Though the Imperial Government hopes for great things from the Japan-American negotiations, they do not permit optimism for the future. Should the negotiations collapse, the international situation in which the Empire will find herself will be one of tremendous crisis. Accompanying this, the Empire’s foreign policy as it has been decided by the cabinet, insofar as it pertains to China, is:

(a.) We will completely destroy British and American power in China.

(b.) We will take over all enemy concessions and enemy important rights and interests (customs and minerals, etc.) in China.

(c.) We will take over all rights and interests owned by enemy powers, even though they may have connections with the new Chinese Government, should it become necessary.

In realizing these steps in China, we will avoid, in so far as possible exhausting our veteran troops. Thus we will cope with a world war on a long-time scale. Should our reserves for total war and our future military strength wane, we have decided to reinforce them from the whole Far Eastern area. This has become the whole fundamental policy of the Empire. Therefore, in consideration of the desirability to lighten our personal and material loads, we will encourage the activities of important Chinese in their efforts in the occupied territories insofar as possible. Japan and China, working in cooperation, will take over military bases. Thus, operating wherever possible, we will realize peace throughout the entire Far East.

At the same time, we place great importance upon the acquisition of materials (especially from the unoccupied areas). In order to do this, all in the cabinet have concurred, in view of the necessity, in a reasonable relaxation of the various restrictions now in force (after you have duly realized the critical situation which has brought the above decisions into being you will, of course, wait for instructions from home before carrying them out). In connection with the above, we have the precedent of the freezing legislation. We are writing you this particularly for your information alone. Please keep absolutely quiet the existence of these decisions and the fact that they have been transmitted to you. (Costello II)

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