Lis­ten:
MP3 One Seg­ment
RealAu­dio
NB: This RealAu­dio stream con­tains both FTRs #426 and #427 in sequence. Each is a 30 minute broadcast.

Intro­duc­tion: This pro­gram high­lights the pro­found cor­po­rate con­nec­tions between Amer­i­can finan­cial and indus­trial insti­tu­tions and the Zaibatsu—the giant fam­ily trusts that con­trolled Japan­ese indus­try since the coun­try was opened in 1850s. To recoup their invest­ments in Japan made before the war, Amer­i­can com­mer­cial giants and their allies in gov­ern­ment, the media and the MacArthur group within the mil­i­tary delib­er­ately frus­trated attempts at reform­ing Japan. The Zaibatsu were returned to power. By white­wash­ing the Emperor’s piv­otal role in Japan’s war of aggres­sion and the atten­dant atroc­i­ties, MacArthur and his men­tors pre­served the Impe­r­ial house­hold. In addi­tion to the eco­nomic motives for under­min­ing Japan­ese ref­or­ma­tion, MacArthur and his allies in the State Depart­ment and the Mor­gan finan­cial and indus­trial group sought to estab­lish Japan as an anti-Communist bul­wark. Ulti­mately, they were entirely suc­cess­ful, and the polit­i­cal fig­ures who had pros­e­cuted Japan’s slaugh­ter in the Pacific were returned to power.

Pro­gram High­lights Include: The role of Dil­lon Read’s William Draper, Jr. in the restora­tion of the old order in Japan; Her­bert Hoover’s pri­mary influ­ence in the per­pet­u­a­tion of Japan­ese fas­cism into the post­war period; the smear­ing and appar­ent mur­der of both Japan­ese and Amer­i­cans who stood in the way of the nega­tion of Japan­ese reform.

1. Begin­ning with dis­cus­sion of the pro­found con­nec­tions between Amer­i­can cor­po­ra­tions and key Japan­ese finan­cial and indus­trial inter­ests, the broad­cast high­lights the deci­sive impact this rela­tion­ship had in negat­ing the breakup of the zaibatsu (the giant Japan­ese fam­ily trusts.

“Impru­dently, the Amer­i­can bureau­crats who drafted FEC-230 fool­ishly over­looked the vested inter­ests of major U.S. banks and cor­po­ra­tions that had made huge pre­war loans and invest­ments in Japan. Mor­gan Bank had pro­vided Japan with many loans, includ­ing one of $150 mil­lion to rebuild Tokyo after the Kanto earth­quake, and the Japan­ese gov­ern­ment had defaulted on repay­ment of all these loans at the time of Pearl Har­bor. Many other U.S. cor­po­ra­tions had major pre­war stakes in Japan in the form of loans and direct invest­ments. At the end of 1941, Amer­i­can invest­ment accounted for three-quarters of the total for­eign cap­i­tal in Japan­ese indus­try. The largest sin­gle direct invest­ment, nearly half of the total, was by Gen­eral Elec­tric, one of the Mor­gan extended fam­ily. GE held 16 per­cent of the paid-up cap­i­tal of Tokyo-Shibaura Elec­tric, a firm linked to the Mit­sui zaibatsu. Other large invest­ments had been made by Asso­ci­ated Oil in Mit­subishi Petro­leum, by West­ing­house in Mit­subishi Elec­tric, by Owens-Libby in Sum­it­omo, by Amer­i­can Can in Mit­sui, and so on. After the war, these U.S. cor­po­ra­tions were owed repa­ra­tions, roy­al­ties and loan pay­ments total­ing more than a bil­lion dol­lars. They were deter­mined not only to recover their invest­ments but to resume their prof­itable busi­ness oper­a­tions in Japan. If Japan’s biggest con­glom­er­ates were bro­ken up, this would impact directly on their Amer­i­can part­ners. If the direc­tors and own­ers of these zaibatsu were con­demned to death or to long prison terms, the new man­age­ment might well argue that they were not respon­si­ble for debts incurred under a pre­vi­ous crim­i­nal mil­i­tary dic­ta­tor­ship. If efforts to intro­duce democ­racy to Japan mis­car­ried and led to a social­ist or com­mu­nist takeover, past expe­ri­ence with Soviet Rus­sia showed that such debts would never be honored.”

