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The US-Japan War-Payments Rift

SMALL misunderstandings between individuals sometimes lead to large misunderstandings between nations. This is one such story, gleaned from American and Japanese officials. Tokyo's contribution of $11 billion to the military costs of the Gulf war has caused endless recriminations with Washington. Influential Americans like Treasury Secretary Nicholas Brady and Deputy Defense Secretary Donald Atwood are said to believe that Japan gave grudgingly and that even today it has not paid the full amount pledged. This feeling has influenced perceptions about Japan in the United States.

The Japanese response, in turn, is one of resentment. They admit their first response to the invasion of Kuwait was slow. They sent no troops, and their monetary contribution of $1 billion to the military effort was increased by another billion only after loud American complaints.

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But the Japanese say the $9 billion contribution Tokyo announced in January was the largest amount given by the US's Western allies. It was also financed 60 percent by new taxes. The Japanese admit that money is no substitute for precious lives sacrificed to repel aggression, but they say they are the only nation in the Gulf coalition to have taxed themselves to pay for the war.

Last fall, when Japan's first contribution to the Gulf war was being disbursed, a procedure was set up whereby the entire amount went to the Gulf Cooperation Council, which allocated $1.7 billion to the US and $300 million to other members of the multilateral force. US officials were not altogether happy about this.

So, when Mr. Brady met Japanese Finance Minister Ryutaro Hashimoto in London in January, he stressed US costs. Once war broke out, Brady told Mr. Hashimoto, Washington would have to spend $15 billion per month or $45 billion for three months. He thought a Japanese contribution of 20 percent, or $9 billion, would be appropriate. Hashimoto accepted Brady's proposal with alacrity, according to Japanese sources. But Brady had not told him specifically that he wanted $9 billion for US forces, and Hashimoto a pparently believed Japan's contribution would be disbursed, as before, through the Gulf Cooperation Council.

The Japanese government duly submitted a budget request to the Diet for the yen equivalent of $9 billion. It was a risky move. The Diet was divided, and concessions had to be made to minor parties to ensure approval. Meanwhile, Japanese officials say they told their American colleagues they would continue to channel contributions through the Gulf Cooperation Council.

The Diet approved the budget early in March, just after the ground war ended. By this time, the gyrations of the yen-dollar exchange rate had caused the yen equivalent of $9 billion dollars to go down by half a billion dollars. Another $700 million went to the British, French, and Arab forces, bringing the US share of the Japanese pledge down to $7.8 billion.

Furious, Brady refused to accept Japanese explanations made via the State Department. When Prime Minister Toshiki Kaifu came to California for a summit with President Bush in April, Brady prevailed on the president to take up the entire $1.2 billion which, according to his calculations, the Japanese still owed. Mr. Kaifu told Mr. Bush that he could not easily change an amount discussed and voted on by the Diet. Bush tried to get Kaifu to agree that US and Japanese officials would continue to work on the problem. But the usually complaisant Kaifu apparently dug in his heels. Japanese officials said it was out of the question to reimburse the US for amounts paid to the other Gulf allies, or even for the $500 million loss caused by exchange rate changes.

In the end, a compromise was reached. The Japanese agreed to cover the US's exchange rate losses, while Washington dropped its demand for the $700 million paid to the other allies. But the affair has left a bad taste in everyone's mouth. If there is a lesson to be learned, it is that in money matters, even between friends, nothing should be assumed. There is also room, on both sides, for more generosity about the other side's motives. After all, this was a war in which the US and Japan were not enemies, but partners.

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