munications, Tatsunosuke Yamasaki; Commerce and Industry and concurrently Railways, Admiral Takuo Godo. 2. According to the latest information available to the Embassy, Hayashi has not yet approached any one to become Minister for Foreign Affairs. Ambassador Sato at Paris and Ambassador Saito at Washington have both been prominently mentioned but Foreign Office officials have informed the Embassy that no telegram to Saito has passed through the Foreign Office. It is generally assumed that some of the other portfolios being held concurrently will be abolished or amalgamated with others in the process of administrative reform. 3. Inform Treasury. The reaction to the new Cabinet in Japan is generally favorable. It was expected that the Hayashi Cabinet would show decided fascist trends but the appointment of Ministers of known moderate tendencies has greatly relieved public apprehension. In particular the appointment of Yuki as Finance Minister has served to quiet the fears of economic circles. He is a practical banker of many years experience and the general opinion is that he will not follow the "irresponsible" finance of Baba. It is believed that he will not permit governmental expenditures to outrun economic advance and cause dangerous inflation but it is thought that it will be necessary for him to exercise some measure of control over industry and finance in order to accomplish this end. 4. Analysis will follow later. Repeated to Nanking. GREW 894.00/690: Telegram The Ambassador in Japan (Grew) to the Secretary of State TOKYO, February 6, 1937-11 a. m. [Received February 6-7: 10 a. m.] 43. Embassy's 36, February 2, 7 p. m. 1. Political observers ascribe formation of moderate Cabinet to army realization that it had gone too far in opposing will of rest of nation. The army's wrecking of the Hirota Cabinet resulting from the former's quarrel with the political parties and its successful obstruction of Ugaki who was the almost unanimous choice of the Nation exclusive of the army for Premier brought about a suggestive undercurrent of criticism of the Japanese Army's interference in politics which led army leaders to encourage the formation of a Cabinet with less military and fascist leanings than was expected. Hence the choice of Nakamura instead of the strong Itagaki as War Minister. 2. Statesmen close to the Throne desired a Cabinet with not too strong leanings either toward fascism or liberalism in order to avoid a frontal clash between the two ideologies. Japanese politics are usually opportunistic and this seemed the moment for a comparatively innocuous Cabinet which would avoid radical change but would gradually enforce necessary reforms. 3. Such is the Hayashi Cabinet, without decided complexion, without the support of the political parties, and without marked convictions or theories although more mature public appraisal is inclined to regard it as less colorless than at first believed. While somewhat more under military influence than the preceding Cabinet it is probable that this influence will be exerted with restraint owing to the attitude of the military leaders described in paragraph 1. There are indications that before further asserting their power the army leaders will await the development of the new reactionary political party which will support and be supported by the army. The facts concerning this new party which had its origin in a grouping of military and other patriotic societies under the incentive of the retired General Tatekawa will be reported by despatch. 4. The Premier is exclusively a soldier, honest, rational, straightforward, not a forceful character, influential in army circles though with little experience in politics and government. Nakamura and Yonai are good service men but almost unknown outside the army and navy. Yuki is generally believed to be the strong figure in the Cabinet. A protégé and follower of former Finance Minister Takahashi, he can be expected to follow tenaciously the cautious financial policies of his renowned predecessor. It is the general opinion that he will endeavor to reduce the financial burden on the people as far as the military will permit and will avoid sudden or drastic moves which might endanger the financial structure. No other members of the Cabinet are outstanding in reputation and few are well known to the public. 5. The indeterminate character of the Cabinet is illustrated by the vagueness of its supposed policies as published in the press: (a) Thorough clarification of the national policy. (b) Establishment of a definite diplomatic policy. (c) Repletion of national defense and development of national industry. (d) Righteous administration under the Imperial Constitution. 6. The Hayashi Cabinet is generally regarded as a transitional and temporary government meant to tide over a political crisis and perhaps constituting a short step on the road to some sort of Japanese fascism. The absence of support from the political parties (no mem bers of the Cabinet are members of the parties) and its general weakness would appear to presage a short life but such Cabinets often survive for an unexpectedly long time in Japan. Some observers are of the opinion that it will live for about a year unless it is overthrown earlier by some unforeseen cause. It will undoubtedly meet with opposition in the Diet but as too strong opposition would result in dissolution and it is not believed that the politicians will carry their criticism to extremes. Repeated to Nanking by mail. GREW 894.00/693: Telegram The Ambassador in Japan (Grew) to the Secretary of State TOKYO, February 10, 1937-7 p. m. [Received February 10-9:30 a. m.] 52. Embassy's 43, February 6, 11 a. m. Two appointments of significance were made yesterday: 1. General Nakamura has resigned as War Minister because of illness (apparently real) and last night General Hajime Sugiyama, Inspector-General of Military Training, was appointed as his successor. Sugiyama has a stronger character, is better known, and enjoys the confidence of the army to a greater extent than Nakamura. He has had wide experience both at home and abroad and has successfully held important posts in the army organization. He is an advocate of an augmented military machine. His appointment will undoubtedly strengthen the military influence in the Cabinet and on the other hand will enhance discipline within the army. The Cabinet will be strengthened by the acquisition of Sugiyama but as he will probably insist upon the approval of the proposed military budget the Cabinet's financial difficulties will not be lessened. Sugiyama was succeeded as Inspector-General of Military Training by Terauchi, former War Minister. 