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367 Australian Government to Mission in Tokyo

Cablegram 25 CANBERRA, 23 January 1948, 5.25 p.m.


Trade with Japan.

1. We have been giving consideration to the practical measures
that might be taken within the framework of the Interim Sterling
Payments Agreement to break the present deadlock in reviving trade
between Australia and Japan which is primarily due to currency
difficulties. [1]

2. It seems to us that best prospect of reaching mutually
acceptable arrangement would be to explore possibility of arriving
at an agreed programme for exchange of commodities between
Australia and Japan on a balanced basis which would avoid any
question of conversion of marginal amounts into dollars. Even if
agreement could initially be reached only on a restricted scale it
would permit some two-way trade to take place and would be
preferable to present position where trade is virtually at a

3. Provided SCAP on his part would undertake that the full amount
of proceeds would be used for purchase of Australian export
products over approximately the same period we would be willing to
undertake to issue import licence to permit private purchases of
the following goods during the calendar year 1948:-

Raw silk A750,000
Rayon and fuji silk textiles 6000,000
Rayon yarn 600,000
Milling Silk 25,000
Insulators 40,000
Total A2015,000
All values are C.I.F. [2] The above dissection is approximate only
and values of different commodities licensed may vary over the

4. Such an arrangement could make use of the machinery provided by
the Interim Sterling Payments Agreement. Payments for imports from
Japan could be made by the Australian Importers to SCAP's Interim
Sterling Account and SCAP could draw against these funds for his
purchases of Australian wool or other products.

5. We should welcome the extension of the arrangements to cover
other commodities required to meet essential needs in Australia
provided always that SCAP would undertake to use the full proceeds
arising from Australian imports from Japan for the purchase of
Australian export products.

6. In the absence of some arrangement with SCAP to overcome the
difficulties created by the convertibility clause in the Interim
Sterling Payments Agreement we may have to continue to treat Japan
as virtually a dollar country for import licensing purposes and to
place drastic restrictions or even prohibitions on the importation
of Japanese raw silk and other commodities.

7. We recognise that even if SCAP is willing to conclude a
balancing arrangement along the lines suggested it will be some
time before payments for Japanese export would be actually
received from Australian importers and that SCAP will therefore be
unable to begin purchase of Australian wool immediately. We feel
however, that outstanding liability for raw silk purchased through
Government channels provides a ready means by which SCAP could
finance immediate wool purchases. We are fully prepared to meet
our obligation to pay in dollars amount owing for raw silk but,
feel that SCAP's present reluctance to use these funds to buy wool
might be overcome if such purchases were clearly part of a
continuing arrangement offering some hope of permanent revival of
trade between Australia and Japan.

8. If SCAP is agreeable to this proposal we could pay the money we
owe for raw silk to SCAP's Interim Sterling Account thus providing
him with funds to finance purchases of wool at the current

9. Glad if you would discuss foregoing proposals with SCAP
immediately and advise his reactions.

1 On the Interim Sterling Payments Agreement and difficulties of
reviving trade with Japan, see Volume 12, Document 427.

2 i.e. charged in full.

[AA:A1838/278, 479/2/8]
Last Updated: 11 September 2013
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