will make some progress, particularly in
rearmament and strengthening of central
government power. Nevertheless, the attain-
ment of conservative objectives will probably
continue to be hampered by conservative fac-
tionalism and the strength of the left opposi-
tion. Failure to resolve factionalism and to
adopt a more positive leadership role could
result in a succession of minority governments
with limited capacity to formulate and imple-
ment long range policy.
33. A strong public reaction to a failure in do-
mestic or foreign policy might force the hold-
ing of general elections in which the socialists
might win a plurality. Even in this circum-
stance the socialists would only come to power
if they were united while the conservatives
remained divided. If they did come to power,
the socialists would have a difficult time
agreeing on policy and a split would probably
soon develop between the doctrinaire leftist
members and the somewhat more pragmatic
right wing elements. The period of socialist
control would probably only be a brief inter-
lude, therefore, during which the conserva-
tives repaired their organization and prepared
to reassert their control.
34. Beyond the nexta few years, the pattern
of Japanese government is far less certain.
A continued growth in socialist strength
would serve to encourage conservative unity
and might limit the drift of conservative forces
further to the right. It might also provide a
more attractive rallying point than now exists
for those elements in Japan who are not satis-
fied with traditional social; economic, and po-
litical forms. It is likely, however, that if the
socialists should begin to offer a serious threat
to conservative control, the conservatives
would take vigorous action to undercut the
socialist position. Moreover, socialist pros-
pects will probably be limited by their own
disunity, their lack of popular appeal, and the
inherent conservatism of much of the elec-
torate. Therefore, we believe it is more likely
that the socialists will remain in a minority
and that control of the government will alter-
nate between two major conservative group-
ings.
35. Over the long run, it is uncertain whether
conservative governments will be able to main-
tain their present moderate character and still
govern effectively. Even under favorable con-
ditions conservative governments may have
increasing difficulty in satisfying competing
demands of their various supporters. Popu-
lar pressures for completing the withdrawW
of US forces and reduction of US influence will
probably increase, and conservative govern-
ments may not move rapidly enough to satisfy
these demands. The electorate will increasing,
ly expect the government to expand social and
economic welfare programs, and failure of the
government to respond would strengthen the
appeal of the socialist movement. On the
other hand the government will have to take
into account the pressures of business leaders
who will not wish to see their taxes increased,
and who would be concerned that domestic
costs not be increased. Pressures from the
military may lead to conflicts with some finan-
cial interests and conservative politicians over
the pace of rearmament, the degree of en-
couragement to be given nationalism, and the
role of military power in the conduct of for-
eign affairs.
36. Moreover, democratic parliamentary in-
stitutions are not yet firmly established in Ja-
pan. If the moderate conservatives fail to
give Japan effective leadership, extremist doc-
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trines of both the right and left, particularly
-the former, would have growing appeal. This
danger is increased by the possibility that con-
servative politicians, in their efforts to pre-
serve their position and to strengthen the
authority of the central government, may re-
vive instittitions and practices that might
jeopardize democratic processes. Many poli-
ticians, especially among the conservatives,
are not fully committed to democratic institu-
tions, and might join an authoritarian move-
ment if it seemed to be gaining popular sup-
port. On the other hand, the groups which
have benefited from recent reforms ? labor,
the socialists, and the intellectuals ? would
vigorously resist this trend and might greatly
increase their cooperation with the Commu-
nists. This might lead to a period of danger-
ous unrest and uncertainty in Japan in which
the operations of government would be seri-
ously impaired.
37. However, the chances for a significant in-
crease in the strength of extremist forges will
be reduced if, the moderate conservatives suc-
ceed in formulating objectives and slogans
that serve to unite the Japanese people with-
out returning to the dangerous appeals of ul-
tranationalism. In any event, the chances of
a seizure of power by the extreme right will for
sometime be limited by the discrediting of ul-
tranationalism, militarism, and racism during
the last war; by the real strengthening of the
moderate position in postwar institutions in
Japan; by a general fear of war; by the weak-
ness of the military as a political force; and
by the fundamental changes in Asia which
have removed any opportunities for quick and
easy military adventures by Japan.
38. Within the period of this estimate, the
JCP is not likely to win a significant parlia-
mentary position, although in certain circum-
stances it might gain substantial support from
the non-Communist left. Moreover, the JCP
probably will not attempt, much less be suc-
cessful in, an effort to overthrow the govern-
ment by violence except in the event of a
serious political crisis and then only in co-
ordination with direct military threats from
the Soviet Bloc.
