894.51/622
The Secretary of State to the Consul General at Sydney (Wilson)
Sir: There are enclosed for your information copies of certain documents, as listed below,78 in regard to the matter of extension by Australia of credits to Japan, north China and Dairen for the purchase of wheat and wheat flour. You will note that reference is made in the tag memorandum of February 1 attached to the third enclosure and in the fourth enclosure to the attitude of the Department in regard to the extension of credits of Japan. That attitude may be summarized as follows:
As a result of the operation of exchange control in Japan and the difficulty of getting funds out of Japan the Department of Commerce on June 6, 1938, advised exporters to have a confirmed, irrevocable letter of credit in their hands before accepting orders for shipments to Japan. Much the same situation in reference to exchange control exists in Manchuria. Moreover, in the light of the fact that Japan’s military activities in China have resulted and are continuing to result [Page 569] in serious injury to American rights and interests, it has been the hope of the American Government that American financial institutions and American sellers of commodities would, on their own initiative and taking into account the credit risk involved, not take any action which would facilitate, either directly or indirectly, Japan’s activities. This Government regards the extension of credit to Japan as coming within that category of action and accordingly this Government has endeavored, quietly and informally, to discourage the extension of credit to Japan or for the use of Japan in China. So far as the Department is aware there have been no substantial deviations by American financial institutions and American sellers of commodities from the policy desired by the Department. We believe that the attitude of the British Government in regard to this matter is similar to our own.
The Department desires that you endeavor to follow with care the question of possible further extension of credits to Japan or Japanese-controlled areas in China by the Australian Government or by private citizens in Australia and that, should occasion therefor arise, you bring again, confidentially and orally, to the attention of appropriate Australian authorities the importance which the Department attaches to the matter of non-extension of credits to Japan or for the use of Japan in China.
Very truly yours,
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