Occupation Without Troops. Glenn Davis
General's objections, as a member of a mission reviewing SCAP's reparations policy, under which Japan was being required to supply industrial equipment to countries that had suffered economic damage from Japanese aggression. Since most of the valuable machinery belonged to the zaibatsu, which had monopolized the spoils of war, the program seemed fair enough. But instead, the mission, headed by industrialist Clifford Strike, recommended cancellation of most of the reparations shipments and the rehabilitation of industries slated for dismantling. "In May, following the Strike Report, General MacArthur ordered all interim reparations removals stopped and tabled the whole issue until after the conclusion of a peace treaty with Japan."15
Ironically, Strike, president of Overseas Consultants Inc., was working hand in glove with Draper and Kauffman, both of whom had a vested interest in the reversal. So did Strike's firm, which was getting a fee of $750,000 for the survey and in the process secured a big contract with the Japanese government—financed by Draper's firm, Dillon, Read & Co.16 One compelling reason for the suspension of reparations was that much of the equipment slated for shipment abroad was claimed as collateral for bonds amounting to about $25 million issued before the war, mainly by Dillon & Read.17 Such mercenary motives seem to have weighed heavily in decisions that gave Japan, the defeated aggressor, an unbeatable head start over its Asian victims.
Although MacArthur held to his liberal position concerning the economy, he became increasingly concerned with the rising tide of militant unionism and political radicalism. Early in 1947, MacArthur outlawed a threatened general strike, and a crackdown on the Communist Party began. But in the April elections, the opposition parties gained a plurality in the lower house, and for the first time in Japan's history a socialist, Tetsu Katayama, became prime minister and formed a coalition cabinet in May 1947.
Harry Kern chose this critical time for a visit to Japan, said to be his first since the war. Through Pakenham he met a number of the purged Japanese for whom he had shown such sympathy. There is ample evidence, mainly from letters, that members of the Japan Lobby were actively cultivating anti-communist business, political, and diplomatic figures of pre-war prominence or notoriety. The latter, of course, were delighted at the opportunity to get themselves rehabilitated, for most of them had been purged and not a few were suspected of war crimes. From them, Kern got his fill of shocking and pitiful stories about the injustices inflicted by the purge, which he circulated among his acquaintances.18
Upon his return to New York, he worked up another sensational Newsweek story entitled "Trouble in Japan: How the Struggle to Win the Peace Now Threatens the Success of the American Occupation." His report (June 23,1947) was billed as "the first complete account of the critical and surprising situation that now faces General MacArthur and the American Occupation." While avoiding direct criticism of MacArthur, who had unwisely granted him a private interview, Kern painted an appalling picture. "The Japanese economic system is about to go into a tailspin... an economic crisis unparalleled in Japanese history... Unless really drastic measures are taken... the chances of making Japan into 'the workshop of the Far East as part of the American policy of rebuilding the world and containing communism will have gone glimmering..."
As the first step toward a solution, Kern called for a separate peace treaty with Japan "by this autumn" even if it meant "leaving out not only the Russians, but the Australians, the Chinese, the Filipinos, and the six other nations on the Far East Commission... That treaty should provide for the continuance of paramount American interests in the guidance and administration of Japan for a long period of time..."
Again Kern attacked the purge and saved his most withering disparagement for the Economic and Scientific Section in charge of the zaibatsu dissolution program. As a consequence of their incompetence, he wrote, "the United States... must now bear the entire burden of supporting impoverished Japan... Food stocks have run so low that... by the end of the summer the Japanese may be entirely dependent on imported food."
MacArthur, who prohibited even mild criticism of his policies by journalists in Japan on pain of expulsion, was infuriated by Newsweek's flagrant exaggerations. For example, Kern stated that the Japanese wanted the Americans to stay for as long as fifty years, and he supported his view by leaking information apparently confided to him by the general himself: "General MacArthur has already raised this question [the stationing of U.S. forces in Japan] with Emperor Hirohito, although the discussion has been denied formally."
By now, MacArthur was openly calling Pakenham a "fascist" and Kern a "reactionary or worse."19 Ignoring numerous signs that official sentiment in Washington was changing, SCAP continued to push its economic reforms. MacArthur seemed to be on solid ground, because the Economic Deconcentration Law, planned by the Far East Commission and just approved by the State-War-Navy Coordinating Committee, was now moving toward enactment by the Japanese government. As Japanese agencies in charge of zaibatsu deconcentration dragged their feet, apparently confident of a policy shift in the near future, the supreme commander resumed his attack. On July 3, without advance warning, he ordered the fragmentation of Japan's two largest trading firms, Mitsui Bussan and Mitsubishi Shoji.
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