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740.00119 P.W./9-2644 Memorandum by the Chief of the Division of British Commonwealth

Affairs (Hickerson) to Admiral William D. Leahy, Chief of Staff to the Commander-in-Chief of the United States Army and Navy

WASHINGTON, October 10, 1944. The Department's memorandum of October 3, 1944 69 transmitted for the information of the United States Joint Chiefs of Staff certain papers concerning a Japanese peace feeler received by the British Government through the Swedish Government.

Word has now been received from the British Government that the British Minister at Stockholm was instructed on September 29 to advise the Swedish Minister for Foreign Affairs that the British Government was not prepared to return any reply to indirect approaches by the Japanese Government. On the same day the British Minister at Moscow was instructed to inform the Soviet Government confidentially of the information received from the Swedish Foreign Minister and of the British reply.

On October 1 the Secretary General of the Swedish Foreign Office advised the British Minister in Stockholm that he would telegraph the Swedish Minister in Tokyo that it was known from experience that the British Government would not answer such indirect approaches and that the Swedish Government had therefore thought it useless to pass on the message to the British Government. The Secretary General also stated that a new telegram had been received from the Swedish Minister in Tokyo stating that he had been advised that the Japanese Foreign Minister was himself preparing to approach the British Government.

J[OHN] D. H[ICKERSON]

POSTWAR POLICY PLANNING IN REGARD TO JAPAN AND AREAS

UNDER JAPANESE CONTROL "

890.0146/12-1043 Memorandum of Conversation, Prepared in the Department of State

[WASHINGTON,] December 10, 1943. Participants: Members from PS and ES 71

Officers from the Naval Office of Occupied Territories. The meeting was requested for the purpose of exploring the possibility of a continuing exchange of views concerning the military government to be exercised by the Navy in the islands of the Central Pacific, particularly the Marshall Islands.72 We were informed that by agreement with the War Department, on the one hand, and with the British on the other hand, military government in the occupied islands of the Central Pacific theatre is to be exclusively in the hands of the United States Navy. A special agreement has been made concerning the Gilbert Islands, by which the British accept the position that their military governors in those islands should be responsible to the United States commander in the Central Pacific Theatre, until the "American forces move westward”.

69 Not printed.

70 For other material, see Department of State Publication No. 3580 (General Foreign Policy Series 15): Postwar Foreign Policy Preparation, 1939–1945 (Washington, Government Printing Office, 1950).

"1 Divisions of Political Studies and of Economic Studies.

The naval officers wished to be certain that the measures of military government which they are planning will conform to the policy of the Department of State as to the future political status of the islands. They said that they would, for example, be greatly assisted in planning measures of military government if they could be informed as to the views of the Department with regard to such matters as repatriation of Japanese, possible confiscation of Japanese investments, obligations arising from the mandate status. They seemed perplexed and somewhat disappointed at our inability to supply them with information as to the policy of the Department.

Commander Shears stated that the Dutch had expressed a desire to have Soerabaya be made an international base.

890.0146/12-1443 The Adviser on Liberated Areas for the Far East (Moffat) to the Di

rector of the Civil Affairs Division, War Department (Hilldring)

WASHINGTON, December 14, 1943. MY DEAR GENERAL HILLDRING: I think it would be very helpful to the State Department and to the Civil Affairs Division if the Adviser on Liberated Areas for the Far East would participate, if only as an observer, in the planning of military government in Japan and other Far Eastern areas. The military were in North Africa and in Sicily before any particular machinery was devised by the State Department for coordinating State Department policies with the work of CAD. As a result the State Department failed to keep abreast of the problems on which its policy recommendations were desired by you. This serious lag arising from lack of coordination from the beginning could, I believe, be avoided in the case of the Far East by such cooperation as I have suggested. I would be very happy to meet with you or with any officers whom you care to designate to discuss the matter further if, as I hope, this suggestion appeals to you.73 Sincerely yours,

2 On January 31, 1944, Admiral Chester W. Nimitz, Commander in Chief, Pacific Ocean Areas, established the first military government under exclusive authority of the United States in the Marshall Islands.

ABBOT L. MOFFAT

890.0146/3

The Navy Department to the Department of State 74

[WASHINGTON,] 23 December, 1943. PROPOSED FINANCIAL DIRECTIVE FOR THE JAPANESE MANDATED ISLANDS

IN THE CENTRAL PACIFIC Finance

1. The currency to be used in the Japanese Mandated Islands during the period of occupation will be U.S. dollar notes overprinted "Hawaii”, hereinafter referred to as H dollars, and regular U. S. coins. As soon as practicable after the occupation of any area a proclamation will be issued declaring the H dollar legal tender in that area.

2. The present rate of exchange between the H dollar and any Japanese yen currency will be one H dollar for 20 yen. Transactions at any other rate will be prohibited under penalty applying both to the local population and to the personnel of the Armed Forces.

3. All foreign financial and foreign trade transactions and all exports and imports of currency will be prohibited, except as permitted under regulations issued by the area commander. Safeguards similar to those now imposed in Hawaii will be imposed in order to minimize the exportation of H dollars to any area other than Hawaii.

