FAR EASTERN SITUATION
Mr. Makin [1] referred to the reports in the press of strained
Japanese-Dutch relations owing to the failure of the trade
negotiations, and enquired whether any report had been received as
to the deterioration of the position.

2. The Prime Minister [2] said that the reports received did not
go beyond what was stated in the press. The Dutch were holding out
against coercion by Japan, who is seeking to get what benefits she
can without resorting to war. If Japan feels that the situation is
favourable to grab territory she will do so, and events in the
Middle East would have an important influence on her attitude.

3. Mr. Curtin [3] enquired whether there was any possibility of
reaching a stable agreement between Japan and Australia, and the
Prime Minister stated that any such arrangement depended entirely
on the Japanese attitude. Her alliance with the Axis and policy in
Asia had not given grounds for encouragement. The Prime Minister
referred to the discussions which he had had with the Foreign
Office, in which it had been suggested, as proposed in the first
Singapore report [4], that a line should be drawn to indicate to
Japan the point beyond which she must not proceed in her southern
advance. [5] Discussions with the United States indicated that the
Americans were coming round to this point of view, and when Japan
clearly understood this she might then be reasonable.

4. Mr. Curtin referred to conversations which he had had with the
Japanese Minister in Australia [6] regarding the possibility of
reaching a basis of understanding, and referred to the body of
well-disposed opinion in Japan which needed encouragement to
sustain it. Mr. Curtin stated that, in accordance with the request
of Sir John Latham [7] at his meeting with the Council before
departure for Tokyo [8], he had also corresponded with him. In
response to an enquiry by Mr. Curtin it was agreed that there was
no objection to continuing with his discussions with the Japanese
Minister.