Recent developments in F.E.C. and in Japan make clear an
increasing tendency on the part of the United States authorities
to by-pass Commission and give it little or no voice in the
formulation of Allied policy towards Japan. Nature of Allied
Council and SCAP's attitude to it [1] make Commission only place
where Allies can influence developments in Japan and, in view of
our particular interests in the Pacific, we are not prepared to
accept view that Japan is sole responsibility of United States and
that Allies are simply sleeping partners. Until Peace Conference
is held it is essential that F.E.C. retain its policy making
function.

2. The following are developments we particularly have in mind:

(a) Attitude to discussions on public service legislation [2] in
spite of views of majority of F.E.C. countries;

(b) Issuance of interim directive on economic stabilisation [3]
without opportunity for discussion by F.E.C.;

(c) Action on F.E.C. 2, 30 (Zaibatsu). [4]

(d) Contention that demarcation of fishing area lies within
administrative authority of SCAR
(e) Decision to rescind purge directive. This step is contrary to
Basic Policy. (On 1st February head of Australian Mission was told
by Chief of SCAP Government Section, General Whitney, that U.S.

Government had decided to rescind purge directive and that members
of F.E.C. had been so informed. Whitney said that decision had
been made in Washington. [5])
(f) As yet unconfirmed Tokyo radio report that SCAP has given Pan
American Airways and North West Airlines permission to operate
inter-island freight and passenger services within Japan.

(g) Report that SCAP instructed Diet to pass recent Labour
legislation 'to forestall interference by F.E.C.'
3. It may be that some policies followed up to present need
revision or relaxation (e.g. dissolution of Zaibatsu, prohibition
of civil aviation in Japan, the Purge) and we should be willing to
discuss revision on basis of facts supporting need for it but we
cannot accept United States and SCAP as sole arbiters in these
matters.

4. Australian Ambassador in Washington has been instructed to
raise this question at next meeting of F.E.C. and stress
Commission's rights and responsibilities under its Terms of
Reference. [6] We should be glad of your support.