My telegram No. 96 17th April (British-Japanese Civilian Exchange). 
The Japanese Government have replied that they cannot accept the new proposal of His Majesty's Governments.
2. We greatly regret having to re-open with the Commonwealth Government the question of the 331 Japanese Merchant Seamen in Australia but we are now faced with the prospect of a complete and final breakdown of these negotiations and moreover with the virtual impossibility of arranging any further exchanges of civilians with the Japanese at all since it is most unlikely that Japanese Government would agree to any fresh negotiations before this difficulty is cleared out of the way. We recognise that the Commonwealth Government's decision  was based on exhaustive consultation with Military and Security Authorities so we hope that the Commonwealth Government may now feel disposed to reconsider decision in light of recent favourable developments in Military situation. It is suggested that risks involved in return to the Japanese of these seamen may no longer be so grave in view of considerable progress which has been achieved in driving the Japanese back in South Pacific.
3. Complete breakdown of negotiations would in our opinion have following serious effects:-
(A) Widespread public disappointment and criticism in the United Kingdom and presumably in the other parts of the British Commonwealth. The United Kingdom public are already complaining that Americans have secured two civilian exchanges with Japan while the British have only secured one.
(B) Intensification of feeling referred to at (A) in the event of Americans achieving third exchange (which they have already proposed to the Japanese Government) and (C) Subsequently realising their avowed intention of repatriating all remaining American civilians in the Far East serious prejudice to the prospect of sending supplies of medicines, food and clothing to British and Allied Prisoners of War and civilian internees in the Far East especially those in the Southern Area whose minimum requirements will not be met even if all proposals put forward by His Majesty's Government and the United States Government for establishing supply routes to the Far East are accepted by the Japanese Government.
(D) From the standpoint of (C) above unfortunate reaction in U.S.A. particularly in State Department and American Red Cross circles. State Department have already expressed their interest in this second British exchange and their concern over its delay.
This can be understood since at Conference in Washington last year between British, Canadian and American Red Cross Societies agreement was reached for the pooling (as between British Commonwealth and U.S.A.) of all arrangements for the despatch of relief supplies to the Far East and such supplies are to be carried equally by British and American exchange ships.
(E) Further deterioration of the situation in Hong Kong where shortage of food is critical and morale affected owing to prolonged delay in effecting the second civilian exchange. It will be recalled that this situation formed the subject of Mr. Curtin's telegram No.1 4th January to the Canadian Government. 
(F) Finally (and perhaps most important) grave and perhaps hopeless outlook for all British Commonwealth civilians in the Far East since with the approach of the war closer to Japan material conditions for British Commonwealth Prisoners and Internees are bound to deteriorate. This is already evident for instance in Germany.
4. The United Kingdom Government therefore feel justified in asking the Commonwealth Government whether on all these grounds and particularly in view of the greatly improved military situation in the South-West Pacific Area they would now be prepared to waive their objection to the repatriation of the 331 Japanese Seamen.