TABLE OF CONTENTS

                                                            Page No.
Chapter II  China Incident                                        9

            Primary Causes of China Incident                      9

            Outbreak and Expansion of the China Incident         13

            Progress of the China Incident                       14

               First Year of the China Incident (1937)           14

            Japanese National Policy Prior to Outbreak           16
            of China Incident

            Policies of Central Army and Navy Authori-           16
            ties of Japan at Outbreak of the China Incident

            Attitude of Chinese Authorities at the               17
            Outbreak of the Conflict

            Diplomatic negotiations between Japan and            18
            China

            Measures taken by the Japanese Navy before           21
            the Shanghai Incident

            Evacuation of residents from the Yangtze             23
            River area

            Evacuation of Japanese residents in South            25
            China

            Navy Operations                                      25

            Shanghai Incident                                    28

               Situation on the Eve of the Incident              28
 
            War Preparations by the Japanese Navy                31

            The Sinking of the USS Panay                         32

CHAPTER II

China Incident

Primary Causes of China Incident

When World War I began in 1914, Japan occupied Tsingtao, German base, of operations in the Orient. Intent upon domination of the Shantung Peninsula, Japan presented the "Twenty-one Demands" to China. These included Japanese succession to German rights in Shantung, extension to 99 years of the leases in Kwantung Province with commercial freedom for Japanese in Manchuria; half interest in the Hanyeh-ping Company which operated iron and steel mills at Han-yang, iron mines at Ta-yeh and a colliery at Pingahan, and a declaration that no part of China's coast should be leased or ceded to any power. These demands upon China implanted in the Chinese people a deeprooted hatred of all Japanese. Japan's acquiescence to Anglo-American pressure at the Washington Conference in 1922 to respect China's sovereignty, independence and territorial and administrative integrity, gave China confidence that by following a foreign policy of "befriending the far and antagonizing the near" she would recover her national sovereignty.

Anti-Japanese feeling was strong in China and an attitude of rejecting or insulting all things Japanese permeated the Chinese people during the transition from China to the Republic of China. These sentiments were exploited wherever possible during the national unification movement.

At the same time, anti-Chinese feeling was growing in Japan. This was directed against unwarranted infringement of Japanese legitimate rights in China and Manchuria, which the Japanese believed had been gained at the cost of blood during the Sino-Japanese and Russo-Japanese wars.

The Manchurian Incident began in 1931, followed in 1932 by the first Shanghai Incident. Subsequently, Manchukuo was founded with

9

Japan de facto in complete control of the state. This caused deep distrust of Japan by China and other powers. Therein lies one of the main causes of the China Incident as well as of the Pacific War.

Japan; Germany and Italy, the "have-not" nations, discontented with the status quo established by the Washington Conference, devoted themselves to the task of rearmament, regarding the "have" nations, "Great Britain, United States, France and the Soviet Union" as potential enemies.

Traditionally the Japanese Army emphasized operations against the Soviet Union, while the Navy considered the United States as the potential enemy. Concurrently, the nation's finances could not meet the requirement's of both the Army and Navy, and, as there was no unified program, year after year, there was intense competition between the two services to see which could acquire the greater part of the appropriations. Factors which contributed to the advance of the military in politics and ended in their complete control were the impotence and corruption of the political parties, the apathy of the people and the inadequacies of measures taken by responsible parties against the "behind the scene" activities of the military.

It was urgent that Japan should attain self-sufficiency in foodstuffs and raw materials. Japan, however, was desperately short of resources, while Manchukuo could supply only part of the requirements. To cope with this situation, therefore, the Navy looked toward the resources of the Southwest Pacific Area and advocated the southward advance of Japan's economic sphere. On the other hand, the Army believed that Japan should make advances into North China to the area bordering on Manchukuo, which had large reserves of iron, coal, cotton, wool and salt. It seemed possible that the Army, in complete disregard of the opinions of the Central Army and Navy Authorities in Tokyo, would take action and advance into North China.

It appeared that Japanese nationalism had supplanted the anti-

10

Communist movement in Japan. This nationalism was intensified by the May 15 Incident of 1932 when Premier Inukai was assassinated by military reactionaries and again by the February 26 Incident of 1936, when Viscount Saito and others were assassinated by young Army officers. In the political sphere, the February 26 Incident was followed by the successive formation of the Hirota, Hayashi and finally the Konoye Cabinet in June 1937. Though inadequate in many ways, the Konoye Cabinet eliminated standing rivalries and achieved a semblance of national unity.

With the establishment of Manchukuo in March 1932, Japan formally recognized this new state and strove to promote its growth. At the same time, the Manchurian question, as a result of Chinese agitation, became a major issue in the League of Nations. On 24 February, 1933, the League of Nations adopted a resolution calling for the non-recognition of Manchukuo and the United States firmly upheld this resolution. As a result, Japan withdrew from the League of Nations on 27 March 1933. Subsequently, the Western Powers watched carefully and viewed with suspicion Japan's moves toward Manchukuo. The Western Powers capitalized on the anti-Japanese feelings of the Chinese people and adopted a policy of offering favors that would further their influence with the Chinese people. The relations between Japan and the Soviet Union over the question of Manchukuo were far from encouraging. It was, therefore, to an internationally isolated Manchukuo that Japan alone offered a helping hand.

