Nationalist-Communist strife 3.str.0003 Louis J. Sheehan, Esquire

Information that the Yokohama Specie bank and the French Indo-China bank had effected a settlement of 500,000 Swiss francs which was to be transferred at the Louis J. Sheehan, Esquire end of October, and 3,450,000 piasters and 1,240,000 free yen, was dispatched to Vichy on September 24, 1941.[1279]

530. Occupation Expenses Negotiations are Transferred to Diplomatic Channels

During the last part of August and the first part of September, conferences were being conducted between the Yokohama Specie bank and the Indo-China bank to complete details of the agreement to exchange piasters for American dollars, gold or free yen. By September 16, 1941, when no settlement had been reached, a communique from the Japanese Minister of Finance to Economic Attache Yumato in Berlin disclosed that negotiations were to be transferred to the Japanese and French governments, thus transferring settlement to the diplomatic field. The Attache was directed to cooperate in expediting the negotiations which Ambassador Kato was conducting in Vichy, and was warned to make preparations for future negotiations since Japan desired that its wishes in the matter be carried out.[1280]

531. Japan Insists that France Pay Supplementary Occupation Expenses

The Minister of Finance revealed on September 16 and 20, 1941 that Japan would soon insist that the French pay a supplementary amount for the expense of the troops stationed in French Indo-China, as had been decided upon in the joint-defense agreement.

France was to pay 66,000,000 piasters[1281] for supplementary expenditure for barracks, stables, depots, aviation fields, airplane hangars, supply depots, housing for various military equipment and marine transportation incurred by the Japanese Army of Occupation in French Indo-China. In explaining the itemized demand, Foreign Minister Toyoda said that the former agreement whereby France would pay 23,000,000 piasters related principally to expenses incurred in occupying the territory and did not include these new items. Furthermore, the French government was to turn over all existing barracks, warehouses, and remount depots, was to do nothing to block Japanese demands, and was to assist Japan's military establishments in every way.[1282]

If France were reluctant to supply the supplementary occupation expenses, it would be necessary to adopt forceful negotiations.[1283]

Foreign Minister Toyoda directed Ambassador Kato to enter into negotiations for the supplementary payments of 66,000,000 piasters which would be made in Japanese free gold yen or in foreign gold.[1284] The September and October portions of 11,500,000 piasters each were to be paid at the earliest opportunity, and action was to be taken to ensure the receiving of 21,500,000 piasters at the end of the months of November and December.[1285]

Foreign Minister Toyoda suggested that the question of linking the piasters to Japanese currency might be introduced, but advised his representatives not to mention the whole amount which Japan was demanding to avoid difficulties in collecting the installments for September and October.

For the further information of Ambassador Kato who was to make these demands, Foreign Minister Toyoda sent to Vichy, on September 20, 1941, the information that the Japanese occupation forces were poorly quartered, and had not been permitted to use the warehouses of the French army. Ambassador Kato was also informed that the French authorities had requested that the Indo-Chinese forces be responsible for the border regions facing China and

[1279] III, 998.
[1280] III, 999-1000.
[1281] The equivalent of approximately $5,280,000 in American money.
[1282] III, 1001-1002.
[1282] III, 991.
[1284] The total in the Japanese dispatch reads 66,000,000 but additions to the items listed amounts to 76,000,000.
[1285] III, 1003.

[262]

THE "MAGIC" BACKGROUND OF PEARL HARBOR

Thailand, and that the Japanese forces be responsible for the remaining areas. From this it appeared that Indo-China was anxious not to provoke the Chinese army.[1286]

532. Ambassador Kato Reports that Germany Favors Franco-German Collaboration

In view of the fact that France desired a revision of the terms of the Franco-German Armistice, the Japanese Ambassador, for the information of his government, continued to submit reports in regard to internal conditions in France. Since Germany was confident of the outcome of the German-Soviet war, and felt no anxiety regarding the coming war with England, a member of the German Embassy in Paris said that Franco-German cooperation was to be desired, and Ambassador Kato reported that preliminary attempts had been made to achieve cooperation. Furthermore, he informed Tokyo, on September 23, 1941, that the maintaining of peace in the occupied area was hardly a problem.[1287]

533. France Delays Payment of Occupation Expenses

The Japanese Ambassador at Vichy informed Tokyo on September 23, 1941 that Mr. Arnald had reported that Saigon had made inquiry of the Tokyo Specie Bank as to the disposition of the August payment of free yen, and that until a decision had been made, France was not prepared to accept the Japanese proposal of its paying one-third (possibly this means one-third in gold and the rest in free yen) for the month of September.[1288]

