Mr. Hubertus van Mook 4.hvm.0002 Louis J. Sheehan, Esquire

274. Japanese Negotiators Recommend Acceptance of Dutch Proposals. Louis J. Sheehan, Esquire


At the same time that the Netherlands' reply to the Japanese proposals was sent to Tokyo, the Japanese Consul in Batavia, on June 7, 1941, suggested the acceptance of the Dutch proposals since they were the best that Japan could hope to get, though the Dutch had not agreed to Japanese demands concerning oil, rubber, and bauxite. [1056]

At a conference between Mr. Hubertus van Mook, Director of Economic Affairs in the Netherlands East Indies, and Tokyo's representatives on June 10, 1941, the Japanese Minister discovered that the intentions of the Dutch officials were considerably more liberal and elastic than the document of the Netherlands' reply had indicated. [1057] However, on June 12, 1941, Tokyo informed its diplomats throughout the world that the Dutch had definitely rejected Japan's proposals, and had refused to export all the raw materials desired by the Japanese. Furthermore, they threatened to cut off all exports, if Japan reshipped them to Germany. [1058] Louis J. Sheehan, Esquire



[1053] II, Ibid.

[1054] II, Ibid.

[1055] II, 1051.

[1056] II, 1052, 1053.

[1057] II, 1054.

[1055] II, 1055.



191



275. Japanese Security Precautions for Diplomatic Codes.



Japan began early in June 1941 to safeguard its state secrets in regard to the Netherlands Indies by adopting new security precautions. When the Japanese Consul in Soerabaya returned a safe to Japan, it was examined by Dutch officials; and as a result, the Japanese Consul in Batavia asserted on June 7, 1941 that there was little prospect of sending secret documents to Japan without inspection by the Netherlands' government. [1059]

To ensure safe communications with the home office, the Japanese Minister in Batavia suggested that reports be exchanged verbally as much as possible, rather than by telegrams. To avoid difficulties with Dutch officials, he was particularly insistent that official couriers coming into the Netherlands Indies be members of the Foreign Office. [1060] To expedite the special handling of messages for military attachés, on June 28, 1941, Tokyo ordered that a caption word including A or M as its second and fifth letters be used as a designator. [1061]

On July 10, 1941, Foreign Minister Matsuoka notified Batavia that a courier, Mr. Zoku Nomoto, who was carrying with him secret documents and cipher machines for both Batavia and Singapore, would have to be passed through the customs. Mr. Ishizawa had al­ready informed Tokyo that baggage could be passed through without examination, provided official seals were attached. [1062]



On August 4, 1941, Tokyo sent out a circular covering the destruction of obsolete codes and the care of the current ones. [1063] During this month, the existing code was also to be replaced by a new and more secret system. [1064]



276. Japan Discriminates Against Dutch Firms.



Meanwhile, in Tokyo, agreements with Dutch business interests were reached as of June 5, 1941, and negotiations were begun with the leaders of the Japan‑South Seas General Merchan­dise Export Guild. In order to insure the Guild's participation and concurrence in Japanese trade negotiations, it was stipulated that its branches in Japan should not be assessed by the Finance Ministry, as were the Dutch firms. The Japanese anticipated that this would dissatisfy Dutch business establishments in Japan, though other Japanese export guilds would probably join the agreement because of the new conditions. [1065]

On previous occasions Japanese guilds had refused to admit Dutch firms, but in late June 1941, as a result of Tokyo's intercession, the Dutch received better treatment from the guilds. [1066]



277. Japanese Business Methods in the East Indies.



Tokyo was informed on June 9, 1941 that branches of the Mitsui, Mitsubishi, Nomura, Iwai, and Kasho companies in Batavia had made competitive offers for June loadings of rubber, and immediate counteraction was suggested. [1067]



[1059] II, 1056.

[1060] II, 1057.

[1061] II, 1058.

[1062] II, 1059.

[1063] II, 1060.

[1064] II, 1061.

[1065] II, 1062.

[1066] II, 1063.

[1067] II, 1064.



