japanese post-war economy
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Dante Scarano
Post-War Japan was in a state of devastation of the Second World War. After the
countless bombings of its most prized cities, it was unfathomable that this nation could
rebuild itself in a rapid fashion. The United States government suspected if Japan was not
rebuilt or protected it would quickly fall to the growing spread of communism in Asia.
America created harsh economic and industrial restrictions to control the amount of
power in Japan, so that they did not gain the amount of power that was had before the
WWII. America reconstructed Japan, for it could be seen as an economic boost for the
Japanese, but also a powerful trade partner in the east for the newly hegemonic United
States. This was not the reason though; the world was plunged into a Cold War and
America needed to take safeguards to ensure its victory over their Chinese enemies. The
American view of the Japanese economy in post-war era, went from reconstructing
economy and infrastructure to securing an economically strong geo-strategic position in
the East when China fell to communism in 1949.
Revisionists and post-revisionists have argued what America’s view of Japan
during the reconstruction phase after WWII was ultimately for. The revisionists’ take on
the matter of the Japanese economy and strictly debate that the economic state in Japan
was the leading role in the U.S involvement in Japan. As the Japanese nation and
infrastructure was destroyed in WWII, the US saw fit to rebuild a nation that could take
part in world trade to become powerful once again. In Forberg’s monograph America and
the Japanese Miracle, he argues, “The escalating Cold war played a larger role in
promoting Japanese economic welfare and in forging the pattern of post economic
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integration.”1 Economics played the largest role in post-war reconstruction of Japan. As
Forberg explains that Washington’s goal in Japan was to create a nation that would be
widely accepted into world trade, which in turn would bolster the economy of Japan. In
other articles such as The Spirit of Japanese Enterprise, Hirscmier argues that there was a
spur of economic nationalism, to disband the major conglomerates that ruled Japan and
create a more stable labor force.2 The key factors of in how economy had created a sense
of anti-communism as it is highly unlikely that for a nationalist nation to concede to
Soviet-style communism. If the American government were able to dissolve the large
companies in the economy, than this would promote growth between the medium and
small companies, creating capitalism. The revisionists’ argument is based solely around
the U.S perception of post-war Japanese economy as an economic force that needed to
rebuild in order to resume functioning once again.
The post-revisionist would argue that during this time period, there was a growing
fear of a possible Third World War against the communist forces. The boosting of the
economy in Japan was seen as a safe guard against communism, rather than an economic
endeavor. Sayuri Shimizu argues this point in Creating People of the Plenty, that
economic boost to Japan was seen as a way to promote capitalism, if an Eastern nation
was economically backed by the U.S, this would offer a powerful force in the East, thus
containing the communist spread. Stopping the immanent spread of communism was in
the best interest of America because the ideology had threatened the way of American
life. In Swenson-Wright’s scholarly monograph entitled Unequal Allies? They argue the
security relationship between both the U.S and the Japanese was seen as a safeguard of
1 Forsberg Arron, American and the Japanese Miracle. 2000 p. XI2 Hirschmeier Johannes, “The Japanese Spirit of Enterprise, 1897-1970”, Business History Review, 1970
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communism. Neither of the two nation’s governments wanted Japan to fall to
communism, this stressed the importance on the economy, however it explains the
amount of importance of the standpoint that Japan was. The newly formed Communist
Party in China began to send red flags to Washington that the American government
might not be able to the battle of ideologies in the Far East.
Throughout World War II, America saw the power of Japanese industry. Most of
the industry was destroyed with the continuous bombing of the mainland, but America
still saw the potential in Japanese industry. During the reconstruction U.S policymakers
looked towards the Japanese industries to help with the cause. To gain this support new
industry was created along with the restoration of pre-war industries with restrictions.3
United States government officials viewed that there needed to be limitations within the
Japanese businesses, or history would soon repeat itself. However, the U.S could greatly
benefit from the industry that would be rebuilt. Various restrictions were put on the
growth and control that many businesses had, but at the same time creating a more stable
economy. The United States policymakers created a long term investment in the Japanese
economy because they knew that the Japanese people would soon rebuild their own
industries, this time though it was in American favor and by their restrictions.