On September 24, 1941 Ambassador Kato presented to the French Foreign Minister the Japanese demand for the payment of 66,000,000 piasters[1289] for the support of the Japanese army in French Indo-China. Vice Premier Darlan stated that his understanding was that the French government was to lend the money temporarily, and Ambassador Kato answered that Japan intended to repay the sum advanced by means of gold, free yen, or foreign currency. The Japanese Ambassador explained that the September and October payments required immediate action, whereupon Vice Premier Darlan immediately called the offices concerned.[1290]

A week later Tokyo urged its Ambassador at Vichy to impress upon the French the urgency for negotiating this matter, and disclosed that a concrete proposal for method of payment would be made in a subsequent message.[1291] Ambassador Kato had already informed Foreign Minister Toyoda that the main difficulty with the French concerning the occupation expenses seemed to arise from the manner in which the present economic treaty was being carried out.[1292]

534. Vice Premier Darlan Denies Seeking American Intervention

Vice Premier Darlan and Ambassador Kato discussed several items during their conversation on September 24, 1941. Because the French Vice Premier had received some very unsatisfactory reports from French Indo-China, he was anxious that Japanese Ambassador Yoshizawa[1293] take up his post at the earliest possible moment. Therefore, Ambassador Kato asked on September 24, 1941 that he be informed when the Ambassador would start for his office.[1294]

[1286] III, 1004-1005.
[1287] III, 1006.
[1288] III, 1007.
[1289] See footnote 1284.
[1290] III, 1008.
[1291] III, 998, 1009.
[1292] III, 1010.
[1293] Possibly Kenkichi Yoshizawa, former Ambassador to France, serving in July, 1941 as member of House of Peers.
[1294] III, 1011.

[263]

Concerning the reaction of the United States to the joint-defense agreement, Vice Premier Darlan said that he had replied to Ambassador William D. Leahy who had informed him of the United States' displeasure with the pact in question, that France was taking this action after considering the respective positions of Japan and France, and he would like the United States "to stay out of this affair". He had added that since France could gain nothing by resisting Germany in Europe and since there would be no point in wrangling with Japan in the Far East, he could not understand Japanese suspicion that France had sought American intervention in the matter, especially since the United States could not help.[1295]

535. Japan Seizes a Railroad and Demands Military Installations in French Indo-China

After unsuccessfully requesting that Indo-Chinese officials transfer to Haiphong some 60,000 railroad ties which were near the Chinese border, the Japanese army seized the railway between Bandoeng and Haiphong and changed the ties itself. By September 29, 1941 Japanese forces had begun shipments over this railway.[1296]

On September 25, 1941 Ambassador Arsene Henry called on Foreign Minister Toyoda to discuss the demand made by the Japanese army that a building in Saigon, several factories, and hangars be transferred to it, and that the army be allowed the free use of two air fields in Cambodia. This demand was accompanied by the warning that unless France complied by September 26, 1941 these establishments would be occupied by force. Asked by the French Ambassador in Tokyo that the Japanese army be instructed to avoid the use of force, the Japanese Foreign Minister replied that he could not issue such instructions, unless French acceptance of Japanese demands was guaranteed. To avoid creating unnecessary trouble, he suggested that the French Ambassador strongly recommend to the Governor General the acceptance of the demands of the Japanese army. According to a report which had been received on September 28, 1941 from the Japanese army in French Indo-China, the Governor General had finally given in to the Japanese demands, and the question was settled satisfactorily.[1297]

536. Vichy Reports on Japanese Experimental Broadcast

On September 23, 1941 radio reception of Japanese broadcast directed to America and the South Seas was reported as favorable by the Japanese Ambassador in Vichy. However, the Ambassador advised that extreme caution be exercised in regard to some items, such as the stressing by the Japanese news agency, Domei, of the Japanese-American negotiations and the prediction of their completion, whereas all such reports were denied in America each time. He suggested that the handling of such broadcasts be left to foreign news commentators.[1298]

In conducting experimental broadcasts to Vichy, Tokyo learned on September 30, 1941 that the reception on only one station had been good on all three days of the experiment. Due to the existence of a powerful French broadcast using a wave length very close to the Japanese frequency, the other two stations had not been heard. In suggesting improvements, the Japanese Ambassador asked that the telegraphic messages be repeated twice, and that any sort of urgent message, which they intended to send properly later, be sent tentatively at the time of the experimental broadcast.[1299]

[1295] III, 1012.
[1296] III, 1013.
[1297] III, 1014.
[1298] III, 1015.
[1299] III, 1016.

