It was agreed at the Moscow Conference of Foreign Ministers, and made public in communique issued at the end of the conference on December 27, 1945 that the Far Eastern Advisory Commission (FEAC) would become the Far Eastern Commission (FEC), it would be based in Washington, and would oversee the Allied Council for Japan. As agreed in the communique the FEC and the Council were dismantled following the Japanese Peace Treaty of September 8, 1951.
The arrangement of commission overseeing a council was similar to those that the Allies had put in place for overseeing the defeated Axis powers in Europe. It was a mirror image of those Axis countries, like Hungary, which fell to the Soviet Union and were occupied by the Red Army alone, Japan having fallen to the United States and occupied by the U.S. Army, the United States was given the dominant position on the Tokyo-based Allied Council for Japan. The change in name of the FEAC to FEC was significant because as the U.S. Secretary of State James F. Byrnes reported after the Conference "As early as August 9 we invited the Soviet Union, Great Britain, and China to join with us in carrying out the objectives of the Potsdam Declaration and the Terms of Surrender for Japan. The Far Eastern Advisory Commission was established in October, but Great Britain had reservations regarding its advisory character, and the Soviet Union requested a decision regarding control machinery in Tokyo before joining the work of the Commission".
Following the surrender of the Japanese Empire in August 1945, the US government began making preparations for the occupation of Japan as set in Potsdam Declaration. Friction evolved between the US government and other Allied governments, which were dissatisfied with US dominant position in Japan. In order to give other Allied governments token representation in the occupation of Japan, the US government on August 21, 1945 submitted a proposal for the establishing of the "Far Eastern Advisory Commission" to the governments of the Soviet Union, UK and China. The proposal provided for the council to consist of representatives of those countries whose governments join the agreement. According to that proposal, the powers of the commission were to make policy recommendations to the US government in enforcing the provisions of the instrument of surrender. Agreement about the formation of the commission was reached at the London Conference of Foreign Ministers (September 11 to October 2, 1945), as US Secretary of State James Byrnes and British Foreign Minister Ernest Bevin agreed to establish the commission along the lines of the US proposal made on August 21, for the purpose of preparing plans for an Allied Council for Japan.
The Far Eastern Commission formulated policies for Japan to fulfil under the terms of surrender it consisted of 13 members, decisions were taken by a majority vote but U.S., U.K, USSR, and China were able to veto decisions made in the commission. Between 10 July 1947 and 23 December 1948 the FEC made 13 policy decisions which fell into three categories: disarmament; democratization; and economic recovery.
In order to further remove Japan as a potential future threat to the U.S. the Far Eastern Commission decided that Japan was to be partly de-industrialized. The necessary dismantling of Japanese industry was foreseen to have been achieved when Japanese standards of living had been reduced to those existing in Japan the period 1930-1934. (see Great Depression)