The fishing economy had become a major debate among the Japanese
policymakers in the U.S; Japan’s major source of food and economy was their fishing
industry. The U.S had created restrictions on fishing because in pre-war Japan, Japan
fished in other coastal nation’s waters and disregard fishing conservation laws. The U.S
3 The United States Reparations Delegate in Japan (Hodge) to the secretary of State, Foreign Relation of the U.S articles 1947, p. 427
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did not want Japan to be starved either creating hostilities toward America.4 As fishing
was one of Japan’s major sources of food, they needed to fish, but with heavy
restrictions. Every restraint that America put on Japan was to stagnate the country,
however at the same time keep it economically stable. America did not want an
overgrowth in the economy in Japan because that is what caused them to go to war with
the U.S in the first instance. The United States would have rather stagnate Japan’s
economy, so that it could slowly rebuild its infrastructure, and industries. The limitations
that were put forth by the American government on the Japanese marine industry directly
mirror, what restrictions that the U.S were putting on the rest of the industries in Japan.
However the U.S policymakers thought that the reconstruction of Japan in the
early post-war era was to be done mainly by the U.S. The economic situation that was
occurring in Japan was America’s fault; a self-supporting Japan was a vision of the
American government as well as the Japanese. The U.S had invested $300,000,000 of
goods to Japan because they did not have any means of paying for its exports and
imports.5 As America became the new hegemonic power of the world, its duty was to
support even its past enemy’s. American taxpayers would not agree with this spending to
support a nation that the U.S was just at war with.
A goal that American policymakers held during the early reconstruction phase in
Japan was to have it become a self-sustaining nation. The Japanese economy would begin
to export various items that were needed in various countries.6 When Japan became a
4 Meorandum by the Acting Assstant Chief of the International Resource Diviision (Flory) to the Informal Interagency Committee on Japanese Fishing and Marine Industry, Foreign Relation of the U.S articles 1947, p. 1805 The Political advisor in Japan (Atcheson) to President Truman, Foreign Relation of the U.S articles,1947, p. 1596 Marshall, The Secretary of State to Diplomatic and Consular Officers, Foreign Relation of the U.S articles, 1947, p. 169
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self-sustaining nation the U.S would no longer have to export goods to it, which means
that the United States would have to pay less to support the Japanese. America known the
work ethic of the Japanese people and thought if they built Japan to its former glory, with
some restrictions, then Japan would become a powerful trade partner in the east. During
this point in Japanese reconstruction, American policymakers saw the rise in the Chinese
communist party; however they did not think that the revolution would accumulate into
such a large scale. At this point their focus America leaned more towards the regrowth of
Japan, so that it would not fall back into the fascist state it was in the pre-world war II
era. The idea of a self-supporting nation would not only create a rehabilitated nation, but
a peaceful non-dependent nation too.
The goal in Japan during the early post war was to rebuild a nation, as quickly and
efficiently as possible. The United States government had taken all the blame for the state
that the Japanese economy was during the post war. American government officials
believed that it would be beneficial for the Japanese people to invest efforts in rebuilding
their own economy. The Japanese government had to preserve through hard work to
recover economically.7 While the United States government was spending billions of the
taxpayers’ money to rebuild Japan, America began to loosen their grip over Japanese
economy; this started to show a shift towards policies towards Japan. The U.S
government intended to combine with a new American installed Japanese government, in
which both governments would be able to work hard rehabilitating the economy. This
ideal would provide for a fast recovery, which the American policymakers and taxpayer’s
had wanted. With the slight transfer of power between the two nations, the U.S could
7 Draft Paper for the National Security Council, Foreign Relation of the U.S articles articles, 1948, p.780
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reluctantly release its grasp over Japan, with hopes that the U.S would be benefitted in
the long run.