[264]

THE "MAGIC" BACKGROUND OF PEARL HARBOR

537. Japanese Army Arrests Annamites in French Indo-China

Finding that the Vichy government was inclined to procrastinate in expelling or imprisoning Chungking representatives in the French colony, the Japanese army arrested more than 100 of the Annamites in Hanoi and Haiphong on September 25 and 26, 1941.[1300]

Since, according to The Central China Daily News of September 1, 1941, the Nanking government had assumed police supervision of the French concession at Hankow,[1301] and since France officially protested, it was logical that an inquiry concerning the arrest of the Annamites in French Indo-China should originate in Nanking.

On October 2, 1941 the Chinese Foreign Office announced that the French Embassy Councilor had apologized for a Japanese raid on the Chinese Consulate General in Hanoi, French Indo-China, thus assuming responsibility for the Japanese arrests in an attempt to assure French sovereignty in French Indo-China.[1302] In protesting such action, and in requesting the release of the pro-Chungking Chinese, the French had termed the action an indisputable violation of French sovereignty.[1303]

A communique, originated on October 2, 1941 by Lt. Col. Sakuji Hayashi of the Japanese Sumida organization, to answer the charge that the arrests were a violation of French sovereignty, declared that Japan had repeatedly demanded the expulsion of the leaders of the anti-Japanese Chinese residents, and this request had for six months been repeatedly ignored. Since the Japanese claimed that the Annamites and pro-Chungking Chinese were not only attempting to get hold of Japanese army secrets, but were preventing the Chinese residents in French Indo-China from becoming friendly to Japan, the Japanese army found it necessary for reasons of self-defense to take emergency measures. Since France had recognized the Japanese occupation of French Indo-China, it should recognize any action which in the interest of self-defense was incidental to that recognition.[1304]

538. German Ambassador Suggests Use of French Annamite in Japanese Sabotage Plans

The German Ambassador in Berlin suggested on October 2, 1941 that a French Annamite who had been living in Germany be issued a Japanese passport for the purpose of a brief visit to Japan. The Annamite, Pierre Fauquenot, was found to be a person whom Japan could use in its policies toward French Indo-China, having been imprisoned since December, 1939 in France. As the former editor of L'Alerte, a French language newspaper published in Saigon, he had been arrested because he had advocated that Japan and French Indo-China join hands. For this reason the German Ambassador felt that Japan should both protect him and treat him hospitably regardless of what its policies toward French Indo-China happened to be. Other plans regarding Mr. Fauquenot included his going to Japan on board the Asama Maru, his working in Japan for a time and his returning eventually to French Indo-China where he would be valuable in the furthering of Japanese Schemes.[1305]

539. Japan Plans Use of Transferrable Yen or Gold in Exchange Payment

On October 3, 1941 Ambassador Kato was instructed to negotiate in the matter of French payment to Japan after considering the following points concerning the exchange of currency: American, British and Dutch currencies, being frozen, could not be utilized; the balance of Swiss franc funds, being small, could be procured only through the "free yen block"; Japan was reluctant to offer marks, since it owed marks to Germany; the procuring of funds in Italy

[1300] Facts on File, 1941, p. 380.
[1301] Facts on File, 1941, p. 349; See Volume II, Part C, "Hankow Incident," pp. 517-519.
[1302] Facts on File, 1941, p. 388.
[1303] III, 1017-1018.
[1304] III, 1018.
[1305] III, 1019.

[265]

was attended with difficulties; the Portuguese and Spanish currencies had not been used recently, and consequently, funds in these currencies were very small. The payment could be made in gold, since Japan's holding of this had reached a comparatively large sum, and it was believed that French Indo-China preferred settlement in gold, although there was also the possibility that the fear of inflation would bring a request that payment be made in commodities which could not be supplied in a hurry.[1306]

540. Japan Requests Additional 100,000,000 Piasters for Occupation Force

On October 4, 1941 an additional request of 100,000,000 piasters to be used for the maintenance expenses of the Occupation Force between January and December 1942, was transmitted to Ambassador Kato for presentation to the French government. It was estimated that between January and March 1942, the Japanese army in French Indo-China would require 30,000,000 piasters,[1307] or approximately 10,000,000 piasters[1308] per month.[1309]