Early in 1933, the Hitler regime came into power in Germany, and, in October 1933, Germany also withdrew from the League of Nations. In this way, a now trend developed in which the "have nots" drew closer together. Eventually, at the end of 1936, the Japanese-German anti-Comintern Pact and the Japanese-Italian Agreement were concluded, Japan thus drew closer to an entered into friendly relations with the bloc of nations desirous of breaking the status quo

11

in Europe.

In the meantime, in China the Nationalist Revolutionary Army under the command of Chiang Kai-shek succeeded in its northern expedition in 1928 and the campaign to unify the whole of China progressed steadily. This movement was further strengthened in December 1936 when General Chang Hsueh-liang kidnapped Chiang Kai-shek at Sian in an effort to force him to declare war on Japan. Even the Reds, whom Chiang had pursued since 1929, assisted in effecting his release, strongly testifying to the moral unity of the country. In January 1937 negotiations were conducted with the Communists and the Shensi Government was brought into harmony with the Nanking Government. Also the successful monetary reform conducted in 1935, under the direction of Leith-Ross, together with the financial boom of the following year strengthened Chinese economy, enabling that country to settle the Suitung issue advantageously in December 1936. This, plus the augmented military power of China and the support of Great Britain, the United States and the Soviet Union, intensified the anti-Japanese movement and paved the way for the inevitable clash between Japan and China.

In North China a situation had been created through maneuverings by the local Japanese Army, influenced by Japanese military pressure in Manchuria, by which the old influential elements in North China hoped to break away from Kuomintang control. By the Umezu-Ho Ying-chin Agreement of 1936, the influence of the Kuomintang was eliminated in North China. With the backing of the Japanese Army, autonomy movements were started, culminating in the establishment of the Chi-Tung Area Administrative Committee. The people of China generally believed that these movements were instigated solely by Japan, and the Special trade relations in the Chi Tung District helped anti-Japanese feeling in that area. The situation grow tenser day by day.

12

Outbreak and Expansion of the China Incident

On the night of 7 July 1937, elements of the Japanese forces garrisoned at Feng-Tai, southwest of Peiping, were suddenly subjected to firing by the Chinese 29th Army, under the command of Sung Che-yuan, while they were engaged in night exercises in the vicinity of the Marco Polo Bridge in Peiping. This was the beginning of the Marco Polo Bridge Incident. There was no evidence that this clash was planned by the Japanese forces or that they desired to spread the conflict. Too, both the Japanese Central Government authorities and diplomatic circles were desirous of localizing the affair. The Chinese authorities, with the exception of some low ranking officers and those directly concerned with the Incident, also appeared anxious to prevent further clashes. It is believed that the mounting tension between the two forces was the cause of the outbreak.

The Navy, at that time, was afraid that if the conflict spread, the necessary help they would be required to give would impede their armament program against the United States. They also felt that the conflict might incite the British to assist the Chinese. The Army feared that the conflict might force a change in the disposition of troops against the Soviet Forces, while financial circles warned that was still, to a great extent, dependent upon the United States and Great Britain.

Repeated negotiations were hold with the Chinese authorities, but the Chinese were indecisive in their attitude, being conciliatory at one time and obstinate at another and committing frequent acts of bad faith.

On 11 July, the Japanese Government decided to send to North China the Jehol Brigade and a motorized unit from the Kwantung Army, together with the 20th Division from Korea and the 5th, 6th and 10th Divisions from Japan Proper. In the meantime, the Chinese authorities again changed their attitude and a delegate from the Chinese

13

29th Army finally accepted and signed a settlement on the night of the 11th. The Japanese local authorities, therefore, regarded the Incident as closed. However, the provisions of the agreement were violated on 19 July by Chinese troops in the vicinity of the Marco Polo Bridge. Pressed by circumstances, both domestic and international, the Japanese Government changed its attitude toward the Incident several times, but after the Lang-Fang Incident on 25 July, followed by the Kwang-an-men the next day, it was finally decided to dispatch divisions from the Homeland, On 28 July, the Japanese Garrison Force in North China opened an offensive in the Peiping-Tientsin area, concluding it on 31 July.

Progress of the China Incident

The progress of the China Incident is described below in chronological order. Short comments are made on those events which affected the Pacific War as well as the over-all international situation at the time.

 
First year of the China Incident (1937)

 7 July:      Outbreak of China Incident.

26 July:      Reinforcements dispatched to North China.
              General offensive in Peiping-Tientsin area begun.

 8 August:    Japanese forces occupied Peiping.

 9 August:    Lt (Navy) Oyama murdered in Shanghai.

13 August:    Outbreak of Second Shanghai Incident (Chinese forces 
              opened enveloping attacks on Japanese settlement. Naval 
              Landing, Forces in Shanghai forced to fight and fierce 
              battles ensured.

14 August:    Japanese Government decided to send army troops to 
              Shanghai.

23 August:    Japanese troops landed in Shanghai and the theater was
              enlarged.

24 August:    Policy of protecting the Japanese residents in Tsingtao

14

              abandoned and order for their evacuation issued.
              Evacuation completed on 31 August.

