Japanese take over in Indochina, escalating tensions

The Pittsburgh Press (July 27, 1941)

JAPAN REPORTED PRESSING THAILAND TO JOIN 'NEW ORDER’

Chungking, China, July 27 (UP) –
The Board of Military Operations released reports today asserting that Japan had demanded Thailand’s adherence to the “New Order in East Asia” and had dispatched 21 troop transports from Canton to the southwest.

The reports, which told of large-scale Japanese troop mobilizations and naval movements, said Thailand had been offered the Laos and Cambodia areas of French Indochina in return for her acceptance of the new order.

It was estimated here that 250,000 recruits and reservists were mobilized in Japan between July 7 and 18 and it was reported that Japanese forces in Manchukuo now included 70 divisions, most of them reinforcements from Korea and northern China.

The Japanese Navy was reported to have placed “obstructions” in the Tsushima Strait on the approach to the Russian Pacific port of Vladivostok. The Strait forms a seaway between the Japanese islands and Korea.

The troop transports sailed from Canton southwest, presumably toward Indochina, on July 20-21, it was said.

Three cruisers, 23 submarines and two aircraft carriers were said to have sailed from Shikoku on July 21.

Chinese quarters, meanwhile, welcomed the United States’ freezing of Japanese assets as the beginning of a “positive policy” and the end of American appeasement of Japan.

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U.S. JOINS BRITAIN IN PREPARING FOR POSSIBLE WAR WITH JAPAN

America leads Axis opponents on new economic offensive; troops on the alert

BULLETIN

Tokyo, July 27 –
The Japanese Dōmei News Agency reported today from Nanking that the government of Gen. Chiang Kai-shek had granted the United States and Great Britain permission to use Chinese air bases. The Chinese government was said to have also agreed to permit American and British officers to command some Chinese air units.

By Harrison Salisbury, United Press staff writer

The democracies prepared today for a possible military showdown with Japan in the Far East.

The United States and the British Empire were already engaged ion economic war with the nation which American and British statesmen have denounced for “aggression” against French Indochina and there were indications that a military war was nmpt considered beyond the realm of possibility.

President Roosevelt ordered Philippine troops placed under the command of the United States armed forces. American soldiers in Hawaii were placed in a “precautionary alert basis,” parachute troops from Fort Benning, Ga., were established at the Panama Canal, and streams of airplanes were en route to Manila and Singapore.

MacArthur named

General Douglas A. MacArthur, 61-year-old former Chief of Staff, today was placed in command of a new Army component to be known as the U.S. Army Forces in the Far East.

General MacArthur, who has been military adviser to the Philippine Commonwealth since 1935, will head all U.S. Army forces as well as the Philippine military groups.

MacArthur will have the rank of temporary lieutenant general.

James V. Forrestal, Under Secretary of the Navy, and Admiral John Towers of the Naval Bureau of Aeronautics were flying from San Francisco to Honolulu.

On the offensive

The anti-Axis powers were on the offensive around the world, led by American action in snapping trade ties with Japan by freezing the assets and credits of the island empire in the United States, Britain also froze Japanese credits and swung the British Dominions, India and colonies into line.

Japan replied in kind to the democracies’ freezing of Japanese assets and the Japanese Dōmei news agency hinted that Thailand, French Indochina’s neighbor, might be the next nation to be drawn into the Far Eastern crisis. The Thailand government, Dōmei said, met in emergency session to “combat Anglo-American encirclement” and gave order for its air force to “make full preparation for any eventuality.”

Demands on Thailand

In Chungking, China, the Board of Military Operations reported that Japan had demanded Thailand’s adherence to the “New Order of East Asia,” in return for which Thailand was to be given the Laos and Cambodia areas of French Indochina.

The Board of Military Operations also reported that Japan had dispatched 21 troop transports from Canton to the southwest toward Indochina on July 20-21. Three cruisers, 23 submarines and two aircraft carriers were said to have sailed from Shikoku on July 21.

In the Far East, the democracies appeared to be striking their most telling blows. The full economic power of the British Empire, covering a quarter of the globe, was directed against the Japanese along with that of the United States.

The joint action in freezing Japanese assets – and the repudiation of Japanese commercial treaties by the British – meant that Japan had lost the bulk of its export and import markets.

The Japanese, who have been obtaining much of their war materials from the United States in the last two years, described the United States’ action as “economic war” and said the future of Japanese-American relations would depend on how far the United States went in its attempts to restrict Japanese commerce.

The Yokohama Silk Exchange, hub of the island empire’s export industry, closed and cotton spinners and other textile organizations called emergency meetings to discuss how to meet the economic threat to their existence. Shares on the Tokyo Stock Exchange dropped.

Dutch consider action

Meanwhile, the Dutch government sought collective security with Britain and Australia and considered what economic action to take in connection with the Anglo-American measures.

Ther Dutch, like the British, were believed to feel that Japanese occupation of Indochina, athwart the Pacific routes to the East Indies, Australasia, the Philippines and India, was a threat to their possessions.

Meanwhile, Canada became the first nation of the British Commonwealth to act against Japanese shipping as well as freezing assets. At Vancouver, a Japanese vessel loaded with hemlock was impounded as it was about to sail.

United States Army authorities in Manila estimated that President Roosevelt’s order would add about 200,000 Filipino troops to the forces guarding the Philippines. In Washington, however, ther number of Filipino effectives was believed to be no more than 75,000.

The United States in recent months has sent many long-range bombers to both the Philippines and Singapore. The British were said to have 60,000 seasoned Australian, British and Indian troops in British Malaya plus about 60,000 Malayans.

Troops to Canal

Washington revealed that units of the newly organized U.S. parachute troops have been sent from Fort Benning, Ga., to reinforce American defenses in the Panama Canal Zone. These units are now effectively disposed to rush to the protection to any South American points in event of emergency. Additional bombardment, reconnaissance and anti-aircraft units have also been sent to the zone.

