The negotiations with the Japanese on the pearl fisheries to the
north of Australia seem to have been stalled for the last three
weeks-and the officers of Commerce and Agriculture Department and
of my own Department have come to believe that the Japanese
unwillingness to reach a compromise conclusion has not been
unconnected with the Japanese Government's concern over the gross
out-of-balance in Australian-Japanese trade. As you will know,
this out-of-balance reached very considerable proportions in the
last 12 months. I attach copy of telegram from our Tokyo Embassy
on this. [1] I have discussed it on the telephone with John McEwen
and also with Dr. Roland Wilson (in the Treasurer's absence from
Canberra) and all three of us tend to believe that the time has
come when some alleviation of our import restrictions should be
seriously considered, so far as Japan is concerned. However, this
is primarily a matter for your Department. No doubt you have been
following this matter and perhaps you may have it in mind to bring
some proposal to Cabinet about it. Please regard this letter as
reflecting the interest of my Department in this matter and also
(as I have good reason to believe) the similar interest of
Commerce and Agriculture and Treasury.

I am sending copy of this letter to Artie Fadden and to John
McEwen.