Editorial
Japan's massive mystery deposit in U.S. Federal Reserve proof of shoddy administration
An investigation by the Ministry of Finance has confirmed that the Japanese government deposited $103 million into a zero-interest account at the U.S. Federal Reserve Bank of New York between 1972, when Okinawa was formally returned to Japan, and 1999. Deputy Prime Minister and Finance Minister Naoto Kan has also admitted that there was a secret pact between Japan and the U.S. over the reversion of Okinawa.
At the same time, it has been learned that no documents relating to the deposit were retained on Japan's side, and officials at the Ministry of Finance did not hand down information to their successors. We are shocked at the slipshod management of documents and the lack of responsibility in handling the public's money.
The fact that there was a secret pact made between Japan and the U.S. during negotiations over the Japanese government's financial obligations in the reversion of Okinawa has already been exposed through documents declassified in the United States.
In December 1969, memos were exchanged between Japan's vice minister of finance for international affairs and the special advisor to the U.S. treasury secretary. They stipulated that Japan would deposit U.S. dollars which it obtained through a currency swap into a U.S. Federal Reserve zero-interest account for at least 25 years, with the amount standing at $60 million or the actual exchanged amount, whichever of the two was greater.
Some have pointed out that operation of zero-interest funds would benefit the U.S. The Ministry of Finance, however, has shrugged off this suggestion, saying that while the move could be viewed as providing financial benefits to the U.S., it was in fact meant to offset windfall profits that Japan would receive through currency exchanges, and differed in nature to the regular provision of financial benefits. Nevertheless, when considering that the agreement was made outside the framework of Japan's official financial burden of $320 million under the Japan-U.S. agreement on the reversion of Okinawa, claims that Japan was providing financial benefits to the U.S. cannot simply be brushed aside.
Surprising is the fact that the secret pact was not passed down to successive generations at the Finance Ministry. During the latest investigations by the ministry, it became evident that the officials were unaware of the meaning of the zero-interest deposit even after 25 years had passed since the reversion of Okinawa.
When University of the Ryukyus professor Masaaki Gabe released a thesis in 1998 raising suspicions of a deposit, officials were not able to respond. We can only conclude that Japanese officials' handing of the massive amount of funds was extremely irresponsible. If the Bank of Japan had not made inquiries with the U.S. in 1999, it is possible that the zero-interest deposit would have remained untouched and unexplained.
It is natural that Kan, commenting on the agreement, said, "One can say there was a secret pact. Or, to put it another way, there was a secret pact in a broad sense." We strongly urge successive government administrations and bureaucrats to reflect on their failure to make an effort to uncover the truth, saying "no secret pact ever existed" despite various references indicating the existence of a zero-interest deposit.
The only reason the Japanese government was able to confirm the existence of a secret pact was because the U.S. preserved the documentation. The Japanese government should learn a lesson from this and follow the U.S. example with more thorough preservation and administration of documents.
(Mainichi Japan) March 13, 2010