39. Assuming favorable economic and political
conditions, we believe the chances are better
than even that the conservatives, partly in
response to continued pressure from the press
and the political left, will not revert to author-
itarian patterns of government. In their ef-
fort to improve Japan's domestic and inter-
national strength, however, the conservatives
will probably attempt to narrow the range of
individual freedoms and to place greater re-
straints upon the activities of organized labor
and subversive organizations. The conserv-
ative program probably will continue to give
priority to measures designed to improve Ja-
pan's national unity and strength. The in-
fluence of the bureaucracy and the military
will probably increase gradually but we be-
lieve that, except in the event of serious and
extended crises, civilian political leadership
will continue to control national policy.
Economic Situation
40. The Japanese economy has demonstrated
a considerable capacity for recovery and
growth during the postwar period. Its large
and flexible industrial plant is generally pro-
ducing at levels only slightly below the peak
achieved during World War II.
TABLE I
INDUSTRIAL PRODUCTION
(Indexes 1934-1936=100)
Peak Year 1950 1954
Percent
Change
Over
Previous
Year
1953 1954
Total
179
(1944)
84
167
23
8
Mining
147
(1943)
97
117
7
-5
Manufacturing
182
(1944)
82
174
25
9
Durable Goods
320
(1944)
110
213
22
2
Lumber
177
(1954)
120
177
8
4
Ceramics
177
(1939)
98
175
13
12
Metals
243
(1943)
97
192
19
4
Machinery
463
(1944)
126
257
22
-4
Non-Durable
150
(1954)
67
150
26
14
Goods
Food
192
(1954)
84
192
41
18
Textiles
114
(1937)
41
82
16
7
Printing
115
(1937)
45
110
36
3
Chemicals
267
(1954)
103
267
29
23
Rubber and
Leather
172
(1953)
114
171
31
-1
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While agricultural production is approximate-
ly 15 percent above prewar levels, the popula-
tion has increased about 27 percent in the
same period. The gross national product
climbed to a level of $20.36 billion in 1954 ?
a figure which in real terms is about 40 per-
cent above the 1934-1936 level. Both the per
capita GNP and consumption levels in 1954
were about 10 percent above prewar. Housing,
however, has not recovered to prewar levels.
41. Japan's rate of economic growth slowed
considerably in 1954 as a result of the taper-
ing off of economic activity generated by the
Korean War and because of the deflationary
measures initiated by the Japanese govern-
ment in late 1953. In 1954 Japan's GNP in
real terms increased by only three percent in
contrast with a 12 percent increase in 1953.
Japan's capital formation as a percentage of
GNP also declined in 1954, but it has continued
at a rate comparing favorably with that in
Western European countries, although per
capita GNP is substantially smaller.
1953-1954
Per Capita GNP Gross Investment
(in US dollars) as a percentage
1953-1954 of GNP
UK
941
16
West Germany
672
25
Italy
395
19
Japan
227
25
At the same time the decline in internal prices
induced by deflationary measures, and the
adoption of export incentives, together with
the generally high level of international eco-
nomic activity, produced some improvement
in Japan's balance of payments in 1954.
Current Transactions
1952 1953
1954*
(US $ millions)
Exports, f.o.b.
1,276.0
1,257.8
1,593.7
Imports, c.i.f.
2,031.8
2,404.7
2,399.4
Trade Balance
-755.8
-1,146.9
-805.7
Nonmonetary gold
5.6
2.4
2.7
Special dollar earnings
804.9
785.8
575.2
Investment income
-4.9
-23.1
-38.8
Transportation and
insurance
184.3
171.8
188.3
Other goods and services
-8.4
4.9
25.6
Balance of Current
Transactions
225.7
-205.1
- 52.7
* estimated
During the first six months of 1955, Japan had
a surplus in its foreign exchange transactions
which was equivalent to about $140 million in .
contrast to a deficit of $177 million during the
same period in 1954.
42. Japan's relatively rapid recovery was
greatly stimulated by the large-scale grants of
US assistance and special US dollar expendi-
tures in Japan. In the early postwar years,
1946-1949, the economy was kept functioning
by direct US economic assistance of some $2
billion. In the following period, 1950-1955,
the Japanese received some $3 billion partly
from direct economic assistance that con-
tinued into 1951, and partly from special dol-
lar earnings from US government expendi-
tures for military and other procurement and
the dollars spent by UN troops in Japan.
Trade Deficit
(US $
millions)
Special Dollar Earnings
(US $ as percent of
millions) Trade Deficit
1952
736
860
114
1953
1,135
786
69 -
1954*
806
' 575
71
1955*
650
450
69
* estimated
43. Despite its economic recovery and growth
in the past few years, Japan is still dependent
on special dollar earnings and has made little
progress toward solving basic economic prob-
lems. Japan must expand its exports sub-
stantially in order to offset the imports that
will be required to enable its economy to sup-
port a rapidly growing population (about one
million per year) in a country which has
limited natural resources. At present nearly
25 percent of Japan's food must be imported.
