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X-378 JAPAN* Gold shipments to this country arise from five sources* 1. The Bank of Japan has always made a practice of maintaining a large proportion of its gold reserve in foreign countries. At the beginning of the war they held a total gold reserve of 175 million dollars of which 109 millions was held abroad* On July 31st, 1917> they held a total gold reserve of 460 million dollars, of which 274 millions was held abroad. l*o figures are available as to what part Of this 274 million is held in the United States, but it is certain that a consider able proportion is held on deposit in Hew York City. 2. Out imports from China, Koiea and Formosa are to some extent financed through Japan — the Japanese banks being purchasers in those countries of drafts on the United States. 3- Japan has been a heavy seller in this market of foreign exchange — sterling, and roubles transactions being the most important. 4. Japanese concerns have obtained considerable credits in the United States. These credits have been in various forms; time import credits, straight loans, over draft 5. credits, etc. Our imports from Japan of silk, tea, etc., have been quite heavy; freights on Japaneje steamers have risen as the result of advance in freight rates and in general our indebtedness to Japan on commercial transactions has been greater than formerly. 2 ^ X-378 It is obvious that each of these classes must be treated separately. 1. It would be inadvisable to place any embargo on the gold reserves of the bank of Japan. The amount held here should be ascertained and placed at their free disposal. Care should be taken, however, that the Bank of Japan be not used as a channel for draining us of our gold. 2. Imports from China, Korea and Formosa as well as those from Japan should be paid for by gold exports if necessary. A large part of these imports, however, are not necessary to the successful prosecution of this war and should, therefore, be restricted. When proper restrictive measures have been adopted the volume of gold exports would be proportionately reduced. 3* Balances arising in this country from the sale to us of sterling and roubles (i.e. arbitrage operations), and from borrowing operations should not be paid out of our gold reserves. Applications for permits to ship gold to Japan should disclose fully the transactions giving rise to such proposed shipment and licenses should be issued only in conformity with the above. The fact that some of the gold exported by us to Japan is re-exported by them to India really has no bearing on the subject before us. Japan's exports of gold to India are made in settlement of her own transactions.
@FedFRASER