893.5151/428: Telegram

The Secretary of State to the Ambassador in Japan ( Grew )

121. Department’s 113, March 31, 7 p.m., and your 220, April 2, 8 p.m. When you have ascertained that your British and French colleagues are prepared to take similar action, you are authorized to make an oral approach, supported by an aide-mémoire, to the Japanese Foreign Office on the question of the establishment of exchange control in north China.

The Department suggests that in your approach to the Japanese Government you point out (1) that, having in mind the experience of American interests in Manchuria, we view with great concern recent developments in north and central China where régimes are being established and maintained by means of Japanese military impulsion and support; (2) that there has already been press comment in the United States to the effect that discrimination in favor [Page 12] of Japan’s trade with north China is to be effected by means of a new currency “pegged to the yen and subject to rigid control”; and (3) that inasmuch as there is reason to fear that such control would have a seriously adverse effect on American rights and interests, especially trade interests, in north China, we would welcome assurances from the Japanese Government that it will not support or countenance financial or other measures in the areas occupied by Japanese forces in China which discriminate against American interests. The Department suggests that in your discretion you also make full reservations in regard to American rights and interests.

The Department leaves to your discretion whether or not in your approach you should make reference to the situation which has developed in Manchuria as a result of the exchange and trade control there and in Japan. It appears that you have copies of Harbin’s and Mukden’s reports on the subject. These reports indicate clearly that the system whereby the Japanese and Manchurian exchange and trade control laws are not applicable to the movement of funds and goods between Manchuria and Japan is in effect discriminatory against foreign goods, including American goods, inasmuch as such goods cannot be imported into Manchuria without specific authorizations which in practice are frequently delayed or refused.

Please continue to keep the Department fully informed.

Repeat to Hankow.