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CHAPTER 1

Just a Friendly Visit

It was mostly the worst of economic times in the Japan of late 1977. The country had suffered devastating effects from the great oil shock four years before, while the yen was skyrocketing in value vis-a-vis the U.S. dollar. Prime Minister Takeo Fukuda was trying desperately to cope with problems arising from Japan's astounding economic success—including an uncontrollable torrent of exports and a snowballing surplus in the international balance of payments. November 2 was an especially busy day, yet Fukuda found space in his crowded schedule to spend some time with an American visitor totally unknown to the Japanese newsmen covering events at the prime minister's official residence. How, wondered these newsmen, could this silver-haired, aristocratic-looking foreigner simply walk into the prime minister's office seemingly without an appointment while they waited endlessly in the cold, damp halls?

To one curious reporter, the seemingly brash visitor admitted his name was Harry Kern, and that he was the president of something called Foreign Reports —information that left the hapless newsman none the wiser. Apparently this less-than-investigative reporter held no suspicion that Kern, by manipulating people and events during the latter part of the U.S. Occupation (1945-52), had been instrumental in creating the problems that now plagued his old friend Fukuda. To put it metaphorically, the mysterious visitor, the unacknowledged progenitor of an offspring known as 'Japan Incorporated," was paying a stealthy visit to his now prosperous, but illegitimate son.

That timely brush with the Japanese press in November 1977, however, did lead to more investigation of the silver-haired stranger in the bowler hat who was so close to the prime minister. Just over a year later, mystery man Kern was unmasked as a behind-the-scenes operator in the Grumman Aircraft Scandal, which was already threatening the new cabinet of Prime Minister Masayoshi Ohira in early 1979.¹ Suddenly, every citizen of Japan knew of Kern's existence and his special contract with Nissho-Iwai which promised the "blue-eyed fixer" a staggering forty percent of each Grumman E-2C Hawkeye early warning and reconnaissance plane sold in Japan.

This must have created a strong sense of deja vu in Japan, since the Lockheed Scandal three years before had amply demonstrated how American secret agents for aircraft companies had succeeded in subverting and overturning government decisions for aircraft purchases.² This time, an American Securities and Exchange Commission report (SEC-8K) charged that Grumman officials had admitted to caving in to a "request" from an unnamed Japanese government official to switch sales agents from Sumitomo to Nissho-Iwai ten years earlier. The SEC report went on to state that Kern might in turn pay a portion of his commission to "one or more government officials." Kern responded by bringing a $30 million lawsuit against Grumman, loudly and emphatically proclaiming his innocence.

Innocent or not, it became clear that former journalist Harry Kern was more than just a representative of certain American east-coast elites—he was playing a major role in what the late historian Howard Schonberger, of the University of Maine, called "the pervasive pattern of corruption that has characterized so much of Japanese business and politics since the end of the Pacific War." Schonberger also wondered why the Grumman case got very little, if any, ink in the American press at the time. "That Kern and Grumman should have their activities suddenly exposed to public view in bombshell reports out of the SEC is even more incredible," he suggested. "Whatever the explanation, the revelations so far point to the alarming conclusion that important political decisions in America, as in Japan, are made by men moved by big money and who are beyond the control of the American people."³

The Stuff of Textbooks

The Japanese public is no better informed than its American counterpart on such issues, however. Though Japanese textbooks, especially those dealing with the history of the Pacific War, are still carefully screened for content by the Ministry of Education,⁴ most aspects of the immediate postwar period have been well documented. Every Japanese child learns about the Allied Occupation of Japan, dominated as it was by the "blue-eyed shogun" General Douglas MacArthur, the Supreme Commander for the Allied Powers (SCAP). They learn about this American military icon who gave Japan a democratic, pacifist constitution in 1947, which is still the highest law of the land. Modern students learn of the purge and punishments meted out to the warmongers, the emperor's denial of divinity, and numerous reforms granted to his long-suffering subjects. No less famous is MacArthur's "dissolution" of the mighty zaibatsu, or large financial combines, such as Mitsubishi, Mitsui, Sumitomo, and Yasuda, which kept Japan so solidly authoritarian and plutocratic in the prewar period.⁵

Nonetheless, the average Japanese is as unaware as his American counterpart that "... as early as 1947, American policies in Japan had shifted from emphasis on these far-reaching reforms toward restoring Japan as the economic workshop of the Far East." wrote Professor Schonberger, who was a leading authority on the often overlooked "reverse course." This reverse course was a series of events in the late 1940s which clearly reversed American policy from democratizing occupied Japan, in favor of building the country into a bastion of anti-communism in the Asian region. "Curiously, the role of non-official pressure groups... has been virtually ignored by all scholars of the Occupation. The most important group concerned specifically with Japan was the American Council on Japan (ACJ), the organizational umbrella for what may be properly termed the Japan Lobby."⁶

