PEACE SETTLEMENT WITH JAPAN
Reference is made to your memoranda dated 24th March and 23rd May, in which you sought the views of this Department, on strategic aspects of the peace settlement with Japan. The matter has been examined by the Defence Committee and I am attaching copy of the Report of the Committee (Minute 220/1947) which has been endorsed by the Acting Minister for Defence.
2. It will be noted that in paragraph 18 (f) of its Report the Defence Committee has made some observations on the proposal (contained in the draft Australian Policy Paper forwarded by your Department)  that after the signing of the Peace Treaty small garrisons of the Allied Supervisory Commission should replace S.C.A.P. Occupation Forces and be stationed in main areas in Japan, and that a key base for the forces of the Supervisory Commission should be stationed in an adjacent island, e.g., Okinawa. The Defence Committee has commented that it is not aware what is implied by 'small' garrisons, but has expressed the opinion that the Forces in Japan should be adequate to ensure that the directions of the Supervisory Commission are complied with.
Regarding the key base which it is proposed to establish on an island adjacent to Japan, e.g., Okinawa, the Defence Committee has observed that this island is some 800 miles distant from Tokyo, and in any case, is to be ceded to the U.S.A. by Part 11 of the Treaty. The Defence Committee did not consider that a force stationed at Okinawa would fulfil the requirements of the force needed to provide adequate support for the Supervisory Commission in Japan. The Defence Committee has proposed amendments to the draft Policy Paper to cover the above points. 
3. The above observations of the Defence Committee represent a military opinion on the question of occupation forces. It is observed from your memo of 4th July (P.47/10/61) that the proposal in the draft Australian Policy Paper is in line with the views of General MacArthur as conveyed through Mr. Macmahon Ball, and it is appreciated that considerable weight must be give to such views.
4. As stated in paragraph 16 of the Defence Committee Report, the question of control of Japanese industry (including merchant shipping, shipbuilding and ship repair) is now under detailed examination by the Committee in accordance with your memorandum dated 26th May, (your File E.R. 47/31/21) and your teleprinter message No. 425 dated 24th June. It is expected that the report of the Committee on this subject will be finalised at an early date when you will be further advised.
Defence Committee Minute 220/1047 (extracts) 24 June 1947
AGENDUM NO. 103/1947 PEACE SETTLEMENT WITH JAPAN
GENERAL STRATEGIC ASPECTS OF THE PEACE SETTLEMENT
Balance of Power in the Pacific-The most important single strategic question affecting Australia's security in the Pacific is the continuance of the present favourable balance of power in the Pacific brought about by the United States participation in the occupation of Japan and her control of the former Japanese mandated islands in the Pacific. U.S.A. is the major power in the Pacific, and it is in Australia's interest that this situation should continue indefinitely.
South East Asia-South East Asia is an area of great strategic importance to Australia and, providing U.S.A. remains in control of the Pacific, would be the only practicable route of attack on Australia by any potentially hostile power at present. It is, therefore, of great importance that a situation favourable to Australia be created in South East Asia and any potentially hostile power should not be permitted to obtain power or influence there.
The Indian Ocean-The security of Australia's external sea and air communications to the United Kingdom, Middle East and North America is an essential part of the strategic concept for Australia's defence. As these communications run through both the Pacific and the Indian Oceans, the situation in the countries bordering the latter ocean, must also be taken into account when considering Pacific security. In this regard, Australia's future relationship with India and Ceylon will be of great importance, as an unfriendly India and/or Ceylon, would represent a potential threat to the security of communications running through the Indian Ocean.
PARTICULAR STRATEGIC ASPECTS OF PEACE SETTLEMENT
Japanese Home Islands-The Japanese Islands occupy an important geographical position in relation to continental Asia and would provide valuable bases for any Power aspiring to domination of the Pacific. Possession of these facilities by a potentially hostile power or combination of powers, would be a continual threat to our security. In this we have borne in mind the resumption of Russian control of Southern Sakhalin, her possible domination of Port Arthur and Dairen, and her annexation of the Kuriles. As a result Russian influence is growing in Northern Japan. Russia has also a strong hold on Northern Korea and, unless adequate measures are taken to ensure Korea's independence, will dominate the whole country. This places Russia in an advantageous position to seek control of Japan should she be so minded. In this event, though the possibility may be remote at present, the whole strategic balance in the Pacific would be at once altered to our disadvantage.