Japanese spokesmen attempted to minimize the effects of the freezing of her assets and her loss of markets upon Japan’s economy but emergency sessions were called by Japanese textile industries which fate loss of virtually all markets except the Japanese control bloc in East Asia.

Tokyo did not immediately impose on Britain the freezing restrictions ordered against the United States.

But there was no hint in Tokyo of any turning back. Japanese planes and warships prepared to move into Indochinese bases over the weekend.

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Triple blow dealt world trade –
U.S., BRITAIN SHOW JAPAN THAT THEY WON’T BE BULLIED
By Helen Kirkpatrick

London, July 26 –
Less than 48 hours after an agreement was reached between Japan and Vichy for handing over bases on Indochina, the British government issued an order freezing all Japanese credit balances, gold and securities throughout the Empire.

This measure, taken simultaneously with a similar one in the United States, is regarded here as much more than a mere warning to Japan; it is retaliatory and drastic and the British say they won’t be bullied into any form of appeasement.

A special session of Parliament yesterday heard Foreign Secretary Anthony Eden denounce Japan’s action as a potential threat to British territories and interests in the Far East, and six hours later, the British treasury announced that as from today all Japanese credits here would be blocked.

President Roosevelt’s announcement from Hyde Park Friday night and Under Secretary of State Sumner Welles’ statement on Japan’s act Thursday indicate complete unanimity of views between the U.S. and Britain. Informed quarters here leave no doubt as to the seriousness of Anglo-American intentions and the determination to make Japan’s latest expansion as costly to the Japanese as possible.

Most of Japan’s trade automatically will cease unless Washington and London indicate they are prepared to issue licenses for barter arrangements with Japan.

The Dutch government-in-exile here has given fullest approval to the “freezing” measure, which will be put into effect immediately in the Netherlands East Indies.

The effect of economic sanctions on Japan by the British Empire, the Netherlands and the United States can be appreciated when it is seen that Japan purchases 52% of her total imports from these countries and sells to them 38% of her total exports. American trade is the largest, the U.S. importing 18% of Japan’s goods and selling to her 36% of Japan’s purchases.

There is a division of opinion here on Japan’s next move. Some feel it will be the annexation of Thailand, under the guise of protecting the Thais from a threat from Burma and Malaya, while others are convinced that these drastic measures will force Japan into military action against Singapore. Reports from Tokyo speak of intense German pressure on Japan for an attack on Singapore.

It is also clear that Japanese troop concentrations on the Siberian border are larger than usual, and an attack on Russia cannot be discounted. This would come only if the German campaign against Russia succeeds, it is believed here.

The British say they will not be bullied into any form of appeasement by Japanese words or action. All necessary preparatory defense measures are being taken in Malaya and Australia.

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QUESTIONS AND ANSWERS CLARIFY U.S. FREEZING ORDER

Washington, July 26 (UP) –
Here are questions and answers on the effect of the order freezing Japanese and Chinese assets in the United States.

Will trade between the United States amd Japan be halted?

Yes, but it may be resumed in individual cases where licenses are obtained.

Who controls the issuance of the licenses?

The Treasury Department. A committeee has been established to determine questions of broad policy.

What effect will the order have on U.S.-China trade?

None, since that nation was exempted by general license.

Why were Chinese assets frozen?

Principally to keep Japan from using the assets it has obtained in the portion of China now under its control.

Why were Japanese assets frozen?

President Roosevelt explained that the United States did not want Japan to spend in the United States funds that it had obtained “by duress and cinquest” in other countries. He also wanted to shut off the supply of funds with which subversive agents and propagandists could be paid.

Will the supply of silk from Japan, used in the manufacture of women’s dresse, hosiery and other garments, be shut off?

Yes, until licenses for such imports are obtained from the Treasury Department.

Will Japan be able to obtain any more American oil?

Not unless the Treasury Department grants license for such exports from this country.

How will Japanese nationals in this country run their households, buy shoes, stockings, and other clothing?

The Treasury has issued a general license, permitting each family to spend $500 monthly.

Can Japanese firms operating in the United States obtain funds to meet their payrolls?

Treasury officials indicated that leniency would be shown in such cases and general licenses will be issued to permit payroll payments.

Will Americans transacting business with Japan or any Japanese national be required to obtain a license?

Yes. For example, if an American pays a Japanese firm for goods received, the money involved in the transaction will be placed in a “blocked” fund by the bank and can be removed only by obtaining a license.

How will the government know what assets Japan and China have in this country?

The government is underrtaking a census to determine the possession of funds that would be affected.

Will it be necessary to contact the Treasury directly to obtain a license for all types of transactions?

No. Requests for licenses in some categories may be made to the nearest Federal Reserve Bank. Some may be granted immediately, if the sum is not too great or the product is in certain categories.

Does the order permit the seizure by the United States of Japanese ships?

No, but such vessels are subjected to the Treasury’s marine control regulations and cannot sail without express permission from the Treasury.

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U.S. Department of State (July 28, 1941)

894.5151/247: Telegram

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

Tokyo, July 28, 1941 — 11 p.m.
[Received July 28 — 11:48 a.m.]

1111.

The attention of the Department is called to the fact that, whereas the American Government’s order freezing Japanese assets restricts monthly expenditures of Japanese nationals to $500, the Japanese ordinance provides for a sum of only ¥500.

GREW

810.8593/54

Memorandum by the Acting Secretary of State

Washington, July 28, 1941.

The British Ambassador called to see me this morning upon his return from two weeks in California.

The Ambassador left with me the brief memorandum attached herewith suggesting that British and U. S. authorities advise their bunkering firms on the East Coast of South America to delay the furnishing of fuel to the Japanese ships now proceeding around Cape Horn to Japan. I said that this matter would be given immediate consideration.