This lobby, which greatly influenced American policy toward Japan between 1948 and 1953, was spawned in the struggle between American reformers and conservatives over the program for dissolving the zaibatsu by occupational decree. Harry F. Kern was the ringleader of the lobby and actual organizer of the ACJ. Displaying enormous energy and tactical shrewdness, this unimposing journalist singled out as his target the illustrious war hero General MacArthur, and within a space of two years forced the general's ignominious retreat, and the reversal of the major policies that he had sworn to defend.⁷

In toppling Goliath, this dauntless David was obviously armed with more than just a smooth rock and a slingshot. Indeed, he enlisted the support of the only then living ex-president, several statesmen of cabinet rank, top-level officials in the National Security Council (NSC), and a few renowned generals and admirals. In addition, he counted among his supporters a number of the most prominent American financiers, their corporate lawyers, and heads of their powerful foundations. The question of where the real power lay, and who was serving whom, unveils itself as we introduce the main players of the ACJ.

Having scored his greatest coup some five decades ago, Harry Kern died on May 12, 1996, at the age of eighty-four.⁸ A consummate public relations man, he made his fortune, and much larger fortunes for others, by avoiding publicity himself. Hence, he was able to move in and out of Japan frequently, consulting its most famous and infamous leaders freely, and transacting important and lucrative business without attracting the attention of the press. Even the keenest reader will search almost entirely in vain for his name among the bibliographies of major works on the Occupation, either in English or in Japanese.

From the 1940s to the 1960s, Kern made a practice of paying his respects to Shigeru Yoshida, Japan's best known postwar prime minister, and to Yoshida's successors, who are known collectively in Japanese as hoshu honryu or "the wellspring of conservatism." Some of these conservative politicians were indebted to the ACJ for their success. One of the best known of the latter group was Nobusuke, or Shinsuke, Kishi, former industrial boss of Japan's pre-war puppet state of Manchukuo, and minister of trade and industry (later of munitions) in the wartime cabinet of General Hideki Tojo.Held on suspicion of serious war crimes, Kishi spent three years in Tokyo's now-defunct Sugamo Prison, the current site of the Sunshine City shopping complex in the Ikebukuro area of Tokyo. Kishi was mysteriously released in December 1948, the year in which the ACJ was formed. It is alleged, with considerable supporting evidence, that Kern and his ACJ associates sponsored Kishi in his swift rise to leadership in the conservative party, along with other pre-war militarists and imperialists, including other members of Hideki Tojo's wartime cabinet.

Kishi was prime minister from 1957 until 1960, when an upheaval was caused following his forced passage of the U.S.-Japan Security Treaty (Ampo in abbreviated Japanese) extension through the Diet against overwhelming popular opposition. Police pulled opposition party members from the chamber kicking and screaming so that the conservatives could take a vote. Kern advised and assisted Kishi in his relations with the United States throughout this stormy period, and remained close to his old friend until Kishi's death in the late 1980s. In February 1978, during another visit to Tokyo, allegedly as a middleman for armaments sales to Japan, Kern spent hours in Kishi's office.

Nobusuke Kishi was typical of the pre-war military nationalists who, being pro-capitalist, pro-emperor, pro-armament, and expansionist, became the most enthusiastic allies of the American right-wing policymakers such as Kern's close friend John Foster Dulles, the ultra-conservative secretary of state under President Dwight D. Eisenhower. Dulles' aim in U.S.-Japan relations had been to build Japan into the northern Pacific bastion of an anti-communist alliance for the containment or neutralization of the two major communist powers on the Asian continent at that time—China and the Soviet Union. Being eternally grateful for their narrow escape from the gallows, or long prison terms, crusty veterans of the old guard in Japan were the ideal vehicles for putting the policies of their American protectors into action.⁹

During the Occupation, the function of the Japan Lobby was to influence American policy toward Japan. It was during the crucial years from 1947 to 1951 that Kern induced his supporters and clients to reverse the zaibatsu dissolution, and release business and political leaders from the purge. By restoring them to positions of influence, the anti-reformers helped to curb the exercise of democratic rights, roll back the emergent labor movement, and start Japan along the road to re-armament. In particular, the ACJ lobbied successfully for the retention of the Emperor System, which is presumably what earned Kern the coveted Order of the Sacred Treasure medal, and for his legal collaborator, James Lee Kauffman, the Order of the Rising Sun. An indispensable member of Kern's inner circle, Kauffman was an attorney who had been instrumental in promoting American investment in Japan before the war, and was now preparing to help investors recover their assets and advantageous positions.¹⁰

