IT SEEMS INDISPUTABLE that a combination of complementary economic conditions, close cultural ties, and geographic proximity between Japan and Chinese People's Republic (CPR) would normally be conducive to substantial expansion of their trade. While CPR can be both a useful market and a major source of raw materials for Japan, latter is in an excellent position to assist former's industrialization.' This promise of mutual benefits, however, has been largely undermined by a number of non-economic factors, including absence of diplomatic and political harmony. Moreover, Chinese have long used, or sometimes abused, as a primary instrument of their political operations in Japan. As increased appreciably in i96os, its political role loomed larger in Chinese foreign policies. Especially, during Cultural Revolution, China applied slogan politics in command in all dimensions of Sino-Japanese trade, even to extent of disregarding elementary requirements of economic rationalism. Hence an editorial in Japan Times (March 8, i968) bluntly complained that the Chinese Communists are so completely swayed by political feelings that they have allowed their distrust of Japan to enter into their consideration of commercial matters. Indeed, this tendency not only reflected a particular direction of China's policy toward Japan, but also stemmed from a unique system of relations which rendered Japan singularly vulnerable to CPR's shifting maneuvers. Since i963 there have been dual channels of Sino-Japanese commercial intercourse-friendship trade and memorandum trade-each representing different political backgrounds and economic problems. The relative economic importance of these two methods fluctuated at least partially in proportion to their respective usefulness for China's political interests. The Chinese often balanced one method against another in an attempt to gain a better political leverage in Japan and to mobilize Japanese circles in forcing Japanese government into some concessions in its China policy. Friendship was initiated by Premier Chou En-lai in i960, because drastic decline in Sino-Soviet economic relations, coupled with failure