Crop yields are already high on Japan's in-
tensively cultivated arable land, and the mar-
ginal increases in productivity expected in the
future will probably not keep pace with rising
consumption requirements. Other physical
resources are limited in type and quantity.
Japan must import nearly all its sugar, raw
cotton, wool, and crude petroleum and large
quantities of refined petroleum, rubber, coking
coal, iron ore and scrap, and nonferrous
metals.
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44. One of the limitations on Japan's ability
to increase its exports has been the high costs
of production and the uneven quality of Jap-
anese goods. Fuel and power costs are high
in Japan and interest rates on loans for capital
investment range around 10 percent. Wage
rates for labor are low relative to other indus-
trial countries, but so is labor productivity.
Low productivity is a reflection of obsoles-
cence in plant and equipment, the generally
low level of industrial technology, and the
common practice of underemployment of la-
bor. Japanese industrialists have in general
failed to adopt contemporary production man-
agement and cost accounting procedures. De-
preciation reserves are frequently nominal.
There has been a tendency to maximize im-
mediate output at the expense of long-term
improvements in efficiency, and maintenance
is often inadequate.
45. Japan's trading problems have also been
complicated by the necessity of developing
new export markets and new sources for im-
portant raw materials as well as by changes in
the pattern of demand for Japanese products.
The Western hemisphere, particularly the US,
has largely replaced the Chinese mainland
and Korea as ' a major source of many of the
basic commodities needed by the Japanese
economy. In the postwar period the US had
been the most important single source of im-
ports, as well as the largest market for Japan.
Korea, Taiwan, and mainland China ac-
counted for 42 percent of Japan's total exports
in 1936 but only about 15 percent in 1954;
mainland China by itself accounted for 15
percent of all Japanese exports in 1936 but
for only about one percent in 1954. This shift
has been an important factor in Japan's bal-
ance of payments difficulties largely because
the expansion of Japan's exports to North
America has been limited both by trade re-
strictions and the similarity of the products
of the Japanese and US economies. In an
attempt to secure more of its basic commodi-
ties elsewhere and to further expand its mar-
kets, Japan has sought to develop South and
Southeast Asia as a major trading area. Jap-
anese trade with the area has increased more
rapidly than its trade with other areas, but in
10
real terms has only recovered to prewar levels.
Japan's efforts to expand its trade with South
and Southeast Asia have been impaired by
discriminatory trade barriers and foreign ex-
change shortages in the area. Moreover, an-
tagonism toward Japan and fears of a revived
Japanese economic imperialism, the demands
of economic nationalism, the unsettled repara-
tions questions, and the continued economic
ties of the newly-independent countries to
their former mother countries have also ham-
pered the expansion of Japanese trade. Ja-
pan's exports are now about one-half and im-
ports about three-fourths of prewar levels in
real terms.
46. Japan's trade and payments problems
arising from postwar shifts in trade pat-
tern are also complicated by the inconverti-
bility of currencies. The following table in-
dicates the currency
trade:
pattern of
1935 1951 1952
Japanese
1953 1954
(In percentages
Exports
of total trade)
Dollar area
51.1
23.4 31.2
38.4
34.4
Sterling area
27.1
45.2 42.4
24.7
30.3
Open account area
22.8
31.4 26.4
36.9
35.3
Imports
Dollar area
50.8
59.0 60.2
54.2
58.5
Sterling area
26.7
23.3 24.7
25.0
18.2
Open account area
22.5
17.7 15.1
20.8
23.3
47. Japan's response to its economic problems
has been conditioned by a variety of factors.
Prior to 1949 the occupation authorities did
not place emphasis on solving Japan's eco-
nomic problems, but allowed direct US eco-
nomic assistance to support the economy.
Moreover, US assistance, while contributing
to economic recovery, allowed Japan's gov-
ernment and business leaders to delay taking
actions to make Japan's economy more self-
sustaining. During the Korean War, Japa-
nese production was greatly stimulated, but
basic problems remained and new problems of
inflation and excessive imports developed. It
was only in October 1953 that the Japanese
government faced these problems and initiated
an austerity program. The main elements of
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this program were restrictions on bank credit,
tighter controls on the use of foreign ex-
change, reduction of government expendi-
tures, and the balancing of the budget at a
level slightly less than one trillion yen ($2.8
billion). The impact of the deflationary pro-
gram on the economy was relatively mild, but
wholesale and export prices declined and im-
ports were cut back. However, the deflation-
ary program has been gradually relaxed since
late 1954.
48. Other programs to increase productivity,
to cut costs, and to facilitate trade have con-
tinued or have received increased emphasis.