SUMNER WELLES


The Pittsburgh Press (July 28, 1941)

JAPAN SCOFFS AT EFFECTS OF U.S. ECONOMIC BLOWS

Tokyo, July 28 (UP) –
Near panic spread today among traders in the Tokyo Stock Exchange and the government ordered the Official Securities Co. to advance funds to support tumbling prices.

Action by the government in rushing support to the failing market quieted and fears of traders to some extent and caused prices of issues to recover between ¥5 and ¥6 (the yen has a nominal value of about 24¢).

The government support of stock exchange prices was brought into play as the Foreign Office organ, The Japan Times and Advertiser said that the way was still open to continue economic relations with the United States were it not for the American press which was said to “misprint” news of the situation.

Tokyo police ordered women to stop forming queues in front of food stores as government spokesmen announced that the American and British freezing orders would have little effect on Japan.

The Finance Ministry applied retaliatory freezing regulations to Canada and American possessions and Japan’s satellite state Manchukuo, forced out of Chinese Manchuria, froze American, British and Canadian assets in Japan.

The Privy Council approved the Japan-Indochina joint defense pact, providing for Japanese occupation of the French possession, as the retaliatory freezing regulations became effective. The pact is to become effective upon signature and will not require an exchange of ratifications.

It was only today that the Finance Ministry announced that freezing regulations had been imposed also against Great Britain and Northern Ireland. It was assumed that the freezing order had been made effective at the opening of banking hours today. American assets were frozen Saturday, effective today.

It was announced also that the Yokohama Specie Bank had instructed its agents in Batavia to negotiate a new monetary agreement with the Netherlands East Indies and that if it proved impossible to negotiate one within two weeks the existing agreement should be abrogated.

However, news reached here that the Netherlands East Indies government had already suspended its monetary agreement with Japan and had frozen Japanese assets. Newspaper headlines were such as:

N.E.I. TOO COMMENCES PRESSURE AGAINST JAPAN

They said that the Foreign Office was watching the situation closely.

Finance Ministry officials at once started an examination of assets of American banks in Japan, including the National City Bank branch here, and started a tour of other American enterprises here in an asset check-up.

Disorders reported

The Japan Times and Advertiser, subsidized by the Foreign Office, said Tokyo police had ruled that housewives must stop queueing in front of food shops because of “an outbreak of disorder among women who crowded ships” which deal in bread, vegetables and other foods of which there has been a shortage here for some time.

Special police officers, it was added, have been assigned to see that shops serve customers in such manner as to avoid crowding.

The police are also contemplating measures to halt the forming of long queues in front of beer halls in the busy centers of Tokyo, the newspaper said.

It is often necessary for correspondents to quote newspapers on some aspects of Japanese life because of the drastic Japanese State Secrets Act.

Both government spokesmen and newspapers emphasized that the American and British freezing orders would have little effect on Japan aside from causing it to speed up its southward expansion program in order to form a “greater East Asia co-prosperity sphere.”

Trade aspects

But at the same time they began to hint that Japanese-American trade, especially, need not be paralyzed by the freezing orders unless the United States so desired.

Finance Minister Masatsune Ogura said in a press statement yesterday that Japan’s balances in America were very small, that trade had been decreasing steadily in recent months, and the effect of American action would be comparatively slight.

The Finance Ministry said Japan had frozen American assets only as a retaliatory measure and the Japanese order would be applied with as much elasticity as possible, depending on the rigidity with which the United States enforced its freezing order.

The Japan Times and Advertiser, developing this theme, said that there need not be an complete cessation of Japanese-American trade if the United States chose to use “wide discretion” in licensing transactions. But, it added, the United States freezing order was an unfair, it said, because it sought to make use of assets entrusted to “its honor and care” as a weapon in an economic offensive against Japan:

…in order to enforce American foreign policy in the Western Pacific.

Why act is dangerous

The newspaper continued:

The freezing order is dangerous because it threatens to bring about wider differences between the two states and has a challenging effect. America deems itself justified in freezing Japan’s assets because of its joint defense measures with France in Indochina. That would justify this empire in freezing American assets because of United States joint defense of Canada and South America, and the freezing of assets in countries which America is jointly defending.

The Finance Ministry today listed the following American business concerns as included in its freezing regulations:

Tokyo

  • Andrews & George Co.,
  • Sakuma Industrial Co.,
  • Tokyo Otis Elevator Co.,
  • Frazar & Co.,
  • Frazar Estate Ltd.,
  • Nippon Hanovia Quartz Lamp Co.,
  • American Trading Co. of Japan Ltd.,
  • Baker Platinum Co.,
  • Lury & Co.,
  • Dai Nippon Universal Motion Picture Distribution Co.,
  • Tokyo Western Electric Co.,
  • Automatic Telephones of Japan Ltd.,
  • Japan National Cash Register Sales Ltd.,
  • Japan Cash Register Co.,
  • Japan Polyotto Co.,
  • RKO Pictures of Japan,
  • Honnovia Chemical Co.

Yokohama

  • Standard Shipping Co.,
  • Oriental Paper Bag Co.,
  • Ford Motor Co. of Japan Ltd.,
  • Ford Finance Co. of Japan Ltd.,
  • Watson Business Machines Japan Ltd.,
  • Yokohama Tansan Aerated Water Co.

Kobe

  • A. P. Munning & Co.
  • D. S. Terry, Ltd.,
  • Maxwell & Co.,
  • Merchandise Trading Co.,
  • Cox.

The nationalistic Hochi denounced American-born Japanese residents here, for speaking English in public. If these American citizens were in Japan for pleasure, the newspaper said, they should return home as soon as possible because there was no reason for their continued presence.

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JAPANESE TROOPS REPORTED LANDING IN INDOCHINA
By Kurt Steiner, United Press staff writer

Saigon, French Indochina, July 28 –
Japanese troops were reported today to be landing on the Cambodian coast in southwest Indochina, near the Thailand frontier, and an undercurrent of apprehension was noticeable there.

