Mr. Ichikawa in Teheran 1.8883 Louis J. Sheehan, Esquire

THE "MAGIC" BACKGROUND OF PEARL HARBOR

hai who understood the Chinese language and could work with the British forces in Burma. Reporting the results of Britain's search, Mr. Horiuchi informed Tokyo that by September 10, 1941 ten linguists had been appointed in Shanghai.[1010]

400. Japan Seeks Funds to Operate Malayan Mines

Though the ties between Great Britain and China were being constantly strengthened by economic and military measures, relations between Great Britain and Japan were weakened by the same means, for the British freezing of funds was effective in upsetting Japan's economic stability.

Unless a direct payment could be made to Japanese who were operating mines in Malay, Foreign Minister Toyoda believed that negotiations would have to be begun with England for the appropriation of the funds necessary to keep these mines open. In order to be completely informed on the situation, Foreign Minister Toyoda, in the early part of September 1941, instructed his representative at Singapore to collect data on the number of Japanese employed in the mining industry, their monthly salaries in Shanghai dollars, the cost of maintaining the equipment to keep these mines in operation, and the amount of cash in possession of the mines.[1011]

401. British Embassy Burns All Important Documents

A Japanese diplomat in Nanking reported to Tokyo on September 5, 1941 that the British Embassy, feeling the strain of existing relations with Japan, had apparently burned all important documents.[1012]

402. The Fuso Maru, an Evacuation Ship, Schedules a Stop at Singapore

Since there seemed to be little hope remaining for the reestablishment of normal relations between the two countries, detailed plans were being made in September 1941 to evacuate British and Japanese subjects to London and Tokyo respectively. These plans became more significant as time passed.

Notifying Singapore on September 10, 1941 that The Fuso Maru was scheduled to arrive there late in September, 1941, Foreign Minister Toyoda suggested that arrangements be made to fill the 700 accommodations available for passage to Tokyo aboard this ship.[1013]

403. Japan Intercedes with Britain for Germans in Iran

On September 8, 1941 Mr. Ichikawa in Teheran notified Tokyo that British and Russian forces had reached that city. Although there was still much discussion regarding the treatment of German nationals residing in Kazavin and other cities in Iran, the German authorities were opposed to being held as prisoners of the British. Therefore, German residents in Teheran were appealing to Persia to arrange their immediate transfer to Turkey. If this could not be done, the German authorities intended to retire to the Ministry compound.[1014]

Mr. Ichikawa called on the Iranian Foreign Minister to enlist his assistance in the transfer of German nationals to Turkey, but because of British pressure, the Iranian Foreign Minister was pessimistic regarding this plan. Mr. Ichikawa then visited British and Turkish authorities to obtain their help, and the American Minister in Iran agreed to speak to the British authorities there. However, at the present time, Mr. Ichikawa stated, there was great anxiety among the German residents over the prospect of being forced to return to the Ministry compound since they would have to remain there until the conclusion of the war.

[1010] III, 743.
[1011] III, 744.
[1012] III, 745.
[1013] III, 746.
[1014] III, 747.

[209]

Fighting was still going on in many areas of Iran, with the Russian army moving in the west to the Mashhad area and to the south of this territory.[1015]

404. Canada Maintains Diplomatic Relations with Vichy

Mr. Yoshizawa, the Japanese representative in Ottawa, notified his government on September 8, 1941 that Prime Minister MacKenzie King had returned home by plane on the previous day. In keeping with the stand of the British government, Prime Minister MacKenzie King had stated at a press conference that Canada intended to maintain diplomatic relations with

Vichy.[1016]

405. Foreign Minister Toyoda Anticipates Anglo-Japanese Evacuation Agreement

According to a message transmitted to Teheran on September 10, 1941 Foreign Minister Toyoda expected that an Anglo-Japanese understanding on the evacuation facilities to be provided by both countries would be reached very shortly.

