Repeated to U.K. High Commissioner, Canberra, and to Prime
Minister, Canberra

Cablegram 771 TOKYO, 24 June 1938, 8.00 p.m.

Received (Canberra) 25 June 1938

Vice Minister for Foreign Affairs [1] spoke to me today about
Australian iron ore exports. He said he desired to impress on me
what a very unfavourable impression decision of Commonwealth
Government had made on Japanese Government and people. Japanese
authorities had been inclined to take seriously protestations of
Powers that raw materials were to remain accessible to 'have not'
Powers and this general impression had been confirmed by
proceedings of relevant League of Nations Commission. [2] Japan's
difficulty in satisfying her needs for iron ore were well-known
and now this special effort which the Japanese industrialists were
making to secure regular supply was to be brought to an end
without even so much as a period of grace. Consequences of such an
action must necessarily extend beyond the immediate monetary loss
to Japanese interests concerned and the Japanese Government could
not therefore regard the matter as being susceptible to settlement
by mere offer of compensation. The point was that Japan was being
suddenly-and Japanese Government believed unreasonably-deprived of
source of supply for raw materials which she would have difficulty
in securing from elsewhere. It was very difficult for Japanese
Government to believe that shortage thus suddenly discovered could
be so acute as to justify so drastic a measure. Japanese
Government therefore earnestly hoped that Commonwealth Government
would reconsider their decision. Vice Minister for Foreign Affairs
made a reference to relations between Japan and British Empire in
general and the impending negotiation of a Japanese-Australian
Commercial Agreement [3] in particular.

I informed His Excellency that instructions which I had received
held out no hope at all of such reconsideration. It was true that
His Majesty's Government in the United Kingdom and His Majesty's
Government in the Commonwealth of Australia were sincere
supporters of the policy of the maintenance of free and impartial
access to raw material throughout the world. But this principle
could obviously be made applicable to raw materials of which there
was surplus for export in producing countries and I understood
that League Commission had expressed recognition of the limitation
on application of general principle. There was no question of
possible shortage being used as pretext for embargo by
Commonwealth Government; the latter were genuinely concerned at
wholly unexpected result disclosed by interim report on survey now
being undertaken and had considered that immediate action was
necessary for the protection of their vital interests. Even at the
present moment available resources of iron ore would only just be
sufficient to meet needs and it was estimated that after a
relatively short period Australia must become importer of iron
ore. To have given the Japanese company a period of grace
therefore would not in any way have eased the situation-in fact it
might only have resulted in further unnecessary expenditure by
Japanese promoter. After stressing the Australian Government's
readiness to give reasonable compensation for actual monetary loss
entailed by Japanese interests concerned, I reminded His
Excellency that prohibition of export applied equally to United
States which had been importing certain amount of iron ore from
Australia.

Vice Minister for Foreign Affairs remained unconvinced by my
arguments observing that they did not touch the central point,
namely, bad impression which was being created throughout Japan at
what seemed deplorable departure from generally accepted principle
of free access to raw materials.

He begged to put this view very strongly before the Commonwealth
Government and to urge even if Japanese group could not be given
facilities for prolonged exploitation of Yampi Sound deposits they
should at least be allowed partially to recoup themselves for
their loss over a certain period and thereby help to relieve
Japan's needs in the immediate future. I replied that I feared
that decision of Commonwealth Government was irrevocable but that
I would certainly place before them the general considerations
which His Excellency had advanced.