TOKYO Very frank and useful discussion with Yoshino, who says:
(1) All officials and Ministers, with the exception of Kono, together with the entire Japanese press agree on necessity for reduced United States surplus to permit valuable agreement with Australia.
(2) However, Kono opposed and his political power overwhelming at present.
(3) Finance Minister Ichimada has agreed to provide equivalent of counterpart yen from the Budget, but Kono will not accept for current reasons (see paragraph 5 my memorandum 24th July). 
(4) MITI Minister Ishibasbi, who is a strong opponent of United States surplus, stayed away from the Cabinet Meeting because he is a contender for the Prime Ministership and wished to avoid tangling with Kono.
(5) Even if, as has been suggested, Kono leaves the Ministry of Agriculture in the near future and becomes Secretary General, Liberal Democratic Party, he would retain power and through a puppet Minister retain financial interest counterpart yen.
(6) Foreign Office trying to get Mitsubishi Shoji, Daiichi Bussan, Kanematsu and Gosho Trading Companies to bring pressure to bear on Kono but so far only Gosho prepared to act at short notice.
Komamura, the President, Gosho, met yesterday but without success.
Further meeting this morning, result unknown.
(7) Japan can grant other Australian requests leaving wheat and Kono as only stumbling blocks.
Yoshino depressed and said he realises that Australia might find it impossible to understand the...power of one man.
We discussed possible compromises:
(a) I said Australia regarded wheat as decisive;
(b) Because of the nature of Japanese requests not possible to grant part of them;
(c) Therefore compromise difficult;
(d) I suggested that the United States might be persuaded to agree that Japan's total commercial wheat imports should be regarded as 'usual' on a 'global' basis, leaving Australia to compete with 'usual' Western wheat, Yoshino, said this had been tried last year with cotton. It was then unacceptable to the United States and still would be;
(e) I said we were unlikely to accept 200,000 tons F.A.Q. and in any case could not see how Japan could fit in even that quantity without major modification of Kono's attitude.
Yoshino said he had received a cable about our request for 'firm allocation' of 400,000 tons F.A.Q. and 220,000 tons semi hard. He said he had not passed this request on to other Ministers because he considered it weakened both his and our position. He said the greatest strength of our requests was that they did not ask for any preferential treatment in Japanese markets. In his opinion the 'firm allocation' would be preferential because it would operate irrespective of commercial considerations of price and quality. I did not pursue this aspect.
Today's press reports airport statement by Takasaki  last night, which includes 'I may also talk with Australian leaders about the import of Australian wheat'.
(a) They have been working on Takasaki for some time but doubts whether he is strong enough to stand up to Kono particularly in view of his dark horse ambitions.
(b) He would ask Ushiba to facilitate Takasaki talks in Australia.
Yoshino said he would prefer the talks to break down on a clear question of principle leaving the way open for later negotiations rather than have a 'messy compromise which was not really satisfactory to either side'. If there was to be a breakdown he said it was essential that it should happen in such a way that the whole responsibility rested squarely on Kono and that the Japanese public knew it. He gave me the impression of a very unhappy man talking completely honestly.
I said that, if all that he had said was true, then it seemed to me that:
(a) Kono had to be brought to heel;
(b) Only the trading and commercial interests could do it;
(c) This would take some time.
I therefore suggested that the best course might be to adjourn the discussions for a couple of months. The Japanese Delegation and Takasaki could come back to assist the mobilisation of trading pressure on Kono. The initiative for the adjournment would have to come from the Japanese side which, I suggested, would say that it needed time to consult its Government. Everyone's face would be saved. Yoshino was most attracted and almost went so far as to say that Japan would adopt the suggestion.
This would pose some tactical difficulties for Japan because of the inadequacy of the present wool allocations which are currently being treated illegally at around 45% premium. If adjournment ran well into the first quarter of 1957, Japan might have to increase allocations 'unilaterally' or suffer serious internal inconvenience.
Both in relation to the present talks and the whole of our future relations with Japan, I strongly recommend against any course, the objective effect of which is that Kono alone has taken us for a ride.