To facilitate production for export, the gov-
ernment has reduced interest rates on loans to
export industries and has made special alloca-
tions of foreign exchange to assist in import-
ing goods needed by export industries. High
costs and low productivity are being attacked
through the application of science and tech-
nology and by increased sponsoring of foreign
technical assistance. However, the govern-
ment is unwilling to offer sufficiently favor-
able terms to attract foreign investment.
49. To facilitate expansion of exports the gov-
ernment has encouraged integration and com-
bination among trading companies enabling
them to strengthen their competitive position
in foreign markets. It has also adopted a
series of measures to gain increased accept-
ance of Japanese products abroad. Japan has
established trade and payments agreements
with virtually all non-Communist countries,
except the US, but these agreements are so
drawn that Japan is still vulnerable to uni-
lateral actions that could increase restrictions
on its trade. Japan has finally won admission
to GATT (General Agreement on Tariffs and
Trade) , but many of its principal trading part-
ners have reserved the right to withhold from
Japan the benefits of membership.
50. Japan has attempted to deal with the
trade barriers and high tariffs imposed in par-
ticular by the dollar and sterling countries
through negotiation. It has gone so far as to
impose export quotas and financial restrictions
on manufacturers of some products destined
for these areas in order to allay fears Of dump-
11
ing. These measures have had some success
in the sterling area, but Japanese exports to
the US have not increased significantly. The
Japanese hope to increase their trade by
achieving a larger role for Japan in providing
technical assistance to underdeveloped na-
tions: So far the slow rate of economic
growth in South and Southeast Asia has dis-
appointed Japanese expectations for an in-
crease in trade with this area. However, the
Japanese are hopeful that increased US eco-
nomic and military aid to South and South-
east Asia will expand Japanese trade oppor-
tunities. The Japanese have not neglected
their "traditional" market on the Asian main-
land. Japan's trade with Communist China
increased during 1953 when restrictions on
this trade were relaxed and a further sharp
increase occurred in 1954 as a result of im-
proved trading arrangements. However, Ja-
pan's trade with Communist China remains
only 1.2 percent of Japan's total trade.
Economic Trends
51. Japan's economy will probably continue to
expand through the next year or so, though
at a considerably slower rate than in 1950 to
1953. It is almost certain that major features
of the deflationary program will be modified
during this period, thus stimulating economic
activity. However, if favorable trends in
world economic conditions continue and if
defense expenditures are not increased sub-
stantially, we believe tha Japan's foreign ex-
change position will not deteriorate seriously
despite declining special dollar earnings.
52. For the next year or two, the Japanese
economy has sufficient strength and reserves
to enable it to withstand a mild economic
shock, such as a minor recession in world eco-
nomic activities. However, a substantial de-
cline in these activities would have serious
repercussions for Japan. It would lose access
to many of its more important export markets
and thus would find it increasingly difficult
to finance imports. Internally, this would
probably give rise to lower consumption and
employment levels, and such a situation could
weaken the position of a moderate conserva-
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tive government. Such a decline might also
provide additional arguments for reductions
in defense expenditures.
53. In the long run, Japan can provide in-
creased employment opportunities and secure
a rising standard of living only if it can bal-
ance its trade at a higher, rather than a lower,
'level. The increase in exports must be suffi-
cient not only to balance the present level of
imports but also to permit an increase in this
level. Increased imports of raw materials and
capital goods will be required for increased
production of export goods, and increased im-
ports of consumer goods will be required to
meet the demands induced by rising levels of
income.
54. By 1965 Japan's population will probably
have increased from 88 million to 97 million,
and its labor force from 40 million to 49 mil-
lion. To maintain a relatively high level of
employment and to provide for normal in-
creases in living standards and per capita
productivity, gross output would probably
have to rise from $20 billion to about $32 bil-
lion ? an annual growth rate of 4.2 percent.
A high level of investment in productive plant
would have to be maintained and imports
would have to increase to an annual rate of
about $4 billion (compared with the current
level of 2.4 billion) . To finance these imports
and to replace special US dollar earnings, Ja-
pan's commodity exports would have to in-
crease from $1.6 billion to $3.4 billion. It
should be noted, however, that Japan might
make such strides in the use of synthetics and
other substitutes as greatly to increase self-
sufficiency and substantially alter long-term
import and export requirements.
55. We believe that Japan could, with effective
government economic leadership, make sub-
stantial progress toward meeting the purely
domestic requirements for a steady expansion
of output. It can reduce costs, improve in-
dustrial technology, and increase productivity.
Japan has consistently demonstrated the
capacity to invest 20 to 25 percent of GNP.
56. However, the problem of expanding exports
is, in large measure, beyond Japan's control.
Although Japan will probably succeed in mak-
12
ing its exports more competitive, expansion
of its markets will probably continue to be
hampered by trade restrictions. Moreover,
while Japan will seek new outlets in the under-
developed countries, these markets will not in-
crease rapidly because of the political instabil-
ity of these countries and their limited eco-
nomic ability to absorb aid. Further, Japan
will constantly face keen competition from
Western industrial nations in these areas.
