From Dominions Office telegram No. 282 of 29th September  you will have seen that Japanese are not prepared to proceed further with the contemplated exchange unless the 331 Japanese merchant seamen detained in Australia are included. This position was today the subject of a full discussion by United Kingdom Committee handling this matter, which Wheeler attended.
In the discussion United Kingdom representatives expressed grave concern at the possibility of a breakdown of the exchange and asked that the views expressed at the meeting be conveyed to you.
Following is a summary which Wheeler has given me of the views expressed at the meeting:-
1. United Kingdom feel that complete breakdown would have following repercussions- (a) Lose all means of sending supplies and medicines to prisoners and internees in Far East.
(b) Condemn 1,600 civilians including women and children and sick to indefinite incarceration under gradually worsening conditions.
(c) British public are aware that negotiations have been proceeding and would suffer considerable disappointment with possible political repercussions, particularly as they know of the American-Japanese exchange due to take place.
(d) The possibility that Japan may refuse to consider any further proposals for exchange.
2. Admiralty advise there is no shortage of merchant seamen in Japan and they have no security objection to the return of the 331 Japanese seamen held by you.
3. Foreign Office emphasise that exchange now under consideration is merely continuation of original negotiations which commenced before status of merchant seamen had arisen. They also point out that lists of British and Allied nationals nominated for repatriation this exchange include 44 merchant seamen (mostly Allied) to whose inclusion Japanese have so far raised no objection.
4. In view foregoing and after mature consideration United Kingdom feel Japanese might now be advised that as the present exchange is but a second operation under the original agreement made in 1942 and before the principle of assimilating merchant seamen to prisoners of war status had been notified to the Japanese Government, there is no objection to the inclusion of merchant seamen in the exchange at present under negotiation but such a concession is not to be regarded as a precedent for any future operations of a similar nature.
I have gone fully into this matter personally. I find that there is a very strong feeling here that it would be most unfortunate to allow the exchange to break down.
The conclusion I have reached after examining all the facts and after full consultation is that we should agree to the inclusion of the 331 Japanese merchant seamen.