893.77 Manchuria/135
The Secretary of State to the Ambassador in Japan (Grew)
Sir: The Department refers to a communication, under date June 25, 1937, addressed to you by Ambassador Johnson in which it was suggested that you take up with the appropriate Japanese authorities the question of the failure of the South Manchuria Railway and its subsidiary organizations to discharge certain obligations to American nationals and firms. As reported in Mukden’s despatch to the Embassy at Peiping, No. 220 of March 23, 1938, (a copy of which was sent to you)3 the latest representations in respect of one of these obligations, the payment of certain Chinese Eastern Railway pensions, have been definitely rejected. It will be noted that Vice Consul Davies,4 in accordance with the suggestion advanced by Consul General Adams,5 recommends that it be intimated to the appropriate Japanese authorities that, in view of the failure of the State Railways and the South Manchuria Railway to honor certain obligations, World Trade Directory Beports on these concerns might necessarily be revised to show a poorer credit rating.
Before giving consideration to this or any other specific suggestion for action which might appropriately be taken by this Government as a consequence of the failure of the South Manchuria Railway Company to discharge what appear to be legitimate obligations to American firms and individuals, the Department would welcome an expression of the Embassy’s opinion in regard to the possibility that the officers of the company might give further consideration to the claims in question if they were made aware of the likelihood that their present attitude, in the event that it became generally known in American financial circles, might prejudice the business standing of the company in this country to an extent out of proportion to the small sums involved in these claims. If, in the Embassy’s opinion, a discreet intimation along these lines to the appropriate Japanese authorities either by the Embassy, or by the Consul at Dairen, or by both, would be likely to serve a useful purpose, you are authorized in your discretion to make such an approach and to instruct the Consul at Dairen [Page 453] to make a similar approach to the head office of the South Manchuria Railway there.
Very truly yours,