A meeting of the clans - leaders of Japan's principal Yakuza families.  Second from the left is Yoshio Kodama, boss of the Yamaguchi-Gumi, the largest Yakuza clan in Japan.

Below that is a 1994 article published at the John Carroll University website (http://www.jcu.edu) by Tim Weiner, that describes how the CIA gave sustenance and support to the Japanese right - including Yakuza boss Yoshio Kodama - during the 1950's and 1960's. 

October 9, 1994

C.I.A. Spent Millions to Support Japanese Right in 50's and 60's

By TIM WEINER

The C.I.A. gave money to the Liberal Democratic Party and its members in the 1950's and the 1960's, to gather intelligence on Japan, make the country a bulwark against Communism in Asia and undermine the Japanese left, said retired intelligence officials and former diplomats. Since then, the C.I.A. has dropped its covert financial aid and focused instead on gathering inside information on Japan's party politics and positions in trade and treaty talks, retired intelligence officers said.

The Liberal Democrats' 38 years of one-party governance ended last year when they fell from power after a series of corruption cases -- many involving secret cash contributions. Still the largest party in Japan's parliament, they formed an awkward coalition in June with their old cold war enemies, the Socialists -- the party that the C.I.A.'s aid aimed in part to undermine.

Though the C.I.A.'s financial role in Japanese politics has long been suspected by historians and journalists, the Liberal Democrats have always denied it existed, and the breadth and depth of the support has never been detailed publicly. Disclosure of the covert aid could open old wounds and harm the Liberal Democrats' credibility as an independent voice for Japanese interests. The subject of spying between allies has always been sensitive.

The C.I.A. did not respond to an inquiry. In Tokyo, Katsuya Muraguchi, director of the Liberal Democratic Party's management bureau, said he had never heard of any payments.

"This story reveals the intimate role that Americans at official and private levels played in promoting structured corruption and one-party conservative democracy in post-war Japan, and that's new," said John Dower, a leading Japan scholar at the Massachusetts Institute of Technology. "We look at the L.D.P. and say it's corrupt and it's unfortunate to have a one-party democracy. But we have played a role in creating that misshapen structure."

Bits and pieces of the story are revealed in United States Government records slowly being declassified. A State Department document in the National Archives describes a secret meeting in a Tokyo hotel at which Eisaku Sato, a former Prime Minister of Japan, sought under-the-table contributions from the United States for the 1958 parliamentary election. A newly declassified C.I.A. history also discusses covert support sent that year.

But the full story remains hidden. It was pieced together through interviews with surviving participants, many well past 80 years old, and Government officials who described still-classified State Department documents explicitly confirming the Kennedy Administration's secret aid to the Liberal Democrats in the early 1960's.

The law requires the Government to publish, after 30 years, "all records needed to provide a comprehensive documentation of major foreign policy decisions and actions." Some State Department and C.I.A. officials say the Kennedy-era documents should stay secret forever, for fear they might disrupt Japan's coalition government or embarrass the United States. Other State Department officials say the law demands that the documents be unsealed.

A Secret Operation That Succeeded

The C.I.A.'s help for Japanese conservatives resembled other cold war operations, like secret support for Italy's Christian Democrats. But it remained secret -- in part, because it succeeded. The Liberal Democrats thwarted their Socialist opponents, maintained their one-party rule, forged close ties with Washington and fought off public opposition to the United States' maintaining military bases throughout Japan.

One retired C.I.A. official involved in the payments said, "That is the heart of darkness and I'm not comfortable talking about it, because it worked." Others confirmed the covert support.

"We financed them," said Alfred C. Ulmer Jr., who ran the C.I.A.'s Far East operations from 1955 to 1958. "We depended on the L.D.P. for information." He said the C.I.A. had used the payments both to support the party and to recruit informers within it from its earliest days.

By the early 1960's, the payments to the party and its politicians were "so established and so routine" that they were a fundamental, if highly secret, part of American foreign policy toward Japan, said Roger Hilsman, head of the State Department's intelligence bureau in the Kennedy Administration.

"The principle was certainly acceptable to me," said U. Alexis Johnson, United States Ambassador to Japan from 1966 to 1969. "We were financing a party on our side." He said the payments continued after he left Japan in 1969 to become a senior State Department official.

The C.I.A. supported the party and established relations with many promising young men in the Japanese Government in the 1950's and 1960's. Some are today among the elder statesmen of Japanese politics.

Masaru Gotoda, a respected Liberal Democratic Party leader who entered parliament in the 1970's and who recently served as Justice Minister, acknowledged these contacts.

"I had a deep relationship with the C.I.A.," he said in an interview, referring to his years as a senior official in intelligence activities in the 1950's and 1960's. "I went to their headquarters. But there was nobody in an authentic Government organization who received financial aid." He would not be more explicit.

"Those C.I.A. people who were stationed in the embassy with legitimate status were fine," he said. "But there were also covert people. We did not really know all the activities they were conducting. Because they were from a friendly nation, we did not investigate deeply."

Recruitment Was 'Sophisticated'

The recruitment of Japanese conservatives in the 1950's and 1960's was "a pretty sophisticated business," said one C.I.A. officer. "Quite a number of our officers were in touch with the L.D.P. This was done on a seat-by-seat basis" in the Japanese parliament. A second C.I.A. officer said the agency's contacts had included members of the Japanese cabinet.

As the C.I.A. supported the Liberal Democrats, it undermined their opponents. It infiltrated the Japan Socialist Party, which it suspected was receiving secret financial support from Moscow, and placed agents in youth groups, student groups and labor groups, former C.I.A. officers said.