(The Yam­ato Dynasty; Ster­ling Sea­grave and Peggy Sea­grave; Copy­right 1999 by Peggy and Ster­ling Sea­grave; Broad­way Books [a divi­sion of Ran­dom House] [HC]; ISBN 0–7679-0496–6; pp. 228–229.)

2. Fear of com­mu­nism and a desire to estab­lish Japan as a bul­wark against the Soviet Union (and later Red China) had much to do with the res­ur­rec­tion and san­i­ti­za­tion of the old regime.

“This new ratio­nale was tak­ing hold in Wash­ing­ton and being echoed in Tokyo, thanks to care­ful orches­tra­tion. Japan­ese gov­ern­ment spokes­men said that SCAP was per­se­cut­ing busi­ness­men not because they had com­mit­ted war crimes, or acquired their wealth by ille­gal means, but because they had been suc­cess­ful. ‘We find it dif­fi­cult to under­stand how this can be democ­racy . . . the empire’s key finan­cial and indus­trial fig­ures, the men we need most to pro­vide a sound busi­ness devel­op­ment upon which real democ­racy must rest, are being con­demned with­out trial, merely because they were busi­ness­men.’ The old guard in the Diet (echo­ing Joe Grew) pre­dicted ‘chaos and con­fu­sion’ and com­mu­nist rev­o­lu­tion in Japan if these purges went ahead.”

(Ibid.; p. 229.)

3. As dis­cussed above, the Mor­gan finan­cial and related indus­trial inter­ests were cen­trally involved in the cap­i­tal­iza­tion of Japan after the Kanto earth­quake of 1923. It is worth not­ing that the Mor­gan group was piv­otal in lob­by­ing against the breakup of the zaibatsu and the struc­tural reform of Japan­ese gov­ern­men­tal insti­tu­tions. (Thomas Lam­ont was a key Mor­gan banker and a dom­i­nant influ­ence on diplo­mat Joseph Grew. The Mor­gan group was also very close to Dou­glas MacArthur, who was in charge of the occu­pa­tion of Japan. Both MacArthur and the Mor­gan group were involved with the 1934 coup attempt against Pres­i­dent Franklin Roosevelt.)

“In Wash­ing­ton, a group known as the Japan Crowd encour­aged these rever­sals of SCAP pol­icy. Joe Grew was their spokesman, guided by Her­bert Hoover as well as Tom Lam­ont, who had raised a gen­er­a­tion of invest­ment bankers to share his view of China as a cor­rupt place and Japan as a nation of fis­cal self-discipline. After the war, Grew retired from his post as under­sec­re­tary of state and moved to Wall Street, where he became the lead­ing lob­by­ist of the Japan Crowd. By 1947, America’s Repub­li­can Party was in full resur­gence. Democ­rats were on the defen­sive. SCAP reforms were being aborted and all talk of purges and ret­ri­bu­tion in Japan was silenced. Grew and the Japan Crowd pre­vailed because Mao’s suc­cess in China and com­mu­nist chal­lenges in Korea, Viet­nam, Indone­sia and else­where alarmed even lib­eral politi­cians, per­suad­ing them of the need to build an Iron Tri­an­gle of Japan, Tai­wan and Korea.”

(Ibid.; pp. 229–230.)

4.

