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as a result of negotiations conducted in the course of the visit, agreement had been reached regarding recognition of Manchukuo by Portugal, a trade agreement, co-operation by Macao with the Japanese, and other points. It was pointed out, however, that, as Portugal maintains a legation in Tokyo, it was hardly probable that negotiations on questions of such political importance would be conducted by the process of sending a subordinate Macao official to Tokyo.
91. Navy. On the 7th March the Minister of Marine announced a new naval replenishment plan, to cost nearly 1,700 million yen, including 1,205 million yen for construction, expenditure on construction to be spread over six years.
United Kingdom.
92. Chinese Currency Stabilisation Fund. The Chancellor of the Exchequer announced in the House of Commons on the 8th March that a fund of £10 million had been organised for the purpose of maintaining the stability of the Chinese national currency. Of this sum, £5 million had been subscribed by Chinese banks and £5 million by the Hong Kong and Shanghai Bank and the Chartered Bank, with a Treasury guarantee against loss. The management of the fund was to be entrusted to a committee consisting of two representatives of the British banks, two representatives of the Chinese banks and a chairman; Mr. Cyril Rogers, of the Bank of England, has been chosen for the latter function, with the agreement of both His Majesty's Government and the Chinese Government.
93. On the 10th March the spokesman of the Japanese Ministry for Foreign Affairs stated that British policy, as exemplified by the establishment of the fund, was plainly against the general trend of developments in East Asia. He added that the amount was not sufficient to save the Chinese currency from the doom which awaited it anyway,
94. His Majesty's Ambassador had informed the Vice-Minister for Foreign Affairs in advance of the intended establishment of the fund and pointed out that a collapse of the Chinese currency would lead to financial and commercial chaos, and that the existence of the fund would benefit not only British but also other foreign interests, including Japanese. Mr. Sawada appeared to think that there was no present danger to the Chinese currency and that the amount subscribed was rather excessive.
95. The Japanese press reactions were somewhat contradictory as far as the financial aspect of the measure was concerned, but, in general, they attacked the action of His Majesty's Government as one more instance of the British determination to help Chiang Kai-shek and to seek vainly to uphold the former British position in the Far East.
China
96. General. On the 10th March it was announced officially that the Asia Development Council had established liaison offices at Peking, Kalgan, Shanghai, Amoy and Tsingtao.
97. Shanghai-Discussion of the question of the suppression of terrorism in the Shanghai International Settlement was continued between the Shanghai Municipal Council and the Japanese authorities and an agreement was reached on the 3rd March. Briefly, the agreement provided for stricter enforcement of anti-terrorist measures by the municipal police and, in particular, for the intensification of the searching of suspects both in the settlement and entering and leaving it, and also for even closer co-operation with the Japanese police force. The council rejected any suggestion which would permit any police organ other than its own to act independently in the settlement.
98. An assassination occurred in Yangtzepoo (Japanese-controlled district) on the 28th March. There was also a serious fire in the Japanese area on the 25th March, in which the warehouse of the Nippon Yusen Kaisha and the Japanese Consulate-General were burnt down.
99. Tientsin.-The situation of the British and French Concessions in Tientsin continued to grow worse during the month of March. The Japanese authorities complained that terrorist organisations were allowed to flourish within the concessions, and took various measures such as the erection of a live-wire fence round the two concessions for the purpose of preventing the entrance and exit of unauthorised and undesirable persons. Further representations protesting against these measures and explaining the attitude adopted by the British
authorities were made by His Majesty's Ambassador on the 3rd March, but no improvement in the situation resulted.
100. On the 22nd March His Majesty's Ambassador suggested that the military attaché to His Majesty's Embassy should visit Tientsin with a view to discussing matters with the Japanese military authorities in the hope of achieving an improvement. The proposal was approved and Major-General Piggott proceeded to Tientsin on the 31st March.
101. Dyott Case. On the 17th March Mr. H. F. Dyott, chairman of the British Chamber of Commerce at Tientsin, was kidnapped by Chinese in circum stances which left no doubt of the culpable negligence and perhaps of the complicity of certain sections of the Japanese military. The co-operation of the Japanese authorities in rescuing Mr. Dyott was urgently requested, and he was ultimately handed over by Chinese bandits on the 3rd April on the payment of $50,000 ransom.
104.
The
102. Tsingtao.On the 25th March three berths in Tsingtao Harbour were opened to foreign shipping, which had previously been excluded altogether from the harbour. The concession was welcomed, but it remains to be seen whether arrangements which provide for only about 50 per cent. of the berthing require- ments of foreign shipping and for no warehouse space will work satisfactorily.
103. Yangtze. No steps were taken by the Japanese in March towards a relaxation of the restrictions on foreign shipping on the Yangtze River, Minister for Foreign Affairs stated in the Diet on the 11th March that it was Japan's intention to open the river to foreign shipping when military necessities for closure disappeared. It was impossible to say yet when this would be. The Minister of Marine endorsed this statement and added that there would be nothing against partial opening of the river after strategic exigencies were relaxed.
Trade and Exchange Control in North China. At the beginning of March the authorities in North China announced the introduction on the 11th March of a system of trade and exchange control under which exports and imports would all be subject to approval by the Federal Reserve Bank of North China and must be transacted at the rate of 1s, 2d. to the Federal Reserve dollar. Formal protests were made in Tokyo by the British, French and United States Ambassadors. Sir Robert Craigie pointed out that the general effect of the new measures would be that British merchants would be unable to engage in import and export trade except with the sanction of the local authorities, and then only if trade was financed through Federal Reserve Bank currency. The French Ambassador described the measures as "in flagrant contradiction of treaty rights, while the United States Ambassador described them as hensive discrimination against United States and other foreign countries and in favour of Japan which has yet been established in North China by Japanese authorities.'
J1
the most compre-
105. The Japanese Minister for Foreign Affairs stated in the Budget Sub- Committee of the House of Representatives on the 17th March that the Japanese Government supported the action taken by the Provisional Government in North China, which did away with discriminatory treatment of third Powers.
The Diet.
HOME AFFAIRS.
106. The Diet session came to an end on the 25th March, having completed action on all of the eighty-nine Bills presented by the Government. None of the thirty-two private members' Bills introduced was approved owing to lack of time. The proceedings were very uneventful owing to the conciliatory attitude of the Government and to the war. The session has, in fact, been described as the quietest since the introduction of parliamentary government in this country.
The Position of the Government.
107. On the opening of the session the Prime Minister's position was generally considered to be precarious, and his Government was expected to be short-lived. Through his judicious handling of the Diet, however, Baron Hiranuma has succeeded in gaining the confidence of Court circles and of the general public to an appreciable extent. Though he has always been classed as a reactionary, Baron Hiranuma's domestic policy has been more moderate up to the present than was Prince Konoye's.
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