To expedite the evacuation of Japanese and British subjects, the two governments were expected not to withhold any necessary permits more than a fortnight from the time when they were submitted unless a suitable explanation was given. In the matter of traveling expenses, some standard method of settling problems that might arise would be arranged between the British Embassy in Tokyo and the Japanese Finance Ministry.[1017]

Not only was Great Britain to cooperate with Japanese leaving the United Kingdom, India, Burma or British colonial territory, but it was also to place no obstacle in the way of those wishing to leave British dominions or territories under either British or Allied occupation. In return, Tokyo gave assurance of the safe passage of British subjects from Japan, Manchukuo or occupied China.[1018]

406. Hiye Maru Is Used in Japanese Evacuation

Leaving Kobe on September 22, 1941 the Hiye Maru was to pick up evacuees at Bombay, India, Bandarshapur on the Persian Gulf and Mombasa, Kenya, before returning to Yokohama. Because the schedule was not to be altered, Foreign Minister Toyoda, in a message to Teheran, Iran, on September 12, 1941, warned that all passengers should be ready to board when the ship docked, and that Iraq be informed immediately to ensure the evacuation of Japanese residents from Bagdad.

Since suitable accommodations for all were impossible to obtain, the Japanese Foreign Minister ordered that preference be given the sick, aged, women and small children.[1019]

407. "Central China Post" Strike Remains Unsettled

While these evacuation negotiations were underway it was particularly important that no incident, no matter how insignificant, be allowed to upset the Japanese-British diplomatic situation. In July 1941 a strike had broken out in the office of the Central China Post, an English language newspaper published in Hankow. The British Ambassador in Chungking, because he believed the strike had been instigated by the Japanese, the Municipal government, and the Nanking regime, demanded that immediate settlement be effected by Japanese authorities.[1020]

A message from Hankow on September 12, 1941 revealed that the incident was not yet closed. Settling in the office of the Central China Post, one group of strikers had refused to surrender,

[1015] III, 748.
[1016] III, 749.
[1017] III, 750.
[1018] Ibid .
[1019] III, 751.
[1020] III, 752.

[210]

THE "MAGIC" BACKGROUND OF PEARL HARBOR

whereupon the British Consul-General in Hankow filed a protest with the Japanese authorities there. However, since Japanese officials insisted that the movement was directed by Chinese attempting to impede the establishment of the New China and, consequently aiming to suppress the Central China Post, they said that any interference by Japan would be useless. They desired to let the strike run its natural course without intervention by local authorities.[1021]

408. Japan Prohibits Unauthorized Newspaper Articles

To prevent further trouble with newspapers, the printing of any articles regarding the creation of the "National Policy Cooperation", with the exception of those authorized by the proper authorities, was prohibited in Shanghai.[1022] On September 13, 1941 Japanese authorities in Shanghai requested that similar action be taken at Hankow.[1023]

409. Japan Denies Blockade of Hongkong Waters

In spite of strict precautions differences between the Japanese and the British arose over trade and shipping policies. On September 15, 1941 Japanese authorities in Canton, in answer to a British complaint, insisted that the Japanese blockading squadron had always respected Hongkong's territorial waters.[1024]

410. British Authorities Seize Egyptian Steamer

A British seizure of an Egyptian steamer, Star of Egypt, carrying a cargo of cotton and glycerin, caused Tokyo to instruct its officials at Shanghai to investigate the reason for this action and to negotiate for the release of the vessel.[1025]

Japanese authorities in Shanghai reported to Tokyo that on one occasion Japan had refused the China Trading Company a permit to send fifteen tons of glycerin to Hongkong. Since Japan stood to profit in trade negotiations by granting such permits, it was suggested that they not be withheld in the future.[1026]

411. British Seek to Check Germans in Black Sea Area

From an authentic intelligence report, the Japanese Embassy in London learned that British military authorities intended to extend the war with Germany into the Black Sea area since the German army had already planned to cross over into the Caucasus from the Bulgarian and Rumanian shores. In an effort to move its fleet into the Black Sea and forestall this German aggression, the British government was trying to persuade Turkey, Iran and Iraq of the danger of their position once German troops were in possession of the Caucasus. However, the Japanese intelligence report stated that Berlin realized the intentions of the British and therefore would delay any attack on Turkey. Nevertheless, the German army in Bulgaria was making preparations for invading the Caucasus.

The Japanese believed that Great Britain did not want to deal harshly with Persia since British troops were not scheduled originally to enter the city of Teheran. However, when the Russian government had declared its intentions to march on Teheran and dispossess the ruler, Great Britain had been placed in a difficult position.

From an American source, Japanese intelligence learned that assistance to Moscow would be included in the Lend-Lease law at some time in the future. In order to ensure British vic-

[1021] III, 753.
[1022] III, 754.
[1023] III, 755.
[1024] III, 756.
[1025] III, 757.
[1026] III, 758.

