Okinawa return costs probably topped $320 million under secret pact

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TOKYO, March 12 Kyodo -
Finance Minister Naoto Kan said Friday he believes the Japanese government paid
more than a total of $320 million for costs related to the 1972 reversion of
Okinawa under ''a secret pact in a broad sense'' with the United States.
Kan made the remarks after releasing the results of the Finance Ministry's
months of investigation into Japan's zero-interest account at a U.S. Federal
Reserve Bank in connection with the reversion of Okinawa to Japanese
sovereignty from U.S. control.
The main subject of the investigation was one declassified memorandum of
understanding that Japan's former top financial diplomat Yusuke Kashiwagi
negotiated in 1969 with his U.S. counterpart, Anthony Jurich, which indicates
that Japan had promised to pay more than $320 million for the reversion.
''Between Japan and the United States at that time, I believe there were secret
promises regarding the burden going beyond $320 million, which has been
stipulated in the agreement on the return of Okinawa, and how other money (for
the reversion) should be spent,'' Kan said at a news conference at the
ministry.
He said the memorandum probably served as ''the starting point'' for
negotiations between the two countries toward reaching clandestine deals.
''I have summed up that the document functioned as a secret pact in a broad
sense,'' Kan said.
The Japanese government made a deposit of about $53 million into the bank
account in 1972 and it was kept through 1999, according to the ministry.
Combined with the Bank of Japan's deposit of around $50 million, Japan put
about $103 million into the account, which is equivalent to the amount of new
dollars that the government obtained from converting Okinawa dollars into yen
with the 1972 reversion.
But Kan said the Finance Ministry could not find sufficient evidence to
establish that Japan's zero-interest account was used to raise extra money for
Washington.
As to some of the reasons for making the deposit into the bank account, the
ministry and Kan presumed that Japan decided to avoid earning ''windfall
profits'' out of the currency conversion, given that Tokyo had obtained new
dollars by just issuing additional Japanese yen at relatively low costs.
They also said the account was apparently used to keep Japan from earning
interest and aggravating the ballooning U.S. balance of payments deficits at
that time.
Kan said he believes the actual amount was more than $320 million yen because
the memo states that Japan would shoulder a total of $405 million, including
costs such as for the relocation of U.S. military facilities, and Tokyo could
not find any record to refute this point.
The ministry's probe into the purported clandestine deals related to the
reversion was commissioned by Kan and his predecessor Hirohisa Fujii, both
lawmakers of the Democratic Party of Japan, which last summer ended more than
half a century of nearly unbroken rule by the Liberal Democratic Party.
The investigation was launched in parallel with the Foreign Ministry's probe
into whether there were secret pacts during the Cold War between Tokyo and
Washington, including one that allows U.S. nuclear-armed vessels to visit
Japanese ports.
Declassified documents in the United States and testimonies of former Japanese
government officials have confirmed the existence of some secret pacts in the
1960s and 1970s. But previous Japanese governments have successively denied
their existence.
Kan's announcement came after a Foreign Ministry panel of experts concluded
Tuesday that some of the most important bilateral agreements of the period were
reached in backroom deals.
Among others, the panel said a secret pact can be confirmed in which Tokyo
consented to shoulder $4 million in costs on behalf of Washington to restore
Okinawa land plots which had been used by U.S. forces to their original state.
But the issues related to the bank account were not subject to the examinations
of the Foreign Ministry panel.
Japan's official stance has been that the government in power at that time paid
a total of $320 million for costs related to the reversion, while some experts
on Japan-U.S. relations have claimed that the actual costs were as much as $685
million, citing some records in the declassified documents in the United
States.
The Finance Ministry could not find a copy of the memorandum, signed by
Kashiwagi and Jurich, in Japan.
The memo, which has been kept in the U.S. National Archives, said, ''The Bank
of Japan will deposit $60 million or the amount of currency actually converted,
whichever is greater, in a non-interest bearing account with the Federal
Reserve Bank of New York acting as principal and agent of the U.S. Treasury.''
The memo, dated Dec. 2, 1969, also said, ''Funds shall remain on deposit for at
least 25 years.''
If Japan did not let the $103 million sit in the interest-free account, it
would have been able to earn interest of more than $70 million on the deposit.
Some experts, including Masaaki Gabe, a University of the Ryukyus professor,
who obtained a copy of the memo from the U.S. archives in the late 1990s,
believe that Japan used the account to effectively increase its payment to the
United States for the return of Okinawa.
The negotiators who represented the Finance Ministry in the course of realizing
the reversion of the southern island as well as former Finance Minister Takeo
Fukuda and Kashiwagi are no longer alive.
The Finance Ministry said it went through almost all documents kept in its
facilities and interviewed as many former and present government officials as
possible, but could not find any record related to the memorandum.
Kan said the ministry will change its rules on how to deal with administrative
documents, including a plan to transfer all important documents on
international negotiations to the National Archives of Japan even after the
current official storage period of 30 years expires.
The deposit was counted as Japan's foreign reserves, but the ministry said no
one knew that it was coming from the costs related to the reversion.
==Kyodo
2010-03-12 23:06:09