“Con­ser­v­a­tive Amer­i­can busi­ness lead­ers were usu­ally care­ful to denounce monop­o­lies and car­tels in prin­ci­ple, but they suc­cess­fully fought off any effort to break up Japan’s con­glom­er­ates in prac­tice. Grew and his col­leagues made all the right demo­c­ra­tic noises about reform­ing post­war Japan, while work­ing ener­get­i­cally behind the scenes to block all efforts at reform. These men believed that the best hope for the future Pacific econ­omy lay in reviv­ing pre­war trade pat­terns, with Amer­ica again becom­ing Japan’s biggest trad­ing part­ner. Japan had the only mas­sive indus­trial base in Asia. Once its finan­cial elite were fully restored to posi­tions of con­trol, Japan would become an indus­trial bul­wark against fur­ther expan­sion of com­mu­nism in Asia. The time frame was urgent.”

(Ibid.; p. 230.)

5.

“Grew also became co-chairman of a new lob­by­ing group, the Amer­i­can Coun­cil on Japan (ACJ). The ACJ was a polit­i­cal action com­mit­tee set up by wealthy Amer­i­can con­ser­v­a­tives imme­di­ately after the war to lobby Wash­ing­ton and to fight the ini­tia­tives on reform­ing Japan that were being cham­pi­oned by liberals—whom the ACJ scathingly referred to as ‘New Deal Democ­rats’ and ‘com­mu­nist fel­low travelers’ . . .”

(Idem.)

6. A key fig­ure in the res­ur­rec­tion of the old order in Japan was William Draper, who was also instru­men­tal in help­ing to finance the inter­ests that backed Adolf Hitler. After the war, Draper helped to frus­trate the decarteliza­tion of Ger­many (as did Her­bert Hoover). (For more about Draper, see—among other programs—Miscellaneous Archive Show M11—available from Spitfire—as well as FTRs 99, 102. For more about Her­bert Hoover, see RFAs 1, 2—available from Spitfire.)

” . . . In the sum­mer of 1947, [Har­ri­man asso­ciate James Lee] Kauff­man vis­ited Tokyo on behalf of Dil­lon Read and made a per­sonal assess­ment of the Tru­man administration’s secret plan for the break-up of the zaibatsu. The secret FEC-230 doc­u­ments were then leaked to Newsweek by Under­sec­re­tary of the Army William Draper, in civil­ian life a senior part­ner of Dil­lon Read. In Decem­ber 1947, while Amer­ica was gear­ing for its pres­i­den­tial elec­tion cam­paign, Newsweek began a series of arti­cles denounc­ing SCAP-1. The mag­a­zine accused SCAP of run­ning amok and exceed­ing its author­ity. SCAP was try­ing to impose ’ an eco­nomic the­ory which has . . . no coun­ter­part any­where else in the world. It is not com­mu­nis­tic but it is far to the left of any­thing tol­er­ated in this coun­try.’ Newsweek went on to warn Amer­i­can tax­pay­ers that this plan posed grave dan­gers to their wal­lets. ‘Japan is cost­ing the Amer­i­can tax­pay­ers mil­lions of dol­lars a year.’ Break­ing up the zaibatsu would ‘weaken the Japan­ese econ­omy to the point where the main­te­nance of Japan would become a con­tin­ual charge on the Amer­i­can tax­payer.’ It was vital, Pak­en­ham said, to get Japan back on track and make it ‘a fer­tile field of Amer­i­can capital’ . . . ”

(Ibid.; p. 231.)

7. In order to frus­trate attempts to reform Japan and estab­lish a true democ­racy, the reac­tionar­ies described above delib­er­ately under­mined the offi­cials attempt­ing to bring about change in Japan.