Small-scale runs had started in some banks here, particularly the Hong Kong-Shanghai chartered banks. The runs started upon Chinese banks Friday. As a result of the rush of depositors to withdraw funds, all banks placed an arbitrary limit on withdrawals.

The Japanese rapidly appeared to be crowding out the French in Saigon as more and more members of “Japanese military mission” poured into the city.

Hotels were packed to capacity and families of French officers were streaming in from military posts in the interior. They were forced to vacate their quarters to provide room for the Japanese.

The first military trucks rumbled through Saigon this morning and it was expected occupation of southeastern Indochina would be in full swing by tomorrow.

Japanese military authorities took over the French Chamber of Commerce, one of the finest buildings in Saigon, as the headquarters of the Japanese general occupation staff. About 200 members of the Japanese military mission are housed at the Continental Hotel.

French Indochina was now cut off from the world so far as transport went because of the suspension of the Dutch Airline to Singapore and Batavia.

The situation was delicate here and authorities took all precautions but reports that there has been incidents between Japanese and French civilians are untrue.

Commander Kanei Chudo, chief of the Japanese naval mission, said Japan was bringing its best disciplined men to Indochina and that no incidents were expected.

Asked who would settle any incidents which might arise between the Indochina and Japanese forces, Commander Chudo replied:

We will.

However, he said that incidents were most unlikely because the Japanese had come to:

…cooperate with the French against aggression.

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EAST INDIES FREEZE JAPANESE ASSETS

Batavia, Netherlands East Indies, July 28 –
The Netherlands East Indies government today froze Japanese banking assets, announced the discontinuance of foreign exchange traffic with Japan and ordered all future exports to Japan, Manchukuo, China and French Indochina subject to special government license.

Banks were forbidden to debit or credit accounts of Japanese subjects without special permit.

The government issued a decree under which the army is empowered to invoke emergency laws at any time it deems them necessary.

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U.S. Department of State (July 29, 1941)

611.94231/46b: Telegram

The Acting Secretary of State to the Ambassador in Japan

Washington, July 29, 1941 — 10 p.m.

440.

On July 28, the Japanese Ambassador called at his request. He said with reference to the freezing order of this Government that the question of how Japanese vessels in American waters would be affected was giving his Government great uneasiness and he therefore desired any information I could give him. I told the Japanese Ambassador that under present conditions and for the time being prompt clearance would be granted by the Treasury Department to any Japanese vessels in American ports which wished to clear. In reply to a further inquiry I told the Ambassador that while purchase by those vessels of food supplies and fuel would require specific licenses from the Treasury Department, licenses would be granted for such transactions for the time being and under present conditions in order to enable those ships to clear from ports in this country. The Ambassador expressed satisfaction with my replies.

WELLES

611.94231/57

Memorandum by the Chief of the Division of Far Eastern Affairs

Washington, July 29, 1941.

Mr. Iguchi, Counselor of the Japanese Embassy, called this afternoon at his request. He said that the Japanese Ambassador had instructed him to call and make inquiries in regard to questions relating to the cargo on board the Japanese vessel, Tatuta Maru. Mr. Iguchi said that when the Japanese Ambassador’had seen Mr. Welles yesterday the Ambassador had not raised the question of cargoes aboard Japanese vessels. Mr. Iguchi said that it had now developed that according to U. S. Customs regulations, a clearance permit for a ship would not be issued unless the cargo destined for the port in question should have been discharged. Mr. Iguchi said that this represented the usual American procedure. He said that in this connection he wished, under instruction from the Ambassador, to raise the question whether it would be possible to alter this procedure and permit clearance of the vessel without discharge of cargo or, if this should not be possible, what would happen to the cargo. He asked whether the cargo would be frozen. Mr. Iguchi said that the Ambassador desired that we be so good as to find out the answers to the questions which Mr. Iguchi had asked.

MAXWELL M. HAMILTON

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The Pittsburgh Press (July 30, 1941)

SILK EXPORTING ORDERED BY JAPAN
By Robert Bellaire, United Pres staff writer

Tokyo, July 30 –
Raw silk and silk fibers were put under an export licensing system today as a further retaliation against the American asset-freezing order, and it was understood that the question of permitting silk exports would be determined by the future moves of the United States against Japanese trade.

It was understood that the Yokohama Silk Exchange, which suspended trading as soon as the American freezing order was issued, would remain closed for some time because of the uncertainty of developments in the United States.

Munitions stocks advanced on the Tokyo Stock Exchange as the Japanese Army and Navy consolidated positions in Indochina and the country attempted to measure the effects of British and American economic action against Japan.

Although munitions stocks advanced, other issues were off from three to four points.

Reliable reports said the Japanese authorities at Dairen had withdrawn from the Standard-Vacuum Texas and Shell Oil installations yesterday, having occupied them because of a misunderstanding of Japanese regulations freezing American assets. United States consular officials had intervened with Tokyo.

A political commentator wrote in the newspaper Miyako that the Japanese occupation of Indochina was the “greatest undertaking in Japanese history” and that the Southern Pacific now had been included within Japan’s defense sphere.

Japan today froze assets of British Borneo, and the Finance Ministry placed an additional 11 British firms under freezing regulations.

A government spokesman said today that the Netherlands East Indies government had denied that it had abrogated its oil agreement with Japan. The assurance, the spokesman said, was given to Yutaka Ishizawa, Japanese consul-general at Batavia. It still remained to be seen, the spokesman added, whether the Netherlands Indies would actually suspend oil shipments to Japan.

A Dōmei (Japanese) news agency report published in Shanghai under a Tokyo dateline said that according to responsible NEI authorities, private contracts for oil between Japanese purchasers and British American and Dutch producers would be fulfilled under a permit system.