192



THE "MAGIC" BACKGROUND OF PEARL HARBOR



Three members of a large Japanese banking and investment corporation had gone to the Netherlands East Indies to establish a joint stock company dealing with rubber plantations in Borneo and Soerabaya. Directing the Japanese Minister to obtain another month's stay in the East Indies for these gentlemen, Tokyo, on June 12, 1941, expressed the hope that they would accomplish their objective. By such close supervision of Japanese business interests was Japan striving to control the East Indies' rubber market. [1068]



278. Japan Foresees the Discontinuance of Negotiations.



Tokyo stated on June 14, 1941 that it was becoming impossible for the two countries to successfully carry on further negotiations, since the reply of the Dutch East Indies' authorities reserved the right to alter at will the export volume of those materials which the Japanese regarded as indispensable. Japan asserted that no international agreement could be made on the basis of such an attitude.

Although the Dutch claimed that the object of its foreign policy was based on furthering the progress and prosperity of its own peoples, Japan felt that the Netherlands East Indies could accomplish much more by firmly establishing commercial cooperation with Japan, and in this way contributing to the peace of the Far East. Claiming to be the economical benefactor of the Dutch East Indies, Japan insisted that merely out of consideration for the unity of purpose existing between the two countries, it had contributed generously to the development of these islands. [1069]



279. Japan Plans to Publicize the Discontinuance of Its Negotiations.



Batavian authorities revealed to the Japanese Minister on June 14, 1941 that Tokyo was planning to publish the results of the negotiations between the two countries without first in­forming the various Dutch authorities that a diplomatic rupture was inevitable. The Japanese Minister at Batavia warned his Foreign Office that the result of such unilateral action would be detrimental to future agreements. [1070] Tokyo replied on June 14, 1941 that since the negotiations had failed, publicity in regard to the matter was solely a responsibility of Tokyo and was no concern of the Dutch.

The Japanese also pointed out that during the meetings of November 1940, when a com­promise had been reached regarding the purchase of petroleum, joint communiqués issued by Dutch petroleum interests had advised the public of the quantities involved. Furthermore, Tokyo stated that the Netherlands Indies, according to authoritative intelligence, had kept the United States and Great Britain constantly informed regarding every detail during the discussions.

In addition the Japanese were indignant because the Netherlands East Indies had sent to its ministry in Tokyo both the Japanese proposal of May 14, 1941, and the Netherlands' reply of June 6, 1941 in plain text. [1071] This was very irritating to the Japanese because their code clerks in Batavia had spent ten hours in enciphering the message which the Dutch had already transmitted in plain text. [1072] In view of the dangers to their cryptographic systems from this procedure, Tokyo thereafter permitted its representatives to send foreign text messages in a simpler code system or even in plain text. [1073]



[1068] II, 1065.

[1069] II, 1035.

[1070] II, 1066.

[1071] II, 1067.

[1072] II, 1068.

[1073] II, 1069.



193



280. Japanese Minister in Batavia Protests Against Tokyo's Procedure.



Japanese Minister Daihyo in Batavia warned Tokyo on June 16, 1941 that if the Japanese were to publish the results of the conferences with the Dutch government, extreme care must be taken in wording the report lest a bad impression be created, particularly since they were breaking off negotiations with the Dutch. The Foreign Office in Tokyo should not give the impression that Japanese public opinion, contrary to the policies of the Japanese government, was in any way controlling its actions, since this would impair the dignity of Japan.

Because there were at least 7,000 Japanese living in the Netherlands East Indies, Minister Daihyo desired to continue normal relations, at least with the Dutch government. At the same time, however, he pointed out that to declare openly that Consul General Ishizawa was to con­tinue the negotiations after the negotiations had failed would be a black mark against Japanese prestige. Therefore, until more natural circumstances permitted, Minister Daihyo suggested that no revelation of the Japanese desire for further talks with the Dutch be made. While the needs of Japan demanded that the petroleum question be settled immediately, it could not be considered separately, since it was but one part of the trade negotiations. [1074]



281. Tokyo Accedes to Minister Daihyo's Request.



Tokyo replied promptly to Minister Daihyo's protest on June 16, 1941, and requested him to assure the Dutch East Indies that any further negotiations would not be an attempt to save the Japanese Cabinet from embarrassment. By discontinuing the talks and recalling its representatives, Tokyo was endeavoring to prevent the rise of circumstances which might infuriate the Japanese people and turn them against the Dutch East Indies. In addition, the Japanese government wished to avoid giving the world the impression that normal relations with the Dutch East Indies had been disrupted, and that the two countries were not at swords' points. Therefore, Japanese Consul General Ishizawa was to indicate in any public announce­ments that discussions would be continued from time to time with the Dutch. [1075]