” . . . Her­bert Hoover had ear­lier warned [MacArthur aide] Bon­ner Fellers that the State Depart­ment was send­ing ‘a bunch of com­mu­nists’ to Tokyo, along with some ‘fel­low trav­el­ers.’ At the time Fellers was very busy sub­orn­ing Gen­eral Tojo and other key wit­nesses. Hoover was liv­ing in an apart­ment at the Wal­dorf Asto­ria Hotel in New York City, where he met reg­u­larly with Grew, Kern and the oth­ers. He encour­aged them to attack SCAP, while at the same time secretly giv­ing advice to MacArthur and Fellers, and pass­ing ques­tions to Hiro­hito. Dur­ing this whole period, Hoover con­tin­ued to lead MacArthur to believe that he had a seri­ous chance of being nom­i­nated as the Repub­li­can pres­i­den­tial can­di­date or, at the very least vice-president. This made MacArthur acutely sen­si­tive to Newsweek’s charges that SCAP was pur­su­ing goals that were vir­tu­ally com­mu­nis­tic . . . Accord­ingly, MacArthur weeded out the remain­ing lib­er­als and New Deal­ers from its ranks, turned SCAP-1 and into SCAP-2, and fol­lowed the pro­phy­lac­tic course dic­tated by those who held his future in his fists.”

(Ibid.; p. 232.)

8. Ulti­mately, the above-mentioned William Draper played a crit­i­cal role in destroy­ing Japan­ese reform.

“The death-blow to reform came soon after­ward. In Feb­ru­ary 1948 the Amer­i­can gov­ern­ment sent two Wall Street bankers to Japan to decide whether lib­eral reforms should go ahead or not. The out­come was pre­dictable. The Draper-Johnston mission—led by banker Percy John­ston and Under­sec­re­tary of the Army William Draper—spent two weeks in Japan, then announced its rec­om­men­da­tions. Draper knew lit­tle about Japan but, as he was on leave from his posi­tion as a vice-president of Dil­lon Read, it was only nat­ural that he was anx­ious to pro­tect its invest­ments and those of related firms. Ear­lier, he had made a name for him­self by res­cu­ing Ger­man indus­try from the ‘exces­sive zeal’ of U.S. occu­pa­tion forces in Europe. Percy John­ston was an exec­u­tive of New York’s Chem­i­cal Bank, which had long­stand­ing ties with Mit­sui Bank. So this was like send­ing foxes to inven­tory the hen house. What Japan really needed, they said, was not to be pun­ished for wag­ing a mer­ci­less war, but to be restored to eco­nomic power as quickly as pos­si­ble. The Japan­ese them­selves could not pos­si­bly have said it better.”

(Ibid.; pp. 232–233.)

9.

“Of the orig­i­nal list of 325 Japan­ese com­pa­nies that were to be reor­ga­nized, only 20 remained on the Draper-Johnston list. No Japan­ese banks were to be restruc­tured. The ambi­tious Amer­i­can plan to reform Japan’s econ­omy and gov­ern­ment was suf­fo­cated in the cra­dle in less than three years. As a pre­cau­tion, the great zaibatsu banks did change their names for a while. Mit­subishi Bank tem­porar­ily became Chiy­oda Bank, Sum­it­omo Bank became Osaka Bank, Yasuda Bank became Fuji Bank, and so on. (The boom brought about by the Korean War, 1950–1953, quickly returned them to prof­itabil­ity, and made it pos­si­ble to resur­face their care­fully hid­den assets with­out attract­ing atten­tion. Prime Min­is­ter Yoshida called the Korean War ‘a gift from the gods.’)”

(Ibid.; p. 233.)

10. Even attempts at effect­ing repa­ra­tions to the vic­tims of the war were largely negated, as the zaibatsu and their Amer­i­can busi­ness part­ners suc­cess­fully appro­pri­ated much of the funds ear­marked for repa­ra­tions in order to shore up their own respec­tive situations.

“In the imme­di­ate post­war scram­ble for repa­ra­tions, the Japan­ese zaibatsu, includ­ing the wealthy fam­i­lies toward whom [Tru­man adviser Edwin] Pauley was so sym­pa­thetic, and who (like post­war prime min­is­ter Tanaka, for exam­ple) had prof­ited enor­mously from the war and hid their prof­its, sub­mit­ted their own claims for com­pen­sa­tion for wartime dam­age to their arma­ments fac­to­ries. These claims came to more than $5 bil­lion, and many were paid. Com­pare that to the $1 bil­lion paid to victims.”

