Referring to various notes upon the above subject, I now set out
hereunder two brief outlines indicative of the penetrative system
of Japan:

(1) The use of Japanese capital for economic development is a
feature of Japanese penetration and 'special interests'. It has
been utilised in Japanese efforts in China. The system has been
proved to operate against the country accepting it.

(2) Japan is always prepared to invest even in unpromising
ventures to secure a foothold.

The tendencies indicated have been generally noted by observers in
the Orient and have been emphasized in much that has been written
from time to time.

It is to be noted also that Japanese efforts in the Philippines,
Portuguese Timor, Siam, Malaya, Dutch New Guinea and Netherlands
India have in recent years been supplemented by an investigating
activity in the Mandated Territory of New Guinea and Yampi, in the
two last mentioned places particularly by the Japan Mining
Company. The Chinese Island of Hainan is further a feature of
Japan's present conflict with China and there is no shadow of
doubt that all this is in deliberate pursuance of the southward
expansion policy regarding which details have already been
furnished. Please also see the map, with relative captions,
contained in the Japanese book 'Construction of New Japan' sent to
the Department last year.

The Yampi endeavour, as shown in the Brassert-Japan Mining
Agreement, is unquestionably part of the whole scheme and the
operation of the terms of that Agreement can only result in the
occupancy and exclusive right over a portion of Australian
territory by Japanese interests and personnel, upon the face of it
for half a century; a hold from which these people will not be
either then or in the interim readily loosened once the Agreement
is allowed to become operative.

Of the three methods of prevention which might be applied to this
question:-

(a) Immigration Act;

(b) Preclusion of export by declaration of insufficiency of iron
for Australian or Empire needs;

(c) Defence Act;

method (b) is diplomatically unobjectionable and should provide
the readiest solution. Method (c) could also be unobjectionable
for reasons obvious to anyone, but (b) is probably better. Method
(a) may be diplomatically objectionable and in any case could not
be a complete remedy in that at best it would exclude Japanese
personnel only and not remove the exclusive lien over the ore
under the Agreement, and even then the Japanese may seek
exemptions for brief periods and try to overcome the personnel
factor by sending fresh employees of the Japan Mining Company
every six months or so. Expense is no object to the Japanese
penetrative effort and the men would travel upon the ore-carrying
ships in which the Company will directly or indirectly have an
investment interest since their connections in Japan will ensure
this.

It is a considered opinion that the fulfilment of the Brassert-
Japan Mining Agreement could have the practical effect of
affording a foothold to Japan upon Australian territory for a very
long time and the position is so exceedingly serious as to justify
the compulsory cancellation of the Brassert scheme by any means
whatsoever.