282. The Netherlands East Indies and Japan Issue a Joint Communiqué (June 17, 1941).



On June 17, 1941, after a conference between Mr. Yoshizawa, Mr. Ishizawa, Mr. van Mook and Mr. Hoogstraten which did not change the answer of the Netherlands in any way, a joint communiqué was issued as follows:



Both the Netherland and the Japanese delegations greatly regret that the economic negotiations, which has been conducted between them, has unfortunately come to no satisfactory result. It is needless, however, to add that the discontinuation of the present negotiation will lead to no change in the normal relations between the Netherlands Indies and Japan. [1076]



Although no agreement had been drawn up between the two governments as a result of their extended conferences, Foreign Minister Matsuoka expressed the opinion on June 18, 1941 that the Japanese would be able to obtain through ordinary business deals the types of goods that the Dutch considered unimportant. However, as a political gesture to warn the Dutch that Japan needed vital raw materials, the Japanese representative, Mr. Yoshizawa, urged the Governor General of the Indies to reconsider his stand. Nothing came of this, and the Japanese nego­tiators were ordered to withdraw. [1077]



[1074] II, 1070.

[1075] II, 1071.

[1076]Hubertus J. van Mook—op. cit., p. 122.

[1077] II, 1072.



194



THE "MAGIC" BACKGROUND OF PEARL HARBOR



283. Japan's Urgent Need for Petroleum and Tin.



In view of the Japanese need for petroleum, on June 18, 1941 the Chief of the Japanese Fuel Bureau requested his petroleum representative, Mr. Ito, to remain in Batavia even after other delegates had returned home. Since the international situation was extremely delicate, he directed Mr. Ito to obtain fulfillment of oil contracts which had already been made by the Dutch.

Mr. Matsuoka promised that Japan would not make any direct demands for future oil pur­chases or for the development of oil fields in the East Indies. [1078] But on June 21, 1941, the Japanese Consul General was instructed by Tokyo to protest immediately to the Dutch au­thorities against the concentration of Dutch oil products and transportation in British hands. [1079]

To take advantage of any possible diplomatic change after the breakdown of negotiations in June 1941, the Japanese desired to keep their commercial representatives in Batavia so as to be able to renew negotiations for oil rights with the Dutch. Problems other than oil rights, accord­ing to the Chief of the Japanese Fuel Bureau, were to be given secondary considerations for the time being. [1080]

A difference of opinion arose on June 19, 1941 between two Japanese representatives in Ba­tavia. Mr. Hatanaka felt that because the negotiations had been discontinued, the acquisition of raw materials could be handled by the local branch of Mitsui, and Mr. Ito could return to Tokyo, leaving Mr. Hatanaka to carry on alone. On the other hand, Mr. Ito believed that the Dutch were just about to accept the Japanese separate proposal and wished, therefore, to re­main until the affair could be finished. [1081] But on June 22, 1941, Mr. Ito reported that he was returning to Tokyo since he could do nothing more concerning the petroleum question. [1082]

By virtue of the rupture of the negotiations, Mr. van Mook, the Director of Economic Affairs in the East Indies, had explained that the negotiators had no authority to enter discussions pertaining to other matters of trade. Thus, questions regarding the shipment of fuel would come as usual under the jurisdiction of the Bureau of Mines and would be discussed by competent industrialists. However, Mr. van Mook pointed out that at present the Bureau had been di­vested of the authority to deal with such matters because of the political aspects involved. Regardless of whatever point of view the Japanese might take concerning future acquisition of rights and interests, Mr. van Mook insisted that present agreements were impossible. [1083]

The withdrawal of Saito, a Japanese fuel negotiator, a few weeks later attested to the belief of Japanese authorities that the decision was irrevocable. [1084] Nevertheless, some time later on July 30, 1941, the Chief of the Netherlands East Indies Trade Bureau assured the Japanese Minister that his government had no intention of abrogating the existing oil agreement; nor did he believe that the Dutch oil company would refuse to sell the product. Regarding this latter point, the Japanese official stated that the company was delaying the loading of oil for which payment had already been made. Assuring the Japanese Minister that the company was undoubtedly discussing the provisions which called for payment in dollars, the Dutch official stated that Mr. van Mook and representatives of the oil company were to confer on the following day. Although company officials would be heard before any decision were made, it was hoped that an agreement, satisfactory to all parties, would be concluded. [1085]



[1078] II, 1073.

[1079] II, 1074.

[1080] II, 1075.