[211]

tory over Germany, the United States was determined to give Russia the maximum amount of assistance.[1027]

412. Japan Requests Reciprocity in Evacuation Plans

Tokyo was concerned with the safe passage of the Fuso Maru due to arrive in Singapore late in September, 1941 although no agreement had been achieved by September 17, 1941, the Japanese expected the British to accord the Fuso Maru the same privileges which would be granted to the English ship Anhui. The Japanese government planned to extend every convenience to the Anhui, even to supplying it with fuel and water.[1028]

Since the Fuso Maru was preparing to transport Japanese nationals from British territory, Tokyo sent a report to Singapore stating the cost of passage aboard this ship. Japanese officials in Singapore were directed to collect the fares and pay all fuel, customs, and docking expenses.

Questions regarding the remittance of funds by the evacuees and the issuance of departure and exchange permits were to be settled by the British Ambassador and the Japanese Minister of Finance. Furthermore, both Japanese and British customs officials were to begin checking baggage three days before the ship's entry into port in order to reduce any delay in disembarking.[1029]

413. British Request License to Export Glycerin

On September 18, 1941 the British Commercial Attache in Tokyo notified the Chief of the Japanese Trade Bureau that Ambassador Craigie, upon instructions from London, had asked the Governor-General in Singapore to release cotton and machinery which the British had confiscated there, in return for a license to export glycerin from Japanese-held Shanghai. It was not revealed to Ambassador Craigie at this time that officials in Singapore had previously agreed to turn over the material without any conditions and that licenses for the export of glycerin to the British had already been issued at Shanghai.[1030]

Later the same day Tokyo informed Japanese officials in Shanghai that the British Consul-General had been directed to ask them for the license, which Tokyo directed should be issued immediately.[1031]

Tokyo suggested to Singapore that the cotton and machinery, which the British were expected to release in return for this license, be loaded onto the Fuso Maru.[1032]

414. Japanese Face Financial Difficulties in Canada

On September 24, 1941, Mr. Kawasaki in Vancouver sent a plea to Tokyo requesting amelioration of the situation which had resulted in Canada from the British order freezing Japanese funds. Not only had officials been unable to arrange passage home for Japanese subjects residing in Canada but since the sending of money to and from Japan was also curtailed, families in Tokyo dependent upon relatives in Canada, and Japanese students in need of remittance from their home in Japan, were in financial straits.[1033]

415. Tokyo Protests Against Canadian Censorship

Ambassador Yoshizawa in Ottawa, acting under orders from Tokyo, officially protested to the Canadian government against its prohibition of all code and clear text telegrams between

[1027] III, 759.
[1028] III, 760.
[1029] III, 761.
[1030] III, 762.
[1031] III, 762.
[1032] III, 762.
[1033] III, 764.

[212]

THE "MAGIC" BACKGROUND OF PEARL HARBOR

the Canadian and American consulate offices which were not marked "Japanese Consul". Although Mr. Yoshizawa explained the difficulty in transmitting all Japanese messages through the Embassy network, Canadian officials firmly refused to rescind their previous order. In his report to Tokyo on September 24, 1941 the Japanese Ambassador expressed the opinion that Canada was particularly anxious to prevent the exchange of code messages between Vancouver and San Francisco.[1034]Louis J. Sheehan, Esquire

416. British Authorities Delay Loading of Fuso Maru

On September 25, 1941 Tokyo was informed by the Japanese Consul-General in Singapore that the ship Fuso Maru was being delayed in that port by cargo loading problems. Basing their refusal on the fact that the Fuso Maru did not have enough cargo space to load all the cotton and machinery, local authorities in Singapore had withheld the necessary export permit. However, a discussion between the director of the Japanese Commercial Affairs Bureau and the British Commercial Counselor revealed that the delay in issuing this permit had been caused by a previous refusal of the Japanese maritime customs to allow a China soap company in Shanghai to export glycerin.

