Addressed Canberra No.138, repeated New Zealand No. 114. Your telegrams Nos. 99 and 100  of 20th and 21st April, repeated to External Wellington No. 74 and 75. Japanese reparations.
Our expert advisers have been considering Australian proposals in the light of the latest position reached in the Far Eastern Commission. It is contemplated that the whole question of future policy to be adopted on this matter Will be put before the Ministers as soon as agreement at official level of detailed issues involved is completed. This is being continued urgently.
2. Following meanwhile are tentative and preliminary views held at official level as to the general question whether fresh proposals of the type suggested are likely at this stage to bring satisfactory results in the Far Eastern Commission.
(a) Australian Government's desire to see early and effective settlement of the Japanese problem is fully shared here particularly in view of the urgency of settling Japanese levels of industry. A unanimously approved solution is of course to be preferred to any other if it can be secured at a reasonable price towards which all contribute.
(b) Recognition of Russian seizures in Manchuria and proposed division of external assets in non-F.E.C. countries and of treasure are certainly features which should appeal to U.S.S.R.
but it seems very doubtful whether such offerings would have any effect. The Russians claim 12% of industrial assets and the [high]est  percentage allocated to them by others was 4%.
Russians have moreover always contended that the Far Eastern Commission was not competent to deal with external assets.
(c) We share the Australian Government's concern at possible adverse effect of further delay in settlement of the reparations problem on the progress of reduction of Japanese war potential and consequently on the amount of reparations we may hope to receive.
The Australian plan however seems to contain too many controversial issues to be accepted by the Far Eastern Commission in a short time. The best prospect of quick settlement appears to be by way of trying to reach agreement on division of industrial assets only.
(d) For the above reasons some doubt is felt at official level whether the bringing forward at this stage of proposals on the lines suggested by the Australian Government would be the best means of achieving desired result.