12 September: Chinese Government presented case of Sino-Japanese
              conflict to League of Nations.

 6 October:   United States Government issued a statement accusing  
              Japan of violating the Kellogg Peace Pact.

23 October:   General offensive launched by Japanese forces in the
              Shanghai area.

25 October:   Planning Board established within the Japanese Go-  
              vernment.

28 October:   Mongolian Federal Autonomous Government established. 

 5 November:  Japanese troops landed at Hangchow Bay.

 6 November:  Italy joined German-Japanese anti-Comintern Pact.  

20 November:  Imperial General Headquarters established in Imperial
              Palace. Removal of Chinese Government to Chungking
              begun.

9-30 November: Japanese forces captured Sung-Chiang (9 November),
              Nanshin, suburbs of Shanghai (12 November), Soochow
              (19 November), Wu-Sih (25 November), Kwang-Teh (30
              November), and other strategical points.

 1 December:  Extraterritoriality between Japan and Manchukuo
              abolished.

12 December:  Japanese naval aircraft bombed and sank American gunboat   
              Panay by mistake. 

13 December:  Japanese forces occupied Nanking.

14 December:  Chinese Provisional Government established at Nanking.

2-24 December: Japanese forces occupied Chiang-yin (2 December),
              Chen-chiang (8 December), Wu-hu (10 December),
              Nanking (13 December), Yang-Chou ({1?} December), 
              Hangchow (24 December), and other strategical points.

15

Japanese National Policy Prior to Outbreak of China Incident

The Hirota Cabinet formulated a basic national policy on 15 August 1936 and reported it informally to the Emperor, (See Appendix 1) This basic national policy and the corresponding foreign policy aimed at attaining cooperation between Japan, China and Manchukuo through friendly relations. The foreign policy based on friendship with all powers was not of such a nature as to be the direct cause of the China Incident or the Pacific War. However, two salient points of that policy are worth noting. One was the tendency to approach Germany for the purpose of containing the Soviet Union while the other was the design to establish an anti-Communist zone in North China. The former developed very shortly into the anti-Comintern Pact between Japan, Germany and, Italy and later into the Tripartite Alliance. The latter, which aimed at creating an anti-Communist zone, by placing North China under the Japanese sphere of influence, can be viewed as a principal cause for the conflict in North China in 1937.

On 16 April 19379 the Hayashi Cabinet (Prime Minister Senjuro Hayashi, Foreign Minister Naotake Sato, War Minister Hajime Sugiyama, Navy Minister Mitsamasa Yonai, Finance Minister Toyotaro Yuki) decided to adopt the decisions of the previous cabinet with some modifications in regard to the policy to be followed in China for the time being. (See Appendix 2) There wore two mayor principles in common with the previous cabinet in that they aimed to protect North China from Communist domination through collaboration and mutual assistance on the part of Japan, China and Manchukuo and desired to create a pro-Japanese and pro-Manchukuo zone in North China.

Policies of Central Army and Navy Authorities of
Japan at Outbreak of the China Incident

The China policy formulated by the Japanese Army authorities on 8 July 1937. (See Appendix 3)

16

The China policy formulated by the Japanese Navy authorities on 8 July 1937. (See Appendix 4)

The China policy of the Japanese Government as reported to and approved by the Emperor on 11 July 1937, and the announcement by the Japanese Government. (See Appendix 5)

As shown in the various appended documents, the Japanese central authorities adopted a localization policy at the outbreak of the incident. However, the government was forced to resort to practical measures for settling the situation by sending reinforcements, in order to display its power and maintain peace and order in North China. Such measures, however, were misinterpreted throughout China as an act of aggression by the Japanese Army against North China and finally led to disagreements and mutual distrust in all subsequent negotiations.

Attitude of Chinese Authorities at the Outbreak of the Conflict

Chiang Kai-shek expressed the strong determination of the Chinese to defend their country in his statement at Lushan on 17 July, issued in connection with the rejection by the Chinese Nationalist Government of the statement made by the Japanese Government on 11 July 1937 as well as the Japanese Government demand of 17 July. (See Appendix 6) Although Chiang appeared to take a strong stand in his statement, the Nationalist Government showed interest in Prime Minister Konoye's speech at the 71st Special Diet session on 27 July when he said: "We have not relinquished hope for peaceful settlement of the conflict in China," There appeared to be a movement to place the party under the direction of Wang Ching-wei of the pro-Japanese group and have him expedite a peaceful settlement.

On 28 July the United States and Great Britain made representations to Foreign Minister Hirota stating that in consideration of their rights and interests in the Peiping-Tientsin area, Japanese forces should be requested to cease military action in that area.

17

They also stated that it was feared that the action of the Japanese troops might bring about a conflict with the Chinese Kuomintung force.

In answer to these representations, the Foreign Minister explained the circumstances that had led Japan to take such action. He further stated that he could not promise to stop the Japanese military action. Germany and Italy were generally conciliatory toward Japan.