(Ibid.; p. 296.)

11.

“Instead of cash pay­ments to con­quered coun­tries, Japan was ordered to send indus­trial equip­ment. Even these token repa­ra­tions were sus­pended by Wash­ing­ton when the equip­ment was claimed as col­lat­eral for bonds issued before the war by Amer­i­can firms includ­ing Mor­gan Bank and Dil­lon Read, who were at the head of a long line of U.S. cor­po­ra­tions with big pre­war invest­ments in Japan. By the early 1950’s, Japan owed Mor­gan nearly $600 mil­lion in unpaid inter­est, penal­ties and prin­ci­pal just for the 1924 earth­quake loan. This did not include other huge sums for other loans that Mor­gan, and mem­bers of its extended fam­ily, had made before 1940.”

(Idem.)

12.

“In 1951, an offi­cial from Japan’s Min­istry of Finance arrived at Mor­gan head­quar­ters at 23 Wall Street, say­ing, ‘I have come to honor my sig­na­ture.’ At this time no Japan­ese bureau­crat had the power to make such a state­ment. Japan was still an occu­pied coun­try and noth­ing of this sort could have been said with­out the explicit approval of Gen­eral MacArthur. In any event, the offi­cial went on to say that Japan had not defaulted on a loan in two thou­sand years. Refi­nanc­ing and ser­vic­ing was arranged through Smith Bar­ney and Guar­anty Trust. Smith Bar­ney had already joined the Mor­gan fam­ily when it suf­fered finan­cial rever­sals dur­ing the Depres­sion, and Guar­anty Trust had been a Mor­gan ‘ward’ since the 1920’s. Thus Mor­gan not only ben­e­fited by get­ting its loans repaid, but by hav­ing its sub­sidiaries col­lect com­mis­sions for restruc­tur­ing the same loans. In the end, there was noth­ing fair about the way Japan’s (acknowl­edged) post­war resources were allo­cated. Peo­ple who were phys­i­cally the vic­tims of Japan­ese bru­tal­ity were com­pletely upstaged by big cor­po­ra­tions that com­man­deered all the money made avail­able. By 1952, Tokyo had repaid all pre­war invest­ments by United States cor­po­ra­tions, and com­pen­sated them for all prop­erty damage—so these Amer­i­can firms made a profit on the war even in Japan.”

(Ibid.; pp. 296–297.)

13. In order to frus­trate Japan­ese reform, MacArthur and his aides saw to it that Emperor Hiro­hito was absolved of all war guilt. As seen in FTR#290, as well as M26, the Emperor bore a great respon­si­bil­ity for the Japan­ese aggres­sion and atroc­i­ties of World War II. One of the ways in which MacArthur white­washed the Emperor was to impugn the char­ac­ter of any­one who impli­cated him or his fam­ily in war crimes, even a mem­ber of the impe­r­ial royal fam­ily, Prince Konoe. The Prince’s char­ac­ter was assas­si­nated, and his own bio­log­i­cal death fol­lowed shortly thereafter—an alleged “sui­cide.” Two aides to Prince Asaka, who directed the Rape of Nanking, also died under strange circumstances.

