386 Lord Cranborne, U.K. Secretary of State for Dominion Affairs, to Commonwealth Government

Circular cablegram D182 LONDON, 5 April 1941, 3.51 p.m.

SECRET

1. We have been considering the possible steps which we could take inter alia in economic sphere as counter action in the event of further Japanese moves to the south. Two suggestions have been made which seem to be worth considering as possible reprisals.

They are:

a. placing of Mitsui, Mitsubishi or Okura on the black list and b. denunciation of the Anglo-Japanese Commercial Treaty 2. Our preliminary views on these two suggestions are as follows:

3. The black listing of one or other of the above firms might bring home to the Japanese industrialists the perils of bad leadership. If at any time in the future such a step were to be decided on, we think that also it might be well to begin with Okura who are regarded as being largely interested in German trade, and that Mitsubishi should be listed before Mitsui who have shown themselves rather more friendly to British interests. A simultaneous listing of all three might have even more adverse effects on trade of Empire countries than on Japan itself.

The same violent reaction might also be anticipated to this step as is to be feared from a complete oil embargo or other extreme economic sanction.

4. The argument in favour of denouncing the Anglo-Japanese Commercial Treaty is that although a year must elapse before its expiry, denunciation would have a considerable political effect in Japan, particularly if accompanied by some statement to the effect that in view of Japanese restrictions on British trade it had become obvious that the treaty in its present form no longer served any useful purpose. If Japan were to take over Indo-China after coming to an agreement with Russia and the treaty were then to be denounced Japanese industrialists would perhaps feel that the sacrifice had been unnecessarily great and the unpopularity of the Government of Pro-Russian policy would increase.

5. We have asked H.M. Ambassador at Tokyo [1] for his views on the above suggestions. We realise of course that it is not possible to give a precise appreciation of their effect failing an exact indication of occasion of commencing application.

H.M. Ambassador has also been asked to ascertain the views of his Commonwealth colleagues in the matter.

6. We should be grateful for any observations the Dominion Governments may wish to offer on these two proposals.

1 Sir Robert Craigie.

2 Sir John Latham.

[AA: A981, TRADE 68, iv]