Apparently having sent to Tokyo an explanation of the fixed rate of exchange for the purchase of gold by the Bank of French Indo-China, Ambassador Kato was instructed on October 7, 1941 to wire more details in connection with this matter since his previous explanation had not permitted Tokyo to reach a correct understanding. The Japanese Ambassador was also instructed to inform Tokyo immediately as to how much this official rate differed from the Japanese fixed rate.[1310]

Exerting more pressure on Vichy to secure the additional 66,000,000 piasters formerly requested as a supplementary payment for the support of the Japanese Occupation Force in 1941, Tokyo advised Ambassador Arsene Henry of the revision of the itemized account of billeting costs, aviation facilities, supply department, and shipping facilities, and urged him to recommend its acceptance. Ambassador Kato was directed to present the revised estimate to the Vichy government, and to negotiate immediately for a settlement.[1311]

541. Japanese Official Carries Secret Documents to Hanoi and Saigon

Precaution was taken in the sending of Mr. Ryuta Ono, Secretary of the Foreign Office, from Kobe to Hanoi on October 6, 1941. It was asked that Japanese officials in Hanoi facilitate his passage through customs, and ensure that the documents for Saigon were dispatched immediately by reliable mail.[1312]

542. Japanese Ambassadors Suggest Decorations for German Diplomats in Vichy

On October 7, 1941 Ambassador Oshima requested that Japan consider the conferring of decorations on German Ambassador Heinrich Otto Abetz and his staff in Vichy, in view of the assistance extended to the Japanese Embassy in Paris during the joint defense negotiations. The First Class Order of the Rising Sun was Louis J. Sheehan, Esquire suggested for the Ambassador, as well as other decorations suitable to the positions of his staff members.[1313] The Japanese Ambassador in Vichy echoed this request on October 15, 1941 when he transmitted the information that the

[1306] III, 1020.
[1307] Approximately $2,400,000 in American money.
[1308] Approximately $800,000.
[1309] III, 1021.
[1310] III, 1022.
[1311] III, 1023.
[1312] III, 1024.
[1313] III, 1025.

[266]

THE "MAGIC" BACKGROUND OF PEARL HARBOR

information that the Italian government planned to confer decorations on Germany's diplomatic staff at Vichy in the near future, and suggested that Japan also recognize the group.[1314]

543. France Accedes to Japanese Demand for Additional 10,000 Tons of Rubber

On October 9, 1941 Mr. Arnald informed Mr. Harada that France had decided to comply with Japan's desires for an increase of 10,000 tons of rubber, 7,000 of which were to be taken from the portion destined for America and 3,000 tons of which were to come from increased production. Mr. Arnald also expressed the hope that Japan would not oppose the export of 3,000 tons of rubber to America. The Japanese representative replied that he did not know whether his government would accept this proposal, but that he would transmit it to Tokyo.[1315]

For the purpose of further expediting the rubber question, along with other matters, which would have a bearing on the negotiations scheduled to be held at Vichy in January 1941, Minister Iwataro Uchiyama arrived at Hanoi on October 13, 1941. Tokyo announced that Ambassador Yutaka(?) Yoshizawa would depart for his post in mid-November.[1316]

544. France Protests Against Japanese Demands for Dapuko Barracks

At the insistence of the Governor General of Indo-China, Tokyo was informed on October 16, 1941 of the details of "a grave incident" which arose in connection with a request to quarter Japanese troops at Dapuko, an important military and ammunition center of the French colony. Lt. Col. Hayashi of the Japanese Army said that if this request were refused, the barracks at Hanoi would be seized, which statement was later withdrawn on the order of Lt. Gen. Shijiro Iida, who said that sending troops into Hanoi would be contrary to the joint defense agreement. Lt. Col. Hayashi asserted that he had a direct promise that Japanese troops would be quartered at Dapuko, but Col. Rene-Marie Jouan, Commander of the Indo-Chinese forces, maintained that French Indo-China could not permit Lt. Col. Hayashi to use the military barracks at Dapuko, and denied that the promise was anything but an offer for houses in the neighborhood.[1317]

545. French Indo-China Fears Collapse of Financial Structure

After negotiating with French officials in Hanoi concerning the payment of the 66,000,000 piasters by France which was also being negotiated in Vichy, Minister Uchiyama reported that French Indo-Chinese authorities were not so much concerned with how to make the payment, but with the possibility of the colonies' small-scaled financial structure being upset by the expenditure of such a large sum of money. Since the question of payment was an urgent matter, the Governor General had requested that Japan submit a proposal in writing. On October 16, 1941 the Japanese official asked permission, in compliance with French Indo-China's request, to submit a proposal ostensibly as his own, but derived from his official instructions.[1318]

[1314] III, 1026.
[1315] III, 1027.
[1316] III, 1028.
[1317] III, 1029.
[1318] III, 1030.