57. Japan would like to increase its trade with
Communist China, and a moderate increase
in present levels is likely over the next few
years. Expansion in the short run will be
limited, however, by Japanese desires not to
offend the US. Japan will also be concerned
not to jeopardize its important trade with
Taiwan by a too close association with Com-
munist China. With present controls, we be-
lieve that by 1957 Sino-Japanese trade might
reach an annual figure of $70 million each
way. If controls on Chinese trade were
lowered to the level now applied against other
Bloc countries, we believe that by 1957 Sino-
Japanese trade could probably be raised to at
least $100 million each way. It might even
reach $150 million, but we believe this would
require some diversion of Chinese trade from
other export markets. However, the long run
prospects for resolving Japan's economic prob-
lems through a large scale expansion of China
trade appear poor even if all controls are re-
moved. As a result of its program of indus-
trialization and the reorientation of its econ-
omy toward the Bloc, China is now either
consuming internally or exporting to the Bloc
a large portion of the grains, iron ore, and
coking coal that Japan would like to import.
Japan is wary of becoming dependent on Com-
munist China as a major trading partner and
Communist China could not undertake a
large-scale expansion of its trade with Japan
without disturbing Sino-Soviet economic com-
mitments presently underlying its basic devel-
opment plans.
58. We believe that even with favorable world
conditions, Japan will probably require foreign
economic assistance for several years, at least,
and that the Japanese economy will remain
extremely sensitive to major fluctuations in
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the international economy for the next dec-
ade. Further Communist advances in South
or Southeast Asia would obviously have a seri-
ous economic impact on Japan.
Military Situation and Prospects
General Considerations
59. Japan's conservative governments have
favored a moderate program of rearmament.
They realize that only through some measure
of rearmament can Japan insure internal se-
curity and contribute to its national defense,
increase Japan's influence in international
affairs, and secure greater independence in
relations with the US.
60. However, the extent, nature, and pace of
rearmament have been major sources of dis-
agreement between the US and Japan and
have been divisive issues in domestic Japanese
politics. Although there is now a general ac-
ceptance of the need for Japan to have its
own defense forces, even on the part of most
socialists, popular opinion does not support
a rapid or sizeable build-up of the armed forces
beyond their present levels. Some groups op-
pose large-scale rearmament because they fear
resurgence of military influence on govern-
ment. Many also argue that no expansion of
authorized strengths can be undertaken with-
out revision of the war renouncing article of
the constitution. Such revision is opposed in
principle by the left wing parties who fear
that if the constitution is once amended it
would be easier for the conservatives to make
further revisions which would modify consti-
tutional guarantees of personal rights and
freedoms. It is widely believed that Japan
has no need for large forces since it has no
expansionists aims, and it is frequently argued
that any forces which Japan could support for
the foreseeable future would be of little value
in defense against a major foe with nuclear
weapons. The socialists claim, and this view
may be shared by some conservatives, that re-
armament under present circumstances of
dependence on the US would create forces that
would act as an instrument of US rather than
Japanese policy. However, the most wide-
spread arguments against larger defense
forces rest on economic grounds. The Japa-
nese and particularly the government, argue
that Japan cannot afford to allocate substan-
tially more funds to defense until the economy
is on a sounder footing. There is also strong
pressure to devote more funds to social welfare
at the expense of rearmament.
61. The Japanese government, under both
Yoshida and Hatoyama, has been responsive
to public opinion on the question of rearma-
ment. It has been unwilling to support the
long range force goals, except for the air force,
considered desirable by the US.
62. In deference to constitutional limitations,
Japan's military services are still called "Self-
Defense Forces" and as such lack the prestige
of regular military establishments. Morale is
good in all services and lack of a conscription
law has not yet affected attainment of author-
ized strength since ample qualified volunteers
have been available. However, the armed
forces suffer from a shortage of funds, facili-
ties, and equipment, and from uncertainties
and lack of coordination in top level govern-
ment planning.
Ground Forces
63. The Ground Self-Defense Force (Army) is
currently organized along US lines into a two
division corps with supporting combat and
service units, and four separate divisions each
with organic support units. The GSDF is cur-
rently effective at the Battalion Combat Team
level. It has an authorized strength of 150,-
000 men and an actual strength of about 131,-
000.
64. A force-wide reorganization and expansion
from a four division to a six division force
which took place last year improved its po-
tential effectiveness and made possible the
transfer of responsibility for the ground de-
fense of Hokkaido from US to Japanese units.
