Officials of both the Gaimusho and the War Ministry said it was neces-to maintain a vigilant watch ove:
the observance of the terms of the agreement of July 11 by China.
Japan, a Gaimusho spokesman ssid to-day, continues to regard the Lukouchiao incident as a local affair, "but if it is expanded, the Government will treat it differently Japan's attitude, he said, "will b: changed for instance, it Nanking per sists in interfering with local negotions in Peiping and Tientsin, or if Nanking continues to send its troops north."
The Japanese Government, he con tinued, is as anxious as Nanking for an amicable settlement of the incident, "but fears that the Ho-Umetsu greement of 1935 has already been violated by the Central Government."
The military authorities here continued to profess pessimism over the outcome of Sino-Japanese talks.
Messages from Hankow reported continued transportation of military equipment and food north on the Peiping-Hankow Railway. Passenger trains, operating on a one or two-train daily schedule, were said to run only as far as Chengchow, Honan.
Mr. Shinrokuro Hidaka, Counsellor of the Japanese Embassy
Text read from the printed page and cleaned; old type leaves the occasional error.