Mr. Watanabe did not know the location of Mr. Mutoh's Matsushima, but he suggested that it could be Takeshima (Ulleungdo) or a small neighboring island of Takeshima. He also mentioned that there was an island near Japan called Matsushima (Liancourt Rocks), but said that if the island in question was not Takeshima (Ulleungdo), then it should "return" to Japan, which suggests that he believed Liancourt Rocks to be Japanese territory.
Here is an unfinished translation of the 1877/8 document :
Watanabe Kouki (渡辺洪基), Director of the Bureau of Documents
After considering arguments A, B, and C, this will fit somewhere in the middle. It is clear that the British government ship HMS Sylvia has departed for Joseon coastal waters, and it is said that Russian ships are also inspecting the surrounding area. Moreover, when the ............................... left carrying the consul from........................., this island is on the route to Vladivostok. Considering the political situation these days, it is natural that this will also come to the attention of England. However, since we do not know their plans, this would be a good opportunity for someone to go to the problem area and find out if there is some kind of port; if there are trees, fish, shellfish, and other things; if Koreans are living there and why; if it is administered by a province; if it is called Ulleungdo; and if it is an uninhabited island. If costs a little bit to do this, then it is worth it. Also, we can determine if Ulleungdo and Takeshima are two names for the same island, if Matsushima is another name for Takeshima, or if it is a neighboring island.
Besides the Takeshima mentioned above, there is also a place called Matsushima. Since it [Matsushima] is close to us and since Japanese have already been to Takeshima, where they caused trouble, it is certain that they have also been to Matsushima, which is close to that island [Ulleungdo]. However, if Matsushima is not Takeshima, then it can return to either Inaba (因幡), Oki (隠岐), Iwami (石見), or another province. If we do that, then we have to find out from the prefectures. We have to investigate and ask these prefectures if Matsushima is a neighboring island, if Takeshima and Matsushima are the same island, or if they are different islands. Then we can clearly know if Matsushima is a genuine island of Japan, if it is Takeshima [Ulleungdo], or if it is a small, neighboring island of Takeshima. Also, we can determine the island's correct position and learn its current situation and details of its past.