On 29 July, Wang Ching-wei as President of the Chinese Nationalist Government's Executive Yuan made a statement in which he categorically supported Chiang Kai-shek's policy of resistance against Japan, emphasizing Japan's aggressive attitude since the Manchurian Incident. He reiterated that the North China Incident was a matter of vital importance to the very existence of the Chinese nation and that the people should be prepared to make any necessary sacrifice to resist aggression.

Diplomatic negotiations between Japan and China

On 17 July 1937 the Japanese Government, on the basis of the decision reached at the Council of Five Ministers, (comprising the Premier, Foreign Minister, Finance Minister, Army Minister and Navy Minister) sent the following instructions:

1. The Army attaché at Nanking was instructed to communicate the following to the Minister of War of the Nationalist Government: In the event that Chinese Government troops took action in violation of the Umezu-Ho Ying-chin Agreement, the Japanese Government would take such measures as it deemed necessary and the Chinese Government would be held responsible for the consequences arising therefrom.

2. The Japanese ambassador in China was instructed to present the following demands to the Ministry of Foreign Affairs of the Nationalist Government:

18

The Imperial Government, resolved to hold fast to the principle of preventing the spread of the conflict as stated in the declaration of 11 July, herewith makes the following demands in view of the subsequent attitude of the Nationalist Government:

(1) Immediate cessation of all provocative words and actions.

(2) No hindrance of local authorities of either countries in their efforts to settle the conflict.

A definite answer to the foregoing was requested not later than 19 July. The Central Army authorities sent a directive to the Japanese garrison force in China stating that since the Chinese authorities had not shown evidence of fulfilling any undertaking in good faith, in order to ascertain their good faith and thereby obtain a positive ground for future decisions a time limit of 19 July would be placed on their making effective the items then under negotiation. On the afternoon of 19 July, the Minister of Foreign Affairs of the Nationalist Government sent an answer in the form of a memorandum substantially rejecting the Japanese demands. The gist of the Chinese Government memorandum was as follows:

The Chinese Government has been making every effort for the peaceful solution of the incident under the principle of localization of the conflict. Military action taken by the Chinese authorities is nothing other than a preparatory step for self-defense to cope with the Japanese reinforcements sent to the Peiping-Tientsin area. The Chinese Government, desiring to prevent the spread of the conflict, makes the following two proposals to the Japanese Government:

(1) A date will be fixed for simultaneous suspension of military action and the armed forces of both countries will be withdrawn.

(2) Diplomatic negotiations will be continued in good faith for the solution of the present incident. Although a local solution of the incident is being attempted because of its essentially local character, any local agreement must be submitted to the central governments concerned for sanction. For the sake of peaceful solution of the incident, the Chinese Government will accept any method of settlement based on international law or treaty. It is also willing to have the case submitted to arbitration.

Thereupon, the Japanese Government severed diplomatic negotiations with the Chinese Government and issued a statement to that

19

effect from the Foreign Office.

Although both the Japanese and Chinese governments tried to avoid full-scale clashes in the hope of realizing an early peace, they missed the opportunity of entering formal negotiations for peace. This was due in part to the effort of the Chinese Nationalist Government to save face both domestically and internationally by discrediting Japan's real intentions and in part to the lack of unity within the Japanese Army caused mainly by the unyielding attitude of radical elements.

With the completion of punitive operations against the 29th Army in the Peiping-Tientsin sector early in August, behind-the-scene negotiations were started, mainly under the sponsorship of Navy Minister Yonai, which aimed at saving the situation by diplomatic measures. As days passed the differences between the radical and moderate elements within the Army were gradually lessened and a trend toward the resumption of formal diplomatic negotiations became discernible. On the part of China, the Foreign Affairs Department of the Nationalist Government made an announcement on 7 August as follows:

There still is a possibility of peacefully settling the present conflict between China and Japan, provided that the latter be ready to accept the former's proposal for negotiations. So long as diplomatic relations between the two countries have not been formally severed, negotiations could be started soon. Now that the situation has become extremely tense, it is imperative to give an immediate answer to the question of war or peace. This, however, does not necessarily mean that it is too late to begin negotiations for a peaceful settlement. It is believed that the present difficulties will be surmounted only if leaders of the Japanese Government show statesmanship supported by courage.

The time seemed to have at last arrived when there would be peace between the two countries. Formal negotiations were about to be commenced. However, the Oyama Incident in Shanghai caused the peace move to end in total failure.

20

Measures taken by the Japanese Navy before the Shanghai Incident

1. Upon the outbreak of the Marco Polo Bridge Incident, the "Army-Navy Agreement on the North China Operations, and the "Army-Navy Agreement on the North China Air Operations" were reached on 11 July between the Navy General Staff and Army General Staff. These agreements were immediately put into effect. (See Appendix 7)

2. Informal plan for operations against China formulated by the Navy General Staff on 12 July 1937. (See Appendix 8)

Actions mentioned in paragraphs (1) and (2) were based on the government policy of localizing the conflict. However, the Navy, from its estimate of the situation, foresaw a great possibility of the incident extending to Central and South China and concluded that without sufficient preparation in real power, it would be impossible to protect Japanese residents and to safeguard Japanese rights and interests in China. (Some members of the naval agencies stationed in China also expressed the opinion that it was necessary to thoroughly punish the Chinese forces in the North China and Shantung areas even at the cost of Japanese interests in Central and South China and that if the situation was not dealt with firmly, China would show even stronger anti-Japanese feeling and repeated clashes with Japan would create an irretrievable situation. However, neither the government nor the central military authorities made any positive move in line with the idea of abandoning Japanese rights and interests in Central and South China and taking definite action in North China.)

