Your 374.  Japanese Reparations.
Our approach is based on following principles:
(a) We are opposed to any action to by-pass F.E.C. jurisdiction and to depart from the Moscow Agreement;
(b) We feel that original proposal for reparations conference outside F.E.C. machinery but subject to F.E.C. ratification of decisions  was soundly based on reasoning that F.E.C. machinery is too cumbersome for speedy decisions;
(c) It seems to us that proposal for that conference should be pressed to a vote on F.E.C. It is not sufficient that the bilateral U.S.A. Soviet discussions reached a deadlock;
(d) Decision by F.E.C. on level of economic life should precede detailed discussion on reparations.
2. We are therefore giving consideration to authorising the Australian F.E.C. representative to proceed on following lines:
(a) Press for F.E.C. decision on level of Economic Life as matter of urgency in advance of any further discussion on reparations;
(b) Press for F.E.C. to vote on proposal for a reparations conference. This should be done in such a way that if Soviet should veto inclusion of external assets within the scope of detailed discussion of reparations it will not prevent the implementation of the next stage. In that event external assets can be dealt with as a separate issue at diplomatic level.
(c) Propose for F.E.C. discussions the following broad plan for allocation of internal assets:
(i) A proportion of the total to be set aside to cover costs of occupation. This amount would be divided among the countries providing occupation forces in the proportion of troops contributed by each.
(ii) The remaining quantity to be divided among all claimant countries including those not members of F.E.C.
(d) If the broad plan set out in (c) should be approved a conference of all F.E.C. member countries under F.E.C. aegis should then proceed to determine the percentages to be allotted to each claimant country.
3. This approach is considered to be substantially in agreement with views expressed in your paragraph 2. With reference to your paragraph 5 however we consider that we should not indicate our attitude on the question of co-operation with the U.S.A. in the preparation of interim directives outside F.E.C. until the Soviet attitude has been fully established in F.E.C. We regard purely bilateral negotiation outside F.E.C. jurisdiction as most undesirable.