894.5151/260: Telegram
The Ambassador in Japan (Grew) to the Secretary of State
[Received October 9—10:46 a.m.]
1598. 1. A member of my staff has learned from a source considered very reliable that the Japanese Government’s available supply of foreign exchange has been reduced to around 20,000 reichsmarks and that it will have no other recourse than to default on maturing foreign exchange contracts. The American, British and Netherlands East Indies freezing orders have completely blocked exchange transactions in dollars, sterling and guilders and have sharply curtailed dealings in South American currencies. Our informant states that his exchange contracts amount to around 5,000,000 Swedish kroner [Page 895] and that Japanese purchases from Sweden during the past several months have been financed chiefly through Berlin, presumably by credits advanced by Germany.
2. Recently the Germans have frozen these credits advising the Japanese that they are to be used to finance the purchase of German goods only. Another likely motive according to our informant is that the Germans anticipate Japan’s withdrawing from the Axis. They suggested that in as much as Sweden is heavily in debt to Germany for arms and ammunition, Germany is now demanding goods from Sweden rather than kroner. There are reports here to the effect that Japan now owes Germany around 80,000,000 marks.
3. Actually Japan now finds herself in exactly the same embarrassing international financial position as the foreigners have been placed in Japan.