My telegram No.150, repeated New Zealand No.122. Japanese Reparations.
The matter has now been considered by Ministers whose views were as follows:2. As regards Australian plan, Ministers fully share Commonwealth Government's anxiety for an early settlement of the reparations problem having regard to the fact that every day of continued stalemate in Far Eastern Commission:
(a) reduces chance of claimants receiving anything at all, and, (b) increases risk that war potential will not be removed from Japan. But in light of all the factors involved, Ministers felt obliged to endorse expert advisers' doubts set out in my telegram of 11th May, Number 138 , whether the bringing forward at this stage of a comprehensive proposal on the lines suggested would, in fact, lead to an early settlement. Not only would the attitude of U.S.S.R. almost certainly be unfavourable, but chances of other countries accepting any new approach on the lines contemplated, whatever its intrinsic merits seem slight; in particular, the United States Government would be unlikely, we feel, to support any new plan greatly different from their own. The best course in the circumstances seems rather to be to continue to seek a settlement, as regards internal industrial assets only, by means of some plan on the lines of that submitted by the United States Government last November. 3. This, as you know, represented an attempt to strike an average of various schedules of percentages put forward by different countries in the course of discussion in the Far Eastern Commission, and was supported by Australia, Canada, New Zealand and China. Since then, we have heard at the official level that the United States Government might be prepared further to modify schedule of percentages if some slight amendment would increase chances of the plan being accepted. The United States Government had already stated in the Far Eastern Commission that, if schedule proposed in November, 1947 were adopted United States Government on its part would hold 18% out of its own 28% share for distribution among 'dissatisfied' countries in proportions to be agreed upon by them. Suggestion for further modification now made is that the United States might reduce basic Claim from 28% to 23%, thus making available an additional 5% to increase basic figures for four 'dissatisfied' countries, viz United Kingdom, India, Netherlands and France. This would make the United States plan somewhat more attractive from the point of view of the United Kingdom and those territories for whose interests we speak, and there is some reason to suppose that France and the Netherlands would be prepared to support it also.
4. Ministers have accordingly considered carefully, whether, without great disadvantage to our own economy, and without disappointing legitimate hopes of Burma and Colonies, we could accept less than the 20% of industrial assets which we have hitherto regarded as a minimum. In the result we have decided to instruct the United Kingdom representatives in Washington to inform the United States Government that the United Kingdom Government would be prepared to accept United States plan subject to modifications on lines indicated in paragraph 3 above, whereby the United States would forgo 18 % Plus 5% out of her own share, provided it is made clear to all concerned that the United Kingdom Government's acceptance is entirely without prejudice to the percentage of other Japanese assets to be allocated to the United Kingdom in subsequent distributions of Japanese reparations. The United Kingdom representative has been asked to inform his Commonwealth colleagues of these instructions.