adverse effect of this situation on American import trade but with the impairment of the Chinese Government's income from customs revenue which impairment tends to jeopardize the capacity of the Chinese Government to meet its outstanding financial obligations to American citizens.

3. In the light of the facts that this Government has received from no government an official request that this Government approach other governments with a view to the making by them of representations in Tokyo on this subject and that this Government has made no such approach to any other government, it seems advisable to the Department that you not make such an approach to the German Government.

4. Please continue to keep Department informed by telegraph of developments.

HULL

693.94244/39: Telegram

The Ambassador in China (Johnson) to the Secretary of State

PEIPING, May 29, 1936-5 p. m. [Received 7:12 p. m.]

268. Embassy's 265, May 28, 4 p. m.1

1. There is no evidence that measures of the National Government are effecting any decrease of smuggling in North China. According to a Reuter report which is said by the Consulate General at Tientsin to be correct, 150 Koreans ejected Chinese passengers from several third class coaches of a train of the Tientsin-Pukow Railway on May 27 at Tientsin and themselves entered the coaches with 552 bales of smuggled rayon which they carried as personal baggage. This action was presumably taken to avoid possibility of difficulties from lack of customs documents covering goods shipped by rail out of Tientsin. Japanese police on the scene made no effort to interfere. The Japanese authorities in North China apparently have no intention of rendering that assistance which is necessary for effectively checking smuggling by Japanese nationals. Nor can it be anticipated that railway officials at Tientsin will cooperate with other Chinese authorities in attempting to prevent smuggling.

The local Japanese Assistant Military Attaché informed the press this morning in reply to a quotation [question?] that the Japanese are not pressing Sung Che Yuan to establish a customs service independent of Nanking.

By mail to Tokyo.

1Not printed.

JOHNSON

761.94/905

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

No. 1866

TOKYO, May 29, 1936. [Received June 15.]

SIR: I have the honor to submit the following reviews of developments affecting Soviet-Japanese relations that have occurred since the Embassy's despatch No. 1831 of May 13, 1936.2 There is appended hereto an annex 2 containing comments taken from the press and other sources relating to the chronology of events given in the despatch.

The only new developments of note affecting Soviet-Japanese relations during the period May 13, the date of the last report, to May 27, were the provisional fisheries agreement, the arrival of the first increase in the Japanese Army Garrison in Manchuria and North China, the Anglo-Soviet naval conversations, and the protests over the arrest of the Japanese employees of the Soviet Embassy. The two minor border incidents that took place were apparently not considered developments calculated to cause concern to either Government. The final sessions of the Diet still occupied almost the entire attention of both the press and the public, and those sessions were concerned for the most part with internal affairs.

THE BORDER PROBLEMS

It was reported on May 13 that a clash occurred between Soviet and "Manchukuo" forces at Wuchaiatzu near Changlingtzu when a Soviet patrol crossed the frontier and was fired upon by "Manchukuo❞ guards after ineffectually warning the Soviet troops to return. The Soviet soldiers were driven back but they returned later with reinforcements and both sides took up strong positions some 500 meters apart. The casualties reported were slight but the Kwantung Army, it is understood, plans to lodge a protest with the Soviet authorities. The news report blames the lack of border demarcation for this latest clash.

The Foreign Office at Hsinking according to the press plans to lodge a protest with the Outer Mongolian Government because of the landing in "Manchukuo" territory on May 8 of an Outer Mongolian plane. The occupants of the plane are understood to have questioned the local inhabitants regarding conditions in that vicinity and subsequently to have flown back to their own territory.

The concentration of Soviet troops along the "Manchukuo" border has finally brought about an increase in the Kwantung Army's strength. Army headquarters in Tokyo have already agreed to an

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eventual increase and in addition the Kwantung Army has decided at a conference on May 16 on a special program to expand its air forces. Lieutenant General Itagaki recently returned to Hsinking after a conference in Tokyo and apparently brought word that the necessary reinforcements would be forthcoming. According to the press there is to be a fundamental change in the Kwantung Army. Instead of the present system of replacing Japanese troops stationed in Manchuria with others from Japan there is to be developed a standing army in Manchuria which will not be subject to frequent change. It is understood that the First Regiment which has just left for Manchuria will not replace other troops. The Lieutenant General it is understood reported to Kwantung Army headquarters that the Japanese nation is more keenly concerned over the frontier question than he had anticipated. Another despatch on May 15 reported that Soviet troops along the border were being continually reinforced, apparently in preparation for any emergency, and it was indicated that, therefore, immediate reinforcement of Japanese "Manchukuo" strength is necessary.