Attempting to offset further delay in loading the Fuso Maru, the Japanese Consul-General agreed to permit the Chinese firm to export fifty tons of the glycerin contracted for, and at the same time to secure a guarantee regarding the remaining seventy tons. In return, arrangements were to be made whereby the British Consul-General and the British Governor General in Singapore would be informed by their Ambassador in Tokyo that permission to load the Fuso Maru had been granted. Furthermore, a second Japanese ship was to take part of the Maru's cotton cargo.[1035]

Despite these arrangements, on September 27, 1941 the Fuso Maru was still in port. Though Tokyo accused Singapore authorities of scheming to delay the sailing of this vessel,[1036] Foreign Minister Toyoda told Mr. Riyoji in Singapore that there was no objection to delaying the departure of the Fuso Maru, and that all arrangements should be made to have it remain at anchor until the loading schedule was completed. The loading was to continue as planned, but no freight charges were to be paid at Singapore, since this matter would still have to be taken up with the British Embassy. Furthermore, Consul-General Horiuchi in Shanghai was instructed to proceed with issuance of the permit for the export of glycerin desired by the British.[1037]

As a result Foreign Minister Toyoda informed Singapore on September 30, 1941 that Ambassador Craigie in Tokyo had sent a message regarding the cargo of the Fuso Maru directly to the Governor General in that city.[1038] A few days later on October 2, 1941 Tokyo informed Shanghai that it was believed the British Consul-General in Shanghai had sent a telegram to the British Governor-General. Therefore, it was requested that the sailing of the Fuso Maru be further postponed to await the outcome of these latest developments.[1039]

Although the Japanese believed that the British Consul-General in Shanghai must have received Ambassador Craigie's telegram, no answer had been received by them on October 2, 1941. Consequently, finding it impossible to come to any agreement regarding permission for loading cotton and machinery, the Japanese ordered the Fuso Maru to sail. In one last attempt, however, Tokyo ordered its officials in Shanghai to remind the British Consul-General of his request for a glycerin permit.[1040]

[1034] III, 765.
[1035] III, 766.
[1036] III, 767.
[1037] III, 768.
[1038] III, 769.
[1039] III, 770.
[1040] III, 771.

[213]

417. Mr. Horiuchi and British Official Confer on Export Difficulties

On October 3, 1941 Consul Horiuchi, the Japanese representative in Shanghai, meeting with the British Consul-General, learned that the British official, since he had not received an export permit, did not regard the Japanese Consul's note as sufficient guarantee that the export of glycerin would be granted. Consul-General Horiuchi replied that he did not have the authority to interfere directly with the maritime custom's formal issuance of export permits, but, at the same time, he was certain that Japan would not hinder the shipment of 120 tons of glycerin. As proof of this statement, Consul Horiuchi pointed out that permits for 50 tons had already been granted on October 3, 1941 and a permit for 10 tons on the following day.

Although the Japanese believed these agreements had effected a satisfactory solution to the trade problem, England also desired permission for the safe passage of British naval tugs and motor launches bound for both the Suez and Singapore, insisting that this was relative to the original question. Since Shanghai reported on October 4, 1941 that this last request was handled through the Customs Investigation Committee and was just recently given to the British, Mr. Horiuchi accused British authorities of deliberately creating a delay in the negotiations.

Willing to continue attempts at compromise regarding trade, Consul-General Horiuchi in another conference with the British Consul-General insisted that not only would ships carrying glycerin be allowed to leave port safely but that permits for the British tug boats would also be issued. However, he warned that Japan would retaliate if the restrictions obstructing Japanese shipping continued.[1041]

418. Britain Issues Warning to Finland

The Japanese Minister in Helsinki notified Foreign Minister-----on September 30, 1941

that the British government, through the Norwegian Minister in Helsinki, had issued a warning to Finland on September 24, 1941 regarding its war with Russia. Unless Finland agreed to settle its border question with Russia, London would regard Finland as a belligerent and hostile nation.