Under currently proposed force goal limita-
tions of 180,000 men, the GSDF will remain
much too small to defend Japan against large-
scale Communist invasion and it will continue
for some time to be dependent on US sources
for logistical support. However, the GSDF
is capable of maintaining internal security
and its effectiveness as a small, mobile combat
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force will continue to improve through train-
ing and modest expansion.
Naval Forces
65. The Maritime Self-Defense Force (Navy)
has an authorized strength of 19,400 men,
and an actual strength of 15,000 men. It has
two destroyers, 20 escort vessels, one sub-
marine, and numerous minesweepers, am-
phibious vessels, and auxiliaries. Most of the
major type vessels are on loan from the US.
The MSDF is currently capable of conducting
limited ASW, minewarfare, and escort opera-
tions within the Japanese coastal waters. Its
air arm, consisting of 961 men and 57 aircraft,
was officially established in August 1954 and
is engaged primarily in training activity. Ja-
pan's Maritime Safety Board (Coast Guard) ,
with its 10,000 men, 95 patrol craft, and 300
other small craft, is utilized in a security
capacity and is available to augment the
MSDF in event of war.
Air Force
66. The Air Self-Defense Force is still in an
early formative stage. It has 92 training and
transport aircraft and no combat capability.
With USAF support, the ASDF is engaged in
an intensive training program and present
plans call for the development of a force of
fighter, fighter-bomber, and transport type
aircraft. By the end of 1958 some units should
be capable of assisting in the defense of Japan.
Internal Security
67. Primary responsibility for Japan's internal
security is charged to the NPA (National Po-
lice Agency) which has an authorized police
strength of 114,715 organized into seven re-
gional bureaus. Although the police can
maintain internal security in an emergency
not accompanied by an act of external aggres-
sion, they cannot protect isolated military in-
stallations from sabotage. This vulnerability
to sabotage poses a definite threat to US forces
in Japan. In the event of an uprising during
an invasion it would be necessary for military
units to reinforce the police. Gradual im-
provement in the security picture is antici-
pated as the police and other internal security
agencies gain self-confidence and as they learn
to utilize their existing powers more effec-
tively. However, significant changes must
await the passage of adequate security legis-
lation. At present there is no antiespionage
law nor any general law protecting Japan's
own defense secrets. There is, however, a law
to protect MDAA (Mutual Defense Assistance
Agreements) secrets And a weak statute
against subversive organizations.
Industrial Support
68. Japan has the industrial potential and the
fundamental skills necessary to support a
large-scale expansion of its armed forces.
However, such an expansion could not be car-
ried out without a heavy government invest-
ment in defense industries. We believe that
such a program is unlikely, at least for the
next few years.
69. Japan is now dependent on the US for
most heavy and specialized items of military
equipment. Japan is producing light weap-
ons, ammunition, and service equipment,
though not yet in sufficient quantities to meet
current requirements. It is also producing
small naval craft up to and including de-
stroyer types and is planning to manufacture
US type aircraft with US financial and teCh-
nical support. Domestic production of light
military equipment for Japan's own forces and
for export will probably increase moderately.
In the main, however, the Japanese are unlike-
ly to divert any substantial portion of their
budget to increased armaments production.
Rather, they will seek continued US Assist-
ance, both in the form of end items and as
financial aid in the development of arma-
ments production facilities.
Research and Development
70. Japan has the skills and talents for ap-
plied research and development in modern
weapons. Research in military fields, how-
ever, is handicapped by opposition to large-
scale rearmament, by lack of funds, anti-
quated facilities and relative isolation from
the rapid postwar developments in weapons
systems. Therefore, Japanese scientists and
engineers will be heavily dependent on US and
other foreign data and experience for the next
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SECRET 15
few years. Nevertheless, the Japanese will
probably devote increased effort to military
research, particularly in the fields of elec-
tronics, jet engines and aircraft, guided mis-
siles, and eventually nuclear energy. With
the completion of modern research facilities
some of which are already being built, the
Japanese will be undertaking increasingly in-
dependent programs of weapons development
particularly after 1960. For example, Japan
may be producing air defense weapons sys-
tems of its own design by 1965.
Future Plans
71. We have no clear evidence that Japan's
military leaders have developed, or discussed
with political leaders, long-range strategic
plans. It appears, however, that the military
leaders are aware of the importance of modern
weapons and desire to emphasize the develop-
ment of modern defense systems for protec-
tion of air space and coastal waters and of
highly mobile but relatively small forces for
ground defense. Responsible officials are sug-
gesting that Japan's defense efforts should
be primarily directed toward development of
defenses against air attack. They appear to
plan on large-scale US participation in Japan's
defense in the event of enemy attack in the
foreseeable future. ?