As the relocation of power to the Japanese began the U.S government grew wary
that Japan would not continue the economic recovery that America had set forward. The
main priority that U.S government officials had put forth was to give power to the
Japanese which in turn they would carry out the deconstruction process.8 This process
would help diminish and dissolve large conglomerates and monopolies within Japan
(Zaibatsu). This could ultimately benefit the American economy, without monopolies
throughout Japan, new businesses would be created, businesses that had American ideals
instilled within them. This would work to the advantage of the United States economy
because these newly former companies would begin to trade with America rather than,
various nations amongst the East. The government officials in Washington at this time
perceived the economy of Japan as economic booster for their own economy; they had
known the workmanship of the Japanese and began to exploit it for their own profit. The
U.S was not close in trading with Japan in the prewar period, but as the policymakers in
the United States began to shape the Japanese economy it produced a dependable trade
partner. Soon Japan would be able to stand economically on its own again; it would be
created as a vanguard of capitalism to push back the growing threat of the U.S.S.R.
During the early post-war period in Japan the American government was solely
focused on rebuilding Japan from the devastation that they had brought during the
Second World War. Many of the letters in the state department focused on the Japanese
economy for rebuilding of the nation and to correct trade industry. The communist threat
8 Memorandum by Mr. Paul H. Nitze, Deputy to the Assistant Secretary of State for economic Affairs (Thorp), to the Assistant Secretary of State for Occupied Areas (Saltzman), Foreign Relation of the U.S articles, 1948, p.1025
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from the U.S.S.R was also a problem, but through the perception of the government
officials it had not been as major of an issue as the complete destruction and re-
establishment of the Japanese economy. On October 1, 1949 there was a shift in power in
the Far East; Mao Tse Tung’s communist party had become victorious in China.9 The
shift in the foreign relations documents on Japan show the amount of importance that this
held to the U.S government. The newly formed communist state in China struck fear into
the policymakers in Washington, this meant that the communist forces were winning in
Asia and the next nation to fall to communism would be Japan. It was in the utmost
importance that the U.S government would have to protect Japan from communism.
With a newly formed communist state in China, it was in the American
government’s best interest to take action to contest this shift. One instance that the United
States government took action to combat the Chinese Communist Party (CCP) was to
blockade it from trade. Not only was China blockaded from American trade, they were
able to stop Japan from trading with China as well.10 Japan was viewed to become a geo-
strategic standpoint for the U.S forces against CCP. This would create devastation for
China, as there long standing trade-relations with their partners to the West had now been
broken. In some ways however, this blockade of China from the Japanese could be seen
as a burden for the United States. This would mean that the American government would
have to increase trade with Japan to even larger heights. Japan may not have relied on
China for economical goods, but it did depend greatly on China’s food source.11 This
explains the importance that the government officials in Washington felt towards Japan.
9 Bronfenbrenner, Martin, The American Occupation of Japan: A Retrospective View, pp. 13-4 , 196810 Cohen B. Jerome, Japan’s Foreign Trade Problems, 1952, pp. 167-911 The Assistant Secretary of State Far Eastern Affairs (Butterworth) to the Acting Poltical Adviser in Japan (Sebald), Foreign Relation of the U.S articles, 1949, p. 895
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As the United States government would have to reconsider their ideas of a self-sustaining
Japan. America needed to invest more money in the Japanese economy once again to
hold a geo-strategic standpoint against the CCP. At this moment the Japanese economy
was seen as an even greater burden because there needed to be more investments in Japan
to keep it economically strong against communists.
What U.S policymakers later began to realize was that since the war had ended
Japan received most of its goods from the United States. As the amount of money that the
U.S government would have to spend on keeping Japan strong was overstated in the
previous years. Japan was in an ideal position to blockade the Chinese, the importance of
trade between the two nations was over exaggerated, and Japan received much of its
imports from America and islands surrounding Japan since the ending of the war.12 The
United States government saw this importance to the Chinese and chose to exploit it
against them. As there was a general blockade on all communist nations from the allies,
this would make it difficult for Chinese to get the imports that they had needed. This
would create the perception of the Japanese economy of how much of a geo-strategic
position it had in the Far East. If the Japanese kept trade with the Chinese than it would
have kept flourishing into a powerful nation, instead of Japanese trade stifling the CCP’s
economy. However, many of the government officials did not agree with the restrictions
that were put forth. Yoshida Shigeru who was the premier, began to disregard the
blockade of trade to China that Washington had commanded. Yoshida also made
attempts to seek out peace treaties with the Chinese communist government.13 This
explains that the relations with Japan had to be held carefully as the wrong move would
12Cohen B. Jerome, Japan’s Foreign Trade Problems, 1952, pp. 167-913 Unsigned Memorandum of Conversation, with Yoshida Shigeru, Foreign Relation of the U.S articles, 1951, p 1326
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have made them become communist. The government in Japan was not stable as they
were just rebuilding. The policymakers in Washington saw Japan as important position in
the East, but were also volatile.The Chinese and the Japanese were trade partners since
the establishment of each country. To put an end to these trade relations explains how
serious that the American politics were towards the communist threat in the Far East.