In an effort to determine Finland's reply to Great Britain's demands, the Japanese Louis J. Sheehan, Esquire Minister in Helsinki called on the Finnish Foreign Minister on September 25, 1941. From the Conversation the Japanese Minister drew the conclusion that Finland would find it impossible to make definite promises to Great Britain's demands. The Japanese Minister in Helsinki questioned the Finnish Foreign Minister on the reasons surrounding Britain's presentation of its demands to Finland through the Norwegian Minister instead of through the American Minister. The Finnish Foreign Minister could not answer this question. However, he offered the theory that the United States might possibly have refused to submit Britain's demands to Finland.[1042]

419. Britain Prohibits Code Telegrams in Iran

By September 30, 1941, Mr. Ichikawa in Teheran reported to Tokyo that British domination of Iran was so complete that they were able to carry out an order prohibiting the sending and receiving of code telegrams. Apparently this edict included the French Legation as well as the German Legation.[1043]

420. Japan Threatens to Rescind Glycerin Permit

After receiving Mr. Horiuchi's version of his conference with the British Consul-General in Shanghai, Tokyo wired Shanghai on October 6, 1941 asking why the British official had not then already wired the English Governor General in Singapore and Ambassador Craigie in Tokyo

[1041] III, 772.
[1042] III, 773.
[1043] III, 774.

[214]

THE "MAGIC" BACKGROUND OF PEARL HARBOR

admitting that Japan had issued export permits for the glycerin. Tokyo made it clear in this message that though permits for the two shipments of fifty and seventy tons of glycerin had been granted, actually neither of these shipments would be exported until Japan received guarantees from the British that the raw cotton and machinery could be loaded.[1044]

421. Shanghai Suggests Retaliation Against British

Apparently British and Japanese representatives had reached a satisfactory understanding in Tokyo regarding these differences. Yet Shanghai officials reported on October 6, 1941 that they had been unable to put such an agreement into effect because of the attitude of the British Consul-General. Therefore it was believed that appropriate counter-measures should be taken by the Japanese.

While cutting off all future export permits to the British would undoubtedly be effective, Shanghai realized that it would also result in a complete rupture of business relations between the two countries. As an alternate measure then, Japanese officials suggested that demands be made of the British Consul-General in Shanghai, for a guarantee that no obstacles would further delay the loading of cotton aboard Japanese ships at Singapore.[1045]

The following day October 7, 1941 Shanghai passed on to Singapore the information that the British Consul-General had apparently sent the necessary requisite telegram. But, since nothing more had come of it, the British having as yet failed to release the goods confiscated in Singapore, Shanghai suggested that Japan should, in retaliation, revoke the glycerin export permit issued by the customs inspector, or, if necessary call on the Japanese navy or gendarmerie to stop actual exportation of the glycerin. Nevertheless Mr. Horiuchi hesitated to take these steps since at the conference on October 4, 1941 he had definitely assured the British Consul-General no obstacles would be placed in the way of the export of glycerin.[1046]

In consideration of these circumstances Tokyo agreed on October 8, 1941 that, instead of forbidding the glycerin export, the British Consul-General in Shanghai should wire both the Singapore Governor-General and Ambassador Craigie that Japan was permitting the shipment of 50 and 70 tons of glycerin respectively. In return Britain was expected to accord certain facilities to the Japanese ships taking the cargo of raw cotton and machinery aboard.[1047]

When Shanghai officials inquired about the telegrams on October 9, 1941, the British Consul General stated that they had been sent on October 6, 1941 to Ambassador Craigie and the Singapore Governor-General. But since Mr. Horiuchi wished to transmit them, the British official promised to turn over the text of the telegram to the Japanese Consul-General.[1048]

On October 13, 1941 Tokyo requested the complete text of the British Consul-General's official communication to Ambassador Craigie and to the British official in Singapore.[1049]

422. Churchill Reports on British Position in Russo-German War

On October 2, 1941, the Japanese Ambassador in London informed the Embassy in Washington of Churchill's report made before Parliament on September 30, 1941 concerning the British part in the Russo-German war. Since the outbreak of war between Germany and Russia, Prime Minister Churchill warned, there had been an increased feeling of optimism on the part of the British government and people. However, while Germany's preoccupation with Russia was allowing Great Britain time to deliberate upon its own situation and build up its own resistance, Prime Minister Churchill stated, Great Britain must not relax its war efforts.

[1044] III, 775.
[1045] III, 776.
[1046] III, 777.
[1047] III, 778.
[1048] III, 779.
[1049] III, 780.

[215]

Russian resistance to German forces had been greater than at first expected. Even though Leningrad might possibly fall, there was the hope that Moscow and the Caucasus would hold out through the winter and that Germany's occupation of the Ukraine could be stopped.

