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securing the overdraft was a public utility or undertaking which the Japanese desired to acquire. There were warnings that if this were not done securities or immovable property would be realised but no case has been discovered in which this threat was actually carried out and the fact remains that one well-known Chinese family who owed the bank nearly six million dollars made no effort to pay off their overdraft although they had ample assets in the Colony to do so and responsible members of the family were at all times in the power of the Japanese.
3. It is noteworthy that the bulk of the repayment took place after the 1st July 1943 when depreciation in the purchasing power of the Yen set in. It seems probable that by the end of that year the yen only had a quarter of the purchasing power it had in January 1942. Overdrafts continued to be paid off during the first half of 1944 and also during the first half of 1945. For some curious reason no payments seem to have taken place during the latter half of 1944. The purchasing power of the Yen varied widely over this period and according to some figures kept in Stanley Internment Camp, the accuracy of which cannot be vouched for, the yen had by December 1944 in terms of purchasing power dropped to 1/60th and by June 1945 to about 1/400th of its value in January 1942.
4.
Morse points out that even if all payments were declared invalid the Banks would still have heavy losses as at the request of Government they financed large consignments of raw materials which were subsequently lost. If the loss sustained in any settlement in connection with these overdrafts is such that the Bank is forced to call in money wherever it can the position will be made much more difficult for the great majority of the business community.
5. The repayment of mortgages is not quite in the same category as bank overdrafts as the former payments were made to the mortgagor or his agent whereas the latter were made to a liquidator who was in no sense the representative of the banks. Moreover Hong Kong mortgages normally contain a provision enabling the debtor to repay on one month's notice so there was nothing illegal about such repayments during the occupation period. Nevertheless repayments which took place during this period must be suspect as they were in most cases made in order to reap the benefit of prevailing conditions. It would appear therefore that there is a case for treating such repayments in the same manner as repayments of bank overdrafts, if a sliding scale is finally decided on for the latter.
6. I still feel considerable doubt as to whether the proposals contained in your Telegram No. 637 would be a just solution as far as Hong Kong is concerned for conditions here are quite different from those which obtain in Malaya. If however, in spite of the further information contained in this telegram you still feel that you cannot accept my original recommendations I will do my best to produce a scale of values for the Yen based on purchasing power. The Banks will
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