Your F.E.C.321 (New Zealand No.57).
We understand from your reports that United States intend to formulate by early April a plan for resumption of private trading with Japan. Our reports from Tokyo indicate that various United States interests have for some time been resuming and developing contacts with Japanese interests. (Please see D.288).  We feel uneasy about any over-rapid or widespread resumption of Japanese external contacts and would, therefore, stress the need for control by S.C.A.P. and by the respective Governments, and also the advantage of continuing Government trading in respect of important commodities especially those in short world supply.
While we feel that in order that Australian interests should not be left behind, representatives of approved Australian interests should be able to enter Japan some time before resumption of private trading so as to make the preparations which will be necessary to the conduct of their businesses, we do not consider it practicable at this stage to state a specific date for the resumption of private trading. Even then we envisage a transitional period during which Government and private trading would be carried on side by side. We would not wish in any case to give any encouragement whatever to the sending to Australia of Japanese business representatives.
In general our feeling is strongly against the tendency to piece- meal settlement with Japan. We do not wish, however, to hold up necessary planning in advance of the settlement and it is for that reason that we forward preliminary comments on the six questions raised in I.A.T.B.  by the United States representative. These comments have been formulated as a result of consultation between Departments concerned on the basis of information at present available.
1. Subject to control by the respective Governments and in conformity with the broad policies of the occupation authorities (e.g., reparations and level of economic life), private trading interests should be permitted to enter Japan when practicable to engage in trade with the Japanese.
2. In view of the number of commodities in world short supply, it would appear desirable to continue Government trading in certain commodities, and to provide for a gradual tapering off in Government transactions as the supply position improves.
3. It seems highly desirable that an official rate of exchange should be established for commercial transactions as soon as private trading is resumed. The only alternative would appear to be to permit private barter transactions which are always attended with many practical operating difficulties. Because of the link between Australian currency and sterling the question of determining an appropriate rate of exchange between the Australian pound and the yen would, of course, have to be considered in consultation with United Kingdom Government.
4. In the admission of private traders to Japan, first preference should be given those who were established in Japan pre-war. In view of the limited facilities available in Japan we recognise that restrictions may be necessary and if so we consider quotas should be established on recommendation of I.A.T.B. Within limits of quotas we would select representatives of approved commercial interests bearing in mind such factors as pre-war volume of trading, length of time established in Japan, availability of accommodation etc.
5. With the full reversion to private trading, contact with individual Japanese firms must be permitted. However, in the transitional period there would be no objection to commercial interests making contact with Japanese traders through Boeki Cho  or SCAP, provided that traders were not subject to direction as to the particular firms with whom they should trade.
6. Allocations of commodities in world short supply should continue to be determined on the recommendation of I.A.T.B. and controlled through SCAP. In regard to other commodities it would appear essential for balance of payments reasons to restrict imports but the maintenance of any extensive control over exports should not be necessary. Control can be operated by the Japanese, but should be under SCAP supervision. The types of controls over Japanese trade and their relation to I.A.T.B. will need to be reviewed when further data becomes available.