Japanese Peace Settlement.

1. You will recall General MacArthur's statement that he
considered an early peace settlement desirable. [1] Macmahon
Ball's reports clearly indicate that MacArthur is facing
increasing economic difficulties and that political trends are not
as favourable as he has been indicating. [2]

2. Just before MacArthur's statement, I urged in the House [3] an
early settlement, but for different reasons. Unless there is an
early settlement at which the active belligerents with a right to
participate are present, major decisions will continue to be made
piecemeal.

3. Since my statement, Macmahon Ball has sent reports indicating
that political control is gradually going back to reactionary
groups. [4]

4. I have in mind to suggest immediate talks among those members
of the British Commonwealth concerned, at which could be discussed
both the Japanese settlement and the current control problems.

This need not be on ministerial level but should, I think, take
place in Canberra in near future. I should appreciate your co-
operation.