72. The government's present tentative de-
fense plans call for a modest and gradual
strengthening of the armed forces over a six-
year period ending 31 March 1961. Under
this tentative plan Japan would build its army
strength to 180,000 men by 1959 distributed in
6 divisions and 4 brigades. Naval strength
would reach 33,000 men and 200 ships, includ-
ing 17 destroyer types, 23 patrol vessels, and 4
submarines. Most of this augmentation is
scheduled to come from domestic shipbuilding
facilities. The naval air arm would include 10
squadrons of 12 antisubmarine aircraft each.
The air force would expand to about 33 squad-
rons (700-800 combat aircraft) and about 50,-
000 men by 1961. These plans fall short of
Japan's capabilities in terms of manpower and
industrial potential, and will impose a lesser
burden on the economy than the defense effort
of numerous other countries. Nevertheless,
given the political and economic problems
facing Japan, it probably represents the upper
levels that Japan will support in its rearma-
ment program over the next few years.
73. Beyond the next few years, the pace and
extent of Japan's rearmament will depend on
many contingent factors. ?The pace of rearm-
ament might decline if there were a prolonged
relaxation of tensions, and probably would if
the socialists won office. On the other hand,
a rapid withdrawal of US forces or an increase
in international tensions might stimulate an
increase in the pace of rearmament. More-
over, a strong rightist government might at-
tempt more rapid and extensive rearmament
in order to support a more independent for-
eign policy. Except in these circumstances,
however, we believe that, over the long term,
the Japanese government will not devote a
large share of its resources to defense.
III. PROBABLE DEVELOPMENTS IN JAPAN'S
POSITION AND ORIENTATION
Trends Through 1958
74. Most Japanese at present favor a Western
alignment, because they feel that this will sup-
port Japanese national interests and because
they see no reasonable alternative. At the
same time there is a growing spirit of inde-
pendence in the conduct of Japanese national
and foreign affairs and an increasing demand
for a revision of US-Japanese defense arrange-
ments including a reduction of US forces.
There is a feeling that the danger of war and
the need for US protection has lessened. There
is also a belief that the US will have to defend
Japan in any case in order to protect the US
position in Asia. Thus the Japanese are more
inclined to attempt independent action which
may offset their ties with the US and might
eventually weaken them.
75. Moreover, irritants in relations between
the US mad Japan have increased. US pres-
sure for Japanese rearmament, the existence
of US bases in Japan, US experiments in the
Pacific with nuclear weapons, US opposition
to increased trade with Communist China,
and the problem of paroles for war criminals
are all issues which have troubled relations
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Balega1111/e-- 16
between the two governments. At the same
time Japan probably anticipates that US eco-
nomic support will decline further and that
US diplomatic support will become a less vital
factor in achieving Japan's objectives.
76. Japan is becoming more critical of US
policies, more unwilling to accept US advice,
and more eager to find opportunities for
demonstrating its independence. Japan's in-
creased assertiveness in its relations with the
US is, in part, a natural reaction to the years
of close identification of the conservative camp
under Yoshida with US policies. Hatoyama
and other conservative politicians undoubted-
ly have felt the need to break with the past,
assert their independence and win a "made
in Japan" label for both domestic and foreign
policies. The prospects are that this reaction
against close identification with the US may
continue for some time. In this climate, Ja-
pan will prove increasingly difficult in nego-
tiations with the US, and will probably seek
full consultation on all matters affecting
strategic, economic, and political develop-
ments in northeast Asia and especially an
equal voice in planning for the defense of Ja-
pan.
77. Japan will support US policies in the Far
East to the extent that such policies are clear-
ly in Japan's interest and carry little risk of
military involvement. It would support US
military operations in the Far East which
would not carry serious risk of involving Ja-
pan itself, but would not participate with its
own forces unless its own security were im-
mediately threatened. On the other hand, US
opposition probably will not prevent Japan
from joining other countries in supporting
reductions in controls on trade with Commu-
nist China. Japan is also unlikely in the next
few years to take measures, such as participa-
tion in regional defense pacts, that tend to in-
crease military commitments to the West and
which they fear would limit possibilities for
broader contacts with neutralist and Commu-
nist states.
78. General support for a policy of greater in-
dependence in foreign affairs has encouraged
Hatoyama's government to try to normalize
relations with the USSR and Communist
China. Japan has begun talks with the
USSR on a peace treaty and has permitted un-
official contacts with the Chinese Communists
to grow rapidly during the last few months.
At the same time it has been careful not to
sacrifice Japanese interests or to risk loss of
US support. It has consistently held that the
settlement of territorial issues and the repa-
triation of Japanese nationals are prerequi-
sites to the establishment of diplomatic rela-
tions with the USSR. It has shown some
skepticism about the value of trade and politi-
cal relations with Peiping and has been con-
cerned lest contacts with Communist China
should prejudice trading relations with Tai-
wan and the level of US aid for Japan. De-
spite the current cautious approach of Japan
toward the Bloc, we believe that Japan will
probably establish diplomatic relations with
the USSR within the next year or so. Rec-
ognition of Communist China will probably
be delayed and will continue to depend in part
on the attitude of other non-Communist pow-
ers toward China, especially that of the US.
