Japanese Wool Position Further to my memorandum of 25th March (your papers M41/15/25)  I desire to invite your attention to my cable of today's date regarding the Import Budget 1954/55, in which I advised, inter alia, that the anticipated import of wool into Japan from April 1954 to March 1955 was 610,000 bales with an anticipation of 235,000 bales for the first half of the fiscal year.
As I stated in the memorandum regarding the Budget, the Japanese Government has discontinued the practice of announcing from which of the three currency areas imports are proposed to be obtained so that it cannot be forecast with any accuracy how much wool is likely to be bought from the sterling area in general or from Australia in particular. You will note that in paragraph 5, page 5, of my memorandum of 25th March, I advised that the President of the Wool Spinners' Association was of the opinion that about 50% of the year's total would be purchased from Australia. I noticed the following paragraph printed in the Japan Trade Bulletin, which is published by the Japan Export Trade Research Association:
'Sheep Wool. The imports of sheep wool for fiscal 1953, which was estimated at about 700,000 bales in the original plan of import, has to be reduced by about 15%. For the attainment of this purpose, efforts will be exercised to cultivate the synthetic fibre industry, as well as for acceleration of blended spinning.
Besides, greater efforts will be exercised to shift the import market of sheep wool from Australia to various countries in the Open Account Area, including Brazil, Argentina, etc.'
I asked Mr Ushiba this morning whether it was true that a deliberate attempt was being made to divert purchases of wool from Australia to South America as stated in the paragraph. He said that this was not true and that the chief consideration which should be taken into account in this connection was Japan's obligation under the recently signed trade agreement with Argentina to import wool from that country. As I have advised you on other papers, $26 1/2 million was the sum mentioned for the purchase of wool from Argentina. Mr Ushiba further stated that while it was possible for Australia completely to prohibit the import of Japanese goods, Japan could not totally prohibit the import of Australian goods even if this were contemplated, as Japan must have certain types of Australian wool.
Your attention is invited to the advice contained in my report of today's date regarding the Import Budget concerning increases in the rates of import securities. It will be noted that commodities such as raw wool and wool shoddy will be changed from the automatic approval system to the foreign exchange allocation system as from 1st April and that the import security will be raised to 10% in cash. However, in the case of raw materials for re-export under the export/import link system, the import security for wool, among other commodities, will remain at 1% by letter of guarantee.
I have learned that during the last week the President of the Japan Wool Spinners' Association and a senior executive of the Woollen Textile Industry Association, attended a meeting with officials of M.I.T.I. to work out measures for the promotion of woollen goods exports. It is said that key points of the discussion were:
(1) An export goal which M.I.T.I. desire to place at $41 million, including special procurements of $5 million, whilst the woollen industry considered that $29 million for woollen piece goods and $10 million for other woollen products would be possible.
(2) Price Stabilisation: The industry representatives urged that a joint export commission should be formed to stabilise prices and to prevent dumping, as it was alleged that since the export/import link system came into force last August, some firms have exported woollen goods below cost.
(3) Foreign Policy: It was urged that a strong economic policy should be formulated with regard to foreign nations which discriminate against imports of Japanese products and the industry stated its desire for the Government to make provision to secure exports of Japanese woollen goods in future trade agreements.
(4) The necessity for propaganda, including advertising of woollen goods in foreign countries.
Further information will be forwarded as it becomes available.