TOKYO

Japanese Wool Position
Further to my memorandum of 25th March (your papers M41/15/25) [1]
I desire to invite your attention to my cable of today's date
regarding the Import Budget 1954/55, in which I advised, inter
alia, that the anticipated import of wool into Japan from April
1954 to March 1955 was 610,000 bales with an anticipation of
235,000 bales for the first half of the fiscal year.

As I stated in the memorandum regarding the Budget, the Japanese
Government has discontinued the practice of announcing from which
of the three currency areas imports are proposed to be obtained so
that it cannot be forecast with any accuracy how much wool is
likely to be bought from the sterling area in general or from
Australia in particular. You will note that in paragraph 5, page
5, of my memorandum of 25th March, I advised that the President of
the Wool Spinners' Association was of the opinion that about 50%
of the year's total would be purchased from Australia. I noticed
the following paragraph printed in the Japan Trade Bulletin, which
is published by the Japan Export Trade Research Association:

'Sheep Wool. The imports of sheep wool for fiscal 1953, which was
estimated at about 700,000 bales in the original plan of import,
has to be reduced by about 15%. For the attainment of this
purpose, efforts will be exercised to cultivate the synthetic
fibre industry, as well as for acceleration of blended spinning.

Besides, greater efforts will be exercised to shift the import
market of sheep wool from Australia to various countries in the
Open Account Area, including Brazil, Argentina, etc.'

I asked Mr Ushiba this morning whether it was true that a
deliberate attempt was being made to divert purchases of wool from
Australia to South America as stated in the paragraph. He said
that this was not true and that the chief consideration which
should be taken into account in this connection was Japan's
obligation under the recently signed trade agreement with
Argentina to import wool from that country. As I have advised you
on other papers, $26 1/2 million was the sum mentioned for the
purchase of wool from Argentina. Mr Ushiba further stated that
while it was possible for Australia completely to prohibit the
import of Japanese goods, Japan could not totally prohibit the
import of Australian goods even if this were contemplated, as
Japan must have certain types of Australian wool.

Your attention is invited to the advice contained in my report of
today's date regarding the Import Budget concerning increases in
the rates of import securities. It will be noted that commodities
such as raw wool and wool shoddy will be changed from the
automatic approval system to the foreign exchange allocation
system as from 1st April and that the import security will be
raised to 10% in cash. However, in the case of raw materials for
re-export under the export/import link system, the import security
for wool, among other commodities, will remain at 1% by letter of
guarantee.

I have learned that during the last week the President of the
Japan Wool Spinners' Association and a senior executive of the
Woollen Textile Industry Association, attended a meeting with
officials of M.I.T.I. to work out measures for the promotion of
woollen goods exports. It is said that key points of the
discussion were:

(1) An export goal which M.I.T.I. desire to place at $41 million,
including special procurements of $5 million, whilst the woollen
industry considered that $29 million for woollen piece goods and
$10 million for other woollen products would be possible.

(2) Price Stabilisation: The industry representatives urged that a
joint export commission should be formed to stabilise prices and
to prevent dumping, as it was alleged that since the export/import
link system came into force last August, some firms have exported
woollen goods below cost.

(3) Foreign Policy: It was urged that a strong economic policy
should be formulated with regard to foreign nations which
discriminate against imports of Japanese products and the industry
stated its desire for the Government to make provision to secure
exports of Japanese woollen goods in future trade agreements.

(4) The necessity for propaganda, including advertising of woollen
goods in foreign countries.

Further information will be forwarded as it becomes available.