The Rise of a Journalist

Harry Frederick Kern, born in Denver, Colorado, in 1911, was no ordinary journalist. Having studied at Harvard during the depression years, he joined Newsweek in 1935. At that time, Newsweek and Business Week, both published by McGraw Hill, were links in the widespread propaganda network of the National Association of Manufacturers, often referred to then as the general headquarters of American big business. Newsweek was especially under the influence of J.P. Morgan & Company, and a few other leading financial family groups such as the Harrimans, Astors, Whitneys, and Mellons, and was regarded as being even more conservative than its main rival, Time. Like many big business people, Newsweek's directors tended to favor European and Asian fascism, which they perceived as a bulwark of capitalism against encroaching collectivism. Thus, Newsweek supported General Francisco Franco, both before and after his military forces, aided by Adolf Hitler, crushed the freely elected Spanish republican government. Even while the United States was at war with the Axis powers in 1942, Newsweek praised the Italian dictator Benito Mussolini for having "saved Italy from communism." It was that kind of a magazine, and Kern was Newsweek's kind of man.¹¹

Thriving in such a plutocratic atmosphere, the ambitious young journalist rose rapidly, becoming assistant editor in 1937, associate editor in 1941, and war editor in 1942. In the latter position, Kern became acquainted with leaders in the U.S. State Department, the War Department, and military industries. His job was not only to follow the course of the war but to learn as much as possible about the peace that was to ensue in Europe and Asia. But it was after the war that Harry found his true vocation, that of a press agent for the powerful industrialists he had met through big business journalism. During the U.S. Occupation, he assisted Japanese business and political leaders seeking privileged treatment from the U.S. government, thereby encouraging their future success and winning their future cooperation. Extending his operations in the mid-1950s, Kern left Newsweek to become a full-time middleman, lobbyist, and publisher of Foreign Reports, said to be a newsletter on world affairs.

As the 1960s unfolded, Kern developed contacts with oil interests in the Middle East, exploiting his friendship with such figures as King Saud of Saudi Arabia and his son Faisal. Having become a Muslim himself, Kern acted as go-between for Japanese leaders (including Kishi) and Saudi Arabian royalty, and is said to have assisted Arab oilmen and their agents in their dealings with the United States. One such agent was Adnan Khasshoggi, who was also close to President Richard M. Nixon. Kern also represented the Grumman Aircraft Company in deals between Japan and the Middle East.¹² According to an insider at Grumman,¹³ Harry got his position with Grumman through a former undersecretary of the U.S. Air Force, who happened to be a law partner of Charles Colson, one of Nixon's convicted Watergate henchmen. One of Kern's close associates, with whom he is said to have collaborated on public relations projects, was Kermit "Kim" Roosevelt, a son of former president Theodore Roosevelt and the chief architect of the coup d'etat in Iran in 1953 that placed the Shah back on the throne. Ironically, the Shah himself was unseated in the late 1970s by an Islamic revolution, leaving his country for "a vacation" in January 1979, a holiday from which he never returned to Iran.¹⁴

A Volatile Background

In Japan, the international battle that was raging between capitalism and communism, known popularly as the Cold War, formed a volatile setting in which Kern and his circle of friends carried out their early political stage management. Toward the end of the Pacific War, the U.S. government was dominated by men who had conducted the social reforms of the New Deal, which brought the United States out of the Great Depression of the 1930s. By nature, these men were generally anti-fascist and favored stern treatment toward enemies blamed for unleashing the most destructive war in history.

Opposing the New Dealers in the United States were conservatives, who regarded their opponents as radicals, subversives, or even communists. Among the main points of difference between these two groups were the policies to be followed after the surrender of Germany and Japan, especially in economic matters. Both Newsweek and Time were organizing political support for conciliatory—rather than vengeful—policies toward these countries. This was quite natural, since American capitalists had large and valuable interests in both enemy countries, and also high hopes of developing investments and markets there, after U.S. forces occupied their territories and assumed temporary control over their governments.

In the State Department, which was trying to hammer out unified Occupation policies, the most conservative wing was led by Joseph C. Grew, who had been U.S. ambassador to Tokyo for ten years (1932-4l) and was on close personal terms with the main zaibatsu families, the peerage, diplomats, and political chieftains in Japan.¹⁵ While the Franklin D. Roosevelt government had strongly opposed Japanese aggression against China in 1937 and thereafter, Grew had felt it necessary to avoid antagonizing Japan's militarist elements in order to prevent an all-out war against the Western powers. In that sense, he was the Asian counterpart of British Prime Minister Neville Chamberlain, who, in the same years and for the same reasons, was trying to appease Hitler in Europe.

Grew, a cousin of John Pierpont Morgan and a wealthy man in his own right, was deeply concerned with American investments in Japan and China, the largest of which were controlled by Morgan affiliated companies and banks. Another appeaser was Senator John Foster Dulles, chairman of the Rockefeller Foundation, whose law firm, Sullivan & Cromwell, had long served Rockefeller interests abroad. At a time when most knowledgeable commentators thought the Second World War was inevitable, Dulles had declared in 1939: "Only hysteria can entertain the idea that Germany, Italy, or Japan contemplates war on us."¹⁶ Not surprisingly, Kern later became deeply involved with like-minded Grew and Dulles in publicizing their conservative policies toward defeated Japan.

