Canberra, 14 March 1952
80. SECRET PRIORITY
Japan and Colombo Plan
1. Over long term a case can be made for participation of Japan in order to encourage export priorities and financial assistance to recipient countries in area. In next year or two it seems doubtful whether Japan's balance of payments will permit foreign assistance of this kind. Much depends on extent to which United States will encourage such policies and cover Japan's deficits from M.S.A.2 aid. There are signs of moves in this direction. Alternative role for Japan which does not necessarily involve formal participation in committee is for her to act as source of supplies with United States providing 'free' dollars to recipient countries expendable in Japan. We believe this is current M.S.A. policy.
2. For your own information, formal participation of Japan would naturally have important political implications, and Australian Government is unlikely to agree in near future. We do not wish, however, to be in position of appearing to Asian countries to be prejudicing their economic interests by a stand based seemingly on political considerations. Please point out to Symonds3 that we would have preferred that such matters involving differing political attitudes among Commonwealth countries were first discussed by United Kingdom with us privately rather than in general meeting. You should use opportunities in private discussions to convey to Ceylon and other Asian members the idea that:
(1) We believe consideration of participation of Japan is premature for following reasons:—
(a) There is case for considering participation of France before Japan.
(b) There might be justifiable protests from Philippines and Indonesia at any move to encourage Japanese aid to other Asian countries while reparations claims are unsettled.
(c) In immediate future it seems doubtful whether Japan's balance of payments would permit her to afford any tangible financial benefits to other participants.
(2) Position might well be kept under review during coming 12 months.
[NAA: A10299, C13]