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:: Tuesday, August 24, 2004 ::

I found this at http://squawk.ca/lbo-talk/0007/0076.html regarding the so-called democratization (more like corporatization) of Japan after WWII with the use of stolen loot from China, Korea, Taiwan and the Phillipines in the form of the M-Fund. Also see Seagraves book "Gold Warriors" at www.bowstring.com for a full account of Japanese political corruption and American collusion regarding this multi-billion dollar secret fund.

Chalmers Johnson on US Covert Support for the LDP
Subject: Chalmers Johnson on US Covert Support for the LDPFrom: Yoshie Furuhashi (furuhashi.1@osu.edu)Date: Mon Jul 03 2000 - 11:15:56 EDT
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The 1955 System and the American Connection: A Bibliographic Introduction
by Chalmers Johnson
In a letter to the New York Times dated March 4, 1995, the Acting Director of Central Intelligence Admiral William O. Studeman wrote, "We are aware of the importance of an accurate historical record." Nonetheless, he insisted that the CIA has an obligation to "keep faith" with foreigners who have "received legally authorized covert support from the United States."
It is important to state at the outset that an "accurate historical record" is also what interests the Japan Policy Research Institute. As we search into the history of American payoffs to the Liberal Democratic Party in Japan and dirty tricks against its political opponents, we do not wish to compromise in any way the national security of either the United States or Japan. Kodama Yoshio (1911-1984), probably the CIA's chief asset in Japan, has been dead for more than a decade; and for most Japanese and Americans the Allied Occupation, the M-Fund, the mobilization of yakuza to protect President Eisenhower in 1960, and the Lockheed case itself are all ancient history. Our present-day discussion could embarrass some deceased Americans and some descendants of former prominent politicians in Japan, but it no longer has anything to do with national security.
It also has nothing to do with American efforts during the 1950s and 1960s to influence Japanese public opinion by offering prominent Japanese writers and intellectuals short-term visits to the United States. These official American propaganda activities are an important part of the historical record, and we applaud the series of articles by Matsui Michio and Alec Dubro in Japanese on this important subject. (See the five-part series under the general title "Panel-D-Japan: Amerika tai-Nichi senno kosaku no zenbo" [Panel-D-Japan: The Complete Story of America's Brainwashing Operations Against Japan] in Views magazine, a Japanese monthly, starting with the November 1994 issue and running through March 1995. Topics covered include use of the actor Takakura Ken to intrude American propaganda into Japanese films, production of American-inspired propaganda films, payoffs to the NHK, invitations to professors at Kyoto and other universities to travel to the U.S. at government expense, actions to counter the popular campaigns against nuclear power and nuclear weapons in Japan, support for anti-communist writers, and support for the LDP. Also see in English Alec Dubro and David E. Kaplan, "A Question of Intelligence: Forty-five Years of the CIA in Japan," Tokyo Journal, March 1995, pp. 32-37.) Whatever one may think of these Congress-of-Cultural-Freedom type operations, carried out not just by the CIA but particularly by the USIS, they were a ubiquitous aspect of the Cold War. The communist side pioneered them, and they arguably constitute a part of the legitimate cultural diplomacy of all nations in getting their message out to foreign populations. They also have nothing to do with national security in the narrow sense, and they are not what we are concerned with here.
Our interest is in the foreign manipulation of the Japanese political process during the Allied occupation and its evolution over the more than forty years since the occupation ended. This issue has not merely historical significance. As Jim Mann has recently put it, "Did you ever want to know why the Japanese government behaves the way it does today--why its politics seem so corrupt, why its political parties are so hopelessly weak? Why Japan never developed a workable two-party system? There are some U.S. government files that could help shed light on those questions." (see "CIA Keeping Historians in the Dark About Its Cold War Role in Japan," Los Angeles Times, March 20, 1995.) Similarly, John Dower (a member of the JPRI Board of Advisers) comments, "We look at the LDP and say it's corrupt and it's unfortunate to have a one-party democracy. But we have played a role in creating that misshapen structure." (see "C.I.A. Spent Millions to Support Japanese Right in 50's and 60's," New York Times, October 9, 1994.) This is JPRI's interest in this subject. It is historical but it is also directly connected with day-to-day policy-making in Tokyo and Washington now and in the future....