Grew was undersecretary of state at the end of the war. But in truth he was running the department because his boss, Edward Stettinius, a business executive (Du Pont, Morgan) was inexperienced in diplomacy and was usually away attending international conferences. Grew had surrounded himself with several diplomats with long experience in Asia, the so-called "Japan Crowd." Among them were Eugene H. Dooman, who had been his counselor in the American Embassy in Tokyo; Joseph Ballantine, an old Japan hand; Walton Butterworth, a China expert who became director of the Office of Far Eastern Affairs; William R. Castle, a former ambassador to Japan who had been undersecretary of state under President Herbert Hoover; and Max Bishop, a former language officer in the American Embassy in Tokyo and a personal friend of General MacArthur. This tight-knit group of individuals became the inner circle of Kern's ACJ.¹⁷

Enter the Postwar Period

President Roosevelt did not live long enough to see the "infamous" Japanese Empire defeated; he died just before the end of the Pacific War. Harry S. Truman, his then little known vice-president, became chief executive and commander in chief of the armed forces. A month later Germany surrendered, causing the internecine struggle among American leaders concerning policies toward defeated Germany and Japan to intensify. Grew was particularly anxious because the Soviet Union's Joseph Stalin, at the Yalta Conference, had promised to enter the war against Japan by August 8,1945¹⁸ and if the war lasted that long the United States would have to share the occupation of Japan with the Soviets. No definite policy had yet supplanted Roosevelt's insistence on the unconditional surrender of Japan, so Grew and Dooman drafted one, offering terms short of unconditional surrender, including preservation of the emperor system. The draft was bypassed, to Grew's chagrin, and the U.S. planners found it necessary to atom-bomb Japanese cities in order to stop the fighting and thus forestall the Soviet advance.¹⁹ Even so, by entering the war against Japan for a few days, in violation of a neutrality pact the country had signed with Japan, the Russians had won the technical right to participate in the Occupation, and were known to favor a hard line toward the Japanese.

During the U.S. led Occupation, Kern was foreign editor of Newsweek, but a glance at his activities indicates that he was spending more time in Washington than at his desk in New York. Working in close collaboration with Kern as Newsweek's bureau chief in Tokyo was Compton Pakenham,²⁰ an Englishman who had served as a language officer at the British Embassy. Since his father had served as military attache in the same embassy before him, Pakenham had close contacts with the Japanese military establishment and was once enrolled as an officer in the Japanese Imperial Army.²¹

President Harry S. "Give 'em Hell" Truman, a Democrat, continued for a while along the Roosevelt policy line. On September 22, 1945, Truman ordered General MacArthur to democratize the Japanese economy by activating a "program for the dissolution of the large industrial and banking combines:" MacArthur, though far from liberal, was a good soldier, and followed the chief executive's policy to the letter. By the end of 1945, the largest holding companies had been dissolved, Japanese political prisoners had been released, political parties and labor unions legalized, press restrictions eased, and preparations made for the trial of war crimes suspects by an international tribunal.

Of course, all these moves were deeply shocking to the Japanese zaibatsu-military establishment and their political allies, many of whom were now being held as war criminals. Hardly less shocked by all this were American conservatives who had hoped for a stable, disciplined Japan in which big business—foreign as well as domestic—could operate securely and profitably. Thus, from the beginning of the Occupation, the struggle between the New Deal reformers and the defenders of the status quo continued and was aggravated by each step taken by MacArthur in following Washington's directives.²²

Just a Friendly Dinner

In postwar Japan, people were not so easily driven back to the "thought control" of wartime days, but unrest was occurring because of rampant inflation. As the Japanese economy began recovering gradually under the Dodge Plan, an austere economic program introduced by a Detroit banker of that name, the trend was toward conservatism. Truman's zaibatsu dissolution program breathed its last. Everything was moving according to the plans of the ACJ, but Kern was not complacent. Neither was his mentor John Foster Dulles, now an appointed Republican senator and special advisor to the State Department. In June 1950, he was working with General MacArthur and Brigadier General Courtney Whitney of SCAP's Government Section (GS) on the terms of a peace treaty with Japan.²³

Kern, who had gained the confidence of Dulles, had managed to fly to Japan aboard his special plane, and used the occasion to promote the ACJ's schemes. Or was it the other way around? Dulles was arguing for Japanese rearmament, but it was MacArthur who vetoed the idea.²⁴ From June 18 to 21, Dulles visited South Korea, where he inspected defenses at the line that divided north and south—the 38th Parallel. Arriving back in Tokyo he immediately consulted MacArthur, and afterwards told the Associated Press that he predicted "positive action by the United States to preserve peace in the Far East." Only three months after the Korean War had started, Dulles stated that "the problem of keeping Japan within the orbit of the free world was possible of solution only because of Korea... '²⁵

