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APPENDIX TO ANNEX II

347

The background to Japan's present policy of expansion southwards is:-

1.

(a) her desire to dominate "greater East Asia" for

political, economic and strategic reasons;

(b) the failure of her adventure in China which has

now been publicly admitted by Prince Konoye.

Events in Europe have now encouraged Japan to advance south- wards In recent months moreover her relationship with Germany has undergone a change. We believe that Japan now considers that for Germany to lose the war would be a disaster for Japan, and that her partnership in the Axis has accordingly become increasingly intimate.

2.

Japan's policy of gradual penetration southwards has now reached a stage where she appears to have decided that, whether the process involves her in the risk of war or not, it must continue. The following indications, among others, taken together, have convinced us that she has now decided on a major move timed to take place in the near future.

(a) The close relationship which is developing between

Japan and the Axis leads us to believe that the Axis may be arranging with Japan to involve us in trouble in the Far East at the same time as preparations for an offensive in Europe are being

made.

(b) Information has been received that in all Japanese

lines sailings are being cancelled, and the Government is commandeering ships. Although it has proved impossible to obtain any confirmation, this information comes from a very reliable source and is of such significance that it must be given very serious consideration.

+

A

(c) We have received reports of the delivery of large

quantities of war material to Thailand, and of the conclusion of contracts for large additional deliveries.

(d) A telephone conversation has been intercepted between

two imporant Japanese at Sourabaya (Java) to the effect that a move against the Netherlands East Indies was imminent.

(e) A special course in the Malay language has been

started in Japan; a naval officer has informet students that they must study with special al as "time was very short",

(f) Telegram No.18 from H.M. Consul-General at Haiphong

reports that a Japanese expeditionary force is being organised at Formosa and Hainan totalling 100,000 troops of all arms.

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