...These issues reentered the news last autumn when the New York Times published its "C.I.A. Spent Millions to Support Japanese Right in 50's and 60's," by Tim Weiner, Stephen Engelberg, and James Sterngold. This report did not say anything that had not been strongly suspected earlier, but it quoted some important participants, including Alfred C. Ulmer, Jr., the CIA's operations chief for East Asia from 1955 to 1958; Roger Hilsman, the head of Intelligence and Research at the State Department in the Kennedy and Johnson administrations; and U. Alexis Johnson, American ambassador to Japan from 1966 to 1969. Each acknowledged making or authorizing payoffs to the LDP from 1955 to approximately 1972. In Tokyo the Sankei Shimbun reported that on October 10, the day following the New York Times' story, Deputy Prime Minister Kono Yohei (whose father, Kono Ichiro, was one of Kodama's closest associates) held an "emergency meeting" with Ambassador Mondale, which the Foreign Ministry later explained was merely a long-scheduled diplomatic appointment (Sankei, November 17, 18, 1994). Both the Japanese and the Americans maintained that the Times story concerned old news that had become common knowledge.
The real importance of the Times article was that it came in the middle of an on-going struggle to get the CIA to declassify information for the State Department's official histories of U.S. foreign policy. According to Jim Mann, "Right now, the State Department historians are preparing to publish the volume that will cover American policy toward Japan, Korea, and China during the John F. Kennedy Administration. They have found plenty of information about the CIA's operations in Japan and want to include it in the official history. But the CIA has refused to declassify or allow publication of the files that show what it was doing in Japan in the late 1950s and the 1960s" (Los Angeles Times, March 20, 1995). A group of academic historians advising the State Department has recommended that it publish blank pages for the sections dealing with Japan in those Cold War years rather printing a sanitized version.
These materials will ultimately come available, but meanwhile both Japanese and American scholars and journalists continue to pursue the issues they raise using the sources that are available. The record on the Japanese side is not secret at all, even if there are people in Japan who would prefer that it remain private. As a contribution to this continuing inquiry, JPRI is publishing two unusual reports. One is a four-year old memorandum by Norbert Schlei on the "M-Fund" and his unfortunate involvement with it; the other is an essay by a distinguished historian written for the Yomiuri newspapers and reprinted here in English with the newspaper's permission....
...The M-Fund is one of the more slippery topics in postwar Japanese history. During the late 1970s and the1980s, Japanese swindlers used the aura surrounding it and its alleged continuing existence to defraud such companies as Fuji Steel, All-Nippon Airways, and the Tokyu Railroads. Details concerning these cases, as well as the early history of the M-Fund are contained in Takano Hajime, M Shikin, Shirarezaru chika kin'yu no sekai (M-Fund: The Unknown World of Underground Finance) (Tokyo: Nihon Keizai Shimbun Sha, 1980), which is the most important source on the subject. Also relevant is a series of articles in Asahi Journal, which were translated into English as "Lockheed Connection: The 'M Fund' Ghost," Asahi Evening News, April 19-21, 1976....
...According to Takano's book M Shikin, the M-Fund was created out of several different funds that all originally had different names. The "Yotsuya Fund," put together by General Willoughby, the head of G-2 and the CIC, came from black market operations and was used for anti-communist plots. The "Keenan Fund," named after Joseph B. Keenan, chief prosecutor in the war crimes trials, derived from confiscated property. The M-Fund itself, referring to money that Marquat controlled, was initially created from sales of confiscated Japanese military stockpiles of industrial diamonds, platinum, gold, and silver that had been plundered in occupied countries; the sales of shares of dissolved zaibatsu companies; and so-called GARIOA or "counterpart funds," which were accounts of nonconvertible yen derived from the sales in Japan of official American aid imports and authorized imports of such commodities as petroleum.
All three funds were combined into one M-Fund when the occupation ended, and the fund was jointly operated by Americans and Japanese until the late 1950s, when it was turned over to the Japanese by then Vice President Nixon to then Prime Minister Kishi. Schlei's memorandum outlines some of the fund's post-occupation uses and its alleged later history. The amounts involved were very large and were used for industrial projects in rebuilding Japan's economy and later for clandestine activities elsewhere in Asia.
