Interview with Japanese Ambassador
The Japanese Ambassador, during a call on me this morning,
presented an Aide Memoire on Japanese trade. [1] He said that
Japan had been unable to buy its intended quantities of wheat from
Australia because of lack of sterling. The Note drew attention to
Sir Arthur Fadden's statement of 3rd July announcing a relaxation
of import restrictions [2], and expressed regret that this
relaxation had not been followed by a substantial increase in
exports from Japan.

I told Mr Nishi that Australia was very sympathetic to Japan's
economic difficulties and also assured him that his Aide Memoire
would be examined as quickly as possible and given serious
attention. I asked him where Japan was buying its wheat in view of
the lack of sterling and he replied that it was being obtained in
dollar countries, particularly Canada and the United States. I
remarked that, though it was not easy to buy dollars with
sterling, it was quite easy to buy sterling with dollars and that
I hoped Japan would not try to balance its trade bilaterally as
this would benefit neither Japan or other countries. Mr Nishi
replied that Japan found that it was being forced increasingly to
try to make bilateral settlements. For example, until recently it
had sold much more to Pakistan than it had bought, but Pakistan
had cut down its purchases in order to get a better balance. On
the other hand Japan was being asked by Canada to increase its
purchases from that country. He pointed out that Japan had already
a trade agreement with Canada but had nothing with Australia and
he referred to his Government's proposal of 5 November-there
should be new trade talks between Australia and Japan.

I told Mr Nishi that I was not personally familiar with the
details of the matter and would, therefore, have to postpone
discussion of his Aide Memoire until other Government Departments
had had an opportunity to look at it. However, speaking without
any close knowledge of the subject, I thought that one reason why
Japan was having difficulty in expanding its exports, even to
Australia, was that Japan's costs were too high in some lines. Mr
Nishi replied that might be true in some cases but that in some
fields, such as toys, he thought there could be many more exports
to Australia if we relaxed our import restrictions.

Mr Nishi indicated pretty clearly, without saying so directly,
that if Australia took more imports from Japan, Japan would be
prepared to buy some Australian wheat. It will be noted that the
second last sentence of his Aide Memoire also refers to the
likelihood of Japan reducing its imports of Australian wool unless
the balance of trade improved in Japan's favour.

Mr Nishi asked that the Aide Memoire be brought to the personal
notice of the Prime Minister, the Treasurer and other relevant
Ministers. He said we might also show it to Mr Butler (the UK
Chancellor of the Exchequer) and that Japan would have no
objection to our doing so.