[1081] II, 1076, 1077.

[1082] II, 1078.

[1083] II, 1079.

[1084] II, 1080.

[1085] II, 1081.



195



As a result of Mr. Ito's report, [1086] loan the Chief of the Fuel Section, expressing his appreciation for their difficult experiences, directed both Mr. Ito and Mr. Hatanaka to return home. [1087] A report from Minister Daihyo, which stressed the futility of keeping Japanese oil negotiators in Batavia in the face of the Dutch refusal to deal with them, probably had much to do with their return. [1088]

The Japanese were concerned about other vital materials as well as oil. Though the Mitsubi­shi Company had previously obtained a year's contract to export 3,000 tons of tin from the Netherlands East Indies, the Dutch had reduced that amount to a mere 2,300 tons. However, even after the negotiations had been broken off, the Japanese were hopeful that the Dutch might change their uncompromising attitude concerning tin and manganese. [1089]



284. The Netherlands Indies Reduces Shipping to Japan.



Mr. Ishizawa reported on June 21, 1941 that the Dutch were cutting down on all shipping to Japan in an attempt to apply a wartime embargo act. Instructions had been issued by the Finance Minister to limit material sent to Japan to 20,000 tons per month. According to the Japanese, this reduction of shipping was connected with Netherlands national defense and had been ordered by Dutch shipping authorities in New York, and therefore, it was hard to discover the reasons for it. [1090] In order to conceal Japanese purchases in the East Indies, on June 21, 1941 Mr. Ishizawa suggested that all telegrams regarding such matters be sent secretly to him in Batavia. [1091]



285. Japan Suspects American Support of Netherlands Indies.



Because Holland was one of the nations joined against the Axis, and because its own funda­mental policies were closely akin to those of England and the United States, the Netherlands East Indies was greatly affected by the position of the United States in regard to the Japanese "New Order" in Asia. As early as June 22, 1941, according to the Japanese Ambassador in Rome, an intelligence report, sent to the Vatican by the Apostolic Delegate to Batavia, had indicated that the United States, at first, had brought pressure to bear upon the Netherlands East Indies in a scheme to obtain an excellent bargaining position, so as to force Japan into neutrality, if the United States went to war.

Later, however, the United States, with Great Britain, had made the Netherlands East Indies part of a defensive line that included the Philippines, China and Thailand, and thus, by co­operative encirclement, had attempted to force Japan to accept its material aid. Because of this action, according to Ambassador Horikiri's version of the report, the Netherlanders be­came still more certain that Japan would attack their territory. [1092]

Military cooperation between America, Great Britain, and the Netherlands government was announced by a Japanese report of July 17, 1941, which also indicated that an American air base was being built in Papua, New Guinea! [1093] The Japanese Minister to Batavia reported a



[1086] II, 1078.

[1087] II, 1082.

[1088] II, 1083.

[1089] II, 1084.

[1090] II, 1085.

[1091] II, 1086.

[1092] II, 1087.

[1093] II, 1088.



196



THE "MAGIC" BACKGROUND OF PEARL HARBOR



week later, on July 26, 1941, that if the United States should carry out a general embargo, the Dutch people were convinced that Japan would extend its southward march to include Singa­pore and the Netherlands East Indies. On the other hand, although there was to be a blackout for three days of an area centering on Batavia and Baitenzorugu in preparation for any future air raid, the people of Batavia, as a whole, showed little concern over a possible breach of diplo­matic relations with Japan. [1094]



286. Reaction of Netherlands Indies to German‑Russian War.



After war began between Germany and Soviet Russia, the Japanese Consul in Batavia stated in an interview with Mr. Hoogstraten on June 23, 1941 that now the Dutch could cease being anxious over the re‑exportation to Germany of material purchased in the Indies, and that they could ship supplies to Japan in an unlimited amount. Still uncertain of the Japanese position, however, the Dutch were not willing to make agreements on the hypothesis that Japan would not aid its German partner. On the other hand the Japanese feared that the Nether­landers would lend their full support to Russia, because they were fighting Germany.

