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ment under which Nanking and Tsingtao are relieved of the vice of the Government opium monopoly. The present tense political situation is imposing other and heavy burdens on this and other offices in China; but if the situation returns to normal I propose to make inquiry into the matter through the Embassy at Nanking and the Consulate at Tsingtao.

So far as concerns this Consulate General, I may say that I have emphasized to the Chairman of the Council and also to the Secretary General, that any proposed agreement with the Chinese authorities providing for cooperation in the enforcement of the opium suppression regulations in the International Settlement at Shanghai must be submitted by the Council to the interested treaty power Consuls, and I have made it plain that I am opposed to any scheme of cooperation which would introduce the gangster-ridden opium "suppression" organization of the Chinese areas into the Settlement area. I am satisfied that I would have substantial support for such opposition in the Consular Body.

The question, however, is not a simple one for the Settlement. It must be remembered that the Chinese courts have jurisdiction over Chinese and non-extraterritorial foreigners in the Settlement. Those courts will not punish Chinese or others transporting or carrying opium if they have licenses or permits from the Chinese opium suppression authorities. Further, Chinese and others sentenced for offenses in the Settlement against the opium and narcotic laws and regulations are imprisoned in the municipal gaol, which is already overcrowded. The cost of maintaining persons serving sentences in that gaol falls on the International Settlement. As I stated in my despatch No. 887 of July 6, 1937, to the Department,55 the Ward Road Gaol of the Municipal Council was constructed to accommodate about 4,000 prisoners; there were some 6,000 prisoners in the gaol on May 31, 1937; of this total over 2,000 were serving sentences—and usually heavy sentences-in connection with opium and narcotic offenses. If this is the situation under normal conditions, before arrangements have been made to enforce Chinese regulations in the Settlement, one can understand how difficult the position would be if additional measures were taken in accordance with detailed Chinese regulations properly enforced.

This matter of the opium suppression regulations in China has, of course, been put aside by the Chinese and other authorities during the present emergency and crisis in China. But if there is a return to normal conditions the subject will certainly be revived.

The Department will be kept informed of developments.
Respectfully yours,

C. E. GAUSS

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JAPAN

POLITICAL DEVELOPMENTS IN JAPAN; PRESSURE UPON CABINET

BY JAPANESE ARMY

1

894.00/676 : Telegram

The Ambassador in Japan (Grew) to the Secretary of State

Tokyo, January 22, 1937–6 p. m.

[Received January 22—9:30 a. m.] 13. 1. Owing to the strong opposition to the Cabinet displayed in the Diet and especially to the conflict between the army and the political parties culminating yesterday in battle of words between Hamada of the Seiyukai and Terauchi, Minister for War, the Diet was last night prorogued for 2 days in order to give the Government an opportunity to deal with the situation. It does not appear possible that the political parties will yield to or cooperate with the Cabinet and consequently the only courses of action left to the Cabinet are to resign or to dissolve the lower house of the Diet upon its reconvening and to call for a general election. The army is reported to be pressing for dissolution and the Asahi this afternoon reported that the Cabinet this morning decided upon this course and is now awaiting some move by the political parties.

2. The opposition of the political parties to the army and its policies appears to be the principal cause of the present conflict between the Diet and the Cabinet. In a release at midnight immediately following the proroguing of the Diet the War Office took up the issue in a spirited political statement the tenor of which is that the political parties, although crying for reform, are not alive to the reform needs which have been evident since the incident of February 26, 1936 ? and that it is imperative that the people unite at the present time in a positive nationalistic policy of which the political parties are incapable. The army reiterates the necessity of parliamentary reform, clarification of the national policy, national defense and stabilization of the peoples' livelihood and again emphasizes “the present international crisis”.

3. It appears to the Embassy that the decision of the Hirota : Cabinet to dissolve the House of Representatives is a threat for use

2

For previous correspondence, see Foreign Relations, 1936, vol. IV, pp. 706 ff. See ibid., pp. 719-781, passim. * Koki Hirota, Japanese Prime Minister.

against the political parties in negotiations today and tomorrow. Hirota probably hopes that the parties will prefer his Government to a general election. The army seems confident that a general election would show that recent opposition to the Government emanates from the political parties and not from the people. In the opinion of the Embassy that opposition is widespread but on the other hand the party unity necessary to take advantage of the opportunity is not yet evident. A newly elected House without absolute majority in any one party would probably leave the formation of the Cabinet largely within the control of the military without much fundamental change from the present.

4. Effort at further interpretation would be premature at the present time.

GREW

894.00/678: Telegram

The Ambassador in Japan (Grew) to the Secretary of State

TOKYO, January 23, 1937–6 p. m.

