From: Washington. 
To: Tokyo.
23 July 1941
#555 (In 2 parts, complete).

Since Wakasugi had called on the Acting Secretary of State, as reported in my message #545*, I called on Welles myself this afternoon. I explained to him that our southern occupation was absolutely essential from the standpoint of national security and economic safety. I further pointed out the impossibility of Japan to pursue a "do nothing" policy in the face of the embargoes being clamped down against her by various countries, for such a policy would lead to national suicide.

After carefully explaining the above situation, I said that according to press report the French Indo-China affair was apparently being carried out peacefully with the full approval of the Vichy government. I added that in view of those circumstances, it was my hope that the government of the United States would restrain itself from jumping to hasty conclusions, and instead would watch the trend of further developments for a little while yet.

I told him that I feared considerable repercussions among the general public, if measures such as an export embargo on oil is put into effect at a time such as this.

The new Cabinet in Japan, I advise the Undersecretary, is as anxious to bring the U. S.-Japanese "Understanding Pact" to a successful conclusion, as was the previous cabinet.

To the above, the Undersecretary replied that he would not reiterate his statements to Wakasugi. He would not, he said, reconcile the Japanese policy with regard to French Indo-China with the basic principles of the plans being discussed by Secretary Hull and myself. Neither Great Britain nor the United States had any intention of attacking French Indo-China, he said. The consensus here is, he said, that Vichy's submission came as a result of pressure from Hitler and that Japan intends to use French Indo-China as a base from which to make further southward moves.

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The U. S. Government, he continued, has not for the past many years made any hasty conclusions. Her actions are governed by Japan's policies.

Although he did not mention what steps the United States is planning to take in the future, he did say, as I was about to depart that Secretary Hull was expected back at his desk very shortly and that he would no doubt welcome an opportunity to discuss matters with me.

In reply to my inquiry, the Undersecretary said that traffic through the Canal has been indefinitely suspended while it is undergoing repairs. He asserted that no particular nations was suffering discriminatory action.

                                                (Time at present: 2130). 
*JD-1: 3937 (S.I.S. 20026). Acting Secretary Welles, in a requested interview with Jap Minister Wakasugi, states that the reported aggressive move by Japan toward F.I-C. would violate the basis of proposed understanding with Japan. Requests Japanese statement of intentions. Wakasugi asks for source of Welles information and is told that "it is accurate".
JD-1:                                        (D) Navy Trans. 7-29-41 (2)