GENERAL HEADQUARTERS
SUPREME COMMANDER FOR THE ALLIED POWERS

APO 500
18 May 1946

AG 111 (18 May 46) GD
(SCAPIN-967)

MEMORANDUM FOR	IMPERIAL JAPANESE GOVERNMENT.
THROUGH	Central Liaison Office, Tokyo.
SUBJECT	Japanese Budget for Fiscal Year 1946.

1. Recent letters from the Minister of Foreign Affairs transmitting aide-memoires of the Japanese Government on the matter of the Japanese budget for the fiscal year 1946 have been received by the Supreme Commander for the Allied Powers.
2. The Japanese Government is informed that the so-called GHQ Plan for dependent housing as described in the Memorandum for the Imperial Japanese Government from GHQ SCAP (SCAPIN-799), dated 6 March 1946, has been modified. A revised directive adjusting the production and delivery of required construction materials to satisfy a demand for approximately 10,000 family groups during the Japanese fiscal year 1946 is being prepared and will be forwarded upon completion to the Imperial Japanese Government. This modification will not be construed as a rescission of the ultimate family housing requirements set forth in the aforementioned memorandum.
3. The Japanese Government is advised that a recomputation of costs for the construction of dependent and troop housing, subject to the strict application of legal prices and appropriate crediting of materials stock piles seized from the Japanese military which have been returned to the Japanese Government, should result in very substantial reductions in budget estimates. In this connection, it is pointed out that a recent informal recomputation of troop housing construction costs by Japanese Ministries representatives indicates that budget estimates for this project should be more nearly 3.3 billion yen than 5.4 billion yen, even without consideration to returned military stocks.
4. The Japanese Public Works Program in the so-called GHQ Plan is designed to provide from 1,000,000 to 1,250,000 man years of employment. This program is considered essential to increase the supply of food, clothing and fuel for the Japanese people and to establish a counter-inflationary program and will be included in the budget without change.
5. The contention that the proposed budget is beyond the economic or productive capacity of Japan appears to be without foundation. Accordingly, the Japanese budget for the FY 1946 will be revised to reflect actual costs based upon legal prices applied to the list of materials required for the accomplishment of the dependent and troop housing construction of the so-called GHQ Plan as modified and credit for stocks returned to the Japanese Government and submitted without further delay.

(signed) Paul J. Mueller
(typed) PAUL J. MUELLER
Major General, General Staff Corps Chied of Staff