66 Minute 2(Pm) Of Prime Minister's Committee Of Cabinet
17th August, 1954
Submission No. 30-Australian Policy Towards Japan Broadly the discussion was directed to fundamental policy and the detailed list of matters outstanding on page 4 of the submission were only referred to as incidental to the discussion of policy principles. However, for the sake of completeness, this minute contains a reference to the views expressed on individual matters.
Generally the view was reluctantly adopted that, overall, Australia should adopt a more liberal policy towards Japan because of:
(i) the very real danger over the next few years of Japan becoming aligned with Communist China; and (ii) the need for Australia to join with other nations particularly the United Kingdom and the United States in taking measures to avoid that result.
In the discussion, the points set out hereunder were mentioned as relevant to avoiding Japanese alignment with Communist China:
(1) Japan was a nation of great vitality, with a high, fast rising population and a national antipathy to migrating.
(2) All countries had to take some measures to assist Japan in such circumstances.
(3) Japan needed to develop her external trade; and in default of developing her external trade with non-communist countries, she would be forced to trade with Communist China for the purposes, firstly, of disposing of her cheap manufactures and, secondly, obtaining the raw materials she needed. In this way she could become completely dependent on Communist China.
(4) Politically Australia's interest was not served by a situation where Japan was completely dependent on Communist China.
(5) There was a parallel between the position of Germany after 1918 and Japan today; the isolation imposed upon Germany in 1920 had contributed to the rise of Hitler; and there was a danger of cause and effect operating in the next few years to put a Communist government in power in Japan.
(6) In the long-term defence view there was more than a possibility of bringing Japan into close association with the Western Powers and that was a desirable object. In this connection it was pertinent to recall that:-
(a) the history of Japan's alliance with the United Kingdom prior to 1922 showed a stability in her international relations;
(b) any gestures towards Japan by Australia at the present time would have a significant psychological effect on the Japanese people and would influence them towards association with the Western Powers.
(7) In liberalising her policy in the near future, Australia would be likely to receive considerable co-operation from Japan which would not be so forthcoming in a few years' time.
(8) A Japan developing her relations internationally with other countries, particularly in South East Asia, would, by her commercial and other behaviour, create attitudes in those countries towards Japan which attitudes would help to stabilise Japan's power by holding it in balance between tendencies to go communist on the one hand and tendencies to become nationalistic on the other hand.
(1) If Japan's earnings of overseas currency did not increase she would be forced to withdraw, in whole or in part, from her position as a purchaser of Australian wool thereby weakening demand which, in the auction system, could have a considerable effect upon the Australian economy.
(2) The pattern of trade and all other factors pointed to the impossibility of Australia's trade with Japan ever being in balance but the important thing was to allow her to develop trade with other countries by which she could earn credits to apply to her deficit in trade with Australia.
(3) Trade was an essential factor in achieving the political results which are set out earlier in this minute.
(4) In discussing trade with Japan, Australia should write into the arrangements the protection to Australian industry which Canada has provided for Canadian industries in her trading arrangements with Japan: New Zealand has done much the same. This point should be considered in relation to point (8) in the preceding section.
(1) The handling of public relations was very important in any change of policy.
(2) It was desirable to settle as many outstanding matters as soon as possible.
(3) These should be settled in accordance with a deliberate order so as to achieve the maximum support of the public. For example, the request for a party to visit Japanese graves in New Guinea was a specific problem on which substantial public opinion would support a decision to allow the party to enter. The RSL might well support the decision and they might be approached before any formal government announcement was made.
Japanese War Graves Party:
The general feeling was that permission should be granted and the Administrator of Papua and New Guinea  should be consulted.
(1) The general feeling favoured Japan's admission to the plan as a donor nation even though her primary object might be to promote trade.
(2) The trade which Japan would develop in South East Asia through her membership of the Colombo Plan would, when her costs come down, deprive Australia of an incipient trade which was just starting to develop in such items, for example, as Diesel Locomotives and Tractors. But this loss in Australian exports was far outweighed by the necessity of ensuring that Japan was a strong bidder for our wool.
It was noted that the Class 'B' and 'C' war criminals were of interest to the Japanese public and that Australia was the only country which had not granted parole or some measure of clemency to those Japanese War Criminals for whom it is responsible.
Compensation for Former Prisoners of War of the Japanese:
It would help the public relation aspect if Japan would settle the question of Article 16 assets to enable distribution to former Australian prisoners of war. 
Pearl Fisheries Dispute:
It was noted that the delay by Australia in furnishing comments on the Japanese draft special agreement has left a bad impression with the Japanese.
Inclusion of Japan in S.E.A.T.O:
The Minister reported that Mr Dulles had accepted the Australian proposition that Australia could not undertake to guarantee countries in the North Pacific area against aggression.
On the other hand, in accordance with the views set out in the first section of this minute, there would be some merit in tying Japan into a tight military alliance.
Japanese Activity in New Guinea:
The general feeling was that this was most reprehensible and could not be tolerated.