According to the Japanese Minister in Batavia, the Dutch believed that the conflict between Germany and Russia would serve to dissipate Nazi strength, while the fighting power of the British, aided by the United States, would increase. In answer to the Japanese Consul's statement that Europe would then come under the control of Commissar Stalin instead of Hitler, Mr. Hoogstraten asserted that Russia had no great ambition in western Europe. Furthermore, with the destruction of Hitlerism and the cooperation of Great Britain, his mother country, Holland, could be restored. [1095]

When the Japanese Consul was questioned by Mr. Hoogstraten regarding Japan's attitude toward the Russo‑German conflict, he replied that the Tripartite Pact with Germany stipulated that the relations between the respective treaty powers and Soviet Russia were in no way to be affected by the alliance; therefore, the present hostilities would have no immediate effect upon Japan. In spite of the reassurance which the Japanese gave Dutch officials regarding their neutrality in the European war, the Japanese Minister still feared that the Netherlands East Indies would become more anti‑Japanese and that exports to Japan would be reduced to per­mit large‑scale shipments to Soviet Russia. He suggested that Japan formulate and maintain a definite policy with regard to this situation. [1096]

Since there was always the possibility of Japan's attacking Russia, Mr. Ishizawa made in­quiries to sound out the effect of such a move upon the Netherlands East Indies. In his report to Tokyo on July 15, 1941 he announced that if Japan did not commit any direct hostile acts against the Netherlands Indies, there was little chance of war between the two countries, al­though further regulation of exports to Japan would be inevitable if a Japanese‑Russian war broke out. Mr. Ishizawa pointed to the friendly attitude of the Netherlanders toward Italian residents, in spite of Italy's alliance with Germany, as proof that the Japanese would be treated in the same way. [1097]



[1094] II, 1089.

[1096] II, 1090.

[1096] II, Ibid.

[1087] II, 1091.



197



287. After Effects of Discontinuance of Japanese‑Dutch Negotiations.



Ten days after the publication of the joint communiqué which announced the discontinu­ance of the Japanese‑Dutch economic negotiations, the Japanese Minister in Batavia, on June 26, 1941 reported to Tokyo that the atmosphere had become more favorable to Japan and that Japanese residents in the East Indies were not much perturbed. [1098] However, the Japanese-Dutch Society was to be closed in late July 1941, [1099] and about July 15, 1941 the Mitsubishi Company ordered its officials in Batavia to evacuate their families. [1100]

As a result of this prospective exodus, the Japanese Minister inquired whether the order of the Mitsubishi Company stemmed from the Japanese Foreign Office or was issued independ­ently. In addition, the Mitsubishi representative informed his home office that general condi­tions were calm in the East Indies, and for this reason Japanese families did not desire to return to Japan. He also pointed out that the sending of evacuation orders in plain language, as had been done in this instance, would disturb the Dutch government, would not make it change its decision, and would only damage Japanese interests by lessening production. [1101]



288. Netherlands Indies Resent Japanese Intelligence Activities.



When the second Japanese economic mission had come to the Netherlands East Indies, Colonels Maeda and Oga, and Lt. Col. Ishii of the Japanese army had accompanied it. The Netherlands army had been very disturbed by their arrival, but the Dutch refrained from re­fusing them admittance to avoid affronting Japan. However, after Minister Yoshizawa de­parted with his associates, on June 27, 1941 Mr. Hoogstraten pointed out that the officers had been more engrossed in inspecting all parts of the Netherlands Indies than in taking part in the negotiations, and he requested Mr. Ishizawa to arrange for their departure on a ship leaving for Japan on July 3, 1941. [1102]

Tokyo inquired, on July 3, 1941, whether the refusal of the Netherlands Indies to permit a certain Japanese naval officer to return was based on the undesirability of the officer or on a general policy of not accepting Japanese language officers. [1103] The refusal of the Dutch to per­mit the return of a Japanese Vice Consul was because of his previous activities among the radical elements of the native population. [1104]

Whether the visit of the Japanese army officers had been valuable in securing vital infor­mation regarding military strength in the East Indies cannot be definitely ascertained, but it was known that the activities of Japanese spies in that area were attaining some measure of success. According to one spy report on July 18, 1941, details of airfields south of Batavia, west of Serang and on the western tip of Java were known. [1105]

Cooperation between the Netherlands East Indies, Australia, England and the United States was noted in a Japanese message from Batavia on July 18, 1941. United States naval officers stationed in a certain section of Soerabaya and Java, as well as British and Australian army officers in Bandon and Batavia, were conducting military training at this time. It was suspected that at other points on the island, allied officers acted as instructors or liaison officers. [1106]



[1098] II, 1092.

[1099] II, 1093.

[1100] II, 1094.

[1101] II, 1095.