4. All postal savings accounts or other accounts held in financial institutions will be blocked and will remain subject to the control of the area commander. Withdrawals from any such accounts will be effected in dollars at the decreed rate of exchange. Within specified limits individuals may be permitted to withdraw amounts from their blocked accounts for ordinary living expenses. Business enterprises may be permitted at the discretion of the area commander to use their funds for normal local operations. The program will be administered in a flexible manner so as not to interfere with the restoration of financial and commercial activities approved by the area commander.

5. Accounts and other assets held by, or on behalf of, the following persons will for purposes of safeguarding, pending determination of future disposition, be impounded and dealt with subject only to instructions issued by an Enemy Property Custodian appointed by the area commander:

73 Capt. Wilbur L. Williams of the Civil Affairs Division was designated by Maj. Gen. Hilldring to maintain liaison with Mr. Moffat.

7 Handed by a member of the Occupied Areas Section of the Office of Naval Operations to the Chief of the Division of Far Eastern Affairs (Ballantine) on December 23, 1943. Mr. Ballantine consulted other officers of the Department and then replied that the Department perceived no objection to the contents of the directive. It was sent on December 28 to the Commander in Chief, Pacific Ocean Areas (Nimitz) by the Chief of Naval Operations (King).

(a) Individuals who are not allowed personal freedom, including internees and prisoners of war, and business enterprises owned or controlled by such individuals,

(6) Persons resident in enemy or enemy-occupied territory and enemy agencies or organizations,

(c) Other absentee owners and holders.

(d) Business enterprises controlled directly or indirectly by the enemy, or acting directly or indirectly for the benefit of the enemy.

6. As soon as practicable all Japanese (yen) currency will be withdrawn from circulation in the following manner:

(a) At the earliest moment, but under no conditions later than 90 days after occupation of an area, all Japanese military scrip or other yen currency within the area will be surrendered. A proclamation to this effect will be issued immediately upon occupation of the area setting forth, among other items, the manner and place of surrender.

(6) For the yen currency surrendered on or before the date speci. fied in the proclamation H dollars will be given at the decreed rate of exchange in an amount decided by the area commander, but in no event to exceed fifty dollars (1000 yen) to an individual. All yen currency surrendered by an individual in excess of the aforesaid maximum will be deposited to a postal savings account, or to an account in any other financial institution, which accounts will be blocked in accordance with the provisions of paragraph 4 above.

(c) If the initial supply of available U.S. coins is insufficient, a proclamation may be issued to authorize temporary local use beyond the date specified of Japanese yen currency in denominations of less than 20 yen. All Japanese currency in denominations of 20 yen and over will be declared not to be legal tender after the date specified, and may be accepted thereafter only under express approval of an authorized officer who should satisfy himself as to the source of the funds or the inability of the applicant to have surrendered the currency prior to the date specified. As soon as practicable all yen currency will be removed from circulation.

7. The military authorities will have the authority to maintain existing tax law to the extent desirable and to raise such contributions for the administration of the islands as are consistent with international custom and usage. Accordingly new taxes may be imposed and old taxes modified when deemed necessary by the military authorities.

8. None of the tax receipts or other revenues will be used for the payment of principal or interest on Japanese Government obligations.

9. The area commander may set up such safeguards and penalties as he may deem advisable to carry out these provisions.

10. Appropriate records will be kept of all financial transactions. 890.0146/6 Major General J. H. Hilldring and Captain H. L. Pence to the

Director of the Office of European Affairs (Dunn)

WASHINGTON, 18 February, 1944. DEAR MR. DUNN: Pursuant to our recent discussions, there is transmitted herewith an inclosure enumerating some of the fundamental questions which confront us in the planning, training and organization for civil affairs administration in Japan Proper, the Mandated Islands, and the countries occupied by Japan. It is requested that we be furnished with the recommendations and advice of the State Department for consideration in connection with our future planning for such civil affairs administration. The inclosed memorandum is not to be considered as embracing all the questions which are or may become inherent in the future occupation of Japan.

It is recognized that the State Department cannot at this time answer all questions posed in the memorandum. It will be appreciated, however, if the State Department will furnish these offices with its advice seriatim as the answers thereto become fully or partially available. It will also be of invaluable aid to us if the State Department will from time to time transmit such additional information or policy advice as may be indicated in its continuing or progressive consideration of these or any other questions of which the State Department will be cognizant. Sincerely,

J. H. HILLDRING

Major General, USA
Director, Civil Affairs Division

H. L. PENCE
Captain, USN

Officer-in-Charge
Occupied Areas Section

[Enclosure]

Memorandum Prepared in the War and Navy Departments

WASHINGTON, 18 February, 1944.

PRELIMINARY POLITICAL AND POLICY QUESTIONS BEARING ON CIVIL

AFFAIRS PLANNING FOR THE FAR EAST AND PACIFIC AREAS 1. The War and Navy Departments are engaged in the planning, training, and organization for civil affairs administration in Japan and its possessions or occupied lands. The advice and recommendations of the State Department will be of invaluable aid in the formu

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