894.00/688: Telegram

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

36. Embassy’s 34, January 30, 5 p.m.

Hayashi Cabinet installed this morning. Members are as follows: Premier (concurrently Foreign Minister and Education Minister) General Senjuro Hayashi; War, General Kotaro Nakamura; Navy, Admiral Mitsumasa Yonai; Home Affairs, Kakichi Kawarada; Finance and concurrently Overseas Affairs, Toyotaro Yuki; Justice, Suyehiko Shiono; Agriculture and Forestry and concurrently Communications, [Page 707] Tatsunosuke Yamasaki; Commerce and Industry and concurrently Railways, Admiral Takuo Godo.
According to the latest information available to the Embassy, Hayashi has not yet approached any one to become Minister for Foreign Affairs. Ambassador Sato at Paris and Ambassador Saito at Washington have both been prominently mentioned but Foreign Office officials have informed the Embassy that no telegram to Saito has passed through the Foreign Office. It is generally assumed that some of the other portfolios being held concurrently will be abolished or amalgamated with others in the process of administrative reform.
Inform Treasury. The reaction to the new Cabinet in Japan is generally favorable. It was expected that the Hayashi Cabinet would show decided fascist trends but the appointment of Ministers of known moderate tendencies has greatly relieved public apprehension. In particular the appointment of Yuki as Finance Minister has served to quiet the fears of economic circles. He is a practical banker of many years experience and the general opinion is that he will not follow the “irresponsible” finance of Baba. It is believed that he will not permit governmental expenditures to outrun economic advance and cause dangerous inflation but it is thought that it will be necessary for him to exercise some measure of control over industry and finance in order to accomplish this end.
Analysis will follow later.

Repeated to Nanking.