The Ambassador in Japan (Grew) to the Secretary of State
TOKYO, August 10, 1937—7 p.m.
[Received August 10—2:20 p.m.]
254. Department's 140, August 7, 3 p.m. [34a] Today affirmative instructions were received by the British Chargé.
This afternoon I called upon the Foreign Minister at his home and presented confidentially and informally the United States Government's offer of good offices along the lines of the two points set out in the Department's telegram No. 138 of August 8. 
The offer was received by the Foreign Minister in entire friendliness. However, he said that there had already been made an opening for negotiations in the conversation at Shanghai yesterday between Ambassador Kawagoe and Kao, Chief of the-Asiatic Bureau of the f Chinese Foreign Office. The plan of the Japanese for an understanding between China and Japan was presented to Kao and immediately the latter left for Nanking in order to communicate the plan to Chiang Kai-shek. The Foreign Minister said that the complete details of the conversation at Shanghai had not reached him but that war might be avoided if Chiang Kai-shek would reply with some plan (obviously a counter-proposal) which could serve as a basis for negotiations. However, the situation was characterized by the Foreign Minister as critical and he indicated that general hostilities could be prevented only by a favorable and early reply from Chiang Kai-shek.
Foreign Minister Hirota then remarked that if the United States wanted to be helpful the most effective thing it could do would be to persuade Chiang Kai-shek to take prompt action as contemplated in the preceding sentence.
[34a] Not printed.
 "The two points set out in telegram 138 were the providing of a neutral place for Japanese and Chinese negotiators and assistance in smoothing out difficulties which might arise in negotiations.
Apparently Hirota was reluctant to reveal the plan proposed by Kawagoe even in its general nature except that it included conditions for "good relations" with Manchuria and for the elimination of all anti-Japanese activities in China.
I was requested by the Foreign Minister to consider the fact that an opening for negotiations had been made as strictly confidential. He declared that the press has no information about the nature of the conversation between Kawagoe and Kao.
The British Chargé expects to see the Foreign Minister tomorrow and to take similar action.
The Foreign Minister said that matters had been worsened by the murder recently of a Japanese naval officer in Shanghai. The Japanese navy is observing self-restraint, although it is very angry, in order that the situation in Shanghai be not inflamed.