22 Mr J. K. Waller, Department of External Affairs, to Mr H. A. Peterson, Department of External Affairs

Memorandum [1] 3 May 1937,

The extract from Colonel Longfield-Lloyd's note to Major Combes draws attention to two points viz:-Japanese interests in Yampi Sound, and secondly, in Northern and North-Western Australian waters with special reference to the area near Darwin.

The position in regard to Yampi Sound is that, soon after the matter came up for discussion in January 1936, Mr Officer discussed the position with the Committee of Imperial Defence and the Board of Trade and ascertained that, in their opinion, the situation was as follows:-

(a) that iron ore deposits are so extensive that it is not necessary to consider conserving the deposits for future Empire purposes, while other deposits of equal richness to those at Yampi are available much closer to Europe;

(b) that, although the Yampi deposits are not required at present, they would be more use in an emergency if they had been already opened up;

(c) that it is not desirable to prevent the Japanese obtaining their ore from this source. [2]

Mr Officer also pointed out on 4th December, 1936 [3], that Japan's increased demand for iron ore was due to a rise in the price of scrap iron, of which large quantities were used by them because of the particular process of steel-smelting employed. The opinion of the British Embassy at Tokyo was that if Japan succeeded in procuring her ore from Yampi Sound, it would make her more and more dependent on British sources for her raw materials.

It therefore seems that there is little cause for anxiety in so far as Japanese activities at Yampi Sound are concerned.

In regard to Japanese activities in Australian territorial waters, it was decided by the Minister for the Interior on 28th October, 1936, that this question should be brought to the notice of Cabinet. From later advice received from the Department of the Interior it appears that a Cabinet Sub-committee has been appointed to consider this question and in particular such incidents as that which occurred between the Larrakia' and a number of Japanese pearling boats. [4]

It would appear, therefore, that the situation here is also receiving close consideration. In view of these facts it is suggested that you write to Major Combes to the effect that the situation has already received considerable attention both from this Department and the Departments of Commerce and the Interior, but that it might perhaps be desirable to have Colonel Longfield Lloyd's views formally set out on our files. [5]

J. K. W[ALLER]

1 This memorandum was prepared by Waller to provide background information before Peterson replied to Combes's letter of 29 April 1937 (Document 21).

2 See also attachment to Document 54. F. K. Officer was External Affairs Officer in London.

3 Memorandum S3132 to E.A. Department (AA : A981, Australia 90B, i). Not printed.

4 Cabinet papers have not been located. The Larrakia provided a part-time patrol service of the pearling waters of North Australia. The incident in question was the arrest by the captain of the Larrakia of thirteen Japanese pestling vessels, in spite of the fact that he had power only to order the vessels to leave the area within twelve hours. It demonstrated the impotence of existing laws and the potential embarrassment to the Commonwealth Government of attempting to exclude the Japanese from Australian waters. Thomas Paterson was Minister for the Interior.

5 Peterson's reply was sent on to May 1937 (not printed; See AA :

A981, Australia 90B, i). He asked Combes to send him a copy of Longfield Lloyd's memorandum, but no full text of Lloyd's warnings has been located.

[AA : A981, AUSTRALIA 90B, i]