Your F.E.C.321 (New Zealand No.57).

Japanese Trade.

We understand from your reports that United States intend to
formulate by early April a plan for resumption of private trading
with Japan. Our reports from Tokyo indicate that various United
States interests have for some time been resuming and developing
contacts with Japanese interests. (Please see D.288). [1] We feel
uneasy about any over-rapid or widespread resumption of Japanese
external contacts and would, therefore, stress the need for
control by S.C.A.P. and by the respective Governments, and also
the advantage of continuing Government trading in respect of
important commodities especially those in short world supply.

While we feel that in order that Australian interests should not
be left behind, representatives of approved Australian interests
should be able to enter Japan some time before resumption of
private trading so as to make the preparations which will be
necessary to the conduct of their businesses, we do not consider
it practicable at this stage to state a specific date for the
resumption of private trading. Even then we envisage a
transitional period during which Government and private trading
would be carried on side by side. We would not wish in any case to
give any encouragement whatever to the sending to Australia of
Japanese business representatives.

In general our feeling is strongly against the tendency to piece-
meal settlement with Japan. We do not wish, however, to hold up
necessary planning in advance of the settlement and it is for that
reason that we forward preliminary comments on the six questions
raised in I.A.T.B. [2] by the United States representative. These
comments have been formulated as a result of consultation between
Departments concerned on the basis of information at present
available.

1. Subject to control by the respective Governments and in
conformity with the broad policies of the occupation authorities
(e.g., reparations and level of economic life), private trading
interests should be permitted to enter Japan when practicable to
engage in trade with the Japanese.

2. In view of the number of commodities in world short supply, it
would appear desirable to continue Government trading in certain
commodities, and to provide for a gradual tapering off in
Government transactions as the supply position improves.

3. It seems highly desirable that an official rate of exchange
should be established for commercial transactions as soon as
private trading is resumed. The only alternative would appear to
be to permit private barter transactions which are always attended
with many practical operating difficulties. Because of the link
between Australian currency and sterling the question of
determining an appropriate rate of exchange between the Australian
pound and the yen would, of course, have to be considered in
consultation with United Kingdom Government.

4. In the admission of private traders to Japan, first preference
should be given those who were established in Japan pre-war. In
view of the limited facilities available in Japan we recognise
that restrictions may be necessary and if so we consider quotas
should be established on recommendation of I.A.T.B. Within limits
of quotas we would select representatives of approved commercial
interests bearing in mind such factors as pre-war volume of
trading, length of time established in Japan, availability of
accommodation etc.

5. With the full reversion to private trading, contact with
individual Japanese firms must be permitted. However, in the
transitional period there would be no objection to commercial
interests making contact with Japanese traders through Boeki Cho
[3] or SCAP, provided that traders were not subject to direction
as to the particular firms with whom they should trade.

6. Allocations of commodities in world short supply should
continue to be determined on the recommendation of I.A.T.B. and
controlled through SCAP. In regard to other commodities it would
appear essential for balance of payments reasons to restrict
imports but the maintenance of any extensive control over exports
should not be necessary. Control can be operated by the Japanese,
but should be under SCAP supervision. The types of controls over
Japanese trade and their relation to I.A.T.B. will need to be
reviewed when further data becomes available.