The Australian Embassy has the honour to refer to the Note Verbale No. 124/E4 dated 12th May, 1953 , from the Ministry of Foreign Affairs regarding the restrictions maintained by the Australian Government on the importation of Japanese goods into Australia.
The Embassy wishes also to refer to the Memorandum dated 27th March, 1953, from the Japanese Embassy in Canberra to the Department of External Affairs concerning the same subject. 
It is appreciated that the balance of trade between Australia and Japan is substantially in favour of Australia and that, on a bilateral basis, Australia has no balance of payments problem with Japan. As a member of the Sterling Area, however, Australia must view her import licensing controls on Japanese goods in relation to the balance of payments between the Sterling Area and Japan.
After the conclusion of the United Kingdom - Japan Sterling Payments Agreement of 31st August, 1951, Australia, together with other members of the Sterling Area, relaxed appreciably her restrictions on the importation of goods of Japanese origin.
Partly as a result of this action by Sterling Area countries, Japanese holdings of sterling were built up to such a high level that representatives of the Japanese Government informed United Kingdom officials in March, 1952, that their Government regarded the current holdings of sterling as excessive.
Early in 1952, Australia was faced with an acute overall balance of payments crisis. In order to meet this crisis, action was taken drastically to restrict imports from all sources, including Japan.
This action was also in line with Sterling Area policy which, as was advised to Japanese representatives, was designed to reduce Japan's excessive sterling balances.
Subsequent improvement in the overall balance of payments position has enabled the Australian Government to announce, with effect from 1st April and 1st July, 1953, limited relaxations in the severity of the non-dollar import restrictions. In view of the rapid decline in Japanese holdings of sterling and to the extent which Australian reserves would permit, restrictions on the importation of goods of Japanese origin were relaxed at the same time. The list of Japanese goods for which import licences were being issued was increased during the quarter ended 31st March, 1953, by the addition of a number of commodities and the further undermentioned items were added to the list of Japanese goods for which import licences would be available during the quarter ended 30th June, 1953:
Velvets, velveteens and pile fabrics Flannelette Mosquito netting Cotton blanketing and molleton Plain poplins or broadcloth (not printed or piece-dyed) Soft furnishings and curtain net (not printed or piece-dyed) Handkerchief cloth (not printed or piece-dyed) Microscopes for scientific purposes Scientific instruments.
Concurrently with the relaxation of the restrictions on the importation of goods from other non-dollar sources effective 1st July, 1953, the Australian Government was able to extend still farther the list of Japanese goods which may be licensed during the quarter ending 30th September, 1953. These additional items are listed in the attachment to this Note.
The Embassy notes the interest of the Ministry of Foreign Affairs in increased importations of Japanese goods into Australia. The relaxation indicated above are the maximum concessions which it is possible to accord to imports from Japan at this stage. The Embassy would like to assure the Ministry, however, that the trends of trade and payments between the Sterling Area and Japan are under close and continuous study by the Australian authorities, and that the import licensing controls on Japanese goods will be reviewed from time to time in the light of future developments.
With regard to the Ministry's proposal for informal talks between representatives of the Governments of Australia and Japan, the Embassy would suggest that, in view of the recent relaxations, there would now appear to be no necessity for these discussions.
However, any particular problems could, in normal course, be taken up with the Australian Government by the Japanese Embassy in Canberra.