I have seen and discussed with the British Ambassador [1] telegram
from Craigie in Tokio [2] to effect that the time has now come
when circumstances of the war in Europe necessitate a major change
in British and if possible American policy in Far East. He
questions whether if Japan were to become active aggressor in Far
East United States would fight. I believe in domestic political
situation that exists in United States that United States would
not fight. In fact British Ambassador at Washington has been given
quite definite indication that while United States would give all
moral backing and support to British Government in face of
threatened Japanese aggression in Far East, United States would
not fight.

Craigie believes were Great Britain and United States to agree on
it promptly understanding might be yet reached with Japan along
the following lines:-

(a) Joint assistance in bringing about peace with the Chinese
Government on the basis of restoration of China's independence and
integrity.

(b) Japan formally to undertake to remain neutral in European War
and to respect the territorial integrity, not only of the
Netherlands East Indies but also of British, French and American
possessions in the Pacific, so long as the status quo in these
territories is preserved.

(c) United States and members of the British Commonwealth to give
Japan all financial and economic assistance and all facilities in
their power both now and during post-war reconstruction period.

(d) Allied Governments to receive full guarantees against re-
exports to enemy countries.

(e) Question of settlements and concessions in China to be left in
abeyance until the restoration of peace in Europe and China.

My mind has been working along somewhat the same lines in the last
few clays but although I claim no intimate knowledge of Far
Eastern politics I cannot believe satisfactory settlement with
Japan can be reached which includes point (a) above. I believe
common sense of situation must entail certain possible large
territorial concessions by China to Japan leaving Japan allowed
control certain areas and China certain other areas.

In considering above I would point out to you chance of the United
States Government moving considerable part of their fleet from the
Pacific to the Atlantic will be very much increased if French
fleet yielded to Germany. This may possibly unfortunately happen
at a very early date. If American fleet moves from the Pacific,
any such approach to Japanese as is suggested above has
considerably less chance of success, as Japanese would know they
would have little opposition of any consequence to any move
outside China they should care to make.

In other words the situation becoming the perilous one that we are
now maintaining a policy vis-a-vis Japan which cannot in fact be
backed up by force because American Government appears unlikely to
allow its fleet to become engaged against Japan in the near future
and their fleet may even practically disappear from the Pacific.

If the above policy is to be adopted it will have to be done very
quickly and it would be greatly to our advantage to have the
cooperation of American Government in seeking to carry it out.

My own instinct is quite definitely that we should seek to come to
terms with Japan on lines that would be attractive to Japan for
the simple reason that beggars cannot be choosers.

Even if the United States Government does not agree to alteration
in its policy necessary to enable it to negotiate with Japan side
by side with Britain I still believe that Britain should
negotiate. Otherwise Britain may be driven to war with Japan and
will not have active American support.

First step should be to endeavour to secure the cooperation of the
United States Government in seeking to carry it out.

The United States policy up to the present has been to resist
Japanese aggression in the Far East by all negative means but
there are highly placed individuals in the State Department who
believe British Empire and United States should come to terms with
Japan and there is considerable support here in favour of an
agreement with Japan. We should explain frankly to the United
States Government that, much as we have valued their moral support
in the past, it is not enough and that necessity drives us to seek
settlement with Japan as we cannot face possibility of war with
them in present circumstances. We hope they will be prepared to
negotiate along with us as by so doing we can hope to limit
concessions made by all of us. If they are unable to do so we
trust that they will understand the situation we are in and that
we must go ahead and make best bargain we can. I believe if
Britain and/or America is going to negotiate with Japan on the
above lines that America should agree to let her fleet remain
where it is at least during the negotiations and to let it be
known by public statement that it is so remaining.

Lothian is cabling the British Government today in the same
general sense as this cable. I believe most urgent consideration
should be given to all the above and would be grateful most urgent
advice as to attitude I should adopt. [3]

CASEY