Washington ultimately did not want Japan to trade with China because it would
show that a capitalist nation could not survive without the help from a communist nation.
Showing that communism had become the far superior ideology, as it was not able to
support a failed capitalist state as well. This dependence on the Chinese would lead to the
down fall of capitalism in the East because if China controlled the raw minerals to and fro
Japan it would lead to a chaotic system, and the collapse of the Japanese economic
system.14 The question of dependence was soon a growing concern with how the U.S
policymakers viewed the Japanese economy. They could not keep spending money on a
nation that may not be able to recover. This explains why the issue of trade was so
delicate, if trade began again in China, America would lose all control in the East and if
America continued on spending money on Japan it may affect their economy. The
solution to this problem was to have a large amount of Japanese trade be more with
Pacific island nations.15 This would not only continue to spread capitalism, supporting
America’s cause, but also create a strong economy for Japan that did not have to rely on
the communist party in China.
A major issue that U.S policymakers began to face was the threat of an internal
communist revolution beginning to gain power. If Japan was to fall to either external or
14 Memorandum of Discussion at the 139th Meeting of the National Security Council, Foreign Relation of the U.S articles, 1952-1954 p. 140815 139th Meeting of the Nation Security Council, p. 1407
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internal communism, for the American government this would mean the end of
capitalism and ultimately U.S power in the East. Washington needed to take economic
precautions to prevent a further uprising within Japan. The American policymakers left
no room for these internal communists to gain power as Sebald, (Acting Political adviser
in Japan) claimed, “Communists work upon in this large and powerful rural area of
Japanese society comprising of exactly one half of the population. Other areas, save that
of industrial labor, are similarly fortified against communist invasion.”16 There was a
constant threat that Japan was going to fall to internal communist within the newly found
government of Japan as well the United States government. Reforms to various industries
and farmlands would have to be put in place because this is where the seed of
communism would begin to spread. The dangers of a communist controlled labor revolt
would have been instantaneous.17 This ideal struck fear in to government officials in
Washington because this immediate revolution to communism had already happened
once before in China. The ethics of the Japanese people are based around communal
ideas and widely accepted conformity. Communism seems right into place with the
Japanese style of life, this is why American policymakers began to create a large amount
of capitalist ideas within the Japanese society. If the economy was not built up and these
ideas of capitalism were not created Japan would soon fall to the Soviets and the Chinese,
which was creating propaganda against the U.S.
Japan became a truly coveted nation to be had after 1949 not only by the allies
and America, but communists too. Moscow had seen the great importance on creating a
Japan that was communist. Communist spokespeople would meet and gather together
16 The Acting Political Adviser in Japan (Seabald) to the Acting Secretary of State, Foreign Relation of the U.S articles, 1949, p. 60117 Political Adviser in Japan to the Secretary of State, p. 601
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Japanese government officials and begin to create propaganda to incite them to join the
communist revolution. “Russians have been industriously wooing the Japanese with
propaganda … [America] according to Russian spokesmen and Japanese Communists,
seeks to reduce Japan to the status of an American colony exploiting her economy for
American profit.”18 While the American government had focused their efforts on the
Japanese economy the U.S was not going to turn them into a colony. This article could
highlight the feeling of many Japanese at the time as they may have begun to loath the
United States government. This would produce a negative presumption of the American
government by the Japanese people. Washington needed to combat the propaganda by
proving that Japan was being economically restored, which it had done. The U.S
government needed to continue the economic incline in Japan because both the world
was watching what was going to happen to Japan.
