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 [1] and
in my telegram No. 520. [2]

(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 [3]
would greatly appreciate your views.

Repeated to Washington.

BRUCE