PROSPECTS FOR JAPAN

Created: 2/7/1961

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IBRARY

1

NATIONAL INTELLIGENCE ESTIMATE

PROSPECTS FOR JAPAN

(Supersedes)

Submitted by

DIRECTOR OF CENTRAL INTELLIGENCE

TVie following intelligence organisationsns preparation of this estimate: The Central InteUigence Agency and the InteUigence organisation! of the Department!tate, tne Army, the Navy, the Atr Force, and The Joint Staff.

Concurred tn by the CNTTED STATU INTELLIGENCE BOARD

ebruary IHl. Concurring were The Director ofand Research. Department of State; the Assistant Chief of Staff for Intelligence. Deportment of the Army; the Assistant Chtef of "oraltetfiflence).of the Navy; the Assistant Chief of Staff, InteUigence. USAF; the Director for InteUleence, Joint Staff; the Assistant to the Secretary of Defense, Specialnd theof the National Security Agency. The Atomic Energy Commission Representative to the USIB, and the Astfitant Director, Federal Bureau of Invettloatian, abstained, the subject beino outiide of thetr jurisdiction.

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PROSPECTS FOR JAPAN

THE PROBLEM

To analyze the political situation in Japan in the light of developments0 and to estimate the general outlines of probable developments over the next year or so.

Japan will almost certainly remain aligned with the US over the next year or so, it will continue slowly to grow more assertive of its own independentand more active in world affairs. The conservative elements will almost certainly continue to control Japanese governments for the foreseeable future and Lkeda will probably retain thefor the next year, at least. Japan's economy will probably continue to expandapid rate although it will remain sensitive to adverse actions abroad beyond the control of the Japanese.)

Lkeda will almost certainly have his hands full coping with dissension within his party and with an irresponsible and increasingly aggressive opposition in the Diet. Consequently, he will probably exercise extreme caution in dealing with sensitive domestic or foreign policy issues and will emphasize domestic economic measures of popular appeal to theHe will seek to avoid accusations of highhandedness or subservience to foreign pressures.

Pacifist and neutralist sentiment, born Japan'sofin another war, will almostcontinue to influence theexecution of its pro-Western policies. In addition, there will probably be strong domestic pressures for the regu-larization of Japanese relations withChina. However, if the USits opposition to recognition ofChina, the Lkeda government probably will not take any serious steps in this direction. )

The Left will seize any opportunity to agitate the public and to maintainupon the Japanese Government to obstruct effective implementation of the US-Japan security arrangements. In most circumstances, the Lkedawill probably take fairly vigorous steps to oppose leftist efforts to obstruct

rs (SI

t

SECRET

rsrs ISI

the ty oi tne oases would almostbe impaired by leftist massand labor boycotts, and possibly by

The Director of Intelligence and Research,of State, the Assistant Chief of Stan,USAF. the Director for Intelligence, Joint Staff, and the Assistant to the Secretary of Defense, Special Operations, would substitute the following text for the last four sentences of this paragraph:

Japanese Government would not stand In the way of US use of Japanese bases for logistical purposes In support of security operations elsewhere In the Far East during the next year or so, although It would expect to be Informed In advance of our Intentions.

is passing through profoundand social changes. Although theJapan had successfully imposedinstitutionsraditionalistgraduallyeriod of nearly athe impact of defeat and USJapanese society to its foundations.the psychological atmosphereovercast with the memories generatedonly two nuclear weapons ever used infifteen years after the endWar II, Japan has emerged as anand economically significantworld power. Sharply contendingare being presented toadical Left which favorsand closer association with theBloc,onservative Rightassociation with the US.as dominated by Issues relatingalignment with the US and the West.