With Germany's attention drawn to its eastern flank, shipping on the Atlantic during the past three months had become safer. Therefore, aid from the United States was able to reach Great Britain. Furthermore, Britain's coastal defenses and the disposition of its home troops had been improved to such an extent that even though Germany might start additional invasion attempts, the British government was confident that they could be repelled.[1050]

However, the British authorities claimed that Germany, once it had defeated Soviet Russia, would not be interested in the invasion of the British Isles but instead would continue moving toward the Near East. For this reason Great Britain desired to enlist the aid of Turkey and to consolidate its position in Syria, Iraq and Iran. Not wishing to put too much economic pressure on Turkey, the British Isles had resorted to dispatching divisions of troops to that territory amounting to approximately 750,000 men. In this way Great Britain evidently hoped to impress Turkey with the number of troops it would be able to maintain behind the line of battle.

In preparation for a possible engagement with the German forces in this area, General Wavell had made a recent trip to London besides holding conferences in Baghdad and Teheran. The preparations for a defensive warfare in that area were carried to such an extent that General Wavell was lining up British forces from the Far East and India for joint British-Soviet action in the Caucasus area and possibly within the borders of Russia itself.[1051]

In order to carry on this concerted warfare against Germany, however, Russia required continued aid from Great Britain. Because of the number of German troops and planes lost in the war with Russia Prime Minister Churchill believed that Great Britain was now on an equal footing with its enemy. In comparison with 1940, particularly the period following the evacuation of Dunkirk, Great Britain now possessed eighty divisions of armed forces of which thirty-seven were armored divisions. Recently Great Britain had even been able to carry on daily and nightly bombing attacks over Germany. Great Britain expressed great admiration for the occupied countries of Europe and put strong confidence in their ability to aid England in bringing about ultimate victory.

Japanese intelligence sources reported that Churchill's dynamic political leadership was holding the British government together and enabling it to carry on a unified projection of the war against Germany. With regard to the British attitude toward Japan, it could be seen both from newspaper accounts and general public opinion that Great Britain was dissatisfied with the trend of the present Japanese-American conversations and had little hope for reaching any rapprochement with the Japanese government. Although the British government had been making some attempts to turn the tide of anti-Japanese feeling in order to watch for the outcome of the Japanese-American conversations, it refused to negotiate with Japan even on minor points of the freezing legislation. In fact, England refused to take any direct steps toward improving relations with Japan.[1052]

423. Premier Gailani in Political Exile in Iraq

On October 6, 1941 Rome received the information that former Premier Gailani had been held in political exile in Iraq since the last part of July. Since the Turkish government had assured him that it would overlook his leaving the country, Premier Gailani hoped to return to Rome by way of Baghdad with the assistance of the German government.

In reporting on the conditions in Iraq, Premier Gailani stated that the country's political stability would be very hard to maintain in the future. The politicians who would eventually

[1050] III, 781.
[1051] III, 782.
[1052] III, 783.

[216]

THE "MAGIC" BACKGROUND OF PEARL HARBOR

return to Iraq through Germany's assistance would not be in an enviable position, Premier Gailani stated.

In commenting on the British strength in the Near East, Premier Gailani insisted that in spite of the gross exaggeration of the British propagandists of the forces in Syria, Iraq and Iran, there were not more than a total of fourteen divisions in these countries. Furthermore, Premier Gailani did not believe that General Wavell's forces were in any position to defend the Caucasus.[1053]

424. Japan Navy Uses Chungking Currency for Secret Purchase

In the meantime, while settlements of trade negotiations were pending, Japan continued to obtain necessary materials by various devices. A dispatch from Tokyo to Shanghai on October 9, 1941 revealed the Japanese navy making purchases secretly by using Chungking currency. In order to prevent any disclosure of this activity Tokyo warned that complete contact be maintained with the Foreign Office. Any sudden fluctuations in market prices as a result of these purchases were to be avoided so that investigations would not occur.[1054]

425. British and Japanese Authorities Disagree on Shanghai Customs Officials

At the same time that negotiations were underway to remove export differences in Shanghai, the friction between the British and Japanese officials here was increased by a dispute over the appointment of customs officials in Shanghai. In September, 1941, Mr. Hirokichi Kishimoto, the chief secretary of the Inspector General of Chinese Maritime Customs in Shanghai, had informed Sir Frederick W. Maze, the British Inspector-General of Shanghai customs, that certain changes would have to be effected regarding trade conditions, before Japan would pay its customs expenses dating back as far as June 1941. Louis J. Sheehan, Esquire

