Note of October 6th of the Government of the United States, concerning American rights and interests in China, which was delivered to the American Ambassador to Tokyo, Mr. Joseph C. Grew the same evening by the Japanese Minister for Foreign Affairs, Mr. Hachiro Arita.
I have the honour to acknowledge the receipt of Your Excellency’s Note, No. 1076, dated October 6th, addressed to the then Minister for Foreign Affairs, Prince Konoe, concerning the rights and interests of the United States in China.
In the Note are cited various instances based on information in the possession of the Government of the United States that the Japanese authorities are subjecting American citizens in China to discriminatory treatment and violating the rights and interests of the United States.
I now have the honour to state hereunder the opinions of the Japanese Government with regard to these instances.
1. The circumstances which led to the adoption of the present measures concerning export exchange in Tsingtao and the present situation being, so far as the Japanese Government is aware, as set forth below, it considers that those measures cannot be construed as constituting any discrimination against American citizens.
A short time ago the Federal Reserve Bank of China was established in North China whose notes, with an exchange value fixed at one shilling and two pence against one yuan, have been issued thus far to the amount of more than one hundred million yuan, and are widely circulated. These bank notes being the compulsory currency of the Provisional Government, the maintenance of their value and their smooth circulation is regarded as an indispensable basis for the conduct and the development of economic activities in North China. Consequently the Japanese Government has taken a cooperative attitude ; and all Japanese subjects are using the said notes, and in their export trade are exchanging them at the rate of one shilling and two pence. On the other hand, the old fa-pi still circulating in these areas has depreciated in exchange value to about eight pence per yuan. Consequently those who are engaged in export trade and are using this currency are enjoying illegitimate profits, as compared with those who use the Federal Reserve notes and carry on legitimate transactions at the legitimate rate of exchange : that is to say, Japanese subjects who use the Federal Reserve notes have been suffering unreasonable disadvantages as compared with persons who, while residing and carrying on their business in the areas under the jurisdiction of the Provisional Government of North China, use nevertheless, the old fa-pi exclusively.
Furthermore, the existence of the before-mentioned disparity in exchange value between the new notes and the old fa-pi, which the Federal Reserve Bank has been exchanging at a rate not very much below par, is bound to exert an unfavourable effect upon the exchange value of the new notes, and eventually upon the exchange value of the Japanese yen.
The Japanese Government feels that it is incumbent upon it not to remain indifferent to such a situation.
The export exchange measures adopted in Tsingtao are calculated to place
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the users of old Chinese currency who have been obtaining unfair profits, on an equal footing with those who are using the Federal Reserve notes. These measures are also intended to protect the exchange value of the Federal Reserve Bank notes. Inasmuch as the application of the measures makes no differentiation according to nationality they cannot be considered as discriminatory measures. As a matter of fact, it is through these measures that those users of the Federal Reserve notes who had in a sense been discriminated against, have been placed on an equal footing with the others, and thus enabled to compete on a fair basis.
2. In North and Central China the new Chinese régimes some time ago effected revisions of the Customs tariff in an attempt to secure a rational modification of the former tariff enforced by the Kuomintang Government, which was unduly high and ill-calculated to promote the economic recovery and general welfare of the Chinese people. However, the schedule actually adopted for the time being is the one that was approved by the Powers in 1931, so that no complaint has been heard from foreign residents of any nationality on the spot. The Japanese Government is of course in favour of the purpose of the said revision, believing that it will serve to promote effectively the trade of all countries with China.
3. As for the organization of certain promotion companies in China, the restoration and development of China's economic, financial and industrial life after the present Affair is a matter of urgent necessity for the welfare of the Chinese. Moreover, the Japanese Government is deeply solicitous for the early inauguration and progress of work having for its object this restoration and development, for the sake of the realization of a new order in East Asia, and is doing all in its power in that direction. The North China Development Company and the Central China Development Company were established with a view to giving China the necessary assistance toward the said restoration and also with the aim of contributing toward the development of China's natural resources. It is far from the thoughts of the Japanese Government to impair the rights and interests of American citizens in China or to discriminate against their enterprises. The Japanese Government therefore does not oppose, but welcomes heartily, the participation of third Powers on the basis of the new situation that has arisen.
The telecommunication companies in North and Central China and of the inland navigation steamship company at Shanghai and the Wharfage company at Tsingtao have also been established to meet the imperative need of an early restoration of communications, transportation, and harbour facilities. With the exception of the telecommunications enterprise, which, because of its obvious relation to the maintenance of peace and order and to the national defence, as well as because of its public character, has been placed in the hands of special companies, all these enterprises are turned over to concerns that are ordinary Chinese or Japanese juridical persons, without any intention of allowing them to reap monopolistic profits by discriminating against America or any other Power. As regards the wool trade, while the control of purchasing agencies was enforced for a time in the Mongolian region, it has since been discontinued. There is no plan at present of any sort for establishing a monopoly in tobacco.
4. Concerning the return of American citizens to the occupied areas,
Your Excellency is aware that in North China there is no restriction, excepting in very special cases where the personal safety of those who return would be endangered, while in the Yangtze Valley large numbers of Americans have already returned. The reason why permission to return has not yet been made general is, as has been repeatedly communicated to Your Excellency, due to the danger that persists because of the imperfect restoration of order and also to the impossibility of admitting nationals of third Powers on account of strategic necessities such as the preservation of military secrets. Again, the various restrictions enforced in the occupied areas concerning the residence, travel, enterprise and trade of American citizens, constitute the minimum regulations possible consistent with military necessities and the local conditions of peace and order. It is the intention of the Japanese Government to restore the situation to normal as soon as circumstances permit.
5. The Japanese Government is surprised at the allegation that there exists a fundamental difference between the treatment accorded to Japanese in America and the treatment accorded to Americans in Japan. While it is true that in these days of emergency Americans residing in this country are subject to various economic restrictions, yet these are, needless to say, restrictions imposed not upon Americans alone but also on all foreigners of all nationalities as well as upon the subjects of Japan. I beg to reserve for another occasion a statement of the views of the Japanese Government concerning the treatment of Japanese subjects in American territory, referred to in Your Excellency’s note.
As has been explained above, the Japanese Government, with every intention of fully respecting American rights and interests in China, has been doing all that could possibly be done in that behalf. However, since there are in progress at present in China military operations on a scale unprecedented in our history, it may well be recognized by the Government of the United States that it is unavoidable that these military operations should occasionally present obstacles to giving full effect to our intention of respecting the rights and interests of American citizens.
Japan at present is devoting her energy to the establishment of a new order based on genuine international justice throughout East Asia, the attainment of which end is not only an indispensable condition of the very existence of Japan, but also constitutes the very foundation of the enduring peace and stability of East Asia.
It is the firm conviction of the Japanese Government that in the face of the new situation, fast developing in East Asia, any attempt to apply to the conditions of today and tomorrow inapplicable ideas and principles of the past would neither contribute toward the establishment of a real peace in East Asia nor solve the immediate issues.
However, as long as these points are understood, Japan has not the slightest inclination to oppose the participation of the United States and other Powers in the great work of reconstructing East Asia along all lines of industry and trade ; and I believe that the new régimes now being formed in China are prepared to welcome such foreign participation.
I avail myself of this opportunity to renew to Your Excellency the assurances of my highest consideration.
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