371 Mission in Tokyo to Australian Government

Cablegram Department 88 TOKYO, 17 February 1948, 12.30 p.m.

SECRET

Your telegram 49.

Trade with Japan.

Text of S.C.A.P. memorandum 091.31 (February 14th, 1948) ESS/FT, is as follows. 1. The proposal of the Government of the Commonwealth of Australia that private trade between the Commonwealth and Japan be reactivated [1], is received with pleasure. It is understood that the Government of the Commonwealth of Australia will permit import licences for Japanese goods to minimum value of A.2 million for calendar year 1948, providing such export proceeds as Japan will accrue will be used for purchase of Australian exports over the same period. This proposal is accepted. Japan's raw material requirements procurable in Australia can substantially exceed the A. 2 million referred to above. Full assurance is given that Japanese purchases in Australia in 1948 will be at least equivalent to computed Australian purchases in Japan. Under these circumstances the question of the Commonwealth having to convert to dollars a balance will not arise.

2. It is desired that the Government of the Commonwealth of Australia make available at the earliest possible date outstanding debt of the Commonwealth to Japan for previous raw silk and rayon purchases. The proposal that these funds be deposited in the Commonwealth Bank of Australia where they may be freely drawn upon for purchases of wool for Japan is desired so that immediate access may be had to these funds. [2]

3. This understanding is regarded as an important step towards restoration of normal commercial relations between Japan and Australia. Subsequent developments it is hoped will make possible modification of views of the Government of the Commonwealth of Australia that trade with Japan must be balanced. One of the more important objectives of sterling based currency agreement was substitution of a multilateral trading system-sterling area-for bilateral method of trading between Japan and individual countries. Therefore we propose re-opening the subject of wider and multilateral trading system as soon as possible and this present understanding with Australia is regarded as an interim measure.

1 See Documents 367 and 368 2 By agreement the funds were paid, on 27 February 1948, into SCAP's commercial accounts 4 and 5 in London.

[AA:A1838/278, 479/2/8]