JAPAN. My telegram No. 476. 
The question of three Japanese demands still under consideration here and American reply to the United Kingdom's request for their views has not yet been received.
On the assumption that we can depend on nothing more concrete than American moral and diplomatic support Craigie  has forwarded the following recommendations re demand for stoppage of war material via Hong Kong and Burma:
(a) While he does not consider that a negative or evasive reply will lead at this stage to attack on Hong Kong or other British interests, he is nevertheless convinced it will lead to forcible action of some kind, e.g. blockade of Hong Kong or establishment of air bases in Indo-China in order to destroy the BurmaYunnan road.
(b) Such action would inevitably lead to incidents as a result of which the Japanese pro-Axis extremists would endeavour to bring about definite break with Britain.
(c) At the present moment the United Kingdom cannot afford to take serious risk of war with Japan.
(d) If the United Kingdom gives way further awkward demands will be presented by the Japanese but probably a reasonable lull will intervene.
(e) In view of the above considerations the United Kingdom should agree to the Japanese requests and do so at the earliest possible moment before some disagreeable fait accompli occurs. Ambassador adds that he thinks we may get private understanding with the Japanese in return for acceptance of this demand, to the effect that they would not press the question of the withdrawal of troops from Shanghai.
Meanwhile Halifax  has told Craigie that he is to assure the Japanese Minister for Foreign Affairs  that the United Kingdom Government hopes to send reply as soon as possible.