The oil agreement was automatically suspended when the NEI froze Japanese banking assets and suspended the foreign exchange agreement. As the Dōmei dispatch said, it remained to be seen whether any oil would be sent by special agreement.

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BIG JAPANESE FORCE POURING INTO INDOCHINA

15 transports arrive with fully equipped troops; destroyers docks

By Kurt Steiner, United Press staff writer

Saigon, French Indochina, July 30 –
Japanese transports, in gray-black battledress, steamed into Saigon today. They were crowded with troops, and barges and motor boats were on their decks. The main body of a Japanese occupation army of 40,000 men was starting to take over strategic bases in southern Indochina.

The first two transports docked between 6:45 and 7 a.m. By 10 a.m. (11 p.m. EDT Tuesday), four more had docked and nine were lying down the river waiting for dock room.

Members of the Japanese military mission welcomed the troops at the docks.

A long Japanese destroyer teamed up the river and anchored a mile for the docks.

Additional Japanese warships were expected imminently.

The city was already suffering from a shortage of office buildings and dwellings, even before the Japanese occupation reached its peak.

It was estimated that it would take several days to disembark the formidable Japanese Army which has been assigned to southern Indochina and is bringing with it war equipment.

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U.S. Department of State (July 31, 1941)

811.20 (D) Regulations/3968a

The Under Secretary of State to President Roosevelt

Washington, July 31, 1941.

My Dear Mr. President:

A few applications to license exports from the United States to Japan have been made under the Japanese freezing order. A few inquiries have been made regarding imports from Japan. For the time being, the Foreign Funds Control Committee is holding these applications without action. It seems desirable that the Committee and also the export control authorities be given instructions as to the policy which you desire it to follow. I submit for your consideration the following statement of policy.

  1. Exports to Japan. Many categories of exports are already forbidden by the export control regulations. It is recommended that the Foreign Funds Control Committee deny all applications for:

All articles the exportation of which is now prohibited by the existing export controls and such of the following products (or grades or types) as are not already prohibited by those controls:

  • Wood pulp;
  • Metals and manufactures;
  • Machinery and vehicles;
  • Rubber and manufactures;
  • Chemicals and related products except certain products such as some pharmaceutical preparations, et cetera, to be specified after further study.

The above list includes all commodities in which there is any substantial trade except cotton and petroleum products (the latter being dealt with below). In none of the items in the list is there any large export at present. Raw cotton exports have averaged about $600,000 per month in the first six months of 1941 as against slightly over $4,000,000 per month average in 1938.

It is recommended also that action similar to that outlined above be taken at once by the export control administration, so that its action may conform to action taken under the freezing order.

  1. Imports from Japan. It is recommended that no licenses be granted for importation of silk or silk products. The military authorities inform me that they have no need for further silk imports. Should that situation alter, policy can be changed immediately to meet such an altered situation.

It is also recommended that purchase of gold from Japan be discontinued.

It is doubtful whether application will be made for any substantial imports from Japan other than silk. Should such applications be made, it is recommended that they be acted upon depending upon the estimated need for the products involved in the United States. Proceeds from such imports, if any, can be made available for the payment of such exports as are permitted.

  1. Petroleum Products. It is recommended that action here issue from the export control authorities on the basis of national defense needs. The action recommended is the issuance of appropriate directives and the revocation of outstanding specific and general licenses to prohibit the exportation, except to the British Empire, the Western Hemisphere and to nations resisting aggression, of:
  • Gasoline above a specified quality and beyond a specified quantity (normal 1935–36 amount);

  • Lubricating oils above a specified quality and beyond a specified quantity (normal 1935–36 amount);

  • Other petroleum products above a specified quality and beyond a specified amount (normal 1935–36 amount).

(Specifications to be such as will preclude shipment of gasoline or oils capable of use for aviation gasoline and the high grade raw stocks suitable for their manufacture.)

The Foreign Funds Control Committee will continue to hold without action applications relating to petroleum exports from the United States and subsequently grant licenses under the freezing order only in accordance with the policy to be initiated by export control.

Believe me [etc.]

SUMNER WELLES

894.24/1587

Memorandum by Miss Ruth Bacon of the Division of Far Eastern Affairs

Washington, July 31, 1941.
[Extract]
. . . . . . . . . . . . . .

CONCLUSIONS

The decisions taken in this Department upon the course of action to be followed with respect to oil shipments to Japan have been related necessarily to developments in the Far Eastern situation and to this Government’s general policy with regard to that situation. Among the factors determining the Department’s decisions upon the question of oil shipments to Japan have been the state of public opinion in this country, which on the whole has ardently desired non-involvement by this country in any hostilities and which was slow in overcoming an aversion to measures in the nature of sanctions; and the unwillingness of other oil producing countries to cooperate in an oil embargo against Japan unless this Government would give a guarantee of military assistance in case difficulties with Japan should result. With the outbreak of the European war the question of oil shipments to Japan became only one factor in the general strategic situation. Our military and naval authorities advised that this Government was not prepared for war on the Atlantic and the Pacific simultaneously and that action likely to precipitate trouble in the Far East should therefore be avoided. The gaining of time to prepare became a paramount consideration which affected this Government’s policy toward oil shipments, not because it was felt that an embargo upon oil shipments would lead to an attack by Japan upon the United States, but because an embargo would tend to lead Japan to use duress or military force against British or Netherland possessions in the Far East. It has been felt that such a result would have been prejudicial to the cause to which we were committed and to the progress of this country’s rearmament program, and might result in war between the United States and Japan.

Additional considerations weighing against the cutting off of all oil supplies to Japan have been the desire not to impel Japan, or to give Japan an excuse, to move against the Netherlands Indies while they were helpless after the occupation of the Netherlands by Germany, and the desire not to prejudice the ability of the Netherlands Indies to hold their own in the discussions relating to the oil shipments sought by a Japanese economic delegation in the Netherlands Indies. This Government also wished to give an opportunity for the full consideration of a proposal put forward by the Japanese Ambassador here with a view to bringing peace in the Pacific area.