The chief evidence supporting the existence of the M-Fund or something like it, other than circumstances and anecdotes, comes from the life and statements of Kodama Yoshio. For details on his life, see the treatments in David E. Kaplan and Alec Dubro, Yakuza (Reading, Mass.: Addison-Wesley, 1986, part II "The Kodama Years," pp. 41-123); Chalmers Johnson, Japan: Who Governs? (New York: Norton, 1995, pp. 194-97); and Kodama's own two books written while he was an unindicted class-A war criminal in Sugamo Prison from January 25, 1946 to December 24, 1948. They were translated into English during the 1950s as part of the effort to rehabilitate him--from 1956 on he was the Lockheed Aircraft Corporation's chief fixer and wire-puller in Japan--and were published as I was Defeated, Taro Fukuda, trans. (Tokyo: An Asian Publication, 1951), and Sugamo Diary, Taro Fukuda, trans. (Tokyo: Radiopress, 1960). The most important Japanese sources are the study by the Mainichi Shimbun's Political Department--Kuromaku Kodama Yoshio (Tokyo: Eru Shuppansha, 1976)--and Omori Minoru's long interview with him on May 25, 1974 (see Nihon hokai, sengo hisshi [Japan's Collapse, Postwar Hidden History], Tokyo: Kodansha Bunko, 1981, vol. 1, pp. 248-312).
There is no doubt today that Kodama returned to Japan in 1945 from China as the former head of the Navy's Kodama Kikan (Kodama Agency) a fabulously rich war profiteer. He transferred stolen diamonds and platinum before he went to prison to Hatoyama Ichiro and Kono Ichiro, and the funds these materials produced when sold by Kono, about $175 million, financed the creation of the Liberal Party. The go-between in this famous operation was the kuromaku Tsuji Karoku, whom the Diet questioned in 1947 about the alleged use of former military and black market funds to influence politics. There is also little doubt that when Kodama was released from Sugamo on the day after the convicted war criminals were executed, he had been recruited by and was working for U.S. intelligence. On that matter Tad Szulc has written, "Intelligence sources say that Kodama had a working relationship with the CIA from the time he was released from a Japanese prison in 1948"; and another seasoned observer who was also a former SCAP official, Hans Baerwald, comments, "[Kodama's] release from imprisonment allegedly was tied to his becoming an agent of the American intelligence services in general, and ultimately the Central Intelligence Agency in particular." (Szulc, New Republic, April 10, 1976, p. 11; Baerwald, Asian Survey, September 1976, pp. 817-18.)
On April 4, 1976, the New York Times summarized what Kodama did for the CIA and for Lockheed: "Last week there was more evidence of the agency's [CIA's] apparently ubiquitous involvement: its officials knew 20 years ago that the Lockheed Aircraft Corporation bribed Japanese politicians in connection with the sale of F-104 fighter planes to the Japanese Government. In a period of 20 years (1956 to 1975) Lockheed paid $12.6 million to top Japanese officials to sell $700 million worth of aircraft. About $1.5 million was spent to win the F-104 contract away from Grumman Aircraft in the late 1950's. It is not known whom the agency told about the bribes. It reportedly did not inform officials of Grumman, or the State Department."
Another service Kodama performed was to counter left-wing protesters by mobilizing "some 50,000 gamblers, street vendors, racketeers, and members of the violent right to take part in the so-called 'Mass Mobilization for Greeting Ike' and to help the police keep 'order' during the presidential visit." Even though Ike ultimately cancelled his 1960 visit because of the storm of protests over renewal of the U.S.-Japan Security Treaty, this effort cost hundreds of millions of yen, "the source of which is still unaccounted for," in John Roberts' words (see John G. Roberts, "The Lockheed-Japan-Watergate Connection: A 'Kwantung Army' on the Multinational Front," AMPO: Japan-Asia Quarterly Review, March 1976, pp. 6-15). These funds probably came from the M-Fund; it was available and had been created for precisely such needs. All accounts say that after the end of the occupation, the fund's American managers came from the CIA.