On June 22 Dulles, having accepted Kern's invitation, was a dinner guest at Pakenham's home in Tokyo. Apparently, the venue was chosen in order to avoid public attention. Even Pakenham's associates in the Tokyo Bureau knew nothing about the affair, which in retrospect seems to have been a significant episode in U.S.-Japan private diplomacy. Accompanying Dulles was Undersecretary of State John M. Allison, a keen supporter of Grew's right-wing clique and future ambassador to Japan. Kern had arranged the friendly get-together and had persuaded Dulles to attend. The other guests, all "well-informed" Japanese,²⁶ had been carefully chosen: all but one were fluent in English, none had been purged, and each represented one or more of the major aims of the ACJ.

Most distinguished was Yasumasa Matsudaira, a former marquis and brother-in-law of the Mitsui family head, who had been secretary to Count Koichi Kido, lord privy seal, and later Grand Master of Ceremonies in the Imperial Court. As such, he had participated in major decisions of the war, and was still a very useful pipeline to the imperial court. Also present was ultra-nationalist diplomat Renzo Sawada, a Christian convert who had married a daughter of the Mitsubishi zaibatsu.

Also among the select group invited to dinner to meet Dulles was ex-viscount Takeshi Watanabe,²⁷ a Finance Ministry official handling liaison with SCAP, who was the grandson of a former finance minister, and son of a member of the Privy Council. He was also a close associate of Kauffman's, and was later named minister to die United States, where he became a protege of Eugene Black, former president of Chase Manhattan Bank, who subsequently became president of the World Bank. Watanabe was director of the International Monetary Fund (IMF) and of the World Bank before being elected president of the Asian Development Bank (ADB). At the end of 1977, while his friend Kern was busy paying calls on the prime minister, Watanabe was serving as chairman of the Japanese section of the Trilateral Commission, which was enjoying its finest days during the late 1970s. The Commission was established by David Rockefeller, and Jimmy Carter (then president of the United States) and several of his cabinet secretaries were members.²⁸

Another guest of Pakenham and Kern was Osamu Kaihara, a key figure in forming the National Police Reserve, the first stage of Japanese postwar rearmament which later became known as the Self Defense Forces (SDF). Kaihara later became secretary-general of the National Defense Council, after serving as chief secretary to the director general of the Defense Agency, and director of the Defense Bureau.

In evaluating the significance of that private dinner in June 1950, we must remember that Dulles was already the chief foreign policy advisor of the Republican Party and would become President Eisenhower's secretary of state before two years had elapsed. It is also important to note that his brother and business partner Allen, America's master spy, had just been brought to Washington to organize the newly formed Central Intelligence Agency (CIA).

What subjects, then, did Dulles discuss with the guests assembled by Kern? In an interview, Harry said that he "couldn't remember" what happened so long ago, but writer Ikuhiko Hata stated that the theme of the conversation was Japan's role in the Cold War structure of Asia. Watanabe concurred in his own diary, later published in Japanese, in which he recalled the contents of the conversation. Japan's role in Asia was indeed a timely subject, for it was only three days later that a shooting incident broke out at the 38th Parallel on the Korean Peninsula, which quickly escalated into the Korean War (1950-53). Was this the "positive action" Dulles had promised for "the preservation of peace in the Far East?" At any rate, Japan's role as a support station, especially for the repair of vehicles and planes, for U.S. troops in the Korean War became clear.

Whatever J.F. Dulles may have had in mind, the outbreak of the Korean War brought quick and drastic changes to the U.S.-Japan relationship. Japan was quickly swamped with a tidal wave of anti-communist hysteria similar to the rantings of McCarthyism in the United States. The central Committee of the Japan Communist Party (JCP) and the staff of its newspaper Akahata were outlawed despite constitutional guarantees. There was also a general purge of "reds" from labor unions, the press, and other public positions. Almost immediately, business began to boom with special procurement orders. Japan's role then, became that of industrial and logistical base for the defense of South Korea.²⁹

Anti-Communism Flourishes

As the Korean War raged on, it became clear that America's experiment with democratizing Japan was over, especially after its chief proponent—General MacArthur—was away leading the American troops into battle against the North Koreans, who were supported by the two other communist powers on the Asian continent.

In July 1950, General MacArthur had ordered the formation of a 75,000-man police reserve force—later to be called the Self Defense Forces—with Pakenham's friend Osamu Kaihara in a leading role. What this military force was to be called was a very sensitive subject at the time because article nine of the 1947 constitution specifically prohibited the maintenance of any sort of army, navy, or air force in Japan.

