Foreign Relations of the United States Diplomatic Papers, 1939, The Far East, Volume III

611.946/429

Memorandum by Mr. Joseph M. Jones of the Division of Far Eastern Affairs¹

[Washington,] April 20, 1939.

The Matter of an Import and Export Embargo Against Japan^*

It is the principal object of this memorandum to consider the question from a technical point of view of how effective the imposition of import and export prohibitions against Japan by the United States and possessions (except the Philippines), the United Kingdom and possessions (except the Dominions and India), France and possessions, and the Netherlands and possessions, might be expected to be in impairing Japanese economy and in forcing Japan to abandon her plans for the conquest of China. Consideration of the advisability of adopting such a policy is not within the scope of this report.

The possessions mentioned in the foregoing group are only those whose economic policies are controlled by the mother countries specified. The entire group will be hereafter referred to as Group A. The British Dominions and India and the Philippines were studied as a separate group, hereafter to be referred to as Group B, whose economic action probably can be influenced to some degree by the mother countries. The Netherlands and possessions were included in Group A because in the realm of practical international action economic sanctions against Japan could not be envisaged without the cooperation of the Netherlands: Dutch India is an important market for Japanese goods and a very important source of raw materials, notably oil, tin and rubber. An embargo on the shipment of vital raw materials to Japan might be impaired without the cooperation of the Netherlands. Further, if an import embargo were so effective as to exhaust Japan’s ability to purchase raw materials, it is not improbable that the Japanese Navy would attempt to seize some of the necessary supplies in Netherlands India; and for this reason a prearrangement for the protection of that country should be considered as a vital part of the program.

Conclusions

An import embargo enforced by Groups A and B against Japanese goods would probably oblige Japan to dispose of her foreign exchange resources at a rate of approximately 105,000,000 yen per month. EA² estimates Japan’s total foreign exchange reserves at the end of 1939 to be not more than 1700 million yen (see EA’s memorandum entitled “Japanese Gold and Foreign Exchange Resources”³). On this basis Japan might be expected to hold out for about 16 months even were Japanese goods embargoed by Groups A and B.^†

Administrative difficulties involved in the enforcement of a general import embargo are extensive and complex but there is no reason to believe that they are insuperable.

An export embargo on shipment to Japan of essential commodities, enforced by Groups A and B, involves greater difficulty and promises results less certain than has generally been supposed.

There are several important sources of oil outside Groups A and B and commercial stocks in Japan are believed to be ample for at least six months, while the Japanese Navy has on hand at least a three years’ supply. There seems to be no doubt that an embargo on oil would decrease Japan’s military and industrial efficiency after the exhaustion of her commercial stocks, but under the stress of an embargo Japan might be enabled to obtain a substantial portion of her requirements from outside Groups A and B.

Japan’s greatest vulnerability would appear to be her shortage of iron, due to the concentration of iron in the Pacific area in Groups A and B, and the sharp competition for Europe’s production. An embargo on iron ore and all forms of iron enforced by Groups A and B would probably eventually be disastrous to Japan but it is probable that the effects of an embargo on iron would not be critically felt in Japan for some time.

Japan could probably not obtain sufficient supplies of tin outside Groups A and B unless she occupied the Province of Yunnan, China. Adequate supplies of rubber are not obtainable outside Groups A and B. An embargo on lead, copper and zinc by Groups A and B would undoubtedly embarrass Japan’s industrial operations to a certain extent but would not affect Japan disastrously as substantial supplies could probably be obtained in an emergency.

An embargo on automobiles and parts would probably reduce Japan’s industrial and military efficiency but it would by no means cripple Japan’s motor transportation in view of local production and the possibilities of supplies from Italy and Germany. The same may be said of machinery and parts.

Supplies of pulp could probably be obtained outside of Groups A and B and it is probable that supplies of cotton adequate for Japan’s sharply reduced needs (in case an import embargo were enforced at the same time) could be found outside of the yen bloc (notably Brazil).

It is probable that Japan’s present economy could not withstand the combined effects of an import and export embargo enforced by Groups A and B. The tremendous shock which that economy would sustain from a simultaneous loss of export markets and sources of raw materials would probably necessitate immediate state control and operation of industry and trade. Ambassador Grew appears to believe that the Japanese people would accept the disappearance of the existing economic order without withdrawing their allegiance to those who are directing and who would continue the campaign in China. This judgment need not be questioned, but there is little doubt that the immediate social and economic confusion and distress engendered by the simultaneous imposition of import and export embargoes would be so great as to reduce drastically the effectiveness of Japan’s military and economic penetration of China, or even to check it entirely for a considerable period. Millions of industrial workers, farmers, stevedores, fishermen, et cetera, would be deprived of their incomes and a country’s distribution system cannot be reorganized on a different basis without a considerable period of social and economic confusion and distress. Provided the initial shock were withstood and the Japanese people remained loyal during the long period of reorganizing the production and distribution system, it is probable Japan could carry on for a considerable period of time. There would appear to be no doubt, however, that if Groups A and B strictly enforced import and export embargoes for a sufficient period of time, the continued and cumulative effects would eventually so reduce the efficiency of the Japanese industrial and military machine as to force some drastic change in either Japan’s foreign policy or internal leadership, or both.

In this connection, if an import or export embargo should be enforced against Japan and if these measures should embarrass Japan’s industrial or military operations appreciably, it seems probable that Japan would make an attempt to seize forcibly the materials that she needs.

[Here follows detailed discussion of subject.]

1. Copy transmitted to the Embassy in Japan.
2. Limitations of time and assistance were such that some of the tables in this report could not be checked and may contain a small margin of errors. [Footnote in the original.]
2. Office of the Adviser on International Economic Affairs.
3. Not found in Department files.
4. The dollar figures in EA’s report are converted into yen for the purposes of this report at $1.00 – 3.50 yen. [Footnote in the original.]