(2) Timor. My telegram No. 50. [2] On 18th January the Netherlands
Minister in London [3] approached the Far Eastern Department of
the Foreign Office and said that his Government had recently heard
of renewed Japanese activity regarding Timor. He suggested in very
general terms the possibility of co-operation between the
Netherlands and Australia for the development of Portuguese Timor.

He mentioned the possible institution of airlines. While this
approach is welcome here as an indication of co-operation of
British and Dutch interests in the Far East, it was assumed that,
as the matter is of primary interest to Australia, no kind of
reply could be made until the Commonwealth had been consulted.

Dominions Office are now forwarding you by air mail despatch
giving full report of the interview. [4]

(3) According to a secret but entirely trustworthy source, on 22nd
January, the Japanese Minister for Foreign Affairs [5]
communicated with the Japanese Minister at Lisbon. [6] Mr. Arita
stated that he considered 'essential that we should bring indirect
pressure and persuasion to bear on the Portuguese to offset the
following three factors:

(a) suspicion of Japan;

(b) new appointment of Luis [7] to S.A.P.T. group;

(c) British coercion and activities'.

He instructed the Minister at Lisbon, in view of internal
conditions in Portugal, to concentrate on the Prime Minister [8]
himself in negotiations from now on, and told him to emphasise the
following points:

(a) Apart from Japan's present need for oil, Portuguese interests
will be given every consideration and Japan's intentions from
first to last are economic and peaceful in nature.

(b) Japanese do not object in connexion with oil to any other
company, apart from S.A.P.T., which Portugal may see fit to
choose.

(c) Make use of the excuse that Japan, in pressing her just
demands, really has it in mind to free Portugal of unwelcome
pressure and activities of Great Britain.

Japanese Minister for Foreign Affairs also referred to the
despatch of one Yanagimawa to Macao, 'which should give Portugal a
good idea of the sincerity of our intentions and enable us to
understand their attitude more fully'.

He also states that pending change the Governor-General in Timor
[9] is to be exploited by the Japanese to approach the new
appointee and other personages of influence.

STIRLING