3. Evacuation of Japanese residents and preparations for operations by the Navy.

With the final decision of the Army on 27 July to dispatch divisions from Japan Proper, the Central Headquarters of the Navy formulated the following policies and put them into practice immediately:

21

a. Principle

The Navy, though still holding fast to the policy of localizing the incident, will make all necessary preparations for a full-scale operation against China since there is a great possibility of the present tension developing into full-scale hostilities between Japan and China.

b. Objective of operations

The immediate objective of operations will be limited to the solution of the North China problem. For the attainment of this objective, the Navy will promptly lend appropriate cooperation to the Army in the North China area, engage in the escort of transport:, and safeguard Japanese interests as well as residents in all parts of China. At the same time, the Navy will complete necessary preparations for full-scale operations against China and for the protection of Japanese residents in Tsingtao and Shanghai.

c. Operations end related matters

(1) Evacuation of Japanese residents in Central and South China will be conducted with maximum caution to avoid provoking the Chinese authorities.

First stage: Evacuation of Japanese residents from the upper reaches of the Yangtze River above Hankow.

Second stage: Japanese residents in other areas will make preparations for evacuation and act according to circumstances.

(2) Issuance of orders for the organization of a special fleet to be dispatched to China will be followed by the issuance of an Imperial General Headquarters Navy Order concerning the fleet's action in executing its missions.

(3) Orders will be issued for the first stage mobilization.

(4) Two battalions of the special naval landing units will be prepared to advance to Port Arthur for dispatch to Tsingtao.

(5) Personnel and supplies will be ready to leave Furue aboard the transports Kitakami and Sata for an air base on Taihoku.

d. The following war preparations will be expedited:

(1) Production of weapons, munitions (especially materials that cannot be imported in wartime), bombs and machine gun bullets will be accelerated.

(2) Repair and maintenance of naval vessels and pre-

22

paration for requisitioning merchant vessels will be undertaken.

(3) Second stage mobilization will be prepared.

(4) Provision will be made for necessary facilities for the defense of strategic sectors.

On 28 July after negotiations with the Foreign Ministry, the Navy decided to evacuate all Japanese residents and the following telegram was dispatched at 1510 hours, 28 July, by the Navy Vice Minister, Assistant Chief of the Navy General Staff to the Commander in Chief of the Third Fleet. Information copies were sent to the Naval Attaché, the Japanese Embassy in China and to the officers resident in Nanking and Hankow.

Top Secret Telegram No 551.

On the morning of 28 July, the Tientsin Army launched a general offensive against the Chinese 27th Army in the Peiping area. Anticipating that the present conflict will develop into an all-out war between Japan and China, we consider it necessary to withdraw immediately the Japanese residents in the upper reaches of the Yangtze River above Hankow. It is requested that you take the necessary measures to start their evacuation according to circumstances in each sector, keeping close contact with the Foreign Ministry local authorities concerned.

The Foreign Ministry had instructed consuls stationed on the upper reaches of the Yangtze above Hankow to the effect that if the situation changed for the worse, they would start to evacuate Japanese residents at their own discretion.

Evacuation of residents from the Yangtze River area

Japanese residents in the Yangtze River area were guarded by the forces of Rear Admiral {Tanimoto} Umataro, Commander of the 11th Gunboat Division. This division was composed of the flagship Yaeyama, Hozu, Futami and Kotaka in Hankow, Katada, Sumida and Kuri in Shanghai, Tsuga in Nanking, Hasu in Wuhu, Atami in Kiukiang, Seta in Changsha, Toba in Ichang, Hira in Chungking and detachment of 292 persons of the Shanghai Special Naval Landing Unit in Hankow.

On 1 July, the residents totaled about 30,000, including Japanese, Koreans and Formosans, of which 26,600 lived in Shanghai and

23

1,700 in Hankow. In view of increasing unrest throughout China and with the expansion of the conflict in North China, the Navy General Staff issued the following directive to the Third Fleet Commander in Chief on 28 July:

Inasmuch as the forces stationed in Tientsin started a general offensive on the morning of 28 July, it is highly possible that the present conflict will develop into an outright war between Japan and China. You are hereby directed, therefore, to start, after due consultation with Foreign Office agents the evacuation as circumstances require of Japanese residents living along the stream above Hankow.

Evacuation of Japanese residents from the upper reaches of the Yangtze was started on 1 August. On 4 August the approval of the Central Authorities was received for their further evacuation. On 9 August, they reached Shanghai on board Japanese ships.