JAPANESE SITUATION

are many elements of stabilityin Japan. It is economicallyand prosperous. Its gross national prod-

uct (GNP) has increased at an averagerateercent over the past decade; GNP roseercent9 and anotherercentts standard of living is by far the highest in Asia, and per capita GNP9 wasercent above the prewar level. The majority of the electorate remainsconservative; the November Diet elections returned the conservatives to powerf the popular vote. Under the ruling Liberal Democratic Party, the Japanesecontinues to look to the US forand economic security and has publicly rejected neutralism. Despite considerable public reluctance, the government isslowly to improve Japan's military

he events of the past year, however, are reminders of modern Japan's social, political, and psychological dislocations, which wereby World War IT and subsequent events. With military defeat, the entireof state authority and order collapsed, hastened on Its way by the conscious efforts of the occupation to introduce new,forms. Fifteen years after World War

SECRET

Japan is still gropingationalregarding the political and socialto replace those swept awaylthough Japanese ingenuity and industry have broughtemarkable economic recovery, political and social reconstruction has been slow and uncertain. Japan'sof democracy tolerates an excessiveof political irresponsibility among the conservatives, the Left, the press, and the

Japanese attitudes towards foreign affairs areervading desire for non-involvement, for escape from international political obligation, exists side by sideesire, on the part of the great majority of the Japanese, for US assurance of Japan'sand economic opportunity. Thepeople, ln the main, admire the US and dislike and mistrust the Bloc. However, thereatent neutralist sentiment in Japan shared by most elements of the population and particularly strong among the generation that has come of age since the war. The widespread Japanese desire for noninvolve-ment springs from the experience of war and defeat and an effort toew positionivided world. It springs alsoeep distrust of militarism and authoritariana reluctance to assume the economic burden oforror of nuclear weapons and another major war.esire to avoid the unpleasant realities of the cold war whileetter life for thepeople.

In this setting, there is an increasingfor polarization of Japanese political forces between the conservatives and the Left. The Left is largely urban, organized, andand draws strong support from theactive labor movement. Though it has deep schisms, the Left is often able to work cohesively in its opposition role andisproportionate influence at thelevel. On the other hand,strength is based in those elements of the population, particularly in rural areas, which tend to be politically passive andIn consequence, thealthough In the majority at the polls.

lack organized means of making their will felt in the national capital ln times of political crisis. Moreover, the governing LiberalPartyoalition of eight or nine factions, held togetherommon policy outlook but divided by personal rivalries for power.

The conservatives and the Left are sharply divided on the Issue of Japan's basicorientation and on key domestic Issues. The conservatives advocate the continuation of Japan's postwar policy of alignment with the West, the strengthening of Japanesepotential, and the modification ofreforms. The Left espouses the goaleutral Japan and advocates abrogation of security ties with the US.

The Left feels little obligation to abide by decisions of the parliamentary majority and frequently resorts to ex UnparliamentaryWhen such pressures take the form of mass demonstrations and violence,governments, aware of public feareversion to police state methods, have been hesitant to permit the police to exercise more than nominal restraints. On the whole, the stability of conservative governments tends to be precarious in times of political crisis,when the Left enjoys broad popular acquiescence in its position and the Prime Minister lacks the full support of his own party.

The leftist riots of May-June took placeime when the underlying concernsabove were greatly intensified byImmediate events:ncident, the breakdown of the Paris Summit Conference, the approach of President Eisenhower's visit, and. above all, Prime Minister Klshl's action In pushing ratification of the US-JapanTreaty through the Diet. AnU-Kishi demonstrations began as university students took to the streets to protest Klshl's treaty action and his leadership in general.and labor elements soon Joined ln and. spearheaded by Communist agitators, the riots tookistinctly anti-US flavor.the demonstrations and riots could not nullify the ratification of the US-Japan Security Treaty, they did cause the collapse of

the Kishl government and damage USand thereby served the interests of the Bloc. Moreover, the riots demonstrated the potential power of the organized Left to bring pressure upon the Japanese Government to restrict or deny the US use of certain military bases in Japan in future crisis situations.5

The November Diet elections reflect both continuity and change ln present Japanesehere has been no major change in the distribution of parliamentary power. The Liberal Democratic Partyeats, retaining the supportubstantial majority of the Japanese electorate. Many traditional voting patterns continue: theof rural Japan; the tendency for local Issues toreat bearing onespecially outside the major cities; and the strong influence of personal relationships and loyalties on the Japanese voter.

