CANBERRA

Trade between Australia and Japan
I refer to your memorandum 731/3/9 of 2nd April, 1953, and to the
copy of a note, dated 27th March, from the Japanese Embassy, in
which it is requested that Australian import licensing controls on
Japanese goods be relaxed. [1]

2. The nature of Australia's import licensing controls on Japanese
goods and the attitude of the Japanese Government in regard
thereto were recently discussed by officers of interested
departments, including the Department of External Affairs. The
special problems which exist in the case of imports from Japan
were fully examined, and the difficulties in the way of
liberalising the licensing of importations from that country were
considered.

3. It is suggested that the following passages be included in the
reply to be sent by your Department to the Japanese Embassy:

'It is appreciated that the balance of trade between Australia and
Japan is substantially in favour of Australia and that, on a
bilateral basis, Australia has no balance of payments problem with
Japan. Australia, however, is a member of the sterling area and
the question of Australian import licensing controls on Japanese
goods must therefore be considered in relation to the balance of
payments between the sterling area and Japan.

2. Although the United Kingdom-Japan Sterling Payments Agreement
of 31st August, 1951, did not confer any rights on the Japanese
Authorities to convert Japanese held sterling into dollars, it did
not follow that Japan could be regarded as an easy-currency
country vis-a-vis the sterling area. At the time of the conclusion
of this Agreement and subsequently, the trend of trade with the
sterling area was markedly in favour of Japan and, as a result,
her holdings of sterling were rapidly built up and maintained at
very high levels. Associated with this situation was the
possibility that these balances might rise beyond the amount which
the Japanese Government was prepared to hold. In this connection,
the Embassy will recall that representatives of the Japanese
Government informed United Kingdom officials, at discussions in
November, 1951, that Japan did not wish to hold excessive balances
in sterling.

3. While Japan's sterling balances have fallen considerably since
July,1952,the Embassy will appreciate that this development may be
due to the operation of short-term factors and may not reflect a
trend of a permanent nature in trade and payments between the
sterling area and Japan.

4. In these circumstances, it has been necessary for the
Australian Government to proceed cautiously in varying, with due
regard to its obligations to the rest of the sterling group, its
policy towards the licensing of Japanese goods. However, the
Embassy is advised that relaxations have been made since 1st
January, 1953. The list of Japanese goods for which import
licences are being issued was increased during the quarter ended
31st March, 1953, by the addition of a number of commodities, and
the undermentioned additional items have since been added to the
list of Japanese goods which may be licensed for importation in
the quarter ending 30th June, 1953:

Velvets, Velveteens and pile fabrics;

Flannelette;

Mosquito Netting;

Cotton blanketing and molleton;

Plain poplins or broadcloth (not printed or piece dyed);

Soft furnishings and curtain net (not printed or piece dyed);

Handkerchief cloth (not printed or piece dyed);

Microscopes for scientific purposes;

and Scientific instruments.

5. The Department of External Affairs notes the interest of the
Japanese Embassy in increasing the importation of particular
Japanese products into Australia. It is to be regretted that the
relaxations indicated above are the maximum concessions which it
is possible to accord to imports from Japan at this stage. The
Department would like to assure the Embassy, however, that the
trends of trade and payments between the sterling area and Japan
are under close and continuous study by the Australian
Authorities, that the import licensing controls on Japanese goods
will be reviewed from time to time in the light of future
developments and that advantage will be taken of any factors which
would justify further relaxations in the quantitative import
controls.'

Copies of this memorandum have been forwarded to the Departments
of the Treasury and Commerce and Agriculture.