Very little progress has been made toward the establishment of the proposed border commissions. Although both nations have agreed in principle on the establishment of commissions to settle the poorly marked section of the eastern "Manchukuo" border, the Soviet Government still advances its proposal for a second general commission for settling border disputes and frontier lines along the entire 4300 kilometers of Soviet Outer Mongolian border. It is reported that during a call on the Foreign Minister Ambassador Yureneff was requested to explain the difference between the special and general commissions for settlement of border disputes called for in the Soviet proposal. The Ambassador explained that his Government desired the establishment of a general commission to deal with all border questions while the special commission would attempt to settle border questions and define the frontier along that part of the eastern frontier specified in the Japanese proposal. The Foreign Minister informed him, according to the report, that the proposal for a general commission was premature and that the Japanese Government was interested first in settling the eastern border problems. During his call the Ambassador also lodged a protest regarding the suspension by the "Manchukuo" Government of retirement payments to former Soviet employees of the Chinese Eastern Railway. It was also reported that he mentioned the recent clash on the border at Wuchaiatzu.

FISHERIES CONTROVERSY

According to the last report the Japanese Ambassador to Moscow succeeded in negotiating a provisional extension to the existing fish

eries treaty with the Soviet Government on May 25. The treaty was due to expire on May 27 and as prophesied the extension provided for the continuance of that treaty only until the end of the present calendar year in order to cover the fishing season which has already commenced. A copy of the official English text of the Protocol issued by the Japanese Foreign Office together with a translation of the promulgation order in the Official Gazette of May 28 is enclosed.3 GENERAL RELATIONS

Colonel Hikosaburo Hata who has recently returned after two years at Moscow to head the War Office Press Section, is understood to have reported that Soviet Government Officials are skeptical of Japan's soi-disant Continental policy, believing it one of further aggression. He spoke of the rapid military progress in Russia, construction of many machines and airplanes, but did not believe that the effectiveness of Soviet forces should cause apprehension because their rapidly-built equipment, particularly aircraft, was poorly constructed. He is reported to have said that the USSR is deeply concerned over the Polish and German frontiers as well as over the Soviet and Outer Mongolian borders of "Manchukuo". The frequent clashes along the latter two frontiers he stated, have been worrying Soviet Officials.

On May 19 a press report published what are said to be the Foreign Minister's instructions to Mr. Yoshida, the new Ambassador to London. According to the report the Foreign Minister stated that close understanding with Great Britain is a vital factor in the successful pursuance of Japan's Continental policy in view of the fact that a rapprochement between Britain and Soviet Russia would constitute a major obstacle to Japan's plans. He stated that the positive nature of the Soviet Far Eastern policy has caused Japan to desire a readjustment of relations with the USSR and that because of the reported Anglo-Soviet conversations on naval questions it was of great importance that Great Britain understand and sympathize with Japan's aims on the Continent. Ambassador Yoshida will endeavor to convince the British Government that Japan and Britain can pursue their Far Eastern policies amicably, each respecting the others' rights and interests. It is understood that he will also point out to the British Government that Soviet propaganda against Japan, issued in connection with the USSR's entry into the League of Nations, is detrimental to Anglo-Japanese relations and therefore Great Britain must aid Japan in presenting its true Continental policy to the world.

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The Japanese employees of the Soviet Embassy in Tokyo who were arrested some time ago on espionage charges have not yet been released. The Soviet Vice Foreign Commissar according to the press protested to the Japanese Ambassador against the "persecution" of those employees and stated that the campaign in the Japanese press has been giving the Embassy a bad name and hindering its work of improving relations. Mr. Stomoniakov insisted that the arrested translators were merely doing their legitimate work and that espionage charges are entirely false. It was understood on the 24th that Japan would file a counter protest with the Soviet Government pointing out instances of anti-Japanese propaganda, that the Soviet Embassy's employees were arrested in accordance with domestic law, that the Soviet protest is interference in Japan's domestic administration, and that the newspapers are not conducting an anti-Soviet campaign but are merely reporting the facts. The press stated that the counter protest will shortly be delivered by the Japanese Ambassador, and will also include a protest against the statements in Soviet newspapers attacking Japanese policies in alleging Japan is even threatening British and American territories.

The local press has been very full of news regarding the AngloSoviet naval talks and Japanese navy circles are reported to be keenly interested in the alleged Soviet plan of increasing its submarine strength to between 70 and 80 vessels. It appears to be the belief in Tokyo that the USSR will not agree with Britain to weaken its naval forces in the Far East as that would give the Japanese navy a dangerous superiority.

Japan has decided definitely to increase its military forces in both North China and Manchuria in order not only to hasten elimination of bandits but also to provide better protection to the borders of "Manchukuo". As reported by telegraph it is understood that the North China Garrison will be increased to more than 4500 men. It is not known thus far how many additional troops will be added to the Kwantung Army Garrison in Manchuria but it is understood that steady additions over a period of time will be made.

During the period under review very little attention was paid to Soviet-Japanese relations in the Diet, inasmuch as no new incident had occurred to increase friction and negotiations regarding existing questions were progressing as well as could be expected.

Respectfully yours,

JOSEPH C. GREW

*Embassy's telegram No. 111, May 23, 11 a. m. [Footnote in the original.]