The Democratic Socialist Party, which was formed0oderate faction of the Japan Socialist Party, dropped fromoeats, while the Japan Socialist Party in-

'The Director of Intelligence and Research,of State, the Assistant chief of Staff.USAF. and the Assistant to the Secretary of Defense, Special Operations, consider that this paragraphisleading impression of the significance of the events under review. In their opinion, the demonstrations and riots reached the proportions tbey did becauseniqueof IntemaUonal and domestic circumstances. The paragraph should state clearly that public tolerance or support of the demonstrations wasfar more to antagonism against Kishl personally than to neutralist and anU treatyIt should point out that the Communists failed In their effort to turn the demonstrationsroad anti-American movement and thatviolence at the end provoked an adverse public and press reaction against suchFinally, It should point out that the power of the organized Left to bring pressure on theGovernment applies to the whole gamut of governmental policies (for example, in8 Police Duties Billot Just to the US use of military bases, but that the capability of the Left to mount operations of scope ond effectiveness of0 depends largely on the evolution of foreign and domestic circumstances exceptionally favorable to leftist objectives.

'See table In Political Annex for results oflower house elections

creased ita strengtheats. Although the Japan Communistercent of the popular vote, it increased Its representation ln the Lower Houseeats andore votes thanhe combinedDemocratic Socialist, and Communist popular vote increased5lections)3 percent. The Sohyo labor federation, closely allied with the JapanParty, has been greatly strengthened by the elections, while its rival, the moderate Zenro federation, which supported theSocialists, has been weakened. The more radical elements have increased their dominant position in the Japan Socialist Party, which has retained its position as the only significant opposition party.it appearsubstantial majority of young Japanese reaching voting age have cast their ballots for the Japan Socialist Party.

III. THE OUTLOOK

A. Internal Political Outlook 1

he conservative elements will almostcontinue to control Japanesefor the foreseeable future and Ikeda will probably retain the Premiership for the next year, at least. By Japanese standards his governmentompetent but not an outstanding one.

keda will almost certainly have his hands full coping with dissension within his party and with an Irresponsible andaggressive opposition in the Diet. His administration, at least during its first year, will probably endeavor to consolidate itsand to avoid undue exposure to theline of fire. Consequently, Ikeda will probably exercise extreme caution inwith sensitive domestic or foreign policy issues and will emphasize domestic economic measures of popular appeal to the Japanese. In so doing, he will seek to avoid accusations of highhandedness or subservience to foreign pressures.

'See the Political Annex for details concerning the political parties.

OEOIiDT

to expand Its popular base,Socialist Party will portray itselfchampion of Japan's independentand will sharpen its campaign toIn US-Japan relations and theinterest in closer relations withChina. It will be especially alertopportunities offered by evenarising over the Ryukyus andwith US-Japan securityBecause of its minority positionthe Japan Socialist Party willcertainly continue to resort to massand other extraln order to augment Its influenceissues. This tendency will bethe proved effectiveness of suchnd by the probable increasingof radical elements, particularlyof the Sohyo laborthe party. The more moderatewill seek to restrain thisrisis situation, they are unlikely toto control extremists within thethe course of mass demonstrationshave been launched. Oppositionon the government willumber of foreign policythe normalization of Japanesewith mainland China, which wewillajor issue in JapanThe opposition's attacks upongovernment will be buttressed byof neutralismtrongdiscontent with Japan's foreignthe intellectuals, college students,collar workers.

B. Defense Establishment'

of the Japanese militaryhas been hindered bysentiment, but its publichas gradually increased. Despiterestrictions and politicalmeasures for strengthening andthe Self-Defense Forces will continue

principal Judgments respecUng the Japanese Seir-Defense Forces found ln, "Probable Developments inebruaryemain generally valid.

lthough proposed defensewill probably remain controversial, completion of the currently approvedwillignificant gam lneffectiveness. The Self-Defense Forces are capable of maintaining Internal security, but the government will remain mostto employ military forces for thisOver the period of this estimate. Japan will continue to depend almost entirely upon US deterrent strength for its defense.

C. Economic Outlook "

Barring adverse developments intrade, the economy will probablyfor some time to expandapid rate, propelled by high rates of increaseercentlthough the rate of population increase has dropped toercent, the labor force is still growingaster rate and an industrial labor surplus will probably persist. Moreover, there is an increasingdemand for rising living standards. Any significant slowdown in the economy would have immediate political repercussionsto the lkeda government and probably to the entire conservative position.

