Addressed Canberra No.138, repeated New Zealand No. 114. Your
telegrams Nos. 99 and 100 [1] of 20th and 21st April, repeated to
External Wellington No. 74 and 75. Japanese reparations.

Our expert advisers have been considering Australian proposals in
the light of the latest position reached in the Far Eastern
Commission. It is contemplated that the whole question of future
policy to be adopted on this matter Will be put before the
Ministers as soon as agreement at official level of detailed
issues involved is completed. This is being continued urgently.

2. Following meanwhile are tentative and preliminary views held at
official level as to the general question whether fresh proposals
of the type suggested are likely at this stage to bring
satisfactory results in the Far Eastern Commission.

(a) Australian Government's desire to see early and effective
settlement of the Japanese problem is fully shared here
particularly in view of the urgency of settling Japanese levels of
industry. A unanimously approved solution is of course to be
preferred to any other if it can be secured at a reasonable price
towards which all contribute.

(b) Recognition of Russian seizures in Manchuria and proposed
division of external assets in non-F.E.C. countries and of
treasure are certainly features which should appeal to U.S.S.R.

but it seems very doubtful whether such offerings would have any
effect. The Russians claim 12% of industrial assets and the
[high]est [2] percentage allocated to them by others was 4%.

Russians have moreover always contended that the Far Eastern
Commission was not competent to deal with external assets.

(c) We share the Australian Government's concern at possible
adverse effect of further delay in settlement of the reparations
problem on the progress of reduction of Japanese war potential and
consequently on the amount of reparations we may hope to receive.

The Australian plan however seems to contain too many
controversial issues to be accepted by the Far Eastern Commission
in a short time. The best prospect of quick settlement appears to
be by way of trying to reach agreement on division of industrial
assets only.

(d) For the above reasons some doubt is felt at official level
whether the bringing forward at this stage of proposals on the
lines suggested by the Australian Government would be the best
means of achieving desired result.