1. I had a long talk with MacArthur last night about his letter to
Yoshida [2] insisting on early elections.

2. I said I was surprised at so much importance being attached to
his action since I had assumed that elections would, in any case,
be held not later than May and that was apparently the earliest
date at which he felt it practicable to hold them.

MacArthur replied that he too had until the last few days assumed
the elections in May, but has now discovered that Yoshida had made
no plans for the elections. That was the first reason why he
acted. The second reason was that MacArthur felt that if he,
rather than Yoshida, took the decision that the elections must be
held this would rob Yoshida of the advantages his Government might
gain from itself selecting the date and issues of elections.

3. I told MacArthur that while I agreed that the elections should
be held as early as possible I was anxious about what was going to
happen between now and May. If the Yoshida Government remained in
office without changing its policy this might produce something
like disaster in March/April. I felt the important thing was not
so much a change of Government but an immediate change of policy.

Yoshida was clearly unable and/or unwilling to replace his policy
of a 'free economy' with a directed economy.

MacArthur replied that he agreed completely with my views. He felt
that the Yoshida Government must go. He felt the Ishibashil [3]
financial policy was disastrous. He had urged Yoshida to replace
Ishibashi, who, in MacArthur's view is completely incompetent and
wrong headed. But Yoshida had told MacArthur that he was compelled
to retain Ishibashi 'as a symbol'.

I told MacArthur that I felt that the Ishibashi economic policy
endangered the aims of occupation in the same degree as he would
endanger it if he were pursuing a political policy of Fascism.

MacArthur again agreed.

MacArthur said he fully recognised the need for a directed economy
here for immediate and direct controls of materials, prices,
wages, etc. He had worked out such a plan. This was 'top secret'
but he would send it to me today and be most grateful for my
advice about it.

MacArthur went on to say that his biggest problem was to find a
Japanese political leader who would carry out closely his plan. He
knew the Yoshida Government would not do so. But he did not know
where to find the leaders to replace them.

If he could not find alternative Japanese leaders he was forced
[4] with the dreadful prospect of direct military government. But
Washington would not give him the personnel or resources for such
a task.

I formed the impression that MacArthur was deeply concerned about
the present situation, and would perhaps be grateful to share
responsibilities with the Allied Council, now that his
difficulties have increased.

I hope to study his economic plan today.