It is, therefore, in our interests that Allied control of Japan should continue indefinitely. In this control we consider that U.S.A. must continue to play the major part in accordance with our conception of the measures necessary to ensure our security. This does not mean that Australia should withdraw from direct participation in the control of Japan. On the contrary, continued participation by Australia is essential in order to maintain cooperation with the United States which is of vital importance to future defence arrangements in the Pacific. Such participation would also safeguard our right of access to Japanese facilities and be a token of our acceptance of a share of the responsibility in the control of Japan.
Former Japanese Mandates and Other Islands-The United States Trusteeship of the former Japanese Mandates is greatly to our advantage in protecting the Southern Pacific region. It is also most desirable that the United States should acquire sovereignty or predominant influence in the Ryukyu, Bonin, Volcano, Spratley and Marcus Islands.
Destruction of War Potential-Japan as a strong nation would be a constant threat to the security of our Pacific interests and it is essential that she be stripped of all military power. In destroying Japan's ability to make war and thus to upset the Pacific balance, complete disarmament and destruction of her war potential is essential. This is now in train, but the physical control of Japan must continue until not only the destruction of war material (including means of production) and military and paramilitary organisations is completed, but also the will of the Japanese people to wage aggressive war (which must be accounted a strategic factor) is rendered impotent. The conclusion of a peace settlement does not in itself alter the necessity for continued control. The disbandment of military and ancillary organisations, should not affect the civil police force since such a body will be required under Allied control as an organ of public order and security.
The Japanese Home Islands, which now exclude Southern Sakhalin and the Kuriles, lack those raw materials necessary to wage a major modern war and Japan is now, because of her defeat, denied direct access to these resources. A major factor in preventing Japan's military resurgence is, therefore, the continued control of these necessary raw materials. Such control should not be so severe as to cause continued economic depression in Japan as this would seriously affect the task of the liberal education of the Japanese people, would intensify latent hostility and open the way for combination with any power which, for its own ends, offered Japan an opportunity for renewed strength. Control of raw materials should therefore be such that while the extent of imports is sufficient to maintain life at a reasonable level, it is insufficient to permit re-growth of military power. The drastic restriction of Japanese merchant shipping will play a vital part in this control.
The question of control of Japanese Industry (including merchant shipping, shipbuilding and ship repair), referred to in paragraphs 14 and 15 above, is now under detailed examination by the Defence Committee in accordance with a request from the Department of External Affairs and will be the subject of a further report at an early date.
AUSTRALIAN OBJECTIVES IN THE PEACE SETTLEMENT FROM THE STRATEGIC VIEWPOINT:
Based on the considerations stated above, the Australian objectives from the strategic viewpoint should be:
(a) Retention of the present favourable strategic situation in the Pacific.
(b) Continuance of Allied control in which the United States plays the major part and Australia participates, until such time as Japan is considered unlikely to endanger the peaceful aims of the United Nations.
(c) Prevention of the spread of Russian influence in Japan and former Japanese territory.
(d) Safeguarding of our military interests by ensuring our right of access to facilities in Japan required for the establishment of bases, in accordance with Articles 43 and 45 of the United Nations Charter.
(e) Destruction of Japanese war potential which should include the following measures:
(i) All Japanese Armed Forces of whatever kind, General Headquarters, staffs and organisations, of military or paramilitary nature, including secret police organisations, should be disbanded and remain so.
(ii) All military equipment of whatever kind should be destroyed.
The use of existing installations or construction of new installations by the Japanese for military purposes, should be prevented. Such installations as are not required for Allied control purposes, should be destroyed.
(iii) The manufacture or production of any article designed for the equipment, maintenance or use of any military force or establishment should be prohibited.
Note: The question of the control of Japanese industry (including merchant shipping, shipbuilding and ship repair) will be the subject of a separate report by the Defence Committee at an early date.
(iv) Japan should not be allowed to have an aviation manufacturing industry nor to possess or operate aircraft including gliders and lighter-than-air craft.
(v) The way of life of the Japanese people should be so altered by the introduction of democratic governmental, social and economic measures as to strengthen democratic tendencies and eliminate militarism.