If many of the major allies of the US extend
recognition to Communist China, the question
of recognition would become a major issue in
Japanese politics and could strain relations
with the US. Short of establishing full dip-
lomatic relations, however, Japan will prob-
ably attempt to increase trade with Commu-
nist China and may agree to limited official
contacts with Peiping for the settlement of
specific issues.
79. The Japanese have recognized that con-
clusion of reparations agreements and estab-
lishment of normal diplomatic relations with
countries of the Far East are essential if they
are to exploit their economic opportunities in
the area. Except for the ROK, where mutual
antipathy has kept relations strained, Japan
has made gradual progress toward gaining a
recognized place among the Asian countries.
Anti-Japanese sentiment is receding, and
Asian leaders tend to recognize the inevitabil-
ity of closer relations with Japan. Burma has
recently signed a peace treaty and reparations
agreement with Japan and it is likely that the
Philippines and Indonesia will follow suit over
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.010111111Wr
the next few years. The effective and re-
strained conduct of Japanese diplomacy at
Bandung is probably indicative of the manner
in which Japan's relations with non-Commu-
nist Asia will be carried on over the next sev-
eral years.
80. Within the next few years Japan's present
position and orientation in Asia are unlikely to
be greatly modified. While Japan's strength
and influence will probably gradually increase,
it will remain dependent, on the US for eco-
nomic and military assistance, and in a larger
sense, for strategic security. Japan will not
be able in the next few years to develop suffi-
cient military strength and sufficient foreign
trade to follow a completely independent poli-
cy or to exert any great influence in Asia.
There is no desire in Japan to become depend-
ent on the Communist Bloc, and a nonalign-
ment policy, however desirable it may seem to
some Japanese, will not be a practical alter-
native so long as Japan remains economically
and militarily dependent on the US.
81. Japan's orientation probably would not
change radically if the socialists won power.
Any socialist government would probably in-
clude Right Socialists who would exert a
moderating influence on foreign policy. The
socialists would exercise less restraint in re-
lations with the 'Bloc, particularly Communist
China, and they would press for a more rapid
withdrawal of US forces from Japan. How-
ever, the socialists are no more desirous than
the conservatives of becoming pawns of the
Sino-Soviet Bloc, and would recognize that
it is in Japan's interest to maintain close ties
with the West.
Trends Over the Next Decade
82. Japan's stability, strength, and orienta-
tion over the longer run will continue to be
peculiarly dependent on developments beyond
Japan's control. Japan's economy will remain
extremely sensitive to fluctuations in the
world economy and Japan may require dollar
assistance well beyond 1960. However, if Ja-
pan is able to expand exports and to maintain
a rate of economic growth sufficient to avoid
serious internal instability, moderate conserv-
17
atives will probably continue to control Ja-
pan's government. Although Japan will prob-
ably maintain its basic alignment with the
US over the next decade, it will prove an in-
creasingly difficult nation with which to bar-
gain as it grows in strength. It will seek to
make arrangements with the US, and with
the Communist Bloc, that enhance its own
strength and position in Asia. Within the
decade Japan will probably establish relations
with Communist China.
83. For many years Japan will not have the
economic and military strength to support a
politically or militarily neutral position and it
is therefore unlikely to alter its general align-
ment with the US. However, while Japanese
governments are likely to continue to look to
the US for strategic security, they are unlikely
over the long term to agree to the continua-
tion in Japan of bases under exclusive US con-
trol. Moreover, in a period of prolonged re-
laxation of tensions the Japanese might even
estimate that they could gain economic ad-
vantages and increase their political independ-
ence by further weakening their military ties
with the US. Even if Japan retained its gen-
eral alignment with the US, it might attempt
to assume a neutral position in the event of
an imminent threat of general war, -fearing
that its ties to the US might invite the de-
struction of the Japanese homeland through
nuclear attack.
84. A prolonged and severe economic reces-
sion might bring extreme rightists to power
and lead Japan to adopt more opportunistic
policies. The accession to power of a rightist,
ultranationalist regime would seriously reduce
the prospects that Japan could serve as a
focal point for the strengthening of free Asia.
85. In any event, Japan is unlikely to develop
sufficient power and prestige to play a major
role as a leader or defender of the non-Com-
munist Far East over the next 10 years. Given
? favorable world economic conditions and in-
ternal stability, however, it should make grad-
ual economic and military progress. So long
as it retains its alignment with the US it
should constitute a valuable adjunct to Free
World power in the Far East.
wepownellir
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