893.48/968
The Ambassador in Japan (Grew) to the Secretary of State
[Received July 27.]
Sir: I have the honor to refer to the Department’s instruction No. 757, dated May 6, 1935 (file No. 893.48/941), in regard to the alleged boycott by Japanese cotton mills in China of some 102,000 bales of American raw cotton which had previously been purchased by the Chinese Government under the terms of the wheat and cotton credit extended by the Reconstruction Finance Corporation. The Embassy was instructed to report any information which might be obtainable without making inquiry in official quarters concerning the present attitude of the Japanese Government toward the alleged boycott.
[Page 603]Discreet inquiries made by the Embassy in Tokyo of non-official quarters failed to confirm the allegation that the Japanese Government instigated or supported the boycott. It is the opinion of one competent observer that the boycott is non-official; that the Japanese mills in China possess well-organized and adequate channels through which their supplies of American cotton are ordinarily purchased; that they do not wish to disrupt their usual methods of obtaining supplies unless some considerable advantage can be obtained by buying elsewhere; that they know very well that the surplus of American cotton on the Chinese market constitutes a “distress” supply; and they believe that if they wait patiently they will be able to buy this “distress” supply at a very profitable discount. The observer in Tokyo does not believe that the Japanese Government has any connection with the boycott and that the Japanese cotton mills in China will eventually buy the cotton, when they find it to their advantage to do so.
Tokyo, however, is not a cotton center and it is difficult to find nonofficial sources of information in regard to the cotton trade. Consequently the Embassy requested the Consul at Kobe to make discreet inquiries in regard to the matter of the American cotton selling agencies in Osaka, the cotton center of Japan. A copy of the report made by the Consul on his findings is enclosed herewith.15 From this it will be observed that the cotton merchants in Osaka are of the opinion that the Japanese authorities in China did in fact instigate the boycott.
It appears that it will be impossible for the Embassy to obtain information in regard to the present attitude of the Japanese Government toward the boycott without approaching the Japanese authorities. It does not seem that it would be advisable, in the lack of more definite information, for the Embassy to approach the Japanese Government with a suggestion that the Japanese officials “lift the boycott”, for to do so would only invite denials of any connection with the affair. The Embassy, however, can see no objection to a friendly and informal discussion between a member of the staff of the Embassy and the Chief of the Bureau of Commercial Affairs of the Foreign Office16 on the subject of the boycott, with a view to obtaining such information as Mr. Kurusu may possess on the subject.
Respectfully yours,