894.00/686: Telegram

The Ambassador in Japan ( Grew ) to the Secretary of State

34. Embassy’s 33, January 29, 5 p.m.

Last night Hiranuma was invited to form a Cabinet but declined. General Senjuro Hayashi, retired former Minister of War, was then selected. As it is generally conceded that he has the support of a large part of the army it is believed that he will experience little difficulty in forming a Cabinet.
General Hayashi is a soldier and not a politician but is not associated with the more radical element in the army. He is cautious and moderate, believes in discipline in the army and is opposed to the participation of the army in politics (see Embassy’s despatch No. 1414, July 26, 193510). It is believed that he was selected to form a Cabinet because he will be able to control the army and through moderation to minimize friction between the army and the Government.
It is the general consensus of opinion here nomination of Hayashi means a victory for the military. The Hayashi Cabinet, if formed, will be more military and more progressive in character than was the Hirota Cabinet. Some observers say that it will have an entirely military complexion. It will have no strong connection with the political parties and will be devoted to administrative reform rather than to the maintenance of the status quo in government. Because of its military complexion it is expected that it will accept the entire army program including plans of national defense, strengthening of the Japanese-Manchukuo defense and economic bloc and development of Japan’s continental policy.
The newspapers report that industrialists and financiers do not view the prospect with enthusiasm. They expect that the increased military influence in the Cabinet will result in the adoption of a moderate degree of managed economy with further control of industry in the attempt to achieve self supply and further control of monetary organs in an attempt to finance the increased budgets. Some inflation is expected and the share market rose this morning in anticipation.
There is no indication as yet of the attitude of the Diet toward the proposed Hayashi Cabinet.

Repeated to Nanking.

  1. Not printed.