Homer, I believe you are correct, the letter has been taken way out of context; in fact, it’s so out of context as to be libelous, should it ever have come to that.
Yamamoto’s original statement was to the effect that taking on the United States was going to be a formidable task, and that the Americans would not quit fighting until the Japanese dictated peace terms in the White House, an eventuality he did not believe would ever happen. In other words, he counseled against war with America.
This will not be the last time the Times distorts something from the Japanese. The war will end with an incomplete translation of the word “mokusatsu.”
I read up a bit on that letter (via our Wiki friend), and it seems it was Japanese militarists who distorted Y’s message by omitting the sentence that followed. They circulated the truncated quotation to make it seem as though Y. was boasting about what the IJN could do and would do, eliminating Y’s caution which followed.
He was trying to caution the ultra-militarists that they did not grasp the real implications of going to war with America, that it would require a total defeat of America and not some one-off local victory.