In Hankow there was a divergence of opinion between the Consulate General and the Navy concerning the evacuation, and the negotiation was finally taken over by the Central Authorities. Permission for evacuation from Hankow to Shanghai was issued on 6 August, and about 1,000 Japanese residents, eager for evacuation, left for Shanghai on 7 August aboard Japanese ships. Accompanied by a land combat unit detachment and escorted by ships of the 11th Gunboat Division, they completed their voyage safely. The residents in Wuhu, Ta-yeh, Kiukiang and Nanking on the lower reaches of the Yangtze River were evacuated also and reached Shanghai safely on 9 August. However, the Gakuyo Maru, which had left Nanking on 13 August carrying diplomatic personnel from the Hankow area and Army and Navy attaches, as well as a small number of Japanese civilian residents from Nanking, was forced to return to Nanking from the vicinity of Chiang-Yin, as the Chinese had closed the river. They finally reached Tsingtao aboard a specially guarded train. Japanese residents in Shanghai, in view of the increasing danger after 13 August, decided to repatriate women and children. Thus, about 20,000 of the total 30,000 residents were successively returned home around 19 August.

24

Evacuation of Japanese residents in South China

The Japanese residents in South China were under the protection of the 5th Destroyer Squadron commanded by Rear Admiral Masakichi Okuma. The squadron was composed of the Yubari (flagship), Asagao, the 16th Destroyer Division (excluding Asagao) (Mawei), the 13th Destroyer Division (excluding Sanae) (Swatow), and Sanae (Canton). The squadron was assigned to protect about 12,000 Japanese residents in Fuchow, Amoy, Swatow and Canton. With the outbreak of the North China Incident, the 16th Destroyer Division was dispatched to the north. The 5th Destroyer Division from Mako and the 29th Destroyer Division from Japan were in turn put under the command of Rear Admiral Okuma.

Since the situation in South China showed a drastic change for the worse on 12 August, the residents in Swatow started evacuation on that day. After the clash in Shanghai, residents in Canton began evacuating on 15 August and those in Fuchow on 17 August by order of the Foreign Minister. All of them reached Formosa safely. The evacuation of residents from Amoy, which had been delayed for various reasons, was completed in the latter part of August when the Shanghai operation was at its height.

Navy Operations

With the government policy of dispatching troops to North China determined on 27 July 1937, the Navy High Command issued the following orders:

Imperial General Headquarters, Navy Order No 1

28 July 1937

In obedience to the Imperial command, Prince Hiroyasu, Chief of the Naval General Staff, herewith issues the following orders to Commander in Chief Nagano of the Combined Fleet:

The Empire has decided to dispatch troops to North China for the purpose of defeating the Chinese forces in the Peiping-Tientsin area and securing public peace in key sectors of this area. Therefore, the Commander in Chief of the Combined Fleet will have the Second Fleet cooperate with the Army Expeditionary

25

Forces for the protection of the Japanese residents and to safeguard Japanese rights and interests in the North China area. At the same time, the Second Fleet will cooperate with the Third Fleet.

The Commander in Chief of the Combined Fleet will have the Second Fleet protect the transportation of the Army Expeditionary Forces.

Directions on practical matters will be given by the Chief of the Naval General Staff.

Imperial General Headquarters, Navy Order No 2

28 July 1937

In obedience to the Imperial Command, Prince Hiroyasu, Chief of the Naval General Staff, herewith issues the following order to Commander in Chief Hasegawa of the Third Fleet:

The Empire has decided to send troops to North China for the purpose of defeating the Chinese forces in the Peiping-Tientsin area and securing public peace in key sectors of that area. Therefore the Commander in Chief of the Third Fleet is charged with the protection of the Japanese residents in Central and South China and safeguarding Japanese rights and interests in these areas.

Directions on practical matters will be given by the Chief of the Naval General Staff.

Imperial General Headquarters, Navy Order No 3

28 July 1937

Prince Hiroyasu, Chief of the Naval General Staff, herewith gives the following order to Commander in Chief Hasegawa of the Third Fleet:

The Commander in Chief of the Third Fleet will keep strict watch over the Chinese coast south of Hai-Chou Bay (excluding the bay) and over the Yangtze River area.

The Commander in Chief of the Third Fleet will dispatch the 10th Squadron (excluding Izumo) to North China and put it under the command of the Commander in Chief, Second Fleet.

Central standard time will be used.

On 28 July, at 2300, the Assistant Chief of Naval General Staff dispatched the following telegram to the Commanders in Chief of the Combined, Second and Third Fleets. Information copies were sent to all commandants of the naval districts and minor naval districts and also to the Chief of the Japanese Navy Office in Manchuria.

Imperial General Headquarters, Navy Section, Top Secret

26

Telegram No 1, regarding operations.

The Japanese Navy will escort the Army Expeditionary Force to North China. It will, in cooperation with the Army, conduct operations in the Tangku area and other areas; In order to keep strict watch over the possible expansion of the conflict in North China. It will avoid provoking China as long as possible, at least until the evacuation of the Japanese residents along the Yangtze River is completed and the Special Landing Force Detachment stationed at Hankow and all combat vessels in the Yangtze are concentrated at Shanghai. With the exception of troops absolutely necessary for the achievement of the immediate duties mentioned above, existing forces will not be relocated or reinforced as long as there is no remarkable change in the situation. Reinforcement units will be retained in the Kyushu area, ready to be shipped out should the situation so require.

