TOKYO

1. Ishibashi formed Cabinet yesterday after 4 days of hard
bargaining between factions. Kishi is Foreign Minister and Ikeda
Finance Minister-both of whom are likely to be favourably regarded
by Americans. Shigemitsu, Takasaki and Kono are omitted. The fact
that Ishibashi is the only survivor from the old Cabinet, and that
remainder of Cabinet, except the two above, are largely untried,
means severe loss in continuity.

2. The effect on policy towards Australia is difficult to gauge.

It is believed that Ishibashi was in favour of Australian wheat
rather than American surpluses. Views of Kishi and Ikeda could be
different, although they lack the direct personal interest that
Kono had. New Minister for Agriculture and Forests, Ichitaro Ide
is former Co-operative Party member and belongs to the Miki
faction. He is young, but has experience in his field and was
Chairman of the House of Representatives Agricultural Committee.

Miki, who was appointed Secretary-General of Liberal Democratic
Party in place of Kishi, said yesterday that the main task of the
new Cabinet would be to dissolve the Diet and hold general
elections but this may merely have been a threat to control
contending factions. Miki, with his 'progressive' background is
regarded as Government's go-between with Opposition.

3. It is too early to make worthwhile assessment of Government's
chances of survival, but it is my guess that strong attempts will
be made to avoid election in the near future.

4. Details by bag.