“When [MacArthur aide Gen­eral Bon­ner] Fellers dis­cov­ered some­thing neg­a­tive about Hiro­hito, he lit­er­ally set about destroy­ing the source. Nat­u­rally Prince Konoe was inti­mately informed, and when Fellers heard what Konoe had to say about Hirohito’s guilt, he denounced the prince as ‘a rat who’s quite pre­pared to sell any­one to save him­self, and even went so far as to call his mas­ter the emperor ‘the major war crim­i­nal.’ There­after, Fellers, [Grew pro­tégé Max] Bishop and Macarthur took an intense dis­like to Prince Konoe and, with no fur­ther jus­ti­fi­ca­tion, added his name to the list of war crim­i­nals to be pros­e­cuted. One of the few states­men who had tried to talk Hiro­hito into seek­ing an early peace, and who had ear­lier vol­un­teered to go to Switzer­land to arrange secret peace talks, Prince Konoe now was black­balled by the Amer­i­cans and hounded to despair in a vicious cam­paign of back­bit­ing and innu­endo. He was informed (falsely) that his name had now been moved to the top of the list of war crim­i­nals, and that he faced immi­nent arrest and impris­on­ment. One Decem­ber 16, 1945, he was found dead in his home. Most sources quote him say­ing he would not sub­mit to the indig­nity of trial. The offi­cial rul­ing was sui­cide, but schol­ars Meirion and Susie Har­ries, among oth­ers, believe that Prince Konoe was mur­dered. They offer com­pelling evi­dence against sui­cide. For one thing, Gen­er­alis­simo Chi­ang wanted Konoe’s name removed from the list of poten­tial war crim­i­nals. Konoe was not on the British list. Amer­i­can sources indi­cate that Konoe was, in fact, never a seri­ous can­di­date for trial. Joseph Keenan, who became head of the Tokyo tri­bunal, regarded Konoe as a ‘con­fi­den­tial infor­mant’ of the great­est impor­tance. Yet as the Har­rieses note, ‘There was no short­age of peo­ple at every level of the Japan­ese gov­ern­ment who would have pre­ferred Konoe not to tes­tify.’ Other cru­cial wit­nesses also died con­ve­niently before the tri­als com­menced. Two of Prince Asaka’s staff who car­ried out his orders at the Rape of Nanking died sud­denly of ‘heart trou­ble’ at the end of 1945, before tri­als got under way.”

(Ibid.; pp. 208–209.)

14.

“America’s oli­garchs had res­cued Japan’s oli­garchs. Although it was absurd to see the Pacific War as only a minor his­tor­i­cal aber­ra­tion, they were intent upon restor­ing things in Japan as they were before the war. George Ken­nan said: ‘We had pur­posely relieved our erst­while oppo­nents of every shred of respon­si­bil­ity for what was now to come.’ The elite sim­ply tucked the bit­ter pill in their cheek to spit it out the moment the Amer­i­cans were gone.”

(Ibid.; p. 236.)

15. Another highly sus­pi­cious death was that of State Depart­ment offi­cial George Atch­e­son, con­sis­tently at odds with the reac­tionary poli­cies of MacArthur and his staff.

“Given a price­less oppor­tu­nity, the Amer­i­can occu­pa­tion had done lit­tle to change Japan. What was intended to be a vic­tory of West­ern democ­racy over Japan­ese fas­cism became a strug­gle between Amer­i­can lib­er­als and Amer­i­can con­ser­v­a­tives, with many casu­al­ties. One of them was George Atch­e­son, the senior State Depart­ment adviser in Japan. Although he was resigned to ‘the short solu­tion,’ he had his ene­mies, more than he knew . . . In August 1947, when MacArthur’s inner cir­cle was mak­ing the final turn­about from SCAP-1 to SCAP-2, George Atch­e­son decided he had to go back to Wash­ing­ton per­son­ally to report to the Sec­re­tary of State and the White House what was afoot. He gath­ered sev­eral mem­bers of his staff together and set out by gov­ern­ment plane across the Pacific, bound for Hon­olulu. After pass­ing lonely John­ston Island but well short of Hawaii, the plane that had been fully fueled mys­te­ri­ously ran out of fuel and went down. One of the sur­vivors said that, as the plane fell, Atch­e­son shrugged, shook his head sadly and said, ‘It can’t be helped.’”

(Ibid.; pp. 236–237.)