Special orders will be issued for the movement of the 1st and 2d Combined Air Groups to advance their bases to Formosa, Quelpart Island and Chou-Shui-Tze and for the advance of the 21st and 22d Air Groups to China.

Special orders will be issued for the advance of special landing units to Tsingtao and Shanghai from their respective assembly points in Japan.

On 29 July, based on the above orders, Headquarters, Third Fleet, formed its operational plans and issued the necessary orders to its subordinate units. (See Appendix 9)

On the previous day, the Chief of Staff of the Third Fleet disseminated the following statement to the whole Third Fleet regarding the critical situation at that times:

I have received secret information that in Shanghai and its vicinity Chinese forces have completed their preparations for immediate action and are planning to take concerted action in every area at any moment. All naval forces are requested to keep strict guard and maintain special prudence until our preparations are completed.

On 29 July, the Commander in Chief of the Third Fleet dispatched Rear Admiral Honda, Naval Attaché to the Japanese Embassy in China, to Nanking on his behalf. He instructed him to inform Shao-Kuan Chen, Chief of the Navy Department of the Republic of China and Hao-Sen, Deputy Chief of the Military Affairs Department, that he would adhere to the localization policy adopted by Japan. He further stated that it was a matter of great regret that, due to anti-Japanese actions and the concentration of Chinese troops in Central and South China that the incident wets threatening to spread and it was requested

27

that some effective control be applied immediately, In the event the situation deteriorated, the Third Fleet would be forced to take armed action.

The two Chinese department chiefs fully understood the situation and promised to do everything possible to prevent the incident spreading to Central and South China.

On the same day, the Commander in Chief of the Third Fleet announced his policy in an attempt to avert clashes in these areas. The gist of his announcement was:

Our Fleet, together with the Japanese residents in all parts of China, will make every effort to check the occurrence of conflicts. At the same time, we are keenly concerned with cooperative measures to be taken by Chinese authorities and with the development of the present situation. In the event that the measures taken by Chinese central and local authorities are improper and the situation is aggravated beyond peaceful control, the Third Fleet will take every measure considered necessary for the achievement of its mission. We wish our fellow countrymen residing in China to be self-possessed and prudent at this juncture. We also ardently hope that the Chinese authorities concerned will exercise great precaution and exert every effort to prevent the occurrence of any unhappy events in any part of China in order to maintain friendship between Japan and China and to secure peace in the Orient.

At that time, the general situation in the Shanghai area was gradually worsening, and propaganda to the effect that a victory had been gained in North China by Chinese forces, together with many other groundless rumors, was prevalent. The people were restless and the financial world showed signs of aggravation. The Chinese forces made all necessary preparations to cope with any positive actions by the Japanese Navy. Some of their first-class airplanes were, ready for action on the Hung-Chiao Airfield, and some made reconnoitering flights over the Chusan Archipelago.

Shanghai Incident

Situation on the eve of the incident

As stated above, preparations for Central and South China operations were intensified by the Japanese Navy in readiness to meet any possible spread of the incident to Central and South China.

28

Countering this, the Chinese, too, reinforced their strength in and around Shanghai. In North China, the Chinese Air Force deployed some 60 aircraft to the north of the Lung-Hai railroad. In Central China, daily flights were made by reconnaissance aircraft and the movement of Japanese warships and naval vessels in the Shanghai and Saddle Islands area was kept under observation. In addition about 40 Northrup and Martin aircraft were concentrated at Kuei-Ten, Hung-Chiao Hsiao-Kan, and other bases. The course of events was thus steadily building to a point of open clash between the air forces of both sides.

The over-all sentiment against the Japanese took a turn for the worse as evidenced by such moves as the conversations between Chiang Kai-shek and Wang Ching-wei on 31 July and 1 August, the start of an all-out anti-Japanese drive and the increasing number of Chinese notables evacuating from Shanghai, These actions, as well as the attitude of the Chinese Air Force and the Central Government forces, presaged a head-on clash between Japan and China.

At about 1830 on 9 August, Lt Isao Oyama, commander of the Western Detachment, Shanghai Special Naval Landing Force together with Seaman 1st Class Saito, the driver, were murdered by the Chinese Peace Preservation Corps while riding in an official car on the road outside Hung-Chiao Airfield in the western part of Shanghai. Diplomatic negotiations, as usual, made no progress. The incident was used as an excuse by both sides, however, and a sharp increase was made in the forces. Eventually this resulted in the clash in Shanghai.

It was the consistent basic policy of the Japanese Government and the Navy to seek localization of the issue and to refrain to the utmost from acts which would incite the Chinese. However, such incidents as the all-out clash between Japanese and Chinese forces in the North China area during July and August, the complete evacuation

29

of Japanese residents from the Yangtze River basin, the concentration of the 11th Gunboat Division in and around Shanghai and the Oyama Incident as well as the reinforcement of both the 8th Cruiser Division and the 1st Destroyer Squadron at Shanghai on 11 August and the landing of the Special Landing Force, all combined to increase the tension between Japan and China. With civilian transportation on both the Shanghai-Nanking and Shanghai-Hanchow-Ningpo railroad lines banned on 11 August and Chinese regulars and armed Peace Preservation Corps members massed in increasing numbers in and around Shanghai, the situation was such that a single spark would touch off the explosion.