Obstructing the Japanese opposition "was the most important thing we could do," one said.

The covert aid apparently ended in the early 1970's, when growing frictions over trade began to strain relations between the United States and Japan, and the growing wealth of Japan made the agency question the point of supporting politicians.

"By that time, they were self-financing," a former senior intelligence official said. But the agency used its longstanding relationships to establish a more traditional espionage operation in Japan.

"We had penetrations of all the cabinet agencies," said a C.I.A. officer based in Tokyo in the late 1970's and early 1980's. He said the agency also recruited a close aide to a prime minister and had such good contacts in the agriculture ministry that it knew beforehand what Japan would say in trade talks. "We knew the fallback positions" in talks over beef and citrus imports, he said. "We knew when the Japanese delegation would walk out."

Useful though it may have been, the inside information rarely gave American trade negotiators the upper hand with the Japanese.

'The Reverse Course' Of American Policy

The support for the Liberal Democrats had its origins in what some historians call "the reverse course" of American policy toward Japan after World War II.

From 1945 to 1948, the American forces who occupied Japan purged the Government of the right-wing militarists who had led Japan into war. But by 1949, things had changed. China went Communist. The Soviet Union exploded its first atomic bomb. Washington was fighting Communism, not ferreting out rightists.

The American occupation forces freed accused war criminals like Nobusuke Kishi, later Japan's Prime Minister. Some of the rehabilitated politicians had close contacts with organized crime groups, known as yakuza. So did Yoshio Kodama, a political fixer and later a major C.I.A. contact in Japan who worked behind the scenes to finance the conservatives.

These politicians also drew support from a group of retired diplomats, businessmen and veterans of the Office of Strategic Services, the World War II precursor of the C.I.A. The group's leader was Eugene Dooman, an old Japan hand who quit the State Department in 1945 to promote "the reverse course."

During the Korean War, the Dooman group pulled off an audacious covert operation, bankrolled by the C.I.A.

Japanese conservatives needed money. The American military needed tungsten, a scarce strategic metal used for hardening missiles. "Somebody had the idea: Let's kill two birds with one stone," said John Howley, a New York lawyer and O.S.S. veteran who helped arrange the transaction but said he was unaware of the C.I.A.'s role in it.

So the Dooman group smuggled tons of tungsten from Japanese military officers' caches into the United States and sold it to the Pentagon for $10 million. The smugglers included Kodama and Kay Sugahara, a Japanese-American recruited by the O.S.S. from a internment camp in California during World War II.

The files of the late Sugahara -- researched by the late Howard Schonberger, a University of Maine professor writing a book nearly completed when he died in 1991 -- described the operation in detail. They say the C.I.A. provided $2.8 million in financing for the tungsten operation, which reaped more than $2 million in profits for the Dooman group.

The group pumped the proceeds into the campaigns of conservatives during Japan's first post-occupation elections in 1953, Howley said in an interview. "We had learned in O.S.S., to accomplish a purpose, you had to put the right money in the right hands."

By 1953, with the American occupation over and the reverse course well under way, the C.I.A. began working with warring conservative factions in Japan. In 1955, these factions merged to form the Liberal Democratic Party.

The fact that money was available from the United States soon was known at the highest levels of the Japanese Government.

On July 29, 1958, Douglas MacArthur 2d, the general's nephew, who was then United States Ambassador in Tokyo, wrote to the State Department that Eisaku Sato, the Finance Minister, had asked the United States Embassy for money. Sato was Prime Minister of Japan from 1964 to 1972 and received the Nobel Peace Prize in 1974.

Ambassador MacArthur wrote that such requests from the Government of Prime Minister Nobusuke Kishi were nothing new. "Eisaku Sato, Kishi's brother, has tried to put the bite on us for financial help in fighting Communism," his letter said. "This did not come as a surprise to us, since he suggested the same general idea last year."

Sato was worried, an accompanying memo explained, because a secret slush fund established by Japanese companies to aid the L.D.P. was drained.

" Sato asked if it would not be possible for the United States to supply financial funds to aid the conservative forces in this constant struggle against Communism," the memo said. While it is unclear whether Sato's request was granted directly, a decision to finance the 1958 election campaign was discussed and approved by senior national security officials, according to recently declassified C.I.A. documents and former intelligence officers.

In an interview, MacArthur said the Socialists in Japan had their own secret funds from Moscow, a charge the left denied.

"The Socialist Party in Japan was a direct satellite of Moscow" in those years, he said. "If Japan went Communist it was difficult to see how the rest of Asia would not follow suit. Japan assumed an importance of extraordinary magnitude because there was no other place in Asia from which to project American power."

A Close Call In 1976

In 1976, the secret payments were almost uncovered.

A United States Senate subcommittee discovered that Lockheed Corp., seeking lucrative aircraft contracts, had paid $12 million in bribes to Prime Minister Kakuei Tanaka and the Liberal Democrats. The conduit was Kodama -- political fixer, tungsten smuggler and C.I.A. contact.

Then a retired C.I.A. officer living in Hawaii phoned in a startling tip.

"It's much, much deeper than just Lockheed," Jerome Levinson, the panel's staff director, recalls the C.I.A. man saying. "If you really want to understand Japan, you have to go back to the formation of the L.D.P. and our involvement in it."

Levinson said in an interview that his superiors rejected his request to pursue the matter.

"This was one of the most profound secrets of our foreign policy," he said. "This was the one aspect of our investigation that was put on hold. We got to Japan, and it really all just shut down."

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