In 1951, the Mitsubishi financial clique was re-established in virtually its pre-war dimensions and another zaibatsu quickly followed suit. John M. Allison, soon to be named ambassador to Japan, firmly believed that Japan held the key to victory or defeat in the battle' against communism in the Far East.³⁰ He called urgently! for a peace treaty because otherwise there was only a fifty-fifty chance that Japan would remain a "liberal, democratic, and peaceful society." Dulles visited Japan again in 1951, this time accompanied by John D. Rockefeller, whose financial empire was soon to become the largest investor in Japan. Their mission was to pave the way for a peace treaty that tied Japan to Taiwan, a diplomatic move which has severely hampered Japan'? relations with China ever since.

In September 1951, a peace treaty with the United States was signed in San Francisco, in the conspicuous absence of America's wartime allies China and the Soviet Union. America's price for such a quick and generous peace was Prime Minister Shigeru Yoshida's signature on a mutual security treaty with the United States which, despite the end of SCAPs Occupation, assured the continued presence of American military forces in Japan. However, the treaty had to be re-affirmed and extended at the end of a ten-year period. Meanwhile, from the ACJ's point of view, it was necessary to build up a right-wing, military-minded government in Japan that could overcome popular opposition to the treaty, American bases, and rearmament.

For that role, Kern's old friend and protege Nobusuke Kishi was being carefully groomed. At the sacrifice of his political career, Kishi got the revised and extended treaty rammed through the Diet by ordering in the police to drag opposition members from the chamber, in a Machiavellian move still considered one of the darkest days in Japan's postwar democratic government. When Kishi's hawkish brother Eisaku Sato became prime minister in 1964, he immediately went about the task of completing the arms buildup envisaged by the ACJ. The ACJ's scenario for Japan's anti-communist leadership role in the Far East had thus been completed, but there was still much work remaining for Harry Kern and his new generation of carefully groomed conservative crusaders.

NOTES:

1. It is worth noting that the first reports of the Grumman Scandal did not emanate from Japan. In fact, the first came from the U.S. Securities & Exchange Commission (SEC), in a rather harmless looking bureaucratic report entitled Form 8-K, Current Report for the Month of January, 1979: Grumman Corporation, Washington, D. C: Securities & Exchange Commission, Commission File No. 1-302. The secret contract between Harry Kern and Grumman International was exposed in January 1979. Then Nissho-Iwai (the trading company that acted as Grumman's agent in Japan) president Mitsuo Ueda and managing director Sankei Shimada admitted in a press conference late that month that their earlier denials had been lies. They concurred that Kern was to be paid ¥190 million for the sale of 21 Grumman E-2C early warning planes, a commission that worked out to 40%. See "Nissho Admits Signing Secret Pact With Kern," The Daily Yomiuri, January 26,1979. A few days later, Nissho-Iwai's vice president in charge of marketing, Hachiro Kaifu, admitted the special contract had been in place since 1969. See "Kaifu Admits Existence of Secret Contract With Kern," Asahi Evening News, January 31,1979.

2. The Lockheed Aircraft Scandal shocked Japan in 1976. Nothing of its massive scale, involving so many politicians, business people, spies, and others had ever been seen in Japan before. Lockheed executives admitted paying off Japanese politicians, and even powerful Prime Minister Kakuei Tanaka was brought down by the revelations emanating from the American SEC. Curiously, none of the Americans under suspicion was detained or even questioned in depth, giving rise to the prevalent Japanese theory that the American government was out to "get" Tanaka and rightist Yoshio Kodama. The latter, who had been previously known in Japan as a right-wing "superpatriot," was unmasked as a secret agent promoting the sale of Lockheed aircraft in Japan. For a fascinating few months, the Japanese public was treated to a peek behind the closed sboji (paper doors) of Japanese elite decision-making at the highest levels. Cover-ups and inexplicable deaths were rife as the power elite scrambled to put the lid on before the entire political establishment was damaged. Interestingly, a New York Times report dated April 2,1976 quoted a former CIA agent stationed in Japan as saying that the agency was "checking with headquarters every step of the way when the Lockheed thing came up. Every move was approved by Washington." The final Supreme Court ruling of "guilty" was handed down in late February 1995, nineteen years after the case surfaced. The ruling by the nation's highest court affirmed that, yes, a ruling prime minister of Japan had been guilty of receiving bribes while in office. See "Lockheed Appeals Rejected," Asahi Everting News, February 23,1995.

3. "Of Arms and Men: Harry F. Kern and the Corruption of Postwar Japan," unpublished manuscript by Professor Howard Schonberger, University of Maine, dated February 25,1979.

