TNAG-2400-FCO40-3487-Political-relations-between-Hong-Kong-and-Japan-1992 — Page 38

Mr

Sherrington

FED

JAPAN

1.

OCCUPATION “CURRENCY IN HONG KONG

Mr. Rooney

was the reply to her.

2

Ng You- King oven set from Lord Cantrela? may be the papert please? 12/

Hong Kongs Deputy Political Adviser, Mr Bradley, in his teleletter to you of 2 April about his meeting with Yoshito Sengoku (a Japanese Dietman), asked for Research Department to look into the post-war handling of Japanese occupation currency in Hong Kong. I give an chronological background to this issue below.

of in

2. Mr Bradley told Sengoku of the British policy of demonetize or give no value to the military yen. This was a deliberate decision made when consideration was given to the re-establishment British administration in Japanese-occupied territories South-East Asia and the Far East. I believe that there were precedents for the demonetization of the losing side's currency: by the Union after the American Civil War, by the Japanese in parts of China in the 1930s, and by the Allies in Germany in 1945. The reasons for adoption of this policy against Japan were that:

The

i. Giving any value to Japanese currency would expose British currency to heavy inflationary pressures as very large amounts of currency had been put into circulation by the Japanese. If the currency was recognised and the re-occupation was gradual, the Japanese would have been able to pump still more money into circulation to increase these inflationary pressures. The Japanese might also have used their own currency to encourage fifth column activity in re-occupied areas.

even

ii. Non-recognition would discredit Japanese currency, in areas still occupied by the Japanese, as doubts arose about how long Japan would be able to maintain its control.

iii. Large

accumulations of this currency would mainly be a result of either profiteeering or collaboration.

The poorer inhabitants, as their turnover of cash was rapid, would be unlikely to hold much.

policy was accepted and enforced, in most places, with little difficulty.

3.

Borneo.

The need for such a policy was very evident in Burma and In Burma, which had 335 million rupees in circulation under British rule, the Japanese were circulating 2,310

2,310 million rupees and this rose by another 3,000 million rupees towards the end of the war. The Central Bank's holdings of 85 million rupees were stolen between Japan's withdrawal from Rangoon and the entry of Allied forces. In Borneo, 80% of the currency issued by the Japanese represented spoliation (i.e. issue of unbacked notes in payment for requirements of Japanese authorities rather than normal replacement of old notes or expansion of circulation for legitimate purposes).

4.

In Hong Kong, even before the Japanese surrender, the nucleus of a British administration had smuggled a message out of Hong Kong