The Nixon Shocks and Japan-US Relations During Satō’s Administration


By Mark J. RavinaUniversity of Texas

US President Richard Nixon and Japan’s Prime Minister Satō Eisaku met three times in late 1969. The central issue was, at first, the reversion of the Okinawa archipelago to Japan. But the negotiations also touched on trade and on how the US-Japan relationship was changing.

President Nixon and Pat Nixon having a formal dinner with Eisaku Satō
The reversion of Okinawa and trade issues were the main subjects of Nixon-Satō meetings. (Image: Nixon White House Photographs/Public domain)

The Three Nixon Shocks

First, in 1971, Nixon ended the international gold standard that had been established by Allied governments at the Bretton Woods Conference of 1944. He, rather than continuing to fix the value of the dollar to the weight of gold, allowed it to float according to market demand. That reduced the dollar’s value while increasing the strength of the yen and the Deutsche mark, and it thereby increased the price of Japanese and German exports. 

That change represented a huge shift from the immediate postwar order, when the US had endorsed a cheap yen to lift Japan’s economy. Now, Nixon was demanding that Japan reduce its exports to the United States.

Second, Nixon traveled to China in 1972, and began the normalization of US relations with the communist People’s Republic. 

Nixon and Satō
Nixon and Satō negotiated over many important issues. (Image: Bob Moore/Public domain)

A third major shock occurred in 1973, when members of the Organization of Arab Petroleum Exporting Countries—or OAPEC—proclaimed an oil embargo. The targeted nations were those perceived as supporting Israel during the Yom Kippur War—the United States, the United Kingdom, Canada, and the Netherlands—and Japan, included because it was a US ally. The embargo caused a surge in oil prices.

The Consequences of Nixon Shocks

The impact of the three Nixon Shocks was profound for Japan.

First, the Japanese economy was highly dependent on its export trade to the United States because those sales counterbalanced its reliance on imported oil. The end of Bretton Woods and the oil embargo scrambled that logic. And the new relationship between the United States and China, former enemies, challenged the US-Japanese military alliance. After the Sino-American thaw, who was America’s best friend in East Asia?

This article comes directly from content in the video series The Rise of Modern JapanWatch it now, on Wondrium.

Why the US Was Interested in Giving Okinawa Back

The US president was happy to give Okinawa back. Due to growing difficulties with the war in Vietnam, many members of the Nixon administration wanted to reduce US military commitments overseas. At the same time, the United States wanted to uphold its treaty obligations and dispatch troops to defend its allies. 

During a speech in Guam in 1969, Nixon maintained something of a balancing act by declaring that, “We shall look to the nation directly threatened to assume the primary responsibility of providing the manpower for its defense.” For the most part, the president was talking about Vietnam, turning the bulk of the fighting in Vietnam over to the South Vietnamese government. But the policy also had implications for Japan—perhaps a smaller US military commitment to Japan’s defense.

Concerns about Japan’s Trade

Back in 1949, the value of the yen was set at 360 yen to the dollar—an intentionally low value intended to promote Japanese exports. That policy was fine when the Japanese economy was one-eighth the size of the US economy. It wasn’t so good 20 years later after the Japanese economy had grown to almost half the size of the US economy.

For Nixon, the big trade issue was textiles. Textiles were important to Nixon because of his Southern Strategy: the plan to lure conservative southern whites to the Republican Party, away from a Democratic Party that had embraced the civil rights movement. Japanese exports were destroying the textile industry in the South—particularly in South Carolina—and Nixon wanted those votes. His solution was to try and convince Japan to ‘voluntarily’ restrict its textile exports. But what did his counterpart, Prime Minister Satō, make of all this?

Satō’s Formal Policies on Japanese Defense

Satō was hugely successful at the time, presiding over the income-doubling plan developed by his predecessor, Ikeda Hayato. He’d watched real family incomes soar during his time in office.

And Satō was extremely skilled at maintaining Japan’s military commitments to the US without raising fears that a Japanese army might provoke another war. Satō explicitly articulated two formal policies on Japanese defense. The first was his non-nuclear policy:

  • Japan will not produce nuclear weapons.
  • Japan will not possess nuclear weapons.
  • Japan will not permit the introduction of nuclear weapons on its territory.

In that spirit, Satō signed the nuclear non-proliferation treaty in February 1970, and he shared the 1974 Nobel Peace Prize for those efforts.

The second defense policy related to arms exports:

  • Japan will not allow the export of weapons to the communist bloc.
  • Japan will not allow the export of weapons to countries covered by United Nations arms embargoes.
  • Japan will not allow the export of weapons to countries likely to be involved in armed conflicts.

Satō’s Informal Policy

But Satō is perhaps best known for an informal policy, one never explicitly articulated in a speech or policy paper. This was the idea that Japan’s Self Defense Forces were not a military per se, and therefore did not violate Japan’s constitution if the forces met two requirements:

  • Its spending did not exceed 1% of gross domestic product.
  • And, its personnel could not be dispatched overseas, even as part of UN peace-keeping missions.

Satō also began the country’s pivot towards a foreign policy that matched its new wealth. For instance, the Asian Development Bank, established a few years earlier, was a regional version of the World Bank, with Japan as a major lender, extending credit to poorer Asian nations.

Common Questions about the Nixon Shocks and Japan-US Relations During Satō’s Administration

Q: What was the central issue of the Nixon-Satō negotiation? 

Nixon and Satō met three times in late 1969 to negotiate over important issues; an important one being the reversion of the Okinawa archipelago to Japan, as Okinawa was still under US control since World War II.

Q: What was one of Nixon’s concerns regarding Japan‘s trade?

Trade was one of Nixons concerns during Satō’s Administration, with the textile trade being one of his major concerns. Textiles were important to Nixon because of his Southern Strategy. Japanese exports were destroying the textile industry in the South, and since Nixon needed those Southern votes, he had to persuade Japan to voluntarily limit its textile exports.

Q: What were Satō’s formal policies?

Japan’s Prime Minister Satō explicitly stated two formal policies regarding Japans defense. The first was the non-nuclear policy; meaning that Japan will neither produce nor use nuclear weapons. The second policy was not to export weapons to certain countries.

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