CANBERRA

Trade between Australia and Japan

I refer to your memorandum 53/H/4481 dated 25th May, 1953 [1], to
Department of External Affairs, forwarding a draft reply to a note
dated 27th March from the Japanese Embassy.

2. We would suggest that the following paragraphs might be used in
place of paragraphs 2, 3 and 4 of your draft and should be glad of
your comments:

'After the conclusion of the United Kingdom - Japanese Sterling
Payments Agreement of 31st August, 1951, Australia, together with
other members of the sterling area, relaxed appreciably her
restriction on the importation of goods of Japanese origin. Partly
as a result of this action by sterling area countries, Japanese
holdings of sterling were built up to such a high level that
representatives of the Japanese Government informed United Kingdom
officials in March 1952, that their Government regarded her
current holdings of sterling as excessive.

Early in 1952, Australia was faced with an acute over-all balance
of payments crisis. In order to meet this, action was taken by us
drastically to restrict imports from all sources, including Japan.

This latter action was also in line with sterling area policy
which, as was advised to Japanese representatives, was designed to
reduce Japan's excess sterling balances.

Subsequent improvement in our overall balance of payments position
enabled us in February last to announce strictly limited
relaxations of the severity of our own non-dollar import
restrictions. In view of the rapid decline in Japanese holdings of
sterling and to the extent to which our reserves would permit,
restrictions on goods of Japanese origin were relaxed at the same
time. The list of Japanese goods for which import licences were
being issued was increased during the quarter ended 31st March,
1953 by the addition of a number of commodities and the further
undermentioned items have since been added to the list of Japanese
goods which may be licensed for importation during the quarter
ended 30th June, 1953.'

3. Copies of this memorandum are being forwarded to Departments of
External Affairs and Commerce and Agriculture.