Eventually it happened. In Shanghai at 1030, 13 August, Chinese forces occupying the Shanghai Commercial Press Building and the adjacent houses, suddenly opened machine gun fire on Japanese positions near the Heng-Pang bridge. Later, at 1654 on the same day, the Chinese forces in the Patsu-Ch'iao area suddenly bombed and shelled the nearby bridge. The Japanese Special Naval Landing Force retaliated.

The situation did not permit optimism as our landing force, having less than 5,000 personnel, was faced with an enemy force of tens of thousands.

Prior to this, the Japanese Government had discussed a request from the Navy that Army: troops be dispatched to Central China (The area below the Yellow River, and along the Yangtze River). On 13 August, a decision was reached at a Cabinet meeting to dispatch this force. An operational directive was issued on the following day, 14 August, as an Imperial General Headquarters Navy Order. (Appendix 10)

The Japanese Navy, therefore, decided to launch full scale operations, discarding the existing policy of localizing incidents. The following statement was issued on 14 August.

30

The entirely unprovoked murder of Lt Oyama by the Chinese is clearly attested through on-the-spot investigation made by both the Japanese and Chinese commissions as well as by officers of the Municipal Council. The Chinese have adopted a stand of lawlessly assaulting our force and the state of affairs in the Shanghai area has suddenly grown critical. Nevertheless, we have exercised extreme caution in consideration of the fact that Shanghai is an international city where numerous foreigners reside. In evidence thereof, our ambassador offered on 13 August to conciliate differences with the ambassador of China. Under the circumstances we have limited our actions to returning the Chinese illegal fire since the previous day. Moreover, we have not attacked Chinese aircraft flying low within the settlement. Nevertheless, at about 1000, 14 August, about 10 or more Chinese aircraft dared to bombard our warships and vessels, Landing Force Headquarters, Consulate General Office, and other installations. Words cannot describe such acts of violence. To date, the Imperial Navy, having borne the unbearable, is now compelled to take every possible and effective measure. Such a recourse is regrettable in view of the hopes and desires we have held. However, this is inevitable.

The Japanese Government realizing the need to take a firm stand made an announcement on 15 August which was tantamount to a declaration of war.

War Preparations by the Japanese Navy

After the outbreak of the Incident it was realized that the Nationalist Government had formidable forces available for an all-out war against Japan. The situation, therefore, called for immediate preparations on the part of the Navy to ensure the successful outcome of the operation. Further, in the event that operations should be extended over a long period, the involvement of third powers had to be taken into consideration when planning. In order to be able to deal with any such situation it was decided to establish an agency similar to the Imperial General Headquarters Naval War Preparations Research Division, which was later established during the Pacific War. This agency was known as the War Preparations Research Committee and held its first meeting on 23 August 1937. It was decided that in order to anticipate the nation's needs should the China Operations be extended over a long period, the necessary war preparations for prosecuting such operations would be completed. In carrying out these preparations, stress was to be placed on sea operations in order to cope with and repulse any possible interference

31

by any third power.

Concrete plains were made to:

Accelerate the remodelling or reinforcement of warships
Accelerate warship construction
Complete war preparations to meet the requirements of wartime organization
Requisition necessary merchant ships
Remodel aircraft carriers
Accelerate the manufacture and equipment of aircraft
Maintain defense facilities
Maintain installations such as six bases, engineering facilities and signal communication facilities
Mobilize men in the first and second reserves and train aeronautical personnel
Procure and maintain materiel for wartime organization forces

These plans aimed at the replenishment and promotion of naval armament and war preparations to meet any emergencies which should arise by involvement with third powers, in addition to meeting the basic requirements for the China Operations. These preparations actually proved to be the beginning of war preparations for the Pacific War.

Parallel with the above promotion of war preparations by the Navy, the Army began to prepare for war. This caused tremendous friction between the two services in regard to supervising munition factories as well as in procuring supplies.

The sinking of the USS Panay

On 12 December 1937, the day before the occupation of Nanking by the Japanese forces, the United States river gunboat Panay was bombed and sunk while she lay at anchor in the Yangtze River between Nanking and Wuhu. The Panay was mistaken for a Chinese vessel by carrier-borne fighters and bombers of the 2d Combined Air Group

32

(under the command of Rear Admiral Teizo Mitsunami) then cooperating in the battle of Nanking, with its operational base at Shanghai. The Japanese Government apologized to the United States for the mistake and the persons concerned were punished. The tension between Japan and the United States was eased and no serious consequence ensued. However, the frequent infringement of vested British and American interests and mistaken bombings which occurred during the subsequent years of the China Operations did much to increase unfriendly relations between Japan and Great Britain and the United States.

Also on 12 December, HMS Ladybird and Cricket, anchored upstream from Nanking, were attacked by Japanese naval planes. Realizing in the middle of the attack that the ships were British, the attack was halted before a direct hit was scored.

33


Page maintained by Larry W. Jewell, pha@gte.net. Created: 1/3/98 Updated: 1/3/98