Although all oil shipments to Japan from the United States were not cut off, shipments of “aviation” gasoline were stopped in the interests of national defense and shipments of other petroleum products were permitted only under license.

During the two years of time which have thus far been gained, this Department has urged that the defenses of the United States in the Pacific be increased and that the British and Netherland Governments be encouraged to increase their Far Eastern defenses. The strategic position of the United States with regard to the Pacific has been strengthened month by month through the progress of its rearmament and naval expansion programs; through the building up of the defenses of the Philippines, Guam and Samoa; and through the reinforcement with American encouragement and assistance of the defenses of Singapore and other British possessions in the Far East and of the Netherlands East Indies. This Government, moreover, has extended material, financial, technical and moral assistance to the Chinese Government; in recent months this Government’s determination [Page 850]to assist China has been emphasized through the extension of aid under the “Lend-Lease” Act. With the conclusion of the Three Power Pact, moreover, opinion in this country hardened with regard to Japan so that support could be found for measures such as, ultimately, the freezing of Japanese assets in this country. Meantime although Japan has been receiving substantial shipments of certain types of oil from the United States, Japan’s economic position and Japanese morale have been drained by two more years of hostilities in China. Japan’s position has also been adversely affected by the outbreak of hostilities between Germany and the Soviet Union, which has confronted Japan with the prospect that if hostilities should develop in the Pacific as a consequence of Japanese acts, Japan would be open to attack from all sides, and which has made Japan less likely for the time being to react to the imposition of an oil embargo by promptly moving against the Netherlands East Indies.

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The Pittsburgh Press (July 31, 1941)

JAPANESE FIGHTING PLANES ARRIVE IN INDOCHINA
By Kurt Steiner, United Press staff writer

Saigon, French Indochina, July 31 –
Japanese fighting planes and bi-motored bombers, the first to arrive in southern Indochina, landed at the Saigon Airfield today and Japanese forces of occupation pushed on into Phnom Penh, capital of the ancient kingdom of Cambodia, bordering Thailand.

Activities of land and air forces all the way from Saigon to Cambodia were accomplished by movements of 50-60 Japanese warships lying off Cap Saint-Jacques 35 miles down the Saigon River. They cruised off the coast in support of the Japanese forces of occupation.

Dispatches from Phnom Penh said the first detachment of Japanese troops to arrive there had requisitioned buildings for military use. The reports said that traffic on interior roads between Saigon and Phnom Penh had been cleared to facilitate Japanese troop movements.

Scores of trucks moved through the less frequented streets of Saigon, taking Japanese troops to barracks outside the city.

A Japanese destroyer and a minesweeper arrived, and the minesweeper tied up near the Japanese mission headquarters on the warfront, apparently as a radio transmitting station to insure prompt communication with other landing centers.

Some Japanese officers here are wearing a special tropical uniform of white shirts and shorts instead of the traditional khaki, in which enlisted men are sweltering.

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The Pittsburgh Press (August 1, 1941)

LONDON HEARS NEW RUMBLINGS IN EAST

London, Aug. 1 (UP) –
Reliable reports circulated here today that Britain has proposed that Thailand grant Japan military and naval air bases and a virtual trade monopoly in exchange for the French Indochinese province of Laos and the ancient Cambodian city of Angkor.

According to these reports, Japan seeks to control virtually the entire output of Thailand rubber, tin and rice in addition to the strategic bases.

Tokyo reported today that Thailand has granted diplomatic recognition of Manchukuo, effective today, and a spokesman interpreted this move as a decision to:

…forsake the Anglo-American camp and join Japan’s program for construction of a greater East Asia co-prosperity sphere.

A financial agreement whereby Thai banks would extend a ¥15 million credit to Japan, presumably for the purchase of rice, was reported in Tokyo.

Diplomatic reports have circulated here for several days that Japan has suggested informally in Thailand that Thailand agreed on a program of military cooperation with Japan and enter Japan’s “East Asia co-prosperity sphere.”

However, belief persisted that Japan would not go so far in Thailand as to arouse new economic reprisals, or other action by the Anglo-American-Dutch bloc in the Far East.

L. S. Amery, Secretary for India, told the House of Commons today that danger of extension of hostilities to the region of India still threatened and that the threat exists in the east as well as the west.

The British also publicized extensively today the great military reinforcement of Burma which would be immediately threatened by any Japanese move into Thailand.

A Thai spokesman said at Singapore yesterday that his government will not grant bases to any power. He denied flatly that any agreement had been reached either with Britain or Japan concerning bases in Thailand.

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HOW ECONOMIC WAR HITS JAPAN

Screenshot (478)
Screenshot (479)
Economic warfare between Japan and the United States, Britain and the Dutch East Indies has slowed flow of Nipponese imports and exports because of loss of her best markets. The charts show the position of Japan among U.S. customers in 1940, major U.S. exports to Japan and Japan’s big five customers last year, and principal Japanese exports.

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JAPANESE MOVE TO IMPROVE RELATIONS WITH U.S. SEEN
By Robert Bellaire, United Press staff writer

Tokyo, Aug. 1 –
Well-informed diplomatic quarters reported today that, though Japanese-American relations were now at their worst, a quiet move might be made at any time to improve them.

It was widely suggested that the prospective return to Japan if Kaname Wakasugi, Minister in the Japanese Embassy at Washington, might be associated with some attempt by Admiral Kichisaburō Nomura, the ambassador, to suggest basis for improvement.

Attitude softening

The prompt apology of the government for the bombing of the United States gunboat Tutuila off Chungking and the repeated statements of Japanese leaders that Japan will apply retaliatory measures ton American and British economic pressure only to the extent to which she is compelled, were taken as indications that Japan was not reconciled to estrangement.