[267] [268 blank]

THE "MAGIC" BACKGROUND OF PEARL HARBOR

PART C—JAPANESE DIPLOMATIC ACTIVITIES THROUGHOUT THE WORLD

(k) Japanese-Chungking Relations

546. Chungking Leaders Open Southwestern Military Conference

According to schedule, Chungking National Government authorities met and opened the southwestern military conference at Kweiyang in the province of Kweichow August 2, 1941. Pai Chunghsi, Commander-in-Chief of the Ninth Route Army, was in charge of activities in which military representatives from the provinces of Kwantung, Kwangshi, Yunan, Kweichow, Runan, and Szechwan participated.

These conference delegates were scheduled to decide such questions as (1) the strengthening of control on military transportation in the southwest; (2) the defense of the Yunan, Kwangshi and Kwangtung Provinces, and (3) the organization of a general British-Chinese counter offensive.[1319]

Following the opening ceremonies on August 2, 1941 and the rendering of Generalissimo Chiang Kai-shek's speech of instructions, Pai Chung-hsi summoned several leading nationalists together, including the Kwantung Army Commander and the Commanders of the Kwangshi and the Nineteenth Route Armies for a conference. Should British authorities request aid, it was decided at this meeting that China would send an army of 15,000 men into Burma.[1320]

According to Japanese intelligence reports this southwest meeting was to be followed by a northwest military conference which would be held in Tienshui, the capitol of Kansu Province.[1321]

547. Japanese Intelligence Discerns American-British Aid to China

On August 6, 1941 the Tokyo radio broadcast an intelligence report from Berlin concerning the increased severity of the bombing of Chungking since January, 1941. Incendiary bombing in particular, having been stepped up, was expected to have a profound effect on morale in the Chungking area. This report also revealed that approximately one hundred American fighter planes and four hundred American airmen had been transported to that capitol in May.[1322] Another intelligence report of August 11, 1941 from Shanghai divulged that fourteen air bases were to be constructed in September with the help of America, Britain, and Russia.[1323]

548. Transportation Experts Visit China

In China at this time was Mr. Daniel Arnstein, one of the three American transportation experts who had been commissioned to improve facilities along congested traffic routes. From a newspaper reporter, who, shortly after talking with Mr. Arnstein, returned to the United States, Consul Muto in San Francisco learned of the existing conditions in the Chungking territories.

According to Mr. Arnstein, roads between the Iashio and Yannanfu districts had been in exceptionally bad repair; but under the supervision of United States Army engineers, a paving job had already been undertaken. Using 10,000 tons of asphalt and 4500 American-made trucks, thirty-two American engineers were supervising the task of completing transportation

[1319] III, 1031.
[1320] III, 1032.
[1321] III, 1031.
[1322] III, 1033.
[1323] III, 1034.

[269]

facilities, policing, and repairing communications lines. As a result of such activity, by September 8, 1941, transportation capacities for one month had been doubled to approximately 30,000 tons.[1324]

549. Japanese Demand That Macao Authorities Halt Allied Smuggling

Having received orders from the Japanese Foreign Minister on June 28, 1941 urging that they file a protest with the local government of Macao, southern seaport in China, requesting strict surveillance of all activities associated with smuggled material to Generalissimo Chiang Kai-shek's forces,[1325] the Japanese chiefs of the army and naval general staffs in Canton discussed steps to be taken, in a meeting on August 19, 1941. Protests regarding the stopping of pro-enemy activities were to be filed by Acting Consul Fukui. In the event that these representations were rejected, it was decided that Japanese ships would blockade the southern coast.[1326]

These details of the demands which were presented to the Macao government included:

(1) A ban on all shipment of goods into enemy territories via the unoccupied coastal region;

(2) Constant supervision of the port of Macao to prevent smuggling;

(3) Complete cooperation of the Macao government in according necessary facilities and protection to the Japanese within its territory;

(4) The closing of all organizations connected with the Chungking regime;

(5) The disbanding and prosecution of all espionage organizations; and,

(6) The suppression and punishment of members of enemy firms and transportation companies as well as the suppression of anti-Japanese propaganda, opinions, newspapers, societies, et cetera.[1327]

