Reference your cables  and Dominions Office cables Circulars D.318 and D.319 , I agree with you that last instructions to Craigie indicate a regrettable want of willingness to face up to the whole Japanese problem in a spirit of reality. Australia is vitally affected and we would not relish having to defend ourselves against even a minor attack from Japan in less than a year from now.
Some of our cables from the British Government, such as those suggesting a Division for Malaya and also that we draw upon the Militia pool of equipment for equipping the A.I.F. , indicate a failure to appreciate our local position, the absence of a Militia pool, and the grave shortage of our equipment.
Under these circumstances you may imagine how we feel to be told in Cable D.319 that war material from the United Kingdom carried over the Burmese Road has been insignificant and is likely to remain so.
Frankly, we cannot understand why some trifle of this kind should be allowed to stand in the way of a Japanese settlement.
Again, it seems to us that the suggested approach to Japan, with a view to solution of economic problems and with a statement that British Government willing and anxious to assure to Japan supplies of raw material, will be somewhat unconvincing to Japan when she knows that for a long time modest supplies of wool to her from Australia have been withheld.
If this economic approach to Japan is intended to be taken seriously, then I cannot understand the arguments we have been having with Great Britain regarding a periodical 25,000 bales of wool for Japan.
Your cable to myself of July 6th regarding suggested lines of instructions to Craigie goes, I think, to the root of the matter.
I realise that the Japanese may be as much encouraged to war by easy concessions on our part as by the making of difficulties, but my instinct tells me that Japan is not really anxious for another major war on top of her Chinese campaign if she can, by peaceful means, establish her commercial position in East Asia and get some assistance in what must be her real economic difficulties. Our approach should therefore be generous and understanding, without being abject.
The United States cannot very well complain if we decide not to fight her battles in the Far East, seeing that she has been very aloof over the whole discussion and has not been prepared to give any specific guarantee of the status quo even in relation to Australia or New Zealand or the Netherlands East Indies.
Referring once more to your own cable to me, we would I think need to approach paragraphs (d) and (f) of Clause 2 with great care, but apart from this I believe that some flexible authority to Craigie along your lines would be of great value.
Please convey the substance of the above to the Dominions Secretary, at the same time informing him that the necessity to reconstitute our ideas in the light of what we are now told is the inability of Great Britain to send Naval forces to Singapore has occasioned a degree of anxiety among the Members of the Cabinet which can only be increased by any approach to Japan which stops short of being realistic and comprehensive.