It was understood that the government had started to censor drastically anti-American articles in the newspapers. Incidentally, up to early afternoon today, no word had been published in Japan of the bombing of the Tutuila or of the government’s apology.

New order complete

There was another surprising development when Gen. Raishirō Sumita, chief of the Japanese military mission to French Indochina, said in an interview with an Asahi correspondent at Saigon that Japan had completed its construction of a new order in East Asia with the occupation of Indochina in a joint defense program. At the same time, some newspapers began to say that now Japan’s “back door” had been secured against attack.

It was announced that an agreement had been signed by which three big Thai banks would extend the Yokohama Specie Bank credits of about ¥15 million ($3,750,000) to Japan. It was believed the credit would be used to purchase rice.

The Foreign Office announced Thailand had recognized Manchukuo, effective today, and spokesmen said this might be interpreted as a Thai decision to:

…forsake the Anglo-American camp and join Japan’s program for construction of a greater East Asia co-prosperity sphere.

Diplomatic informants report that since Germany attacked Russia, German influence in Japan has noticeably weakened and the government has shifted gradually toward a more independent policy. Informants say also that Gen. Eugen Ott, the German ambassador, is anxious over the situation.

Nazis left Japs exposed

Japanese spokesmen admit that Japan expected Germany to attack the British Isles, not Russia, and that the German invasion of Russia really prepared the way for American and British pressure on Japan.

Informants said that the retired navy leaders in several key spots in the new cabinet had big business connections whose interests lay in trade with countries able to trade, not in political connections with countries from which Japan was separated and from whom she could expect no assistance.

Both American and British diplomatic quarters were cautious in discussing the possibility of rapprochement. They said it was the policy of Axis countries today after each fresh act of aggression that this was the end. But they added that there was reason to believe that the economic pressure to which Japan was now being subjected might carry weight with the men who make up the present cabinet.

Policy toward Russia

Japan’s policy toward Russia remained unclear. A government spokesman said the new Russo-Japanese economic treaty had not been ratified because it was awaiting approval by the Emperor’s Privy Council. He said the Foreign Office was studying possible changes before ratification and that Russia was welcome to suggest changes herself.

The General Mobilization Commission approved today an ordinance on marine transportation under which it was understood the government planned to set up a new semi-official agency to control harbor facilities and ships in the interest of efficiency.

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The Pittsburgh Press (August 2, 1941)

JAPS THREATEN USE OF FORCE TO GET OIL SHUT OFF BY U.S.

Roosevelt seeks bases from Russia to encircle Nippon, Tokyo charges

By the United Press

Warning signals of imminent Japanese war moves continued to fly today as newspapers and officials in Tokyo said Japan was ready to use force to get supplies banned by the United States.

London reported that Japan is steadily massing forces in Manchukuo and Korea for action against Vladivostok, the Soviet Siberian port where any U.S. supplies to Russia must be sent.

This tied in with charges in Tokyo that the U.S. is seeking bases from Russia on the Kamchatka Peninsula near Alaska in exchange for shipping supplies to Vladivostok. Tokyo newspapers said the U.S. plans to send troops from the Aleutian Islands to these bases.

Meanwhile, the British and Chinese believe that Thailand is next on the Japanese schedule. Tokyo denied demanding Thai bases as Thailand announced recognition of Manchukuo, Japanese puppet, after having signed an economic pact giving Japan large credits which probably will be used for buying rice. It was believed Thailand was now in Japan’s camp.

Reports from Saigon, French Indochina, said the Japanese were pouring surprisingly large amounts of aviation gasoline and thousands of horses into Indochina as they gradually took over the Vichy garrisons there.

The U.S. embargo on Japanese fuel for planes was believed to have left Tokyo two choices. Japan either could halt plans for expansion southward and end the tension with the U.S. or would have to wage war to get oil in the Dutch East Indies.

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U.S. ALLIANCE WITH RUSSIA FEARED BY TOKYO
By Robert Bellaire, United Press staff writer

Tokyo, Aug. 2 –
Japan reacted angrily today to new economic measures taken against her by the United States. Commerce Minister Sasazō Sakonji, a Vice Admiral, said:

The present international situation is so tense that a single spark may be sufficient to cause an explosion.

Newspapers and even officials warned that Japan would take drastic steps to offset the effect of economic measure taken against her by the United States, Britain and their associates. Newspapers said Japan was determined to obtain needed supplied “by force if necessary.”

Fear alliance with Reds

Earlier, newspapers warned the government to watch closely for signs of Russian-American cooperation because it might lead to a military alliance “toward encircling Japan.”

They charged that the U.S., in return for supplies sent to Russia, sought bases on the Kamchatka Peninsula, opposite Alaska:

…in order to contact Alaska for the transportation of armed forces by way of the Aleutian Islands.

It was asserted that the U.S. was licensing “considerable” oil exports to Russia and that plans to ship the oil through the Pacific to Vladivostok meant the U.S. no longer considered Japan’s “feelings” toward its alliance with Germany.

Japs rap Welles

The Foreign Office-subsidized newspaper, The Japan Times and Advertiser, criticized Acting Secretary of State Sumner Welles for using “suave words” in a statement that raw materials in the Pacific must be available to all nations on an equitable basis.

Japan, the newspaper said, had been invited to seek export licenses for such materials, especially from Malaya, but always found that by pre-arrangement all available stocks were always destined elsewhere, mainly the United States.

The U.S. is creating the same sort of situation in South America, the newspaper said, and so Japan must:

…rush a Western Pacific self-sufficiency sphere.

Commenting on new Japanese-Thailand economic agreements, the newspaper said Japan and Thailand had not built “a machine which should overcome all barriers to economic cooperation” which America, Britain and China had erected.