2. Fukai resigned on the 8th as Governor of the Bank of Japan and yesterday Seihiu Ikeda, formerly managing director of the Mitsui Organization, was appointed as his successor and Juichi Tsushima, formerly Vice Minister of Finance and Financial Commissioner at New York and London, was appointed Vice Governor. Both are well known to American financial circles. It is reported that Ikeda will follow a more positive policy of cooperation with financial and industrial circles than did Fukai who was regarded by financiers here as more of a scholar and theorist than a practical banker. The appointments of Ikeda and Tsushima are welcomed by financial circles in Japan which believe that with Yuki a strong tri umvirate has been formed which while giving all possible assistance to industry will be able to steady the disturbed financial situation in Japan. Repeated to Nanking by mail. GREW 894.00/702 The Ambassador in Japan (Grew) to the Secretary of State No. 2268 TOKYO, February 18, 1937. [Received March 4.] SIR: In continuation of the Embassy's despatch No. 2241, February 1, 1937,12 I have the honor to report political developments from February 1 to February 16 connected with the formation of a cabinet by General Hayashi. General Hayashi's efforts to form a cabinet began on January 30, and on February 2 the Cabinet was installed in office although not entirely complete. By February 10 the Cabinet was as follows: Premier and Foreign Minister, General Senjuro Hayashi. Navy Minister, Admiral Mitsumasa Yonai. Minister of Finance, Mr. Toyotaro Yuki. Minister of Home Affairs, Mr. Kakichi Kawarada. Minister of Justice, Mr. Suehiko Shiono. Minister of Communications, Count Hideo Kodama. Minister of Agriculture and Forestry, Mr. Tatsunosuke Yamasaki. These appointees are without party affiliations. Of this Cabinet the outstanding figure is Mr. Yuki, Minister of Finance. Mr. Yuki is a banker of long experience, a man of great force, and an effective leader. Biographical information on each member of the new cabinet is being submitted in the usual form, without covering despatch, by the same pouch by which this despatch is forwarded. The first statement of policy by the Hayashi Cabinet was the grandiloquent declaration of five principles commented upon by the Embassy's despatch No. 2256 of February 15, 1937.12 The second important statement was contained in the Premier's speech of February 15 (Embassy's telegram No. 57, February 15, 6 p. m.13) to the Diet, which had until then been continuously prorogued to permit the new government to prepare measures (including the budget) to 12 Not printed. 13 Vol. III, p. 25. submit for consideration. The speech showed a desire for harmonious relations with the Diet, announced that the Cabinet would submit a budget ¥270,000,000 less than that put forward by the Hirota Cabinet before its resignation, was firm in tone concerning relations with the Soviet Union (with regard to which the timeliness of the agreement with Germany against communism was affirmed), and contained a brief friendly statement about relations with the United States. A news report of Premier Hayashi's speech is enclosed.14 The present budget for 1937-1938 is in the sum of ¥2,770,000,000, which is still 19% higher than the budget for 1936-1937; but the Hirota budget called for 30% more than did the 1936-1937 budget. The saving in comparison with the Hirota budget is not at the expense of military appropriations, with the exception of one military item of ¥23,000,000 which is simply deferred until the following year. The reception accorded by the Diet to the Hayashi Cabinet has been in the main friendly and smooth, but on February 16 interpellations in the Lower House were adversely critical of participation in politics by the military. Although the debate did not get out of hand it is reported by the press to have given serious concern to army leaders. So much for a brief statement of the externals of Cabinet developments during the period under review. What was going on behind the scenes? Piecing together the narrative from the best information available at the present time, the Embassy submits the following interpretation. When Ugaki's efforts to form a cabinet were blocked, it was the Army and solely the Army which was responsible for the failure. All other important groups in the country favored Ugaki. To say that the Army was unitedly against Ugaki, however, would give a false impression. Both Terauchi and Sugiyama are personally friendly to Ugaki, but it was utterly impossible for them to assist in the formation of an Ugaki cabinet because of one group within the Army which is bitterly opposed to Ugaki. Although it is impossible to say that the entire Japanese Army stands for such and such, this one group is known to be homogeneous, well defined, and clear in its program. The group is the Kwantung Army faction, the leader of which is Lieutenant-General Seishiro Itagaki, Chief of Staff of the Kwantung Army. The Itagaki group believes that Japan must take Mongolia by a war against the Soviet Union; it insists upon rapidly mounting military appropriations in preparation therefor; it favors state socialism as launched in Manchuria; it anticipates changes in Japan modelled after the new régime in Manchuria; it backs the agreement with Germany against communism; 15 and it believes in circumscribing politics by the building up of a monopoly party, under Army inspiration, of 14 Not reprinted. 15 Dated November 25, 1936; see Foreign Relations, 1936, vol. 1, pp. 390 ff. |