Okinawa return costs probably topped $320 million under secret pact

◆ Okinawa return costs probably topped $320 million under secret pact

TOKYO, March 12 KYODO

By Takuya Karube
     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

Original link:
http://home.kyodo.co.jp/modules/fstStory/index.php?storyid=490291

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The Wall Street Journal / Politics

Japan Kept Secret Deposit With Fed

By YUKA HAYASHI

TOKYO—The Japanese government's probe into a confidential post-war agreement with the U.S. confirmed the existence of a secret deposit that Japan kept with the Federal Reserve for nearly three decades and uncovered Tokyo's lax management of information related to its foreign reserves.

Japanese Finance Minister Naoto Kan said Friday the ministry's recent investigation into a 1969 bilateral accord confirmed that the financial settlement Japan made with the U.S. to end its occupation of Okinawa was larger and more complex than previously acknowledged and included a secret noninterest deposit the government and the Bank of Japan kept at the Federal Reserve Bank of New York.

The deposit totaled $103 million during much of its life before the two nations agreed to lower it to a sum of $3 million in 1999. The deposit was counted as part of Japan's official foreign reserves and consisted of dollars the Japanese government received from the Okinawans in exchange for yen in 1972 when the U.S. ended its post-war occupation of the southern Japanese island.

The noninterest deposit amounted to a de-facto financial payment, as the U.S. was free to manage the money to generate returns. U.S. embassy press officers couldn't be reached for comment.

The probe was part of broader efforts by the government of Prime Minister Yukio Hatoyama to improve transparency in foreign policy. Late last year, the government launched investigations into what it called "secret documents" that chronicled confidential national security agreements that Washington and Tokyo clinched during the decades following World War II.

Earlier this week, Foreign Minister Katsuya Okada unveiled the outcome of his ministry's probe, confirming the existence of agreements related to the nature of U.S. forces stationed in Japan and the shipments and storage of nuclear weapons in Japan. Many of these documents, including the one studied by the finance ministry, had long been declassified and made public in the U.S. but the Japan's previous government had never admitted the existence of such agreements.

The document studied by the finance ministry also revealed that Japan paid a total of $405 million to the U.S. at the time of Okinawa's return to cover the cost of the infrastructure left by the U.S. forces and the consolidation of U.S. military facilities. The formal bilateral agreement at the time listed the amount as $320 million.

The document, signed between Anthony J. Jurich, special assistant to the Secretary of the Treasury, and his Japanese counterpart Yusuke Kashiwagi, was kept at the National Archives in the U.S. but lost in Japan.

At a press conference announcing the outcome of its probe, Mr. Kan said the finding was disturbing on two levels: That the Japanese people were kept in the dark for so long about how a portion of their financial assets was managed; and that the ministry itself had no record of the deposit and the bureaucrats who had the knowledge of it didn't seem to have passed it on to their successors.

"We need to admit humbly to ourselves that a piece of historic information related to our own asset management was kept on the U.S. side" but not in Japan, Mr. Kan said. He added that in the future, the ministry will step up efforts to ensure the transfer of historic records related to important international negotiations to the national archive.

A finance ministry official said the loss suffered by the Japanese people as a result of the agreement to keep its portion of the deposit interest free for 25 years was $46 million. The calculation is based on the assumption the money would have earned that much in income if it had been invested in U.S. Treasurys yielding an average of 6%. The total loss would have been nearly double that amount as the calculation doesn't include the portion deposited by the Bank of Japan.

A Japanese official said the decision to lower the deposit to $3 million was prompted by an inquiry made by the Bank of Japan in 1999 as part of its preparation for a revision in the law governing the central bank's function. Until then, the Japanese side had apparently made no action to release the money from the deposit even after the 25-year-period set by the original agreement expired, Mr. Kan said.

A Bank of Japan official declined to say why it still keeps $3 million in the noninterest deposit account.

—Megumi Fujikawa contributed to this article.

 

Write to Yuka Hayashi at [e-mail]

Original link:
http://online.wsj.com/article/SB10001424052748704131404575117341367468522.html?mod=WSJ_hpp_LEFTWhatsNewsCollection

Japan may pay over $320M to US on Okinawa's transfer

(Xinhua)
Updated: 2010-03-12 20:55

TOKYO - Japanese Finance Minister Naoto Kan said Friday that he believed Japan paid more than 320 million US dollars to the United States as part of a deal when the transfer of power in Okinawa between Tokyo and Washington happened in 1972, according to local media reports.

Kan said that the Japanese government made an interest-free deposit of 53 million dollars to a US Federal Reserve bank that remained until 1999.

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The revelation comes days after the Foreign Ministry revealed in a report on three secret pacts between the United States and Japan that an agreement had been made related to the transfer of power in Okinawa.

However, there was no evidence connecting the deposit to the transfer of power in Okinawa, Kan added.

Officially, Japan paid 320 million dollars when power was transferred to Tokyo, but Kan said the deposit casts doubt that the official figure accounted for the total amount that was handed to Washington at that time.

Declassified documents in the United States have led some experts to put the total amount paid by Japan at the time as high as 685 million dollars.

The Foreign Ministry report released Tuesday has cast doubt on the way previous Japanese governments conducted affairs overseas. The report said it believed past governments had been "dishonest".

Original link:
http://www.chinadaily.com.cn/world/2010-03/12/content_9583437.htm

Japan says secret bank deal with U.S. existed for Okinawa reversion

TOKYO (Kyodo) -- Finance Minister Naoto Kan said Friday he believes "a secret pact in a broad sense" existed between Japan and the United States in connection to the financing of the 1972 reversion of Okinawa.

But Kan said he could not find sufficient evidence to establish that Japan's zero-interest account at a U.S. Federal Reserve Bank was used to raise extra money for Washington.

Still, Kan said he believes that the government in power at that time paid a total of $320 million for costs related to the reversion.

The ministry's probe into the purported clandestine deals related to the reversion of Okinawa to Japanese sovereignty from U.S. control 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 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 Japan 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.

One declassified memorandum of understanding that Japan's former top financial diplomat Yusuke Kashiwagi negotiated in 1969 with his U.S. counterpart, Anthony Jurich, indicates that Japan had promised to pay more than $320 million.

The memorandum signed by the two negotiators touches on how to deal with Japan's new dollar holdings that would result from converting Okinawa dollars into yen with the 1972 reversion.

The memo, dated Dec. 2, 1969, 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."

Then it said, "Funds shall remain on deposit for at least 25 years."

If Japan did not let the dollar funds sit in the interest-free account, it would have been able to earn interest on the deposit.

Some experts, including Masaaki Gabe, a University of Ryukyus professor, who obtained a copy of the memo from the U.S. National Archives, 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 and former Finance Ministers Takeo Fukuda and Kashiwagi are no longer alive.

(Mainichi Japan) March 12, 2010

Original link:
http://mdn.mainichi.jp/mdnnews/news/20100312p2g00m0in030000c.html