AUSTRALIA'S FUTURE POLICY TOWARDS JAPAN
1. Shaw's Despatch 85 raises the question of our future policy towards Japan. For the past two years we have been talking in the language of August 1947, i.e. all will be solved if there is an immediate peace treaty which Australia must attend as a party principal because of her effort in the war, second only to that of the United States, and because of her geographical position etc.
This line of talk is now something of an anachronism.
2. It seems obvious that the U.S. does not want a peace treaty, largely because of her fear of the Soviet filling the Japanese vacuum when the U.S. occupation troops are withdrawn. There would be nothing to stop the Soviet taking control if the no more war provision in the Japanese Constitution were strictly enforced.
U.S. policy seems to be 'peace without a treaty', at the same time keeping a friendly protecting occupation force in Japan to act as a deterrent either against Soviet aggression or Japanese military resurgence or both.
3. The U.S. sees Japan as an ally in a future war with the Soviet.
As a result of the U.S. threat to suspend reparations and her championship of Japan's resumption of international relations, it can be assumed that, with the relaxation of occupation controls and the assumption of a friendly protecting role by the occupation forces, moves will be made to arm Japan, starting probably with the police force.
4. The Japanese Government, which is little different in outlook from pre-war or wartime governments, probably hopes for a US/Soviet clash, particularly if Japan has the nucleus of armed forces, so that she can fish in the troubled waters. Her past record of duplicity and secret agreements give no ground for belief that, left to her own choice, Japan would be more likely to fight the Russians than the Americans. It should be understood at all times that the Japanese are not democratised, there has been no change of heart and they are not to be trusted.
5. It would be calamitous for Australia if Japan were allowed to re-arm under U.S. supervision. It would be more calamitous if Japan came under Soviet domination for she would then probably be encouraged to cut loose in the South East Asian and South West Pacific areas.
6. It is likely that the Soviet and Communist China win press for an early peace treaty in order to end the occupation. They might even go to the extent of agreeing to all members of FEC drafting the treaty in an attempt to force the US hand.
7. The Defence Department view will most likely follow the U.S.
view and consider it would be to Australia's strategic advantage for the occupation to continue even on a friendly basis in which the 'U.S. 8th Army would have exactly the same status and functions in Japan as an ordinary army in the U.S.'
12. It might be necessary to consider an orientation of Australia's policy towards Japan along the following lines- (a) We should agree to the US view of 'peace without a treaty'.
(b) We should agree in FEC to allow Japan to participate in technical conferences but should oppose any further participation in international relations except as decided by FEC. 
(c) We should oppose any deviation from the following two FEC policy decisions FEC.084/21, Reduction of Japanese Industrial War Potential-14 August, 1947.
FEC.017/20, Prohibition of Military Activity in Japan and Disposition of the Japanese Military Equipment-12th February, 1948.
(d) Should Japan manage to secure permission to arm her police force with tanks, armoured cars, machine guns, etc. we should all the more strongly oppose the expansion of Japan's shipping and shipbuilding and the resumption of her civil aviation. Even if Japan has a small army it can be stymied if she has no large ships to transport it and no 'planes to protect it. We should remember this when considering the following papers before FEC- FEC.297/10-Level of Economic Life in Japan: Policy Towards Japanese Shipbuilding and Shipping-last considered 2nd November, 1948.
C2.245/24-Civil Aviation in Japan-last considered 4th March, 1949.
(e) We should send on Shaw's despatch 85 to Defence and ask them for comments.
[AA:A1838/278, 539/1, i]
1 See Document 350.