225 Mr S. M. Bruce, High Commissioner in London, to Mr J. A. Lyons, Prime Minister
Letter LONDON, 18 June 1938
I enclose herewith a note of a conversation I had with the
Japanese Ambassador  on Tuesday last, together with a copy of a
Note he handed to me on that occasion.  He also gave me for my
information, copy of a Note Verbale which had been handed on the
5th May last to Mr Moore  for transmission to the Ministers
composing the Delegation at present in London.  As this latter
document has, no doubt, already been forwarded to you, I am not
enclosing a copy.
During my interview with the Ambassador I had not an opportunity
of reading the Note which he only presented to me when he was
leaving. I have accordingly subsequently written to the Ambassador
informing him that I was forwarding the Note he had left with me
to the Commonwealth Government, together with the representations
he had made verbally.
S. M. BRUCE
1 Shigeru Yoshida.
2 Enclosures to this Document.
3 Not found. A. C. Moore was adviser to the Australian ministerial
delegation in London to discuss revision of the Ottawa Agreement
4 Sir Earle Page (Minister for Commerce), R. G. Menzies (Attorney-
General) and T. W. White (Minister for Trade and Customs).
Note by Mr S. M. Bruce, High Commissioner in London, of
Conversation with Mr Shigeru Yoshida, Japanese Ambassador to the
LONDON, 14 June 1938
The Japanese Ambassador came to see me to-day with regard to
Yampi. He said that his Government had instructed him some little
time ago to make representations on the subject but that he had
delayed doing so. The reason why he had chosen the present moment
to make the representations was a little difficult to follow but
it appeared from what I could understand of his statement that
Baron Ito , who is a personal friend of his, is in some way
financially interested in the position and had apparently been in
communication with the Ambassador upon the matter.
In his statement to me he said very little with regard to the
facts of the case but talked generally about good relations with
the British Empire and pointed out that the present action of the
Commonwealth Government was not helping to improve those
relations. He expressed his regret that action even if it had to
be taken had not been delayed until the relations between Great
Britain and Japan had been established on a more satisfactory
basis. Beyond this he really said nothing.
In reply I told him that the Australian Government had taken the
action it had solely for the purpose of preserving natural
resources inside its own country which were vital to it. That I
was sure his Government would not for one second challenge our
right to do this.
I expressed my regret that the report  which we had now
received upon the Iron Ore resources of Australia indicated that
those resources were far less than we had believed they were. That
it was solely because of the position revealed by this report that
the Government had taken the action it had and that that action
was solely designed to safeguard the vital natural resource of
Australia and was in no way directed against any country.
I asked him to assure his Government that in no sense was
Australia's action directed against Japan and I pointed out to him
that Japan was not the only country affected as we had in the past
exported substantial quantities of iron ore to the United States
I further stressed to him that it was not merely the interests of
Japanese citizens or of any foreign citizens that were affected
but that the interests of Australian citizens were also interfered
I then pointed out to him that the question which arose in this
matter was in no sense one between Governments save in the sense
that the financial interests of commercial concerns might be
affected. This being the case the matter would only be one for the
consideration of his Government in the event of Australia not
according to the commercial concern involved fair and equitable
I pointed out to him that the Prime Minister  in his statement
 had made it clear that the Australian Government would give
careful consideration to any representations by commercial
concerns or individuals affected. I added that I was certain he
could rest assured that any claim by Japanese citizens in respect
of Yampi would receive not only careful but the most sympathetic
consideration from the Government.
I asked him to convey to his Government what I had said and in
particular to stress to them that the basis of the action taken
was entirely to conserve the important natural resources of
Australia; that it was in no way directed against the Japanese nor
was it discriminatory against Japan. That the matter was really
one for consideration of compensation to commercial interests and
not a question between Governments at all. That the Commonwealth
Government would treat any representations by commercial interests
in the most sympathetic manner.
The Ambassador then handed me a Note Verbale  together with a
previous Note Verbale  which, I understand, was handed to Mr
Moore  on the 5th May. I assured the Ambassador I would give
full consideration to the Note Verbale but I had no opportunity of
reading it while he was with me.
Note.-Having read the document it is in no way a summary of what
the Ambassador said to me personally.
I also assured the Ambassador that I would submit to my Government
the representations he had made to me personally as well as the
Note Verbale he was leaving with me.
S. M. B[RUCE]
[AA : A1608, C47/1/4, iv]
1 President of the Japanese Mining Company.
2 The Woolnough report. See enclosure to Document 203.
3 J. A. Lyons.
4 See Document 202.
5 Second enclosure to Document 225.
6 Not found.
7 A. C. Moore, adviser to Australian ministerial trade delegation.
Note verbale handed to Mr S. M. Bruce, High Commissioner in
London, by Mr Shigeru Yoshida, Japanese Ambassador to the United
n.d. [c. 14 June 1938]
1. JAPANESE INVESTMENTS IN AUSTRALIA FOR SECURING IRON ORE
It was about two years ago that the Japan Mining Company concluded
a contract with the Yampi Sound Mining Company to obtain iron ore
supplies from Australia. (A brief history of this development is
given in the attached memorandum prepared by Messrs H. A. Brassert
& Co. Ltd, of London ).
