We understand from the United Kingdom Government that when
discussions begin shortly about renewal of the sterling area trade
arrangements SCAP is likely to propose that Japanese be allowed to
attend as observers.

2. The United Kingdom Government feels that no good purpose would
be served by resisting SCAP on this point if in fact the proposal
is put forward. The United Kingdom Authorities would like at the
same time to be able to make it clear to SCAP that their
acceptance was a concession to United States wishes, and they
would also propose to suggest that some provision be made for the
exclusion of any Japanese from particular meetings where their
presence would be embarrassing.

3. Glad of your comments. If such a proposal is contemplated, we
would be inclined to accept it in same terms as United Kingdom
unless it contains objectionable features of which we are not
aware.