JULY 25, 1941. 
Memorandum for the Chief of Staff:
Subject: Sanctions against Japan. 

I. Discussion.

1. On July 12, 1941 the Japanese Government announced that it had decided to take over control of the nation's capital funds which are to be mobilized in the interests of the state. The new policy apparently discards the past economic set-up and calls for mobilization and distribution of capital at the will of the government in order to attain maximum production as well as to bolster the defense structure.

2. The new policy is obviously a belated attempt to improve the deplorable economic conditions in Japan-conditions pointed out in confidential Economic Estimate, Japan, May 27, 1941, compiled in the Far Eastern Section, this Division, a copy of which is attached hereto as Tab I.*


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3. This centralization of capital which is merely an extension of the control which the government has already secured over industry and other branches of Japanese economic life, will undoubtedly bring about a more efficient control of Japan's internal structure, but will contribute nothing toward the acquisition of critical and essential raw materials so badly needed by Japan's war industries.

4. A step toward this latter end is Japan's current move to occupy southern Indo-China. In the opinion of this Division this will be followed by an extension of Japan's control to include Thailand. Further aggression by Japan after consolidating her position in these new points d'appui will be predicated upon the outcome of the European War.

5. For some time, the policy of our government has been based upon a desire to restrain Japan by moral embargoes and export control, neither of which were stringent enough to drive Japan into further aggressive action toward Malaysia and the Netherlands Indies


6. A discussion as to whether this policy was sound at the time of its adoption is immaterial to a study of the current situation. The fact stands out, however, that Japan has now burst through these mild restraints imposed by the United States Government and is now embarked upon new aggression which endangers the safety of all the areas in the southwestern Pacific, including the Philippine Islands.

7. Under these circumstances the last reason for withholding effective sanctions against Japan has been brushed aside.

8. Attention is invited to the last sentence on page 81 of Tab I which reads: "The United States is today in a position to wreck completely the economic structure of the Japanese Empire." This statement is as sound today as when it was written in May, 1941.

9. Effective economic sanctions against Japan imposed by us, today, would not, in the opinion of this Division, force Japan to take any steps in the way of aggressive action which she does not plan to take anyway, when a favorable opportunity arises, nor would they precipitate a declaration of war on us by Japan. Such action on our part need not and should not distract our attention from the main theater of operations. On the contrary, by adopting such a policy we will be able to conserve for Britain and for ourselves supplies which from the viewpoint of our national defense, are being worse than wasted when we place them in Japanese hands.

                                                SHERMAN MILES
                                         Brigadier General U. S. Army
                                   Acting Assistant Chief of Staff, G-2.
1 Enclosure: Tab I.
   Secretary of War
   Secretary, Joint Board
   Deputy Chief of Staff
   War Plans Division 
[Pencilled notation :] This memo was written prior to receipt of 
information regarding embargo decision.