IMMEDIATE FOR THE PRIME MINISTER HIMSELF
JAPAN. Following summarizes very real anxieties I feel lest owing to failure to face the facts and in the light of them to lay down a definite policy we may fall between two stools.
'(1) Basis of decision to agree to closing of Burma Road for three months was to allow time to attempt negotiation of a wide settlement.
(2) If this attempt were to result in nothing more than the termination of Sino-Japanese hostilities, thus extracting from bog she has landed herself in and freeing her for adventures elsewhere, our position would be seriously worsened.
(3) There is a danger of this happening unless we realise (a) that settlement must be of such a character as to ensure Japan observing it from self interest if for no other reason, and (b) that to obtain such a settlement we must make up our minds how far we are prepared to go down the lines suggested by Craigie  and in my telegram No. 520. 
(4) If an examination of what we are prepared to agree to shows that we are prepared to go sufficiently far as to ensure a prospect of our arriving at a wide and lasting settlement we should approach Japan, tell her frankly what we are prepared to do but making it clear that our offers are dependent upon generous peace terms being accorded to China.
(5) If on the other hand our examination shows we are not prepared to go sufficiently far to ensure a prospect of our arriving at a wide and lasting settlement we would be better advised to abandon the attempt and re-orientate our policy down the lines of exploring with the United States in a spirit of the greatest frankness, and with the U.S.S.R. so far as this is possible, the ways and means by which the maximum assistance can be afforded China in continuing her resistance with the object of preventing Japan from extracting herself from her Chinese entanglement.' As this matter will come up at meeting with Prime Minister  would greatly appreciate your views.
Repeated to Washington.