[1102] II, 1096.

[1103] II, 1097.

[1104] II, 1098.

[1105] II, 1099.

[1106] II, 1100.



198



THE "MAGIC" BACKGROUND OF PEARL HARBOR



In order to direct the military efforts of the Dutch Indies, Sir Robert Brooke‑Popham, the British Commander in Chief of the Far East forces, and a United States Naval aviation officer, Normer, as well as one officer each from the Australian army and navy, arrived in that vicinity some time before July 23, 1941. [1107]



289. The Netherlands East Indies Reduces Exports to Japan.



Though business conditions appeared to be normal, [1108] cancellation or postponement of ex­ports which had already been agreed to by the Dutch drew protests from Tokyo. Listing palm oil, kapok, tannin, scrap iron, rubber and kopra among the products affected by the reduction of exports to Japan, Japanese representatives in Batavia insisted in mid‑July 1941 that the Dutch had failed to carry out their contracts since in the case of all vital products, almost half the quantity ordered had been stopped. [1109]

The Dutch authorities promised to reconsider their decision in view of these previous commitments. [1110] Hoping to receive as much as possible, Tokyo directed on July 18, 1941 that all articles already contracted for were to be exported immediately, aboard the Nichiran Maru and the Chirubuto Maru which had been assigned to the Netherlands East Indies. [1111]



290. Dutch Reprisals Against Japanese Communications.



Around July 26, 1941 Tokyo was informed that the Netherlands East Indies threatened to carry out reprisals if Tokyo decreed that only English or Japanese could be spoken in telephone conversations to the East Indies. The Netherlands government in turn would forbid the use of the Japanese language over its international telephone wires. The Dutch put the order prohibit­ing the use of the Japanese language into effect on July 29, 1941, and Tokyo hastened to nego­tiate with Batavia immediately in an attempt to have it retracted. [1112]



291. Japan Allays Dutch Fears Concerning a Japanese‑British War.



According to a statement made on July 26, 1941 by Mr. Utuheren of the Dutch Immigration Office, the occupation of southern French Indo-China by Japan had damaged Japanese rela­tions with England and the United States, and if war broke out between the Japanese and the English, there was little doubt that the Netherlands East Indies would fight on the side of Eng­land. The Japanese Minister replied that the United States and England had been increasing their assistance to China, and that the Chinese, in turn, were hindering Japan from procuring necessary French Indo‑Chinese goods. Though asserting that if Japan had not acted immediately, British economic and military influence would have dominated French Indo-China, the Japanese Minister expressed the opinion that the possibility of war between Japan and

England was remote. Certain Netherlands Indies' officials were also convinced that Great Britain and Japan would not war over the French Indo-China issue, but they considered the concentration of Japanese



[1107] II, 1101.

[1108] II, 1102.

[1109] II, 1103.

[1110] II, 1104.

[1111] II, 1105.

[1112] II, 1106, 1107.



199



forces in the southern part of French Indo-China to be a potential threat toward the Netherlands Indies. A meeting of important officials at the Governor's mansion made it apparent that the Netherlands Indies was giving deep consideration to its official attitude regarding the Japanese occupation of French Indo-China. [1113]



292. Japan Releases a Confiscated Cargo.



In an attempt to checkmate any movement of war materials to the Chungking government, in the early part of July 1941 the Japanese in Shanghai had held up and investigated a ship with a cargo of machinery purchased by the Dutch. This occasioned a protest from the Nether­lands East Indies and Great Britain. Stressing the importance of the matter, Mr. Hoogstraten, the Dutch Commerce Bureau Chief, had then requested that the machinery be handed over immediately to the Netherlanders. [1114]

According to the Japanese, the exportation had been illegal, since no permit had been ob­tained from the proper military authorities, [1115] and in addition, the vessel had acted contrary to the orders of the Japanese water police. Furthermore, a bank connected with this transac­tion was in alliance with the Chungking regime. However, since Japan had no wish to incur the hostility of such an important trading country as the Netherlands East Indies, and because Japanese enterprises in the area were too valuable to be endangered by retaliation for one ship­ment of goods, Tokyo decided against confiscating this machinery. [1116]

On July 25, 1941 the Netherlands Indies' director, Mr. van Mook was informed that the machinery had been released and he expressed his appreciation to Japanese authorities. [1117] A promise of increased trade had previously been made by the Netherlands Indies' authorities who agreed not to transfer the machinery in question to Chungking. [1118]