4. The legality of textbook screening by the Ministry of Education has been challenged for decades by scholar Saburo Ienaga, who has sued the ministry for making "unwarranted" changes to his drafts of textbooks. The matter finally came to a head in October 1993 when the Tokyo High Court ordered the Japanese government to pay Ienaga compensation of ¥300,000, a paltry sum and only a fraction of what the lengthy trials have cost. Ienaga, who had sought ¥2 million for "mental suffering," filed an appeal while the Education Minister of the time, Ryoko Akamatsu expressed regret that Ienaga had received anything, but said she was pleased that the court had upheld the "constitutionality" pf the government's textbook screening system. See "Text Author Wins Damages, but Constitutionality of State Screening is Upheld," The Japan Times, October 21,1993.

5. There is an extensive analysis of this subject in Mitsui: Three Centuries of Japanese Business, John G. Roberts, Weatherhill, Tokyo, 1973.

6. One of the best analyses of the ACJ and its historical role was an article called "The Japan Lobby in American Diplomacy, 1947-1952," by Prof. Howard Schonberger, Pacific Historical Review, vol. 46, no. 3, August 1977, pp. 327-359.

7. One interesting theory making the rounds in 1947 was that the ACJ was out to "get" MacArthur because he had ambitions of running for president once he returned to the United States. According to General Robert L. Eichelberger, then commander of the Eighth Army, MacArthur believed that the "unfriendly articles" on the economy in Newsweek were a "result of fear" of the general's presidential ambitions, wrote Howard Schonberger in a footnote to "Zaibatsu Dissolution and the American Restoration of Japan," Bulletin of Concerned Asian Scholars, Vol. 5, no. 2, September 1973.

8. Harry F. Kern was interviewed by Japan's semi-governmental television station, called NHK, in March 1994 about his role in the Japan Lobby in the late '40s and early '50s. As expected, the aging Kern claimed that he did nothing out of the ordinary in Japan or elsewhere. This documentary was based on many of the materials appearing in this book. Ref: "The Japan Lobby," (A Contemporary Scoop), NHK Channel 1, March 15,1994. Harry told his own, sanitized, version of how the Grumman Scandal unfolded and how he was completely "innocent" of any wrongdoing in a series of interview articles in The Daily Yomiuri, in April 1979.

9. See Chapter 29, "Behind the Curtain," in Mitsui, John G. Roberts.

10. James L. Kauffman to Robert L. Eichelberger, May 13, 1949. This letter is the chief source of biographical information on Kauffman, who was writing Eichelberger—then working at the Pentagon on Japanese economic affairs—to secure assistance in re-establishing his law office in Tokyo. General MacArthur refused to allow Kauffman back in Japan because of his role in the FEC-230 controversy (see Chapter 2). Kauffman finally returned to Japan in 1951 (after MacArthur was relieved of his command) as senior partner of the Mclvor, Kauffman & Christensen law firm. He died in Tokyo in 1968 at age eighty-two. See obituary in New York Times, June 7, 1968. Ref: "Zaibatsu Dissolution," p. 30.

11. See Schonberger, "Zaibatsu Dissolution," p. 28.

12. Unpublished manuscript by Professor Howard Schonberger entitled "Harry F. Kern and the Middle East-Japan Connection," dated June 8,1979.

13. Although many years have passed since this individual was the representative of an American aircraft company in Japan, the source of this information still opts to keep his identity secret.

14. See a description of these events in Schonberger's "Middle-East Connection," p. 8.

15. For his side of the story, see Joseph C. Grew, Ten Years in Japan, Simon and Schuster, New York, 1944. In this book, written in a diary style, Grew speaks highly of his close friend Nobusuke Kishi. "Kishi has always been one of my highly valued friends in Japan and nothing can ever change my feeling of personal friendship and affection for him." p. 523.

16. Address made to the Economic Club of New York, March 22,1939.

17. See New York Times, July 19,1948 article on formation of the ACJ.

18. Even though the Russians had signed a Non-Aggression Pact with Japan that was to expire in 1946, Joseph Stalin had promised the Allied powers at the Yalta Conference that the Soviet Union would enter the war against Japan on August 8,1945, which it did. This opportunistic move has never been forgotten, or forgiven, by the Japanese, who are still technically in a state of war with the former Soviet Union over the "Northern Territories" problem. In the closing days of World War II, Russia saw a golden opportunity to recover territory conceded to Japan forty years earlier after its defeat at the hands of Japan in the Russo-Japanese War (1901-1905). Russian troops were in the Kurile Islands when the first American atomic bomb exploded over Hiroshima. Some even believed Japan would be split into northern and southern parts, with Russia occupying the former and America controlling the latter. As one scholar put it, "She [Russia] had much to gain and nothing to lose simply by a policy of watchful opportunism." Japan's Imperial Conspiracy, David Bergamini, Granada Publishing, London, 1972, p. 57.