[Received January 23–7:09 a. m.] 21. Embassy's 16, January 23, 1 a. m. Hirota presented collective resignation of the Cabinet to the Emperor this afternoon but not yet accepted. Resignation was due to the War Minister's refusal to accept any form of compromise with the political parties. Successor to Hirota uncertain but Ugaki 6 prominently mentioned. Comments later. Repeated to Nanking.

GREW

894.00/682: Telegram

The Ambassador in Japan (Grew) to the Secretary of State

Tokyo, January 27, 1937—6 p. m.

[Received January 27–7:45 a. m.] 30. Embassy's 29, January 26, 11 p. m.,' first alternative.

1. Ugaki this morning conferred at the Palace with Yuasa, Lord Keeper of the Privy Seal, for over an hour and on his return announced that he would continue his endeavor to form a Cabinet. It appears that the Court is displeased with the army's effort to block Ugaki and desires reconsideration.

6

5 Not printed.
Gen. Kazushige Ugaki, formerly Japanese Governor General of Korea.

2. In the present Cabinet crisis an air of tension among high Japanese convinces the Embassy that there is in process a more determined effort to resist political dictation by the army than has been attempted in the last 15 years. Repeated to Nanking.

GREW

894.00/684 : Telegram

The Ambassador in Japan (Grew) to the Secretary of State

Tokyo, January 29, 1937—5 p. m.

[Received January 29—9:15 a. m.] 33. Embassy's 30, January 27, 6 p. m.

1. Ugaki this noon reported to the Throne his inability to form a Cabinet. Speculation in regard to the next person to be commanded to form a Cabinet now places Baron Hiranuma? (who is believed to have fascist leanings) in the lead and Admiral Osumi 8 next.

2. Before proceeding to the Palace this noon Ugaki released to the press his note of resignation from the position of General on the retired list. This was supplemented by note from his principal lieutenant, General Hayashi, retired. Both notes severely criticised army interference in politics. A press ban was placed on the notes before they were published in Japan but the Embassy is informed that Fleisher succeeded in telephoning the complete texts to the Herald Tribune. Repeated to Nanking.

GREW

894.00/686 : Telegram

The Ambassador in Japan (Grew) to the Secretary of State

TOKYO, January 30, 1937–5 p. m.

[Received January 30–11:20 a. m.] 34. Embassy's 33, January 29, 5 p. m.

1. Last night Hiranuma was invited to form a Cabinet but declined. General Senjuro Hayashi, retired former Minister of War, was then selected. As it is generally conceded that he has the support of a large part of the army it is believed that he will experience little difficulty in forming a Cabinet.

' President of the Japanese Privy Council. 8 Formerly Japanese Navy Minister. Wilfred Fleisher, Tokyo correspondent of the New York Herald Tribune.

2. General Hayashi is a soldier and not a politician but is not associated with the more radical element in the army. He is cautious and moderate, believes in discipline in the army and is opposed to the participation of the army in politics (see Embassy's despatch No. 1414, July 26, 1935 10). It is believed that he was selected to form a Cabinet because he will be able to control the army and through moderation to minimize friction between the army and the Government.

3. It is the general consensus of opinion here nomination of Hayashi means a victory for the military. The Hayashi Cabinet, if formed, will be more military and more progressive in character than was the Hirota Cabinet. Some observers say that it will have an entirely military complexion. It will have no strong connection with the political parties and will be devoted to administrative reform rather than to the maintenance of the status quo in government. Because of its military complexion it is expected that it will accept the entire army program including plans of national defense, strengthening of the Japanese-Manchukuo defense and economic bloc and development of Japan's continental policy.

4. The newspapers report that industrialists and financiers do not view the prospect with enthusiasm. They expect that the increased military influence in the Cabinet will result in the adoption of a moderate degree of managed economy with further control of industry in the attempt to achieve self supply and further control of monetary organs in an attempt to finance the increased budgets. Some inflation is expected and the share market rose this morning in anticipation.

5. There is no indication as yet of the attitude of the Diet toward the proposed Hayashi Cabinet. Repeated to Nanking.

GREW

894.00/688 : Telegram

The Ambassador in Japan (Grew) to the Secretary of State

TOKYO, February 2, 1937—7 p. m.

[Received February 2–10:55 a. m.] 36. Embassy's 34, January 30, 5 p. m.

1. Hayashi Cabinet installed this morning. Members are as follows: Premier (concurrently Foreign Minister and Education Minister) General Senjuro Hayashi; War, General Kotaro Nakamura; Navy, Admiral Mitsumasa Yonai; Home Affairs, Kakichi Kawarada; Finance and concurrently Overseas Affairs, Toyotaro Yuki; Justice, Suyehiko Shiono; Agriculture and Forestry and concurrently Com

10 Not printed.

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