4 Mr R. G. Menzies, Prime Minister, to Mr S. M. Bruce, High Commissioner in the United Kingdom

For the Secretary of State for Dominion Affairs. [1]

Prior to the outbreak of hostilities between Germany and Russia,

we had been reviewing the position that had been reached in regard

to economic policy towards Japan. We were about to suggest to you

that the various economic measures in operation and in

contemplation be considered in relation to foreign policy, and

that the possible effects on our political relationships with

Japan, and our preparedness for any aggressive move by Japan, be

summed up. [2]

At the time we had before us your proposal that we should reduce

our lead exports to Japan to 2,500 tons annually [3], and we were

also considering the Japanese requests for copra and wheat, and

your views in regard to them. [4] Our general attitude was that we

were prepared to cooperate in regard to these matters, provided

the action proposed was valuable in securing United States co-

operation, and was part of a carefully weighed plan with adequate

safeguards for us. We were, however, apprehensive regarding the

effect of the proposed action on our relations with Japan,

particularly in regard to copra, large quantities of which are

lying on many undefended beaches in the Pacific.

When Germany attacked Russia, we suspended action while awaiting

developments. Since then we have studied with interest your

several telegrams on the subject [5], and have noted your

instructions to His Majesty's Ambassador at Tokyo. [6] You mention

in your telegram of 4th July, Circular D.396, that the Japanese

Embassy have pressed the request for copra from New Guinea, and

have referred to the effect of the closing of the Siberian railway

on the possibility of re-export. The Japanese Minister in

Australia has made a similar request to us. [7]

The Australian Minister at Tokyo has expressed to us views similar

to those forwarded to you by His Majesty's Ambassador. Sir John

Latham recently advised us that, while there is a strong case on

economic grounds for the restrictions on further food supplies, a

political assessment of the position must have regard to the fact

that the Japanese people are short of rice, wheat and food oil.

Our Minister points out that it would be possible to work up

indignation against the Empire for denying supplies in view of the

fact that Netherlands East Indies and United States are allowing

supplies of oil and wheat to go to Japan. [8] (We know of course

that the exports of copra from Netherlands East Indies are very

small, but we are not clear regarding current exports from

Philippine Islands.)

While our Minister advises us to permit small supplies of

foodstuffs to go forward, we are trying to postpone a decision as

long as possible. In the meantime we would very much appreciate

advice whether, in deciding on measures against Japan in the

sphere of economic warfare, you feel that we must take a chance as

to Japan's reactions, which may be bitter and may appear well

founded, and whether you consider that effective means of

countering any aggressive action by Japan are available, including

United States collaboration. In this regard we have noted the

relevant portion of your telegram of 6th July, Circular D.399. [9]

[matter omitted]

MENZIES

[AA : A981, FAR EAST 20B, i]