19. Some scholars on the bombing of Hiroshima and Nagasaki believe that the American justification of "saving thousands of American lives in an invasion of the Japanese mainland" masked a deeper intention of warning the approaching Russians to stay out of Japan. "The U.S. dropped the bombs to end the war against Japan and thereby stop the Russians in Asia, and give them sober pause in Eastern Europe," wrote William A. Williams in a chapter entitled "The U.S. Overplays Its Hand" in Recent America —2933 to the Present, Edited by Ross, Vaughan and Duff, Thomas Cromwell Co., N.Y., 1971, p. 128.

20. While Harry Kern was busy promoting his friend Nobusuke Kishi to the American people in the early 1950s, Compton Pakenham was equally busy introducing leading Japanese to Kern. "Journalists like Harry Kern and Compton Pakenham, who frequently traveled between Japan and the United States, provided Japanese with another means of overcoming the communication obstacle thrown up by MacArthur's tight rule in Japan," wrote Schonberger. "Even before the formation of the ACJ, Tokyo-based Pakenham linked his Japanese friends to Kern at Newsweek, and through Kern to high corporate and government figures in the United States. Always careful to protect the identity of his Japanese sources in his dispatches and letters, Pakenham was a regular visitor with high officials at the Imperial Palace, the Ministry of Finance, the Foreign Ministry, the Rural Police and, no doubt, many others." See Schonberger's "Japan Lobby in American Diplomacy."

21. The link between Newsweek, the American corporate and government elite, and the "reverse course" policies for Japan appears to be more than coincidental. W. Averell Harriman (Secretary of Commerce, 1946-48, and an influential hard-line Cold Warrior) and his sister, Mary Harriman Rumsey, were key figures in founding Newsweek in 1937 and among its most important financial backers. During 1947 and 1948 E. Roland Harriman, Averell's younger brother, was a member of the board of directors of Newsweek. Averell's close associate and also a co-founder of Newsweek, Vincent Astor, was chairman of the board of the weekly news magazine. See Raymond Moley, After Seven Years (New York: Harper and Row, 1939), pp. 278-281, and Who's Who in America 1972-73, voL 1, pp. 1334-35. Quoted in "Zaibatsu Dissolution," p. 29.

22. See the "Season of Reckoning" chapter of Marc Gayn's excellent book on the Occupation period entitled Japan Diary: An Eyewitness Record of What Is Happening in Japan and Korea, William Sloane Associates, New York, 1948.

23. According to writer William Manchester, MacArthur had first suggested a peace treaty with Japan as early as March 1947. In a speech at the Tokyo Correspondents Club (now the Foreign Correspondents' Club of Japan), the SCAPs commanding general explained his three stages for the Occupation's reforms: demobilization of Japan, political reform, and economic revival. He said the first stage had been completed, the second was almost finished, and if the third was carried out too strenuously by SCAP, it would bring about the "economic strangulation" of Japan. Thus, the time for a treaty between the United States and its former enemy had arrived, he argued. See American Caesar: Douglas MacArthur 1880-1964, William Manchester, Dell Publishing, New York, 1978, p. 626.

24. Ibid.

25. 'Transcript of the Meeting of the Study Group on the Japanese Peace Treaty Problem of the Council on Foreign Relations, October 23, 1950," John Foster Dulles Papers, Princeton University, Princeton, New Jersey.

26. Letter from Kern to Admiral Pratt, September 8,1950. Pratt Papers, Naval War College, Newport Rhode Island.

27. Ibid. See also Takeshi Watanabe, Senryoka no Nihon Zaisei Oboegaki (Memorandum of Japanese Finance under the Occupation), Tokyo: Nihon Keizai, 1966, p. 290 ff.

28. See the extensive connections of the trilateralists (America-Europe-Japan) in the '70s in the book entitled Imperial Brain Trust: The Council on Foreign Relations and United Foreign Policy. "Laurence H. Shoup and William Minter, Monthly Review Press, New York and London, 1977.

29. In his very interesting book on the outbreak of the Korean War, writer I. F. Stone doubts the official U.S. State Department line that Washington, Seoul, and Tokyo were all "taken by surprise" by the North Korean attack. He wrote that it would be highly unlikely that U.S. intelligence agencies would have been unaware of the huge military building along the 38th Parallel. Seoul's deafening silence at the time was further evidence, he argued, that something very fishy was going on. Ref: The Hidden History of the Korean War, I.F Stone, Monthly Review Press, N.Y. and London, 1952. Then was no room for doubt that Japan was being used a logistical supply and repair base by American troops during the Korean War. William Manchester, American Caesar, p. 656.

30. John M. Allison, Ambassador from the Prairie or Allison Wonderland: U.S. Envoy to Japan in the Hectic Pre-War Years-Ambassador and Friend in the Crucial Post-War Years 1953-57, Charles E. Turtle Company, Tokyo, 1973, p. 186.