421 Forsyth to Department of External Affairs
Cablegram 1069 WASHINGTON, 28 November 1945, 12.08 p.m.
MOST IMMEDIATE SECRET
(1) The third report of Committee I will be considered by the Commission on 28th November. This report consolidates Committee and Sub-Committee revisions of 'United States initial post surrender policy for Japan' in the light of discussions in the Commission. The report follows the general structure of the United States document mentioned (which was cabled by the Legation to Canberra on 25th September ) but this has been amplified, clarified and considerably improved.  The majority of the 80 amendments were proposed by Australia. The main objectives sought by the Australian Delegation have been-that the future Government and Institutions of Japan will be democratic, that Japanese economy will be such as to reinforce democratic tendencies, and that in the words of the Potsdam Declaration economy will be such that Japan will 'maintain such industries as will sustain her economy and permit the exaction of just reparations in kind but not those which would enable her to re-arm for war'.
(2) The principal Australian amendments adopted by the Committee and their purposes were as follows:-
PART I-ULTIMATE OBJECTIVES:
1. Inclusion of 'democratic' in the description of the type of Government ultimately desired.
Original policy statement spoke of 'peaceful and responsible Government'. This appeared insufficient.
2. To remove doubt as to the resolve of the Allied Powers to establish democratic Government in Japan.
The purpose of the United States Document was expressed in a negative way to the effect that while democratic Self-Government was desired it was not the responsibility of the Allied Powers to impose on Japan any form of Government not supported by the freely expressed will of the people. The passage was changed to read- 'such Government in Japan should be established in accordance with the freely expressed will of the Japanese people'.
3. To remove doubt of intention of Allied Powers to bring about total elimination of militaristic influence the United States document might have been interpreted as qualifying Potsdam statement concerning the elimination of influence of those who have deceived and misled the people of Japan.
The new document expresses the policy thus-'The authority of the militarists and the influence of militarism will be totally eliminated'.
4. The inclusion among Rights and Freedoms to be encouraged in  that of 'Association'. In order to secure that workers and peasants organisations shall be encouraged and protected.
5. To clarify the general definition of economic policy. It was felt that the definition in the original policy document was somewhat vague and might permit the Japanese to establish for themselves an unduly favourable economic position, having regard to the economic damage and losses they had inflicted on other peoples. It was decided to use literally paragraph (II) of the Potsdam Declaration. 
PART II-ALLIED AUTHORITY 6. The new document affirms principle of participation in occupation by forces of nations which participated in the war against Japan. (The French Delegation shared this objective.) 7. To replace unilateral statement of the reserve authority of the United States.
The United States document stated that 'in the event of any difference of opinion among them (the Allied powers) the policies of the United States will govern'. The revised document states the present position as follows:
The extent to which the decisions and recommendations of the Far Eastern Advisory Commission will be given effect will be determined in the terms of reference which will also indicate the nature and extent of the reserve authority of the Supreme Commander.
8. To make absolutely clear the overriding authority of the Supreme Commander and his power to intervene at any time and take direct action in execution of Allied policy in Japan. The policy of using Japanese governmental machinery and agencies, including the Emperor, is maintained but it is made clear that this is to be done only to the extent that it satisfactorily furthers the objectives of Allied policy. The Japanese Government may be permitted to exercise its normal powers in domestic matters according to S.C.A.P.'s discretion but it is the Supreme Commander's right and duty to require changes of machinery or personnel if he considers necessary. He is not committed to support the Emperor or any Japanese governmental authority. He is to encourage changes in the form of Government in the direction of modifying or removing feudal and authoritarian character and to establish a democratic Japan.
9. To define the position of S.C.A.P. in the event of use of force by Japanese people to obtain a democratic Government.
S.C.A.P. is to intervene only where necessary to ensure the security of his forces and the attainment of objectives of the occupation.
PART III-POLITICAL . To set in proper perspective the task of disarmament and demilitarisation.
Originally stated as 'primary task' now as 'initial task'.
11. To make it clear that civilian as well as military and naval leaders of Japanese aggression will be exposed Potsdam words are used, viz:-'Those who have deceived and misled' etc.
12. To reaffirm the Potsdam policy concerning war criminals words of Potsdam Declaration were introduced, viz.-'stern justice' etc.
13. Specific mention of Trades Unions as institutions to be encouraged is made in a section on 'Encouragement of desire for individual liberties and democratic processes'.
14. Protection of individual liberties and civil rights. Instead of Japanese officials merely being progressively influenced to protect these it is now laid down as their positive duty to do so.
PART IV-ECONOMIC 15. Strengthening of policy designed to deprive Japan of industrial capacity to make war.
In the new document relevant Potsdam provisions are closely followed.
16. To encourage democratic influences in industry and agriculture.
New document reads 'Organisations of labour in industry and agriculture organised on a democratic basis shall be encouraged'.
Instead of stating the objective as strengthening 'the peaceful disposition of the Japanese', the new document says strengthening 'the democratic forces'.
17. To exclude from economic leadership persons unlikely to pursue peaceful ends.
The new document provides for exclusion from places of importance in industry people who 'because of their past associations cannot be trusted to direct Japan's economic effort solely towards peaceful ends'. Restrictive clause has been omitted.
18. To provide for the return of property surrendered to the Japanese.
The original policy statement dealt only with looted property.
19. To give Allied countries priority over Japan in obtaining imports. The United States document permitted Japan to purchase abroad goods needed for peaceful purposes. This is now 'subject to the prior requirements of the peoples of Allied countries'.
20. To secure equality of opportunity as between Allied nationals in Japanese trade.
The new document provides that 'The Japanese authorities shall give all business organisations, whether Japanese or foreign, equal opportunity to engage in trade and shall be required to give equality of treatment as amongst nationals of all Allied States both in the domestic and the overseas trade and commerce of Japan'.
(3) Amendments by other Delegations supported by the Australian Delegation include French amendments to protect interests, rights and assets in Japan of belligerents. (See also 6 above.) United Kingdom amendments to secure freedom of all religions and guaranteed to this end for the future and to make future as well as existing Japanese goods, equipment and facilities available for reparations purposes. Indian and Chinese amendments to tighten controls in connection with destruction of economic basis of Japanese military strength and to strengthen S.C.A.P. authority over Japanese governmental agencies. The Philippines amendment to give special consideration in connection with reparations to countries which suffered heavily as a result of Japanese aggression.
(4) The Chinese have been insistent but so far unsuccessful in desire to have a definite policy of keeping the Japanese standard of living to a subsistence as minimum clause under Part IV, section 3, sub-paragraph (d), now reading-'To make such provision for the need of the Japanese population as may be possible in the light of supplies available and reparations obligations to other peoples agreed upon by the Allied Governments'. The United Kingdom Delegation fear chaos in Japan if great combines are dissolved suddenly. Clause under Part IV, section 2, sub-paragraph (b), now reads-'To require a programme for the dissolution of the large industrial and banking combinations accompanied by this progressive replacement by organisations which would widen the basis of control and ownership'.