The Foreign Ministry [had] sent telegrams to the Allies (by way of the Swiss Federal Political Department and Max Grässli in particular) announcing that Japan would accept the Potsdam Declaration, but would not accept any peace conditions that would 'prejudice the prerogatives' of the Emperor. That effectively meant no change in Japan's form of government—that the Emperor of Japan would remain a position of real power.
The Allied response... [was] written by James F. Byrnes.... It said:
From the moment of surrender the authority of the Emperor and the Japanese government to rule the state shall be subject to the Supreme Commander of the Allied powers who will take such steps as he deems proper to effectuate the surrender terms.... The ultimate form of government of Japan shall, in accordance with the Potsdam Declaration, be established by the freely expressed will of the Japanese people.
President Truman ordered military operations (including the B-29 bombings) to continue until official word of Japanese surrender was received. However, news correspondents incorrectly interpreted a comment by Carl Andrew Spaatz that the B-29s were not flying on August 11 (because of bad weather) as a statement that a ceasefire was in effect. To avoid giving the Japanese the impression that the Allies had abandoned peace efforts and resumed bombing, Truman then ordered a halt to further bombings.
The Japanese cabinet considered the Allied response, and Suzuki argued that they must reject it and insist on an explicit guarantee for the imperial system. Anami returned to his position that there be no occupation of Japan. Afterward, Tōgō told Suzuki that there was no hope of getting better terms, and Kido conveyed the Emperor's will that Japan surrender. In a meeting with the Emperor, Yonai spoke of his concerns about growing civil unrest:
I think the term is inappropriate, but the atomic bombs and the Soviet entry into the war are, in a sense, divine gifts. This way we don't have to say that we have quit the war because of domestic circumstances.
That day, Hirohito informed the imperial family of his decision to surrender. One of his uncles, Prince Asaka, then asked whether the war would be continued if the kokutai (imperial sovereignty) could not be preserved. The Emperor simply replied 'of course.'