Because the Japanese economy ls soon foreign trade, the increase in ONP necessary to provide expanding employment and rising living standards will requireexpanded markets and Imports. Therefore Japan will remain extremelyto foreign market conditions and theof foreign governments, especially the US, as about one-third of Japan's total trade is with the US. The US directivesallingutback in dollarabroad haveonsiderable psychological Impact ln Japan. Theof these directives, the settlementJapan's obligations for occupation-eraand developments in US trade policy are likely to raise political issues In Japan which the conservatives would find embarrassing and the opposition could exploit

'See the Economic Annex (or details on Japan's economy.

Japanese hope lo Increase theirthe US. but their most immediateis to hold their present share of theToetter balance ln itseconomic relations Japan will step upto improve Its trade with otherareas, particularly Westernwill seek US good offices to this end.Interest of many Japanesein increased trade with theBloc, snd especially Communistalso persist and will be Intensified ifcountries should take actionsJapan's trade Interests.

D. International Orientation

Japan will almost certainly remain aligned with the US over the next year or so. In line with trends of the past few years,Japan will continue slowly to grow more assertive of its own independent Interests and more active in world affairs Thesewill in large degree be the result of US efforts to assist Japan totrong and independent nation, and will hold promiseore natural relationship between two great nations working independently toward mutually beneficial world goals. By and large, this will be the concept of US-Japanese relations held by Prime Minister Ikeda, most of the Liberal Democratic Party, and aportion of conservative Japanese opinion.

Neutralist sentiment will almost certainly continue to Influence Japanese politics during the next year or so. However, the degree to which It is translated Into an active political force resulting either in Increased support of the Left or modification of governmentwill be determined by several factors; the course of Japan's international economicJapanese assessments of developments in US world strength; the policies of the Bloc, and especially Communist China toward Japan; and the effects on Japan of majordevelopments. The US overall military position in the world no longerto many Japanese to be as secure and commanding as it did before the USSR's dramatic advances ln weaponry and Commu-

nist China's rapid growth in strength on the nearby mainland of Asia. The Japanese will continue to be sensitive to any developments which they might construe ashange in basic power relationships in the Far East or as Invalidating existing Japanese foreign policy positions.

Unless, as Is unlikely. Bloc policies become much tougher than they already are toward Japan, the combination of pervasivesentiments, political pressures exerted by the Japanese Left, and the growingspirit will almost certainly cause theto become more active in seeking ways of improving relations with the USSR sndChina. Trade with the USSR win probably continue to increase. However, there is strong suspicion snd hostility toward Russia in Japan, snd the Issues of Sovietof the South Kuriles and restrictions on Japanese fishing are formidable, although not Insurmountable, obstaclesloserletormal peace treaty. Concessions on these matters would not be very costly to the USSR, and the Soviets might make them at any time that they believedove could affect Japan's alignment with the US. During the next year or so, however, we believe that Japan's posturethe USSR Is not likely to be greatly altered.

In contrast to their attitudes towardthe Japaneseense of historic and cultural affinity with China. In addition, many Japanese businessmen continue tothe China mainland marketatural and profitable outlet for Japanese goods,evidence to the contrary. For theseand because of political pressures from the Japan Socialist Party and Sohyo. there willrowing tendency in Japan, even among the conservatives, to seek ways and means of regularizing trade and diplomatic relations with the China mainland. Ikeda will almost certainly oppose any rapidtoward establishing full diplomaticwith Peiping, but at the same time he will almost certainly sanction somein private trade, cultural relations, and low-level technical agreements. If Peiping

" 1 rm f

iji

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to modify its present strict conditions and hard-nosed attitudes, domestic pressures would probably force lkeda to move rapidly to expand trade and other relations.

