Japanese Proposal for Post-Occupation Army and Military Air Force and Japanese Activities in the Palau Islands.
1. (a) Your F.E.C. 130(a) and (b). This information was reported by Macmahon Ball on 16th April following a conversation with Asakai Koichiro , a senior Japanese Foreign Office official who is engaged in preparing draft proposals on the Peace Settlement for the Japanese Government.
(b) A Press correspondent in closest confidence told Macmahon Ball on 15th April that the Head of the United Kingdom L.M. had remarked that 'it would be desirable to make some arrangement by which the Japanese would be permitted sufficient armed forces to protect them against surprise attack from Russia'-(1(b) for your information only).
(c) A Press report on 18th May states that a Japanese Foreign Office official has sounded out various Allied quarters on their reaction to the establishment of a Japanese army of 100,000 and a small military airforce to take over the work of the American and British forces when occupation ends. Such a force would be used to maintain order and control smuggling.
2. A Kyodo radio broadcast of 13th May reported that 'in order to assure the supply of rock phosphates for Japan, SCAP decided that all work with regard to the management of the rock phosphate industry on Angaur Island in the Palau group shall be carried out within the responsibility of the Japanese Government under SCAP control. This step is the first since the end of the war, permitting Japanese enterprise overseas. The fact that this step has been taken prior to the conclusion of a peace treaty, is due to the very kind intentions of the SCAP authorities which are trying to effect the reconstruction of Japan as soon as possible.
In order to put this into practice, SCAP has set up an investigation mission which has left for Angaur Island on May 10th and which is expected to return at the beginning of June.' 3. We are generally concerned at such trends in Japan and note a persisting tendency to discuss matters which should be decided at the Peace Settlement. Please inform State Department of the above report making firm protest and advising them that our attitude to the Japanese proposal for a post-occupation army and military airforce is as follows:
(a) Future control of Japan and military protection of Japan are matters to be decided at the Peace Settlement.
(b) We strongly oppose any suggestion to re-establishment Japanese army or airforce. We agree with view expressed in Article 1 (a) of proposed Byrnes 25 Year Treaty for the disarmament and demilitarisation of Japan. 
Part 3, para. 1, sub-para 2 on page 4 of the Proposed Basic Policy Paper also refers. 
Reference the Palau Islands see my immediately following telegram.