AIDE NBkOIRE
His Majesty's Government have received with
great interest the report of the conversation between
Mr. Hull and Lord Halifax on May 17th reporting en
informal discussion with the Japanese Ambassador with
a view to reaching an agreement between the Japanese
and United States Governments and to settling the Sino-
Japanese war*
The position has, in the judgement of His
Majesty's Government changed fundamentally since the
possibility of a general settlement in the Far Kast was
considered last summer (see in particular the oral
statement handed to Lord Lothian by Mr. Hull on June 28th
last).    Since that time Japan has committed herself to
the Axis by the Tripartite Pact,   she has gained virtual
control of Indo-China and is in the process of securing
control of Thailand.
Whatever may have been the position when the
Japanese Ambassador in Washington first broached the
possibility of an agreement with the United States Govern-
ment and settlement of the China war, it is clear that
Admiral Nomura is now acting as a mouthpiece for Mr.
Matsuoka in a scheme which the latter has discussed with
the German Government.   His Majesty's Government's
reason for taking this view is the coincidence of these
discussions in Washington with Mr. Matsuoka's recent
interview with His Majesty's Ambassador in Tokyo, in
the course of which he stated that should the United
States decide on convoying in the Atlantic and Germany
were to attack the convoys, he believed that Japan would
be/
WGH:HK
be obliged to come to Germany's assistance under
the terms of Article III of the Tripartite Pact.
His Majesty's Government believe these two events
to be part of a concerted Japanese move, the objects
of which appear to be to drive a wedge between the
United States and Great Britain, to enable Japan to
withdraw from her commitments in China with the
minimum loss of face, while retaining Manchouicuo and
the essential advantages acquired during the China
incident, including her position in Indo-Uhina and
Thailand, and to diminish the possibility of United
States assistance to Great Britain not only in the
Pacific but al&o in the Atlantic.    For this latter
purpose Mr. Matsuoxa is trying simultaneously with his
offer of a settlement to intimidate the united States
as to the consequences likely to follow American
involvement in the Atlantic regardless of the manner
in which that might come about.
His Majesty's Government agree with Mr.
Welles1 view that Mr. Matsuoica is in an abnormal frame
of mind.    But the facts are these.   Mr. Matsuoka is the
chief architect of the Tripartite Pact, and his personal
commitment to the policy of tying Japan to the Axis has
been reinforced by his utterances in Kurope.   He has
obtained a pact of neutrality with the Soviet Union and
now hopes to obtain an agreement which at one blow would
free Japan of her China incubus and of her one major
apprehension in the pursuit of her pro-Axis policy,
namely United States intervention.    If Mr. katsuoxa were
to succeed in obtaining this agreement he would doubtless
exert/
exert every effort to bring pressure on His Majesty's
Government to compromise with Germany, thus indulging
his ambition to bring about world peace on Axis terras.
Simultaneously, Japan co^ld continue "peaceful
penetration" in Southeast Asia, including subversive
activities in India, Burma and elsewhere, and could
build up a position from which to deal with Malaya and
the Netherlands Sast Indies at the moment and in the
manner which appeared to her the most appropriate.
His Majesty's Government are most doubtful
whether Japan could in fact accord such generous terms
to China that the settlement offered would be in
accordance with the principles enunciated on page 5 of
Mr. Hull's oral statement of June 28th to which reference
has already been made.    If such a settlement were
possible however, His Majesty's Government trust that
the United States Government would give them ample
opportunity to express their views on any proposed agree-
ment, having regard to their great interest in the whole
matter.
Mr. Matsuoka is aiming high, but His Majesty's
Government believe that it is a game in which he hopes
to bluff his way into success.   They judge Japan's
position to be as follows:-
Her economic situation is bad? and the economic
restrictions imposed by His Majesty's Government are at
last making themselves felt.    She has been restrained
from direct action against British territory in some
measure by her commitments in China and by the knowledge
that the British and Dutch defensive position has lately
become stronger.    Her principal deterrent however is the
possibility/
possibility of United States action.   Even if the United
States became involved in war with Germany, the experience
of Japan which His Majesty's Government has had leads
them to believe that she would weigh the risks carefully
before entering on hostilities with the United States.
There are in fact signs that some Japanese are already
apprehensive lest Mr. Matsuoka by some imprudent action
may precipitate war with the United States.    His Majesty's
Government suggest that it is best to encourage these
fears.    They believe that if Japan is to be detached from
the Axis and real peace achieved in the Pacific, it will
be by a display of resolution and firmness on the part of
the United States, the Netherlands and Great Britain,
and that the present Japanese end Japanese-sponsored moves
are a trap into which His Majesty's Government are
confident the United States Government will not allow
themselves to fall, though no doubt every artifice will
be used so to work on United states public opinion as to
force them into it.
THiS BRITISH SVBA33Y,
WASHINGTON, D.  C.,
May 23rd, 1941