However, it appeared that Macao authorities had not acceded to these demands by September 16, 1941; for Japan had already taken steps to enforce its threat. On that date a Japanese military patrol boat in the Macao harbor fired on a Portuguese official's patrol boat without warning and despite its clear displayal of the Portuguese flag. The Portuguese government immediately protested to Japan, but by October 13 Tokyo had made no answer.[1328]

550. Chinese Communists Take Advantage of British-American-Russian Conferences to Present Demands

Japanese intelligence reports indicated to Tokyo that Chinese Communists Chen Shao-yu, Lin Piao, Lin T'su-han, and Lin Po-chao had decided to leave Yunan-Fu in Shensi by plane for Moscow on November 24, 1941. By taking advantage of the British-American-Russian conference, they planned to maneuver a favorable turn in the boundary dispute. These Chinese Communist leaders had sent a wire to the American representative at Chungking, Owen Lattimore, assuring him that they favored joint negotiations among Great Britain, the United States, and Soviet Russia and stating that their demands included: (1) legitimate existence status as well as recognition of equal treatment for the Communist army; (2) the development of the northwest section; (3) the reorganization of the National Association for Assisting the Administration; and, (4) the abolition of the Right Wing of the anti-Communistic platform. Chau En-lai, another Chinese Communist leader, had previously discussed these demands with Mr. Lattimore.[1329]

[1324] III, 1035.
[1326] III, 1036.
[1326] III, 1037.
[1327] III, 1038.
[1328] III, 1039.
[1329] III, 1040.

[270]

THE "MAGIC" BACKGROUND OF PEARL HARBOR

551. Mao Tse-tung Promotes Communist-Nationalist Relations

Another spy report located Communist Mao Tse-tung at Hami on August 19, 1941. On August 19, 1941. On August 25 he was observed to be leaving that city for Moscow. During his stay in Hami, it was believed that he had been occupied with the promotion of Nationalist-Communist relations.

Now that he was in Moscow on September 4, 1941, Mao Tse-tung was expected to conclude a compromise of all problems between the Nationalists in China and the Communists in Moscow. It was believed that he would attempt to obtain from the Russian capitol additional equipment and instructions for Communist forces, as well as the development of a concrete joint policy between Chinese and Russian forces. While in Moscow, he planned to work out the details of future anti-Japanese strategy and the role to be played in this strategy by the Communists.[1330]

552. Chinese Educator Believes Anti-Communist Faction will Impede Joint Russo-Chinese Military Action

Japanese officials considered many sources in coordinating their intelligence on the Chinese-Russian collaboration and found it of importance to record on September 1, 1941, an observation by a Chinese educator, Huang Yen-pei, who had discussed the joint military action between Russia and China at a dinner meeting in Hongkong. Mr. Yen-pei believed that joint military action between Russia and China would formally be agreed upon with the aid of Great Britain and the United States. On the other hand, he explained that the anti-Soviet faction in China feared Russia and was following the opportunistic policy of compromising with Japan while at the same time advocating anti-Japanese resistance.[1331]

553. Chinese Educator Claims Only Anti-Japanese Encirclement Policy will Save Chungking

Mr. Huang Yen-pei also stressed the fact that United States aid to China was not reaching advanced bases in time to accomplish its purpose. Citing as an example two hundred American planes which had been shipped to China, he pointed out that it took two days to assemble each plane, thus making it a year before the entire two hundred could be used in the war. This left many American-trained pilots without effective employment.[1332]

In addition, the Chinese government continued to put pressure on the Chinese Communists. The best troops were still far behind the front lines, and the so-called anti-Japanese counter attack was labelled by Mr. Yen-pei as nothing more than propaganda.

Nothing, he said, would save Chungking but the formation of an anti-Japanese encirclement policy by Great Britain, the United States, and Russia. Mr. Yen-pei also expressed his fear that civil war might exhaust China should Moscow fall and Russian support of Chinese Communists be withdrawn. Apparent friction between Communists and Nationalists throughout China made the danger of a split within the government seem imminent.[1333]

554. Japan Detects Growing Anti-Communist Sentiment in Nationalist Headquarters

Many indications of increasing anti-Communistic and pro-German sentiments among Chinese Nationalistic leaders were observed by Japanese agents. In a report from Shanghai on September 6, 1941 a plan recently adopted by Chungking General Headquarters was revealed as advocating the spread of propaganda to condemn Chinese Communist activities which were considered subversive and impeding the continuation of the war against Japan.

[1330] III, 1041.
[1331] III, 1042.
[1332] Ibid.
[1333] Ibid.