The newspaper Nichi Nichi said Japan’s occupation of French Indochina “greatly strengthened the bonds of amity” between Japan and Thailand:

… thereby saving Thailand from being dragged into the Anglo-American camp.

Nichi Nichi added that the “teeming millions” of the Netherlands East Indies also needed Japanese goods, because the war had shut them off from Europe and the U.S. could not supply them.

Meanwhile, Japan froze the assets of New Zealand, South Africa and India today in reprisal for British Empire freezing of Japanese assets.

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ROOSEVELT READY TO ASK FURTHER BANS ON JAPS
By Thomas F. Reynolds, United Press staff writer

Washington, Aug. 2 –
The United States struck new economic blow at the Japanese war machine today by making airtight the existing embargo on aviation fuel and oil and imposing strict rationing on other petroleum products.

President Roosevelt’s “short-of-war” action last night to halt Japanese aggression is the most powerful, if not the ultimate, move in the economic warfare which the U.S. is waging against the Axis partner in the Pacific.

The U.S. had already frozen Japan’s assets in this country, a step which subjected Japanese trade here to a strict licensing system. Japan quickly retaliated by freezing American assets.

Ready to cut off all oil

The new action left Japan with a momentous choice. The Tokyo government now must decide whether to abandon its plans for expansion to the south – a move which would stimulate better relations with the United States – or depend upon its reserves and support from Axis partners in a military thrust to obtain oil in the Dutch East Indies.

Mr. Roosevelt, meanwhile, established machinery by which he could instantly cut off all American oil supplies to Japan should that government persist in aggression.

Since 1938, the U.S. has had a “moral embargo” and later actual prohibitions against the export of high octans or aviation fuel and oil to Japan. But the Japanese have been buying heavily on lower grades of oil and fuel.

Japs ‘got around’ order

Government officials said the tightening of controls resulted from information that Japanese and German warplanes have been using fuel with an octane rating of 60 and below. The existing embargo applied to only fuel having an octane rating of 87.5 and above, thus permitting Japan to operate its warplanes with the lower grade product.

The State Department acted quickly to support the President’s move, canceling all existing licenses for the exportation of petroleum products. New licenses will have to be obtained.

Mr. Roosevelt was apparently continuing the policy of parallel action with the British and Dutch governments in the economic warfare against Japan. He conferred yesterday with British Ambassador Lord Halifax before his new dorer against Japan. Britain has already indicated that Japan would get no more British oil and the Empire has threatened to close her coaling stations to Japanese ships. The Netherland has suspended an agreement supplying oil to Japan.

Spain, Portugal affected

Ironically, the terse, two-paragraph statement issued by the White House did not mention Japan specifically, although its full force was directed at that country. The order affected shipments to destinations other than:

…the Western Hemisphere, the British Empire and the unoccupied territories of other countries engaged in resisting aggression.

Spain and Portugal are the only other large nations affected.

Besides embargoing aviation fuel and oil, the order puts Japan on a pre-war ration of low grade oil and crude petroleum, which is useless as far as military purposes are concerned.

Japan imported approximately $54 million worth of American petroleum last year. But under Mr. Roosevelt’s order, the empire in the next 12 months may buy low grade petroleums only in the amount she imported in 1936 – the year before it went to war with China.

In that year, the empire bought 19,143,800 barrels of oils of all types valued at $31,733,000. Much of this, however, undoubtedly was high octane gasoline and airplane lubricants, so the new Japanese quota for the next 12 months will be no more than a fraction of the 1936 figure.

Get oil for furnaces

An expert in the Export Control Office explained that Mr. Roosevelt’s order means that Japan can get certain oil here, such as crude for furnaces, but only in industrial quantities.

The empire, it was believed, would be placed in an extremely hazardous position if it attempted to plan a major campaign solely on its reserves, without first assuring fresh supplies of petroleum.

Japs have big reserves

Government sources have said that the length of time the Japanese military machine could operate on its existing oil stocks would be contingent upon the resistance met. Protracted, bitter fighting would eat into the reserves quickly, officials said. They pointed out, however, that Japan has been building up its reserves and likely has larger stocks than known by outsiders.

The Japanese embassy had no comment.

Chinese Ambassador Dr. Hu Shih expressed “great gratification.” He felt the action would:

…greatly strengthen our morale.

The report persisted that Mr. Roosevelt may instruct Harry Hopkins, Lend-Lease coordinator, to return home from Moscow by the way of Chungking on another move that would be designed to stiffen Chinese resistance.

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ONLY U.S. HOLDERS OF JAP BONDS GET PAID

New York, Aug. 2 (UP) –
The Federal Reserve Bank of New York today authorized release of “frozen” Japanese funds on deposit here to cover the Aug. 1 interest payments on the Japanese government’s 6.5% dollar bonds.

Officials of the Yokohama Specie Bank, local agent for the issue, estimated that the Aug. 1 interest coupons would amount to about $500,000.

It was understood that payments would be permitted only to American holders of these bonds.

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JAPS POUR GASOLINE, HORSES INTO SAIGON

Saigon, French Indochina, Aug. 2 (UP) –
Japanese transports continued arriving here today in a seemingly endless stream, disgorging thousands of troops, trucks, horses, bombs and drums of gasoline.

Stocks of aviation gasoline put ashore by the Japanese were surprisingly large.

Japanese warplanes were lined up for long stretches on the Saigon military airport because of lack of hanger facilities. Soldiers at the field began opening cases of bombs and other troops were moving out of Saigon to garrison towns and cities in the interior.

Thousands of horses were brought from Manchuria.

In Tokyo, the Dōmei news agency reported from Saigon that following landing operations “certain crack units” started to advance “to an important point on southern Indochina.” Japanese newspapers in Tokyo gave prominence to Saigon reports that a Japanese naval squadron had entered Cam Ranh Bay, the great but incomplete French naval base up the coast from Saigon.

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