293. The Netherlands Indies Freezes Japanese Funds.



The Netherlands Indies learned on July 26, 1941 that the United States and Great Britain had suspended monetary and economic intercourse with Japan. After much hurried activity, the Netherlands Indies was able to issue measures, on July 28, 1941, which suspended the monetary agreement and all monetary transactions with Japan, applied the Export Licensing Law to all exports to the Japanese Empire, Manchuria, occupied China, and Indo-China, and subjected all banks to a system of permits affecting monetary or credit transactions with Japanese subjects. [1119]



294. Economic Cooperation of the Netherlands Indies With England and the United States.



The Japanese Minister in Batavia reported to Tokyo on July 28, 1941 that despite some lax­ness in enforcing economic sanctions, the Netherlands East Indies was cooperating with Eng­land and the United States in economic warfare against Japan. Furthermore, Mr. van Mook



[1113] II, 1108.

[1114] II, 1109.

[1115] II, 1110.

[1116] II, 1111.

[1117] II, 1112.

[1118] II, 1110.

[1119] Hubertus J. van Mock‑op. cit., pp. 126‑127.



200



THE "MAGIC" BACKGROUND OF PEARL HARBOR



asserted that if the Japanese continued their aggression, the Indies might conclude a military alliance with the United States and England. Nevertheless, the Japanese Minister believed that the Netherlands Indies was anxious to avert an attack by Japan. [1120]

Since the betterment of Japanese‑Dutch relations was a matter of extreme urgency, Mr. Hoogstraten and Mr. Ishizawa met on July 30, 1941 to seek a solution of the problem. To ex­plain Japan's southward sweep into French Indo-China, Mr. Ishizawa stated that its purpose was to cooperate with the government of France in facilitating the defense of that territory. However, Mr. Hoogstraten assumed that Japan's antagonism toward his country was increas­ing because Japan had established military bases there.

In spite of Japanese protests that no ulterior motives were involved, the Netherlands East Indies viewed Japanese army, naval, and air bases in the southern part of French Indo-China as a threat to her territorial integrity. At this point Mr. Ishizawa reminded Mr. Hoogstraten that the Dutch had boasted of the firm establishment of an American‑British‑Chinese‑Dutch joint front, and in view of the strong defense which the Dutch had attained by these alliances, Japan could not understand their fear of Axis strength.

In spite of the Japanese Minister's remarks, Mr. Hoogstraten insisted that curtailments of military supplies to Japan were necessary for the defense of the Netherlands Indies. Mr. Ishizawa then advised Mr. Hoogstraten that Japan would find other means of obtaining these essential materials. [1121]

After his conversation with Mr. Hoogstraten on July 30, 1941, the Japanese Minister in Bata­via declared emphatically that as long as Japanese forces remained in French Indo-China, the Netherlands Indies would treat Japan as an enemy. In order to combat the punitive trade embargoes imposed by the Dutch, he suggested certain Japanese counter‑measures. Although the freezing order regarding Japan's assets had thus far been strictly enforced, the Japanese Minister felt that since the Netherlanders were also being greatly inconvenienced by it, nego­tiations between Mr. Imagawa of the Specie Bank, and officials of the Administrative Bureau and the Java Bank might produce a favorable solution. In the meantime, however, trade be­tween the two countries was becoming more restricted, and Mr. Ishizawa felt that decisive measures should be initiated against the Netherlands East Indies. [1122]



295. Japan Retaliates by Freezing Netherlands Assets.



In retaliation for the economic measures which the Dutch had taken against the Japanese, Tokyo froze Netherlands assets throughout the Japanese Empire. On July 30, 1941, Mr. Hoog­straten and the Japanese Minister at Batavia discussed various points connected with the freezing orders of both countries. The Dutch official claimed that the Japanese should permit the exportation of not only goods which had been paid for, but also goods under contract, since their title had been transferred to the Netherlands East Indies. If, as a result of the freezing order, the Dutch merchants lost the entire stock of goods purchased from Japan, Mr. Hoog­straten warned that the Netherlands East Indies would use the frozen Japanese funds as col­lateral for the twelve million guilders involved. [1123]

Replying that Japan did not intend to prevent shipment of goods which had been already purchased, the Japanese Minister stated that his country was at present experimenting with the first export embargo it had ever imposed. Furthermore, he insisted that the Netherlands' government had no justification for taking any retaliatory measures against Japan.



