22 Mr J. K. Waller, Department of External Affairs, to Mr H. A. Peterson, Department of External Affairs
Memorandum  3 May 1937,
The extract from Colonel Longfield-Lloyd's note to Major Combes draws attention to two points viz:-Japanese interests in Yampi Sound, and secondly, in Northern and North-Western Australian waters with special reference to the area near Darwin.
The position in regard to Yampi Sound is that, soon after the matter came up for discussion in January 1936, Mr Officer discussed the position with the Committee of Imperial Defence and the Board of Trade and ascertained that, in their opinion, the situation was as follows:-
(a) that iron ore deposits are so extensive that it is not necessary to consider conserving the deposits for future Empire purposes, while other deposits of equal richness to those at Yampi are available much closer to Europe;
(b) that, although the Yampi deposits are not required at present, they would be more use in an emergency if they had been already opened up;
(c) that it is not desirable to prevent the Japanese obtaining their ore from this source. 
Mr Officer also pointed out on 4th December, 1936 , that Japan's increased demand for iron ore was due to a rise in the price of scrap iron, of which large quantities were used by them because of the particular process of steel-smelting employed. The opinion of the British Embassy at Tokyo was that if Japan succeeded in procuring her ore from Yampi Sound, it would make her more and more dependent on British sources for her raw materials.
It therefore seems that there is little cause for anxiety in so far as Japanese activities at Yampi Sound are concerned.
In regard to Japanese activities in Australian territorial waters, it was decided by the Minister for the Interior on 28th October, 1936, that this question should be brought to the notice of Cabinet. From later advice received from the Department of the Interior it appears that a Cabinet Sub-committee has been appointed to consider this question and in particular such incidents as that which occurred between the Larrakia' and a number of Japanese pearling boats. 
It would appear, therefore, that the situation here is also receiving close consideration. In view of these facts it is suggested that you write to Major Combes to the effect that the situation has already received considerable attention both from this Department and the Departments of Commerce and the Interior, but that it might perhaps be desirable to have Colonel Longfield Lloyd's views formally set out on our files. 
J. K. W[ALLER]