At the time, the Yampi Sound Mining Company reached an
understanding with the Government of Western Australia, who gave
their assurance to the Company that the export of iron ore to
Japan would not be hampered in any way by Government action.
Besides this assurance, the Prime Minister of the Federal
Government of Australia  stated on more than one occasion that
the Government would not interfere with the enterprise undertaken
by the Yampi Sound Company, who-relying on the assurances given by
both the State and Federal Governments-have already spent enormous
sums of money in the development of this undertaking.
At the same time, the Japanese Government, notwithstanding the
strict foreign exchange control in operation in Japan, gave
special permission for this particular investment abroad, not only
for the purpose of securing iron ore supplies from Australia, but
also with a view to the furtherance of the amicable trade
relations between Australia and Japan-two great Powers of the
Pacific. In this connection, it should be observed that the export
of iron ore from Australia to Japan would benefit not only the
Australian interests immediately concerned, but a much wider
circle of interests in Australia.
As one example of this, the recent development of the iron ore
trade has brought about the opening up of favourable freight
services between the two countries, and in turn the source of the
frozen meat supply to Japan, is being gradually diverted from
South America to Australia. It is reasonable therefore to conclude
that with the establishment of a regular trade in the supply of
iron ore to Japan under the development of the Yampi Sound scheme,
the additional benefits, in which Australia as well as Japan would
share, are likely to be much greater.
2. THE JAPANESE VIEW OF THE MATTER
The happy prospects outlined above gave rise to a unanimous
feeling in Japan as to the scope for the satisfactory development
of this enterprise and all that it involved. It was therefore with
considerable alarm, and even concern, that the news was received
of the Federal Government's decision to prohibit the export of
iron ore from Australia.  This concern was shared not only by
those immediately concerned in Japan, but by the Japanese people
as a whole, who had looked for a strengthening of the commercial
ties existing between the two countries.
Prior to and also following the announcement of this decision of
the Federal Government, the Japanese Consul-General at Sydney 
had been, under instructions from Tokyo, in constant touch with
the Federal Government, with a view to requesting them to
reconsider their decision.
The Japanese Government consider the present decision of the
Federal Government of Australia most regrettable because they deem
it a de facto discrimination against Japan, especially when
considered in the light of the various factors involved, such as:
the total export of iron ore from Australia, the consuming
countries for such ore, the quantity consumed in Australia, and
the fact that the Japanese interests are largely concerned in the
Yampi Sound Company development.
Although the Japanese Government share the view of the Australian
Government that all countries have the right to preserve important
natural resources, they nevertheless are not convinced of the
reasons the Federal Government have put forward as the grounds for
their present decision, since the survey so far carried out by the
Commission of the Government cannot be regarded as complete, a
fact which the Government themselves admit. Moreover, there is a
conflict of opinion revealed in the various views expressed by a
number of experts on the question of the potential supplies of
iron ore in Australia, and it is clear at least that there is no
imminent necessity to take such a drastic measure as the complete
prohibition of export.
If it be admitted that Governments are entitled to take drastic
measures of the nature in question, on the ground of an
investigation which is by no means conclusive, the basis of
confidence necessary to foreign investment will be entirely
shaken, and there will be no scope for international co-operation
in the development of natural resources.
Moreover, especially so far as concerns this particular case, the
definite assurances given both by the State Government and by the
Federal Government of Australia, to the effect that there would be
no Government interference in the development of the enterprise,
would in the circumstances make it difficult for either of the two
Governments concerned to liquidate their responsibility in the
matter by the mere compensation of the parties for their expenses.
It would be most regrettable if some means could not be found to
prevent what seems to be an avoidable difficulty in view of the
fact that the trade relations between Australia and Japan were so
amicably strengthened about eighteen months ago, after a short
period of tension.
Therefore, the Japanese Embassy in London, always mindful of the
desirability to maintain good relations between the British Empire
and Japan, and especially in their relations in the Pacific, have
already taken the opportunity offered by the visit of the
Australian Trade Delegation to the United Kingdom , to draw
attention to this matter in the conversations between the
principal delegates and the Japanese Ambassador , and also in a
Note Verbale presented to the Delegates,-a copy of which is
attached hereto-and they now desire to bring the matter to the
notice of the High Commissioner for Australia in London.  It is
earnestly desired, in the interests of the relations between the
two countries, that the High Commissioner would be good enough to
see his way to assist in bringing about as speedily as possible
some amicable settlement of this question taking into special
consideration the views expressed in this Note.
[AA : A1608, C47/1/4, iv]
1 Not found.
2 J. A. Lyons.
3 See Document 202.
4 Torao Wakamatsu.
5 See Document 181, note 1.
6 Shigeru Yoshida. No documentation of these conversations has
7 S. M. Bruce.
[AA : A1608, C47/1/4, iv]