The fear of the growing influence of the Soviets had created an entanglement with
the United States government officials and Japan. To push back the Soviet advances
throughout the world was the main goal of the allied powers, and major goal of the U.S.
Towards the end of the Yalta conference the U.S.S.R were seen to have powerful control
over the Far East.19 With the civil war in China and most of the other Eastern countries
torn apart by war, communism had begun to look ideal for the countries left in the wake
of the Japanese war path. Japan would not share the same fate as its neighboring
countries though, as American policy maker’s instilled anti-communist and capitalist
ideals to the Japanese people. These ideals came with the growth of the economy in
Japan, when the U.S government began to hand off power to Japan, General Douglas
18 Farley S. Miriam, Japan and U.S Post-Treaty Problems, 1952, p. 3719 Memorandum of Conversation, by Mr.Marshall Green of the Division of Noertheast Asian Affairs, 1948, p. 789
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MacArthur the Supreme Commander of Allied Powers (SCAP) had created his seven
assumptions regarding Japan,
“Economic conditions in the Far East will permit the necessary expansion of trade … Japan will be increasingly free to conduct its own foreign commerce and engage in merchant shipping … there will be no international trade discrimination against Japan.”20
These assumptions would create free trade within Japan to further boost the economy. All
of these ideas that were created were also promoting capitalism amongst the Japanese
economy. The U.S government gave Japan no restrictions to which they traded with and
made it possible Japan would be able to trade with anyone, once again encouraging the
growth of economy. Whereas only a few years before Japan were barely allowed to
create fishing industry with the amount of restrictions put forth by the U.S government.
This explains the threat that the U.S government officials had now felt towards the
amassing power in the East that had become Soviet Russia. To the U.S government Japan
had begun to be the last holdout of capitalism and economic growth in the Far East.
However, a grueling question of payment still remained, during the time of the
occupation; American government officials questioned how the United States
government was going to continuously supply the nation of Japan with imports. When
Japan was conquered a clause of what was to be apprehended by the conquers, among
this was the vast wealth of Japanese gold. The U.S and SCAP had chosen that it would
not be affective towards any nation if America had used as reparations for occupation
costs.21 The gold had ultimately been given back to the Japanese people to use in their
economy. This deferment of funds was important because it explains how American
20 The Acting Secretary of the Army (Draper) to the Acting Secretary of State, Foreign Relation of the U.S articles, 1948, p 106221The Secretary of the State to the Political Advisor in Japan (Atcheson) Foreign Relation of the U.S articles, 1947, p. 425
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politicians viewed the future of Japan. They wanted to create a friendly trade partner and
ally. If America had taken the gold from Japan, it would have harmed international
relations because the Japanese government would have viewed this as American
attempting to profit on their misfortune. It would be seen as an imperialistic and
capitalistic movement by the nation of Japan. In turn this could have created an anti-
capitalist movement among the Japanese people, making it all the easier to fall to the
clutches of Soviet communism. The United States government was constantly pushing
back communist advances in the east throughout the duration of the Cold War.
During the pre World War period the Zaibatsu were large conglomerates and
banks that had a strangle hold over the nation of Japan. These companies were one of the
factors that had commenced the Sino-Japanese war as well as the war against America in
WWII. Before China had fallen to the communists it was the plan of the occupying
American force to dissolve the Zaibatsu companies in Japan and had eventually wanted
the Japanese government to continue the disintegration of these conglomerates. After the
fall of China to the CCP the Japanese government became more lenient on the Zaibatsu
program, even releasing certain conglomerates from being designated in front of the
Deconcentration review board.22 While the Japanese review board may have been less
harsh on the Zaibatsu, the American government did nothing to continue on and restrict
these companies from growing. The problem was that these conglomerates were
generating a sense of capitalism amongst the Japanese economy. However, the Zaibatsu
were ultimately dissolved and the newly created a ‘new’ Zaibatsu began to rise. These
were considered to be the ‘new’ Zaibatsu, some even bearing the same name as Zaibatsu,
22 The Acting Political Adviser in Japan (Sebald) to the Secretary of State, Foreign Relation of the U.S articles, 1949, p. 842
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such as Mitsubishi. The ‘new’ Zaibatsu was a way to navigate around the policies that the
U.S government had put forth against the large conglomerates, but the restrictions were
had not been strictly enforced.23 If U.S policymakers had continued to dissolve the
Zaibatsu this may have meant less economic growth soon leading to a spread of
communism. This was around the time as the Second Red Scare where Washington’s
government officials were in fear of objecting any idea that had promoted capitalism.