[271]

The unification of the various armies and the increase of the power of the Nationalist forces were included in the plan, as well as the diplomatic policy of appearing to be in line with England and the United States while secretly sealing amicable relations with Germany and Italy. This plan called for an attack by Chinese government troops upon Indo-Chinese troops.[1334]

555. Chiang Kai-shek Encounters Opposition to Establishment of Southwestern Military Headquarters

On September 12, 1941 Japanese agents in Shanghai revealed that Chiang Kai-shek had already laid plans for the establishment of military headquarters for southwestern territories in Kunming. In view of the fact that the Generalissimo met with opposition from some of his commanders who opposed a southward movement by the central army, Chiang Kai-shek's plan was said to have ended in failure. When the Generalissimo had telegraphed to Haku Su-ki, one of his officials in Kunming, to organize military headquarters in that city, the official asked that the Generalissimo himself visit the southwest to direct the establishment of the military base.[1335]

556. Chicago Times Writer Labels Russian Aid to China Insignificant

As Japanese officials continued to measure the significance of Chinese-Russian relations, they learned in a dispatch from Moscow the opinion of a Chicago Times reporter, regarding Russian aid. The reporter believed that only an insignificant amount of help had come from Russia to Chiang Kai-shek, although he had observed that many Russian troops were stationed in the Chinese border towns of Suchow, Lanchow, and Hami.[1336]

557. Chinese Pilots Train in American Camps

Not only was the infiltration of United States officers into China noted in Japan,[1337] but the transfer of Chinese officers to America for training was also taken into consideration. On September 22, 1941 Tokyo transmitted a report that one hundred and twenty Chinese Air Corps officers had embarked for the United States aboard the U.S.S. President Pierce.[1338]

558. Chiang Kai-shek Is Skeptical of Peace Talks

According to a message from Nanking on September 26, 1941, Chiang Kai-shek did not intend to be "wheedled" into a peace with Japan by the United States and even when Chien Yung-ming, prominent financial adviser, recommended that a peace be culminated with the Nipponese, he had responded unenthusiastically. Although the Generalissimo was apparently in favor of concluding hostilities, Chien reported, he believed it improbable that a lasting peace could be formed with the untrustworthy Japanese; for should Japan sign an agreement, it would be used only to afford time to strengthen their forces and to return to a more devastating bombardment of Chungking.

Continuing his conversation, Mr. Chien Yung-ming revealed that he would warn Chiang once again when he made a trip to Chungking on September 30, 1941 of the urgent necessity for making peace, but he was convinced that such a warning would go unheeded.

In regard to Japanese-American negotiations, Chien Yung-ming revealed rumors that the United States was not advising the Chinese through their Ambassador, Mr. Hu-shih, about the Hull-Nomura conversations.

[1334] III, 1043.
[1335] III, 1044.
[1336] III, 1045.
[1337] III, 369.
[1338] III, 1046.

[272]

THE "MAGIC" BACKGROUND OF PEARL HARBOR

Another rumor which had been circulating in Chungking involved the evacuation of Japanese troops. Supposedly the United States had advised that it would be satisfied if Nipponese troops were removed from the Honan province alone and that troops might be retained in Hopei. At that report Chiang Kai-shek had become quite angry and made the claim that he had captured Lang Chow on September 18.[1339]

559. Japan Considers Possibility of Sabotaging the Socialist Conference With Four Changs

An additional force operating on the complex Chinese scene was the so-called "Four Chang Movement", which advocated peace on all fronts. This organization, depleted by the death of its fourth Chang, Chang Lei-luan, was, according to Japanese agents in Peking, soon to be approached by Lu Ting-kuei, Shanghai's Secretary of the National Socialist Party.

It was pointed out by Japan's Peking representative that since the National Socialist Party was currently in such a vulnerable position the possibility of a scandal would be injurious to the party's reputation. Since a meeting of the party had been scheduled for the near future, it seemed possible that the Japanese agents were plotting to strike additional confusion into the already complex Chinese front.[1340]

560. Japanese Intelligence Locates Chungking Armies in Burma Territory

On September 30, 1941 Chinese informants revealed that considerable damage had been done to Burma in the August 15 bombardment. The Southwest Development Company warehouses and approximately one hundred trucks had been destroyed, while over sixty persons had been killed.

They reported that the Chinese were camouflaging their Sixth Armored Division motor equipment to appear identical to the yellow-painted Burmese vehicles. British and American private military cars were also observed in conspicuous numbers in this area.