The Japanese will be especially sensitive to any indications of change in US policies toward Communist China or in thestanding of the Republic of China. Any relaxation in the US attitude toward Pel-ping would stimulate existing pressures for regularizing Slno-Japanese relations. Even if the US position remains unchanged, there will be strong Japanese sentiment for dropping support for the US-sponsored moratorium when the issue of Chinese representation comes up again in the UN this fall. However, in view of the Important Japanese economic and security interests in Taiwan, the Japanese Government would probably prefer to see some kind of "two Chinas" solution to the questions of UN representation and theof diplomatic relations, although it recognizes thatolution is equaUy abhorrent to Peiping and Taipei.

If, over the next year, the US maintains its opposition to recognition of Communist China, the lkeda government probably will not take any serious steps in this direction. If Communist China were admitted to the UN without provision for Taiwan representation, Japan would probably continue to refuse to extend diplomatic recognition. However, if in the unlikely event that somerespecting Taiwan were arrived at inCommunist China, the Japanesewould probably soon extendto Peiping whatever the US attitude.

The Left will seize any opportunity tothe public and to maintain pressure upon the Japanese Government to obstruct effective implementation of the US-Japan securityIn most circumstances, the lkeda government will probably take fairly

vigorous steps to oppose leftist efforts to ob-struct operation of the US bases.

In addition, the utility of the bases wouldcertainly be Impaired by leftist massand labor boycotts, and possibly by sabotage.'

'The Director of IntelUgenee and Research,of State, Uie Assistant Chief of Staff,USAP. tbe Director for Intelligence, Joint Staff, and the Assistant to the Secretary of Defense, Special Operations, would substitute lhe following text for uie last four sentences of this paragraph:

unexpec: we believe that the Japanese Government would not stand In Uie way of US use of Japanese bases for logistical purposes In support of security operations elsewhere in Uie Par Bast during the next year or so, although It would expect to be Informed In advance of our intentlons.

ItT

8

OLITICAL

lkeda Cabinet. In selecting his new cabinet following the0 elections, lkeda put the emphasis upon continuity and stability, avoiding for the tune being anyfightweeping cabinet reshuffle might cause. Nine of the Ministers arefrom Uceda's pre-election cabinet,those ln such key posts as foreign affairs, finance, and labor. Furthermore, the new cabinet, while including representation from all major factions of the LiberalParty, continues to be based primarily upon the three predominant factions of lkeda, ex-Premier Kishl, and Klshl's brother. Eisaku Sato. These three factions holdf theinistries, Including most of the key cabinet positions. lkeda Is generally expected toa cabinet reshuffle after the end of the regular Diet session, probably in July, at which time he will probably attempt totronger cabinet with broadened partyby Including factional leaders themselves.

Factionalism tn the Liberal Democratic Party. The November election caused little shift in the relative distribution of factional strength within the party. Althoughstrengths are difficult to ascertain with certainty, they appear to line up as follows. The present Ikcda-Kishl-Sato coalition haseats ln the Lower House. lkeda hasollowers while Klshi and Sato eachtriking decline in prestige last summer, Kishl has regrouped his faction; lkeda has made slight gains; and Sato has gained considerably. Ichiroitter opponent of lkeda, remains withakeo Miki has re tamed hisfollowing of aboutnd is trying to consolidate his leadership of several minor factionsommon interest lnlkeda Altogether the an tl-lkeda forces in the Liberal Democratic Party have astrength ofembers.Foreign Minister Fujiyama, who Isdisposed toward lkeda, heads the remain-

ing faction and has aboutollowers. At present, the major contenders to succeed lkeda as Prime Minister are Takeo Miki and Eisaku Sato.

Sporadic factional in-fighting will continue to mark the activities of the LiberalParty. Certain personal antagonisms, such as between Kono and lkeda, account for much of the factionalism. More importantly, the conservative leadership apparently does not regard the Socialist and Communist gains in the elections as serious enough tolosing of the ranks. As they see it, the Liberal Democratic Party emerged from the elections with added strength. The partyeats In comparisonn the8 elections. When four persons elected as independents chose to Join It. the Liberal Democratic Party obtained the largest Diet representation of any postoccupation party.