When the Korean war begun the Japanese industries and their economy became a
main focus of Washington. The United States government once again needed an
economically powerful ally in the East to support it with armament and supplies.
However the American government did not want to over exert Japanese economies in
fear that they may fail, “The present and potential capabilities of Japanese industries, the
alternate uses of those industrial resources, the present and the future impact on the
Japanese economy.”24 The U.S had needed aide from the Japanese government, but they
were mindful of how much of various industries and supplies that they were going to use.
If they asked too much from the Japanese industries they would have doomed them to
ultimately fail. Though the success of the American forces in Korea had depended on the
involvement of Japanese industries. The American government’s view towards Japan’s
economy had now grown from Japan being a burden of the previous war, to an economy
that the U.S policymakers had depended on to win in another war. Industries in the
Japanese economy were a main point of focus when the Korean War broke out. The
United States government once again needed an economically powerful ally in the East to
23 Bronfenbrenner, Martin, The American Occupation of Japan pp. 19-2124 The Acting Assistant Secretary of State for Far Eastern Affairs (Allison) to the Assistant to the Secretary of Defense for International Security Affairs (Nash), Foreign Relation of the U.S articles, 1949, p. 601 p. 1140
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support it with armament and supplies. However the American government did not want
to over exert Japanese economies in fear that they may fail, “The present and potential
capabilities of Japanese industries, the alternate uses of those industrial resources, the
present and the future impact on the Japanese economy.25 The U.S needed aide from the
Japanese government, but they were mindful of how much of industries and supplies that
they were going to consume. If too much was asked from the Japanese industries they
would have doomed them to ultimately fail. Through the success of the American forces
in Korea depended on Japanese industries. The American government’s view towards
Japan’s economy grew from Japan being a burden of the previous war, to an economy
that U.S policymakers depended on.
The American view of the Japanese economy changed drastically when China fell
to the communist forces in 1949. The change became less of an economic and
reconstruction based occupation, to the creation of a geo-strategically standpoint for the
American government in the Far East. If the American’s were not so entangled within the
Japanese economy, it could be possibly that the Japanese government may have built
itself back to the fascist state it once was. Japan could have fallen into the clutches of
communism as well, which would mean the spread of communism was unstoppable.
Each outcome would have endangered the hegemonic rule that the American government
intended to impose across the globe.
25 The Acting Assistant Secretary of State for Far Eastern Affairs (Alliso) to the Assistant to the Secretary of Defense for International Security Affairs (Nash), Foreign Relations of the U.S articles, 1949, p. 1140
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Bibliography
Arron Forsber. America the Japanese Miracle. London: University of North
Carolina, 2000.
Jerome B. Choen. “Japan’s Foreign Trade Problems.” Far Eastern Survey, Vol.
21, No. 16. 1952
Martin Bronfenbrenner. “The American Occupation of Japan: A Retrospective
View.” New York: Center for East Asian Studies the University of Kansas.1968.
17
Miriam S. Farley. “Japan and US Post-Treaty Problems.” Far Eastern Survey,
Vol. 21, No. 4. 1952
United States Department of State Foreign relations of the United States, 1947.
The Far East. Washington D.C. 1947
United States Department of State Foreign relations of the United States, 1948.
The Far East and Australia. Washington D.C. 1948
United States Department of State Foreign relations of the United States, 1949.
The Far East and Australasia (in two parts). Washington D.C. 1947
United States Department of State Foreign relations of the United States, 1952-
1954, China and Japan (in two parts). Washington D.C. 1947
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