While we know a lot about Kodama Yoshio and his operations, researchers would still like to see the U.S. government's file(s) on him. Other files that would be of great interest are those concerned with the great murder-or-suicide and sabotage cases of 1949--the Shimoyama, Mitaka, and Matsukawa cases. The Japanese have sought out the KGB files on these subjects and found them unrevealing, but they have long claimed that these incidents were provocations carried out by SCAP and were intended to justify the "reverse course" and its "red purge." Someday we need to know the truth of the matter. (On the three big cases plus SCAP's covert action unit, the Cannon Agency, and its kidnapping of the prominent writer Kaji Wataru, see Chalmers Johnson, Conspiracy at Matsukawa, Berkeley: University of California Press, 1972; and Omori Minoru, Boryaku to reisen no jujiro [Plots and the Crossroads of the Cold War], which is volume 7 of his Postwar Hidden History, 1981.)
Our message in this Working Paper is straightforward. The Cold War is over. Whatever the United States may have believed was necessary to prosecute the Cold War, the Cold War itself can no longer be used to justify ignorance about its costs and unintended consequences. The issue today is not whether Japan might veer toward socialism or neutralism but why the government that evolved from its long period of dependence on the United States is so corrupt, inept, and weak. At a minimum, these essays should forewarn unsuspecting scholars that uncritical analyses of democracy in Japan may one day be blindsided by newly declassified information.
CHALMERS JOHNSON is President of the Japan Policy Research Institute and has authored some twelve books on a variety of subjects including developmental capitalism in Asia and revolution in China. Most recently, Johnson has authored Japan: Who Governs? (W.W. Norton, 1995).
Japan's "M-Fund" Memorandum, January 7, 1991
by Norbert A. Schlei
The subject of this memorandum is Japan's so-called "M-Fund," a secret fund of money of enormous size that has existed in Japan for more than forty years. The Fund was established by the United States in the immediate postwar era for essentially the same reasons that later gave rise to the Marshall Plan of assistance by the U.S. to Western Europe, including the Federal Republic of Germany....
I. The Background
After Japan's surrender on September 2, 1945, a military government was established in Japan by the U.S. armed forces under the command of General Douglas MacArthur. In the early postwar period, General MacArthur saw that financial aid would be required in order to develop democratic institutions in Japan and to rebuild its devastated economy. Primarily because some of these funds would be used to finance political activity deemed necessary to get democratic forces off to a good start, General MacArthur became convinced that it was essential to establish a secret fund.
Such a fund was duly created, utilizing primarily money and property that had been in the possession of the Japanese armed forces at war's end after having been seized during the war in occupied areas such as China, Korea, Taiwan and the Philippines. This wealth, which was turned over to the U.S. at war's end, was not on Japan's books as a nation and was available for use by MacArthur without the need of any public legislative action in the United States. It turned out to be much more substantial in amount than was originally realized. Later, so-called "counterpart" funds--"soft" foreign currencies acquired by the U.S. which could not be converted into dollars--were added.
The new fund was administered by General MacArthur's Headquarters with advisory input from Japanese sources, primarily Prime Minister Shigeru Yoshida. The fund came to be known to insiders as the "M-Fund" or "Marquat-Fund," after an officer named Marquat who was identified with the fund's establishment and early operation. Because of Mr. Yoshida's involvement with the Fund, it has also sometimes been referred to as the "Yoshida Fund." The M-Fund was used not only for the building of a democratic political system in Japan but, in addition, for all of the purposes for which Marshall Plan funds were used in Europe--in effect, the rebuilding of the Japanese economy. Long-term, low-interest or interest-free loans were provided to key Japanese industries such as coal, iron, shipbuilding, fertilizer, electric power, and the like.
When the Korean War broke out in 1950, the departure of U.S. forces for Korea left a vacuum in the maintenance of public order in Japan. This vacuum was filled by the creation of a National Police Reserve, the predecessor of today's National Defense Force. Because of the provision in the Japanese Constitution prohibiting the maintenance of military forces, the government of Japan was totally unprepared to meet the cost of creating the new force. MacArthur solved this financial problem by allocating 20 billion yen(then about $60 million) from the M-Fund....
Copyright 1995 by Norbert A. Schlei, 2800 28th Street, Suite 321, Santa Monica, California 90405. All rights reserved. No part of this document may be reproduced in any form or by any means without written permission from the copyright-holder. Permission to reproduce granted to JPRI in a letter of Norbert A. Schlei dated April 20, 1995.
NORBERT A. SCHLEI is a former U.S. Assistant Attorney General in the Kennedy and Johnson administrations and a prominent attorney in Southern California.
Copyright© 1997 by the Japan Policy Research Institute All rights reserved.
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