FEC23.

(1) The third report of Committee I will be considered by the
Commission on 28th November. This report consolidates Committee
and Sub-Committee revisions of 'United States initial post
surrender policy for Japan' in the light of discussions in the
Commission. The report follows the general structure of the United
States document mentioned (which was cabled by the Legation to
Canberra on 25th September [1]) but this has been amplified,
clarified and considerably improved. [2] The majority of the 80
amendments were proposed by Australia. The main objectives sought
by the Australian Delegation have been-that the future Government
and Institutions of Japan will be democratic, that Japanese
economy will be such as to reinforce democratic tendencies, and
that in the words of the Potsdam Declaration economy will be such
that Japan will 'maintain such industries as will sustain her
economy and permit the exaction of just reparations in kind but
not those which would enable her to re-arm for war'.

(2) The principal Australian amendments adopted by the Committee
and their purposes were as follows:-

PART I-ULTIMATE OBJECTIVES:

1. Inclusion of 'democratic' in the description of the type of
Government ultimately desired.

Original policy statement spoke of 'peaceful and responsible
Government'. This appeared insufficient.

2. To remove doubt as to the resolve of the Allied Powers to
establish democratic Government in Japan.

The purpose of the United States Document was expressed in a
negative way to the effect that while democratic Self-Government
was desired it was not the responsibility of the Allied Powers to
impose on Japan any form of Government not supported by the freely
expressed will of the people. The passage was changed to read-
'such Government in Japan should be established in accordance with
the freely expressed will of the Japanese people'.

3. To remove doubt of intention of Allied Powers to bring about
total elimination of militaristic influence the United States
document might have been interpreted as qualifying Potsdam
statement concerning the elimination of influence of those who
have deceived and misled the people of Japan.

The new document expresses the policy thus-'The authority of the
militarists and the influence of militarism will be totally
eliminated'.

4. The inclusion among Rights and Freedoms to be encouraged in [3]
that of 'Association'. In order to secure that workers and
peasants organisations shall be encouraged and protected.

5. To clarify the general definition of economic policy. It was
felt that the definition in the original policy document was
somewhat vague and might permit the Japanese to establish for
themselves an unduly favourable economic position, having regard
to the economic damage and losses they had inflicted on other
peoples. It was decided to use literally paragraph (II) of the
Potsdam Declaration. [4]

PART II-ALLIED AUTHORITY
6. The new document affirms principle of participation in
occupation by forces of nations which participated in the war
against Japan. (The French Delegation shared this objective.)
7. To replace unilateral statement of the reserve authority of the
United States.

The United States document stated that 'in the event of any
difference of opinion among them (the Allied powers) the policies
of the United States will govern'. The revised document states the
present position as follows:

The extent to which the decisions and recommendations of the Far
Eastern Advisory Commission will be given effect will be
determined in the terms of reference which will also indicate the
nature and extent of the reserve authority of the Supreme
Commander.

8. To make absolutely clear the overriding authority of the
Supreme Commander and his power to intervene at any time and take
direct action in execution of Allied policy in Japan. The policy
of using Japanese governmental machinery and agencies, including
the Emperor, is maintained but it is made clear that this is to be
done only to the extent that it satisfactorily furthers the
objectives of Allied policy. The Japanese Government may be
permitted to exercise its normal powers in domestic matters
according to S.C.A.P.'s discretion but it is the Supreme
Commander's right and duty to require changes of machinery or
personnel if he considers necessary. He is not committed to
support the Emperor or any Japanese governmental authority. He is
to encourage changes in the form of Government in the direction of
modifying or removing feudal and authoritarian character and to
establish a democratic Japan.

9. To define the position of S.C.A.P. in the event of use of force
by Japanese people to obtain a democratic Government.

S.C.A.P. is to intervene only where necessary to ensure the
security of his forces and the attainment of objectives of the
occupation.

PART III-POLITICAL
[10]. To set in proper perspective the task of disarmament and
demilitarisation.

Originally stated as 'primary task' now as 'initial task'.

11. To make it clear that civilian as well as military and naval
leaders of Japanese aggression will be exposed Potsdam words are
used, viz:-'Those who have deceived and misled' etc.

12. To reaffirm the Potsdam policy concerning war criminals words
of Potsdam Declaration were introduced, viz.-'stern justice' etc.

13. Specific mention of Trades Unions as institutions to be
encouraged is made in a section on 'Encouragement of desire for
individual liberties and democratic processes'.

14. Protection of individual liberties and civil rights. Instead
of Japanese officials merely being progressively influenced to
protect these it is now laid down as their positive duty to do so.

PART IV-ECONOMIC
15. Strengthening of policy designed to deprive Japan of
industrial capacity to make war.

In the new document relevant Potsdam provisions are closely
followed.

16. To encourage democratic influences in industry and
agriculture.

New document reads 'Organisations of labour in industry and
agriculture organised on a democratic basis shall be encouraged'.

Instead of stating the objective as strengthening 'the peaceful
disposition of the Japanese', the new document says strengthening
'the democratic forces'.

17. To exclude from economic leadership persons unlikely to pursue
peaceful ends.

The new document provides for exclusion from places of importance
in industry people who 'because of their past associations cannot
be trusted to direct Japan's economic effort solely towards
peaceful ends'. Restrictive clause has been omitted.

18. To provide for the return of property surrendered to the
Japanese.

The original policy statement dealt only with looted property.

19. To give Allied countries priority over Japan in obtaining
imports. The United States document permitted Japan to purchase
abroad goods needed for peaceful purposes. This is now 'subject to
the prior requirements of the peoples of Allied countries'.

20. To secure equality of opportunity as between Allied nationals
in Japanese trade.

The new document provides that 'The Japanese authorities shall
give all business organisations, whether Japanese or foreign,
equal opportunity to engage in trade and shall be required to give
equality of treatment as amongst nationals of all Allied States
both in the domestic and the overseas trade and commerce of
Japan'.

(3) Amendments by other Delegations supported by the Australian
Delegation include French amendments to protect interests, rights
and assets in Japan of belligerents. (See also 6 above.) United
Kingdom amendments to secure freedom of all religions and
guaranteed to this end for the future and to make future as well
as existing Japanese goods, equipment and facilities available for
reparations purposes. Indian and Chinese amendments to tighten
controls in connection with destruction of economic basis of
Japanese military strength and to strengthen S.C.A.P. authority
over Japanese governmental agencies. The Philippines amendment to
give special consideration in connection with reparations to
countries which suffered heavily as a result of Japanese
aggression.

(4) The Chinese have been insistent but so far unsuccessful in
desire to have a definite policy of keeping the Japanese standard
of living to a subsistence as minimum clause under Part IV,
section 3, sub-paragraph (d), now reading-'To make such provision
for the need of the Japanese population as may be possible in the
light of supplies available and reparations obligations to other
peoples agreed upon by the Allied Governments'. The United Kingdom
Delegation fear chaos in Japan if great combines are dissolved
suddenly. Clause under Part IV, section 2, sub-paragraph (b), now
reads-'To require a programme for the dissolution of the large
industrial and banking combinations accompanied by this
progressive replacement by organisations which would widen the
basis of control and ownership'.