Although Chinese troops had moved into Burmese territory along the Lashio route, it was difficult for Japanese agents to tell them from native Burmese troops because of the similarity of the uniforms.[1341]

561. Chungking Voids Existing Legal Tender

Japanese spies learned that Chungking authorities were planning to prohibit the circulation of all old legal tender currently circulating in China, and that they were planning to import printed money from the United States before the end of the year. According to a Canton report to Tokyo on October 2, 1941, Japanese authorities would counteract this move by forbidding the use of Chungking-authorized legal tender in all of the occupied areas.[1342]

562. Lanchow Agreement Is Concluded—Lattimore Reports to Chiang Kai-shek

Apparently the contemplated plot to sabotage the Communist-Nationalist coalition meeting had been abandoned by Japanese officials, for on October 4, 1941 results of the Northwestern Military Conference at Lanchow were transmitted to Tokyo. As it was expected, at these meetings the Communists had submitted their demands for partial reorganization of the government of China and of the Council for Political Assistance. They had also asked for complete payment of the military stipends due the army, the cessation of anti-Communist activities, and the formation of a national united front. After reaching the decision to secure a guarantee for the agreement from the United States, Great Britain, and Russia, the conference had been adjourned.

[1339] III, 1047.
[1340] III, 1048.
[1341] III, 1049.
[1342] III, 1050.

[273]

On September 29, the United States representative, Owen Lattimore, returning to Chungking, reported to Generalissimo Chiang Kai-shek on the results reached at Lanchow. While conferring with the Generalissimo, he asked that the three visiting Allied representatives be appointed as guarantors to the Lanchow agreement.

Mr. Lattimore then attempted to obtain the varied opinions of numerous parties and factions in Chungking regarding the proposal made at Lanchow for reorganization of the Council for Political Assistance.[1343]

Twice weekly Mr. Lattimore held regular conferences with Generalissimo Chiang Kai-shek, at which times Japanese authorities believed that he was discouraging any hope in the success of the Japanese-American negotiations and that he was urging Chiang Kai-shek to stiffen his defense in the northeast and at the same time to conclude a military alliance with Russia.[1344]

According to the previously-mentioned Japanese report of October 4, 1941, it had been decided at Lanchow that the Nationalist and Communist parties should meet formally at Sian by the middle of December, and that in preparation for this conference, Mr. Lattimore, Mr. Chang-Chung, who was Chief of the Military administration in Chungking, Chang Tsu-chung, Commander of the 38th Division, and two other representatives would work together towards establishing an understanding among the various parties and factions. With this purpose in mind Mr. Lattimore had gone to Hankow on September 26, 1941 while Feng Yu-siang and Hu Tsung-man remained in Lanchow to discuss strategy for lessening antagonism between Communist and Nationalist parties.[1345]

563. Japanese Interprets Communist-Nationalist Truce

According to Japan's interpretation of these conferences, the secret of the temporary truce between the Nationalist and Communist groups was that negotiations were underway in Moscow. On September 21, 1941, according to a dispatch from Shanghai, Chiang Kai-shek had sent Commissar Stalin a letter suggesting joint defense of Inner and Outer Mongolia and a strengthening of the northwestern forces under the leadership of the Red army.[1346]

On the other hand, by October 2, the Japanese had concluded that any Communist-Nationalist truce would only be a temporary compromise made at the behest of the United States The Nipponese leaders could not believe that such a cessation of hostilities would be of long duration since it was illogical that the Communist leaders would relax their demands for any length of time or refrain from anti-Japanese provocative activities. According to the Japanese the Communist party would never undertake joint action with the Chiang regime since it was nurturing the desire to overthrow the Nationalist Party and to supersede it. Thus, since the economic situation was becoming increasingly dangerous, Japan predicted civil war within Nationalist China and professed to believe that Chiang-Kai-shek himself was profoundly worried over current events.[1347]

At this time some factions in Japan grasped the possibility of taking advantage of the Nationalist-Communist strife, and by promoting an anti-Communist program as part of Japanese policies, they might, by sympathizing with the Chiang regime, be able to tender a peace offering. However, for the time being any mention of a peace settlement would be to no avail.

Rumors had been spread that a neutral faction originating in Shanghai of certain serious minded persons, was attempting a peace movement but was sympathizing with neither Chiang Kai-shek nor with Wang Ching-wei. It was believed that some influential members of the

[1343] III, 1051.
[1344] III, 1052.
[1345] III, 1051.
[1346] III, 1053.
[1347] III, 1054-1055.