JAPAN. My telegram No. 476. [1]

The question of three Japanese demands still under consideration
here and American reply to the United Kingdom's request for their
views has not yet been received.

On the assumption that we can depend on nothing more concrete than
American moral and diplomatic support Craigie [2] has forwarded
the following recommendations re demand for stoppage of war
material via Hong Kong and Burma:

(a) While he does not consider that a negative or evasive reply
will lead at this stage to attack on Hong Kong or other British
interests, he is nevertheless convinced it will lead to forcible
action of some kind, e.g. blockade of Hong Kong or establishment
of air bases in Indo-China in order to destroy the BurmaYunnan
road.

(b) Such action would inevitably lead to incidents as a result of
which the Japanese pro-Axis extremists would endeavour to bring
about definite break with Britain.

(c) At the present moment the United Kingdom cannot afford to take
serious risk of war with Japan.

(d) If the United Kingdom gives way further awkward demands will
be presented by the Japanese but probably a reasonable lull will
intervene.

(e) In view of the above considerations the United Kingdom should
agree to the Japanese requests and do so at the earliest possible
moment before some disagreeable fait accompli occurs. Ambassador
adds that he thinks we may get private understanding with the
Japanese in return for acceptance of this demand, to the effect
that they would not press the question of the withdrawal of troops
from Shanghai.

Meanwhile Halifax [3] has told Craigie that he is to assure the
Japanese Minister for Foreign Affairs [4] that the United Kingdom
Government hopes to send reply as soon as possible.

BRUCE