REDUCTION OF JAPANESE INDUSTRIAL WAR POTENTIAL

I desire to acknowledge receipt of your memo. of the 6th inst.,
reference ER.46/13/17, to which was attached copy of paper FEC-084
submitted to the Far Eastern Commission by the U.S. member on the
above subject. The views of this Department [1] as to the adequacy
or otherwise of the policy proposed are requested.

2. This Department agrees with the proposed treatment of primary
war facilities as set out in paragraph 2 of the paper, but we
think closer study should be given to the possible effects of the
proposals relating to secondary war industries and supporting
industries, particularly the possible effects of such proposals on
countries other than Japan and more particularly on Australia.

3. I think there is a danger to Australia in the pursuing of a
policy of reduction of Japanese industries too far. Consideration
needs to be given to the problem of what is to be done with people
displaced from such reduced industries, plus demobilized troops,
returning Japanese colonists, etc. The great bulk of them
obviously have to be employed in some form of manufacturing
industry. It is not thought that primary production could absorb
many. A large unemployed population in Japan would soon become an
Allied problem of first magnitude.

4. Manufactures and export are vital to Japan. Her population
cannot be supported other-wise. Japan was a good customer of
Australia before the war, particularly for wool, and we would hope
might become so again in the near future. To do this, however, it
is obvious that we have to take goods from her and she will not be
able to buy from Australia if she is unable to afford to do so by
reason of her poverty.

5. I feel considerable misgiving at the proposals. Whilst it is
highly desirable to prevent a resurgence of a warlike Japan, it is
no use shutting our eyes to the fact that Japan is a heavily over-
populated country relying for its existence very largely on
secondary industry. A way has to be found of allowing the
population to live and it is eminently desirable to endeavour to
do that now instead of at the end of the occupation period, when
the damage might be irreparable. I think that a much broader view
of the whole problem has to be taken than that set out in the Far
Eastern Commission paper under review, otherwise the consequences
to Australia in the future might be extremely serious. America can
probably with impunity pursue a harsh and repressive policy
towards Japan. Australia, however, is in a rather different
situation. We should consider what might be our position when the
occupation period is over. We might be left to face the
accumulated bitterness of Japan by ourselves.

F. A. O'CONNOR

Secretary