Repeated to Washington 12; London 12.
My telegram No. 60.  Your telegram No. 46.  According to latest reports (which since they are reported to Naval Board Melbourne no doubt you have seen them) although Japanese cruisers at present in Gulf of Siam and naval force south of Hainan, southward move which seemed probable at end of January does not seem to have developed. Also there is no confirmation yet of Japanese request for bases and I have seen report from Bangkok denying any demand on Thai. Therefore I have not seen Vice Minister for Foreign Affairs but am keeping in closest touch with British Ambassador and will act in accordance with your instruction should change in circumstances make action appropriate.
Press and Government are playing up the idea that acceptance of mediation means that France and Thai[land] have accepted and submitted to Japan's leadership in East Asia and include Indo- China and Thai[land] in the mutual co-prosperity sphere which Japan is about to establish. 
Very desirable that all possible steps be taken to counteract this endeavour to establish a fait accompli.
I have told the Minister for Foreign Affairs  that Australia is not part of Asia and that Australia will not accept any new order prescribed by another Power. Dutch Minister  made similar statement on 1st February to Minister for Foreign Affairs.
Important to try to establish this attitude in Thai[land] and Indo-China and to stimulate self-respect rather than self- abasement.
In particular every effort should be made to prevent Japan's securing either in terms or recitals of any agreement reached or in any statement any reference to Japan's leadership in East Asia or to future co-operation with Japan.
But what seems to me most important is a more general decision as to what is to be the British policy with respect to South East Asia. There is no doubt that acceptance of Japanese mediation has greatly enhanced Japan's prestige. I fear that Japan's hold on French Indo-China is very strong. Whilst this is a serious threat to our position at Singapore, Japan's domination of Thai[land] would be far more serious and would make the situation of Singapore very precarious. Available resources in Army, Air and above all material are very slender to deal with land based attack. If worst happened we would have to hope for aid from the United States. But I think we should decide where we must draw our lines. If, as I believe, it is Thailand, I think we should adopt following policy; we should do what we can to strengthen our forces near Thai border, warn Thai Government against giving footholds to Japan and offer them all aid in our power to resist any attempt by Japan to take them by force. We should try to disabuse Thai of any idea that they will escape by yielding to Japan.
Having decided on our policy we should explain to the United States Government fully and in advance what we are doing and reasons for it and that we hope they will stand by us if we are attacked.
It may be urged that such action will bring about Japanese attack on us but in my opinion it is more likely to make Japan pause for despite the outcry in their press I do not believe they want war especially as it means American intervention, but seek rather to advance peaceably by slow stages establishing each position before they make the next move. Compare with Hitler in Europe.
Finally, I think we are more likely to secure United States support if we make up our minds and tell them what we believe we must do.
In making the above recommendations I realize the many other preoccupations of the Government in London and Canberra, but I fear we may have already missed the chance of persuading Indo- China to stand firm and that we may see Thai[land] go the same way unless we are resolute and prompt. As I assume Mr. Menzies  will leave shortly for both Singapore and London present seems to be the moment for considering and deciding our policy.