I lunched on Friday with Gwynne.  The object was for me to meet the Japanese Ambassador. The only other person present at the lunch was Edwardes , who was apparently in the Chinese Customs for years and in 1932 became Adviser to the Manchukuo Government.
I am not quite clear when he left Manchukuo, but he is very much persona grata with the Japanese Ambassador and Embassy.
During lunch we had no discussion with regard to the Sino-Japanese position, although I told the Ambassador the impression that Matsuoka  had made upon me when he represented Japan at the time of Japan's withdrawal from the League. I also gave an outline of the speech which Matsuoka made on that occasion.
When the waiters had gone out of the room Gwynne opened the subject of Anglo-Japanese relations, but the conversation for a time was very desultory and was getting nowhere.
Eventually I said that I was somewhat notorious for my frankness, and I proposed to be quite frank and say exactly what I felt.
I started by asking the Japanese Ambassador exactly what was Japan's policy, because I felt that most of the trouble at present existing was due to the fact that neither Japan, nor the United Kingdom nor the U.S.A. had very clearly defined what their respective policies were. I said that I rather felt in the case of the U.S.A. and the United Kingdom, that the reason why the policy had not really been made quite dear was that neither of the Administrations had very definitely made up their minds what their policies were.
If we were to get clearly defined policies, it was essential that we should see clearly what is the basis of the trouble that has arisen in the Far East. I said that, as I saw it, and the Ambassador should tell me if I was wrong, the basic trouble was that Japan had for years had a population that was expanding at a rate far in advance of that of other countries in the world; that the Japanese were not a migratory people but that, even if they had been, there was no place for them to migrate to, as all countries had adopted the line restricting the entry into their borders of Japanese citizens. Faced with this expanding population and this position, the Japanese had been forced to build up their industries but, when they had achieved this and made themselves a most efficient industrial nation, the other nations of the world had adopted the line of restricting the entry of Japanese goods.
This had created an intolerable position for Japan who, in order to safeguard her supplies of certain raw materials, had undertaken her adventure into Manchukuo. Following on this, as the pressure increased, and particularly in view of the fact that she was subjected to boycotts and other methods of interference in her natural market of China, she had taken the further desperate step of embarking upon the Sino-Japanese war.
If this summary of the position was correct, it suggested that Japan's need of markets was the basis of the trouble that had arisen, and there was no reason why that trouble should not disappear if Japan were afforded an opportunity for obtaining her necessary supplies of raw materials and a reasonable market for her manufactured products.
These requirements of Japan I believe could be met, but it entirely depended upon what Japan's own fundamental attitude was.
If Japan was only concerned with ensuring her own essential economic needs, then the position was possible of solution. If, on the other hand, Japan was out for a domination in the Far East similar to the domination Germany's ambitions were leading her to endeavour to establish in Europe, then the position was not possible of solution. I said that, personally, I did not believe the latter was Japan's objective because I did not think the Japanese were a stupid people and yet only a stupid people would set out on such an adventure when Japan was so dependent for her economic life upon the United States and the British Empire.
I also pointed out the dangers to Japan whether we won the war or Germany won. From every point of view I indicated that it seemed to me Japan's best interests lay in bringing about a just and equitable settlement in the Far East.
I then outlined the basis that I believed was possible for such a settlement, viz. that, if Japan was prepared to afford to China a just and equitable peace which guaranteed her integrity, then the United States and the United Kingdom could co-operate in the rehabilitation of China, and in that rehabilitated China Japan would have first opportunity of supplying Chinese needs of consumption goods after China's own factories.
The United Kingdom and the United States would not be acting on a philanthropic basis, because they would get their return in the supply of capital goods.
The market opened up to Japan in China would, to a great extent, meet her immediate needs, but I personally would be prepared to go further and afford to Japan an opportunity in the non-self- governing parts of the world. In this way Japan's immediate needs for a market would be satisfied and, as the rehabilitation of China proceeded, Japan's increasing needs would be met by the increasing demands of a China growing in prosperity. I also indicated that I did not anticipate any difficulty in giving to Japan assurances as to her vital requirements in raw materials being met.
I finished by suggesting that, between the alternatives of Japan's provoking an immediate struggle with the United Kingdom and the U.S.A., as against a broad general settlement of the Far Eastern problem which would be beneficial to everyone, I did not think there could be any doubts as to which would be the wiser course in Japan's own interests for her to pursue. I emphasized again, however, that everything depended upon what in fact was Japan's objective.
The Ambassador made it quite clear, when I had finished, that he agreed with the summary I had given of the causes of the present trouble in the Far East, and was quite definite that Japan would be prepared to consider a wide settlement in which just treatment was accorded to China and her integrity was assured.
We had some further conversation, but I had to leave to go to another meeting. I understand from Gwynne, however, that they carried on the conversation for some time and, in his view at all events, the Japanese would be quite prepared for discussions to discover a basis for a general settlement.
S. M. B[RUCE]