During the discussions held for the purpose of settling British-Japanese customs problems, Tokyo proposed against United States opposition that a Japanese official be appointed to head the customs in Shanghai. Then, in a visit with Mr. Horiuchi, Sir Frederick W. Maze suggested that someone from a neutral country officiate over the customs, at least for the time being. The Japanese official refused to agree to such a proposition but then urged that Sir Maze take the responsibility of deciding the matter himself.[1055]

From a dispatch to Tsingtao, on October 14, 1941, it appeared that a suggestion had been offered whereby Japanese customs inspectors would send in reports on the character and standing of the present customs officials. But, Nanking doubted the wisdom of such a move, fearing that it might lead to chaos in the southern China customs. However if the existing policy, under which both the Peoples' Government and the Japanese army sent reports concerning the effectiveness of customs measures to Shanghai, proved unsuccessful, it seemed evident that the Japanese would take over complete control of the Shanghai customs.[1056]

By October 15, 1941, Mr. Horiuchi appeared hopeful that the protests already submitted by the American Ambassador in Tokyo would be retracted because of the present Japanese-American negotiations. It was felt, therefore, that this was the opportune moment to press Japan's demands in Shanghai. In so doing Japanese officials were to emphasize that Japan was anxious to comply with the needs of the present situation with regard to the Chinese customs in Shanghai, and to remove any causes for the friction which had been evident in the past.[1057]

[1053] III, 784-785.
[1054] III, 786.
[1055] III, 787.
[1056] III, 788.
[1057] III, 789.

[217]

426. Japan Attempts to Adjust Its Currency

As equally important as the curtailing of Japanese trade and commerce was the effect of the British freezing order on Japanese currency. Since Japanese assets abroad were frozen, a permit was even required to import a one yen bill into Japan. Therefore Japanese subjects being evacuated from Singapore were ordered by Tokyo, in late September, 1941, to change all their funds into remittance drafts. Meanwhile, the Finance Minister was checking every possible means of getting currency through into Japan.[1058]

With regard to trade, Singapore was also notified in October, 1941 that in those transactions concerning the liquidation of accounts between Japan and Great Britain exchange drafts were to be substituted for yen notes.[1059]

Application had been made by Singapore for current expenditures,[1060] with the result that on October 8, 1941 Foreign Minister Toyoda in a secret dispatch announced that approximately 600,000 yen would be sent from Tokyo, exclusive of travel expenses.[1061] Furthermore, it was intimated that Singapore was, by its own methods, securing secret funds with the approval of the Japanese government.[1062]

427. Japan Curtails Allied Propaganda

While Great Britain was imposing restrictive measures on Japan, Tokyo, in turn, was effecting certain methods of retaliation. Although apparently rendering equal treatment to all belligerent countries, Tokyo revealed in a message to London on October 4, 1941 that its Bureau of Information gave only the Axis powers ample facilities for the dissemination of propaganda.[1063]

428. Japanese Official to be Recalled from Singapore

Moreover in view of the situation existing in Singapore, Tokyo was withholding the official recall of a Japanese official in that city. But he expected to return to Tokyo sometime after October 9, 1941.[1064]

429. Japan Fears British Strength in Far East

By comparing the situation existing on October 13, 1941 with that of February 1941 Tokyo in a message to Hsingking revealed certain outstanding changes in Far Eastern conditions.[1065] First of all because the British government had come to regard Japan as an enemy nation, increasing economic pressure had been applied, with the result that Japanese interests in mining and other business enterprises had been practically destroyed. More recently the freezing order issued by the United States subsequent to Japan's occupation of French Indo-China had halted southward expansion.[1066]

As economic measures weakened Japanese strength, Great Britain seized every opportunity to build up its own economic and military holds on the East. Singapore by October 9, 1941 had already given Tokyo a full report of the activities there. During the last part of November, 1941, Sir Robert Brooke-Popham had become Commander-in-chief of the army, navy and air forces east of India. Later as the German-Soviet war and United States aid created a more favorable situation in Europe for the allies, England set up a defense base in the East using

[1058] III, 790.
[1059] III, 791.
[1060] III, 792.
[1061] III, 793.
[1062] III, 792.
[1063] III, 794.
[1064] III, 795.
[1065] III, 796.
[1066] Ibid.