The Japan Socialist Party. With thethe Socialists advancedeats- The elections strengthened the majority position of the party's left wing Aboutf the party's members of the Lower Bouse are Sohyo labor leaders. By contrast, moderate elements led by Jotaro Kawakami remained in the distinct minority with only abouteats. The Socialists hope to stimulate the disintegration of the centrist DemocraticParty and to attract its elements back Into the Japan Socialist Party. Thislies behind the agreement amongleaders to elect aging, ineffectual right-wing leader Kawakami to the post of Party Chairman. Buoyed up by their success at the polls and the decline in the competingSocialist Party, the Socialists havefrom their low ebb9 and view the prospect of further gains against theDemocratic Party wilh some confidence An important factor In Socialist optimism is the demonstrated success of the party inthe support of the students and young urban groups, who are believed lo have voted

9

lor the Japan Socialist Party in November.

The Democratic Socialist Party. When this party was formed in0 fromrightwing members of the JapanParty, under the leadership of Suehiro Nishlo, it initially includediet members and had the full support of Zenro. Japan'slargest trade union organization. The party went Into Its first test at the polls ln November, strenuously campaigning toro-Communist and anti-US label on the Japan Socialist Party. It sought toentral position between tbe two majorby advocating an independent foreignpro-Communist nor unduly reliant on theincludedof Communist China and the gradual modification of existing US-Japan securityIt stressed adherence topracticesoderate trade unionism. Many Japanese believed thisto have considerable appeal for the Japanese voter and the failure of theSocialist Party at the polls cameurprise. The party electedhe major effect of the party's defeat Is to remove for the time being evenoderate and responsible opposition party to which governmental power could be transferred without radical changes in Japan's political and economic structure andorientation.

The Japan Communist Party. In theelections, the Communists increased their strength in the Lower House from one to three seats andf the popular vote, an increase ofercent8 and the highest vote9 when the Communistsf the vote. Partyis now believed to beharp increase of0 after several years of near stagnation. Morehowever Is the party's emergence over the past year from isolation on thepolitical scene. Through its united front tactics, the Japan Communist Party has become an acceptable partner in Joint action with many leftwing groups. The capability of the Communists for covert action has prob-

ably increased and they will probablywith some success, to attempt tothe Japan Socialist Party and Sohyo ln order to bolster the Influence of their leftwing elements.

The Rightist Element. Various events, most notably the boldly public assassination of Japan Socialist Party Chairman Inejlro Asanuma in the midst of the electionhave served to show that rightisthave recently become more inclined toward direct and violent action in Japanese politics than at any time since the end of World War IX Their ability to influencedevelopments, except through Isolated violence, is very small. The rightists have limited financial support and no backing from Japanese military elements. In the face of the highly organized labor unions andparties, the rightist groups are fragmented and distrusted by the general public.

Student and Teachers Groups. Mostuniversity students identify themselves with the political Left and support the Japan Socialist Party. This results In part from the postwar rebellion by the young against the customs of their conservative elders, and in part from the pacifist idealism and newfreedoms promoted by the postwar constitution. The main student organization isAll-Japan Federation of Student Self-Govemmentwhich represents about half ofniversity students. The leadership ofhas been largely captured by the Communists, who are, however, split between competing factions, some of them even more radical than their mentors in the JapanParty prefer. The leading teacher'sleftist ln orientation and heavily infiltrated by Communists. Mostschool teachersreat manyteachers are pacifist, Marxist, andMost university students seem to lose much of their radicalism after they graduate and begin their careers,onsiderable number of them are unable to And suitable employment and join the swelling ranks of frustrated, embittered, unemployed

-SBCBBT

- mjoiigT

RESULTS OF JAPANESE LOWER HOUSE ELECTIONS2

Election

Purty Conservatives <LDP>

Popular Vole

'

'

Vote (percent)

Seals

*

i JSP and DSP)

Vote

Vote (percent)

Scat*

(JCP)

Vote

Vote (percent)

Seat* .

and Minor Parties

vote

vote (percent)

Seats

Includes Liberal Party and Progressive Party.

Liberal Party, Japan Liberal Party, and Progressive Party. 'Includes Liberal Party and Democratic Party.

'Includes Right Socialist Party, Left Socialist Party, and Labor Farmer Party.

