Recent developments in F.E.C. and in Japan make clear an increasing tendency on the part of the United States authorities to by-pass Commission and give it little or no voice in the formulation of Allied policy towards Japan. Nature of Allied Council and SCAP's attitude to it  make Commission only place where Allies can influence developments in Japan and, in view of our particular interests in the Pacific, we are not prepared to accept view that Japan is sole responsibility of United States and that Allies are simply sleeping partners. Until Peace Conference is held it is essential that F.E.C. retain its policy making function.
2. The following are developments we particularly have in mind:
(a) Attitude to discussions on public service legislation  in spite of views of majority of F.E.C. countries;
(b) Issuance of interim directive on economic stabilisation  without opportunity for discussion by F.E.C.;
(c) Action on F.E.C. 2, 30 (Zaibatsu). 
(d) Contention that demarcation of fishing area lies within administrative authority of SCAR (e) Decision to rescind purge directive. This step is contrary to Basic Policy. (On 1st February head of Australian Mission was told by Chief of SCAP Government Section, General Whitney, that U.S.
Government had decided to rescind purge directive and that members of F.E.C. had been so informed. Whitney said that decision had been made in Washington. ) (f) As yet unconfirmed Tokyo radio report that SCAP has given Pan American Airways and North West Airlines permission to operate inter-island freight and passenger services within Japan.
(g) Report that SCAP instructed Diet to pass recent Labour legislation 'to forestall interference by F.E.C.' 3. It may be that some policies followed up to present need revision or relaxation (e.g. dissolution of Zaibatsu, prohibition of civil aviation in Japan, the Purge) and we should be willing to discuss revision on basis of facts supporting need for it but we cannot accept United States and SCAP as sole arbiters in these matters.
4. Australian Ambassador in Washington has been instructed to raise this question at next meeting of F.E.C. and stress Commission's rights and responsibilities under its Terms of Reference.  We should be glad of your support.