[1120] II, 1113.

[1121] II, 1114.

[1122] II, 1115.

[1123] II, 1116.



201



Mr. Hoogstraten assured Mr. Ishizawa that if Dutch merchants were permitted to ship their goods from Japan, not only would certain Japanese funds be released, but sugar and similar products would also be shipped from the Netherlands Indies to Japan. However, because the Japanese occupation of the southern part of French Indo-China constituted a direct threat to the Indies, a comparatively strict limitation would still be observed on the exportation of pe­troleum and other war materials in which the Japanese Minister was particularly interested. Regarding the abrogation of the petroleum agreement, Mr. Hoogstraten stated that his govern­ment had no intention of permitting the oil companies to export the undelivered portion of the oil under contract. [1124]

Since the Japanese Minister in Batavia felt that the Netherlands East Indies would still continue to tighten restrictions on exported commodities to Japan, he again suggested on August 1, 1941 that strict counter‑measures be taken. Knowing that an embargo against food supplies, such as salt‑fish from French Indo-China, would give rise to a serious problem for the Netherlands Indies, the Japanese planned to prevent this and other essential items from reaching the East Indies. [1125]

Further discussion by the Japanese Minister with Mr. Hoogstraten finally won some con­cessions, according to a report to Tokyo on August 2, 1941, for the Netherlands Indies granted permission for one shipment of rubber, tin, and ilmonite. [1126] Nevertheless, during the first few days of August 1941, growing anxiety was evident among Japanese residents. Because of the constant stream of applicants for passage aboard ships bound for Japan, the South Seas Shipping Company considered dispensing with cargoes until Japanese nationals could be evacuated. [1127]



296. Japanese Nationals Are Evacuated From The Netherlands Indies.



On previous occasions, at the direction of the Japanese Minister, the leaders of Japanese associations had advised Japanese residents owning firmly established enterprises to remain in the Netherlands Indies and continue their business. On July 31, 1941, however, he planned to advise many of them to return home since in the event that improvement in Japanese-Dutch relations became impossible, a disorderly evacuation would disgrace Japan. Judging from recent trends, and because of the danger of arrest for Japanese residents, it was also felt that all Japanese subjects acquainted with the situation in the Netherlands Indies and able to speak the Malayan language would be of great value to the military authorities, and should, therefore, return to Japan and register immediately. [1128]



297. East Indian Merchants Purchase Japanese Stocks.



Upon hearing rumors that the government of the Netherlands Indies would freeze Japanese funds, Chinese and Arabian merchants in the East Indies realized that Japanese merchants would encounter difficulties in future importations and would be interested, therefore, in cash



[1124] II, Ibid.

[1125] II, 1117.

[1126] II, 1118.

[1127] II, 1119.

[1128] II, 1115.



202





THE "MAGIC" BACKGROUND OF PEARL HARBOR



transactions. These traders attempted to buy up all the articles which Japanese firms had on hand, and in this way obtained a monopoly on many materials. The Netherlands Indies' govern­ment, fearing the increased prices that would result from such reckless buying, prohibited the transfer of woven and knitted goods, fabricated materials and other articles. Although these restrictions were designated to curb the transactions of the Chinese and other merchants, the Japanese Minister felt that inflation was now an imminent danger in the East Indies, and would cause more trouble to the Dutch themselves than to Japan. [1129]



298. Japan is Urged to Further Retaliation Against the Dutch.



On August 3, 1941 the Japanese Minister in Batavia reported to Tokyo that the Netherlands East Indies was concerned about food for the Dutch residents in Japan, and about the ship­ment of goods out of Japan which had been contracted and paid for by Netherlands Indies' merchants. Although Tokyo had so far been indecisive concerning these questions, Dutch firms nevertheless placed considerable reliance on the influence of Mr. Ishizawa.

Believing that Japan's delay was responsible for the issuance of the Netherlands freezing order, Mr. Ishizawa suggested again that Japan retaliate immediately when any actions con­trary to her national well‑being were undertaken by the Netherlands Indies. He requested, therefore, on August 3, 1941 that decisions reached by the Foreign Office concerning such action be wired to him without any delay. [1130] Furthermore, if time were wasted while he waited for specific instructions, a general embargo might be imposed by the Dutch with the result that Japan would be prevented from obtaining even those materials which were procurable. Such action on the part of the Dutch would possibly freeze Japanese assets indefinitely. [1131]