Japan Socialist Party and Democratic Socialist Party. Latter party, formed In0 by former Right Socialists,otes orercent ot the popular vote but won onlyiet seats.

"Since the elections ln November the LDP has increased its Diet strengtheats. Four of the five additional seats came from the accession of Independents to LDP ranks; one was gained because the postelection deathocialist candidate gave the seat to an LDP runner up.

ANNEX B

ECONOMIC

broken and defeated country only fifteen years ago, Japan today Is more prosperous than it has ever been before and the economy is expandingigh rate.he rate of Increase in Japan's gross national product (GNP) has only once fallenercent. In real terms, ONP9 wasercent8 and is expected to have increased byercenthis rapid economic growth was caused partly byconditions ln the international trading community Butarge extent, lt has resulted from the energy and ability of the Japanese people themselves. Through their efficiency, labor, and Investment, abetted by US Investment and aid, they have returned Japan to its position as one of the Free World's four major industrial complexes. Japan now produces two-thirds of the cement, most of the steel and electric power, and virtually all the finished capital goods made inAsia. In addition Japan leads the world in the production of steel ships and rayon textiles, and in the import of iron ore and raw cotton.1

The fact remains, however, that theeconomy restsrecariousit must import virtually all the rawits Industry consumes, and it mustenough to pay for its imports.ontinued substantial Increase in national production is required if Japan Is to maintain high employment and the steady rise In living standards which the Japsnese people have come to expect. Prime Minister Ikeda has called for doubling the national income in the next ten years, bringing per capita income to present Western European levels. Ikcda's program would imply an average annualofercent lnealizable

goal given no abrupt adverse changes lnconditions abroad.

As ofapan's population was4 million, fifth largest in the world. The population Is expected toithin the growing labor force, the percentage of industrial workers isdue to the steady migration of farm workers to urban areas. Thus, despite the rapid growth of the economy, an Industrial labor surplus persists.

Because the economy depends so heavily on foreign trade, sn increase Ln GNP In theprojected by Ikeda will require greater Imports and expanded markets abroad. At present. Japan's trade Is predominantly with the Free World, particularly North America and Asia. The US Is Japan's best customer, taking almost one-third of its exportsatillionn turn, the US is expected to supplyercent of Japan's imports valued5 billion0 (making Japan third after Canada and the UKustomer for USrade with the Sino-Soviet Bloc is very slight, although the volume of Imports from the USSR has been increasingubstantial rate over the past few years.

Special dollar earnings, derived from US offshore procurement and other military spending in Japan, have been an important part of Japan's exports to the US. These earnings have averaged0ear for the last five years and.ave made the difference between deficit and surplus in Japan's balance of payments.pecial earnings probably equalled Japan's estimated (BOO million increase In foreign exchange reserves.

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TableELECTED INDEX OF JAPAN'S ECONOMIC GROWTH

(Current Prices)

(Calendar years)

national product

national product per capita

production

(cJ3J

increase over previous year of:

activity

production

consumptionercent of GNP

private Investmentercent of

public utilities. Source: Japanese Government.

Table 2. BALANCE OFND0 (Calendar years: values In millions of US dollars)

January-

(fo*.)

Imports

balance

and Insurance (net) ..

net*

(net)

goods and services

transactions

(reparations, short-term bor-

etc.)

total all current transactions

may not add to totals because ofainly special dollar receipts. Source: Bank of Japan.

Tabl* S. FOREIGN TRADE BY GEOGRAPHIC AREAS. CALENDAR YEARS Mb. AMD JANUARY-JUNE

January-

I960

(billions of US dollars! {billions of US dollars)

09

1.0

2.5

32

43

30

3.2

(percent of total):

M

and Central America

11

States)

lit)

America

I

%

and Oceania

(percent of total):

..

53

and Central Amerva

28

States)

)

America

1

and

t

trade with Slno-Sovlet Bloc.

Fltfures may not add to totals because of rounding.

Source: Japanese Government.

Table t. JAPAN'SITHO-ROVIET BLOC. CALENDAR9 AND0

(In millions of US dollars)

January-June

China

43

of Japan's World.

:

China

8

2J

.,

4

of Japan's World Total

Japanese Government

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