68 Extract From Casey's Diary

17th August, 1954

I did an Executive Council Meeting early this morning.

We then had a Policy Cabinet meeting, the greater part of which was taken up by my putting through a Cabinet memorandum on our attitude towards Japan, in which I proposed that we should take a more civilised attitude towards Japan for the future. It was agreed to without any appreciable dissent.

It was quite a good discussion of about 2 1/2 hours, during which I said that the situation of Japan in the world was not an enviable one. I believe that Japan's action in the Second World War was brought about by the two great internal pressures-(1) the fact that they were not (and are not) an emigrating nation, which is reflected in the fact that well under 1 million Japanese have left the shores of Japan for any other country in all their history. Their very large net annual population increase in consequence creates a progressively greater internal population pressure; (2) the fact that whenever they get their industries in such shape that they can export cheap goods to the outside world, the world's customs tariffs rise against them, thus neutralising the employment of their population in secondary industries.

The combination of the above two matters (population pressure and lack of markets) is likely to be a continuing one-and will build up into the same sort of pressures in the future as were instrumental in causing the explosion of the last war.

I told them of my conversation with Yoshida in Tokyo three years ago [1], in which he said that he could not see more than five years into the future, so far as the economy of Japan was concerned. He said that his experts told him that, by the use of modern agricultural methods, probably another 5 million Japanese could be accommodated in the Japanese Islands, but that beyond five years he could not see.

Cabinet agreed that it was necessary for Australia to do whatever we could to help enable the Japanese create a viable economy-that we had to live with them in the world and treat them in a more civilised way than in the past.

I dealt with the difference between pre-war Japan (in possession of Korea and Manchuria) and post-war Japan (without any Chinese mainland possessions, and with reduced homeland area-and with, at present, an unstable economy). I referred to their very bad and worsening overseas balance of trade. This led naturally on to the inevitable tendency that must arise for Japan to come to commercial arrangement with Communist China, both to secure a source of raw materials and to get a large market for her (Japanese) cheap goods, once they were able to get their cost structure down.

There was no real opposition to the general proposition in the Cabinet memorandum that I put up-that we should treat Japan in a more civilised way.

John McEwen supported it from the trade point of view, by reason of the advantage that would accrue to us by an improvement in the Japanese international trading position, which would put her in possession of more overseas funds and so help her to be able to continue to buy our wool. He said that if Japan's overseas funds were still further depleted, they would inevitably become much less competitive at our wool auctions, which might easily have a substantial effect on our annual wool cheque. Against this there is to be offset the much smaller consideration that Japan would probably take some part of our market in free Asia away from us- but that this was a much lesser disability than that of (say) a 10% drop in our wool prices, by lack of Japanese competition.

I brought up the subject of Japan entering the Colombo Plan-and it was generally agreed that this would be a good move to start off our 'new deal' towards Japan. I said that I would, of course, endeavour to make as much of this (by way of a deal) with the Japanese as I could, probably in connection with Japanese compensation to our ex-prisoners-of-war.

I raised briefly the question of Japanese inspection of their war graves in New Guinea and mentioned the fact that the Australian Administrator of New Guinea is reported to have said that he would need twelve months' notice before any such Japanese team was allowed to come to New Guinea. It was generally agreed that twelve months was very unnecessarily long.

1 See Document 8.

[NLA : MS6150, VOLUME 17]