FO371-24687 — Page 28

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Decypher.

Sir R. Craigie,

D.

R.

11.20 a.m. 9.50 a.m.

No. 992.

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3239

178/10

A

14

LIMITED DISTRIBUTION.317

(Tokyo).

13th June, 1940. 13th June, 1940. 13th June, 1940.

Very Confidential.

In course of a private talk recently the Vice Minister for Foreign Affairs mentioned that he was more and more convinced that, in the general interest, steps should be taken to prevent friction between countries primarily concerned in the Chinese currency question and to [grp. undec.] any serious decline in value of Fapi. He believed that influential circles in Japanese Army were also coming round to this view. Difficulty was to decide what these steps should be and he shared my view that any attempt by Japan to establish a separate currency could only lead to chaos and political friction with British, United States and French Governments. In the circumstances he had been wondering whether the matter might not be discussed in a purely private, informal and non-committal way between technical representatives in Shanghai of Japanese, British, American and French Governments. felt however that, in view of the prejudice in Japan against Fapi as a currency it would be difficult for him to initiate any such proposal.

He

2. I said that His Majesty's Government remained convinced of the importance of maintaining value of the Fapi but that, in the present circumstances, they were naturally not in a position to initiate new measures as effectively as they had done previously. Personally however I liked the Vice Minister for Foreign Affairs' suggestion and I enquired whether any non-Japanese initiative in this sense would meet with Japanese acceptance. Vice Minister for Foreign Affairs replied that until the matter had been carried further he could not give me an assurance to that effect and I made it clear to him that His Majesty's Government for their part might well feel that any initiative should in the present circumstances be taken by some other country.

3. In view of the difficult situation which is bound to arise in Shanghai as a result of Italy's entry into the war, I consider it most desirable to reach some working arrangement (of however limited scope) with Japanese on currency questions if this is at all possible. Should such unofficial

conversations take place in Shanghai it would of course be necessary for the matter to be discussed simultaneously with the Chinese Government.

4. I should therefore be glad to know whether I should encourage Vice Minister for Foreign Affairs to continue to think along these lines. We have here a chance to obtain examination

of/

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