Baynes is anxious. General Yatabe's arrival in San Francisco has been delayed, and two weeks have gone by. Bormann's death destabilized the Reich but a recent paper declared that Dr. Goebbels has been named the new Reich’s Chancellor. Baynes wonders if the whole plan has been discovered, and if General Tedeki has been detained or decided not to come. He was told by his superiors not to contact any Abwehr personnel, but he decides he must supersede these orders. If Tedeki is not coming, he could at least give his information to Tagomi, though it is unclear what Tagomi will do with such intelligence.
Baynes heads to the Fuga department store, and tells a clerk that he has returned for the pair of dark brown wool slacks he was looking at yesterday. He heads to the dressing room, and it is not long before a Japanese man knocks on the door. The man asks to see ID, and then comments on a picture of a girl in Baynes’ wallet, whom Baynes identifies as his daughter Martha. The Japanese man says he also has a daughter named Martha.
Baynes suddenly says that he has been waiting for two weeks and Yatabe has not shown up. The Japanese man tells him to return tomorrow afternoon. Baynes is relieved and wishes he had contacted them sooner.
In the car on the way to Denver, Juliana reads The Grasshopper Lies Heavy. Joe chats enthusiastically about music and theater, disrupting her concentration and irritating her. The book describes a world in which the US has opened up the great market in China, and Britain is a major world power. In the book, the British authorities end up creating "detention preserves" for disloyal Chinese citizens; Churchill has been in power since World War II and has become a dictator. Joe rambles about the greatness of Mussolini.
Abruptly, Joe suggests that they drive up to Cheyenne and visit the author of the novel, Hawthorne Abendsen, who doesn't live far away. They'll stop in the city first and treat themselves to new clothes and a night at the theater. Juliana is rather surprised at this odd suggestion, but she agrees.
Tagomi's morning cast of the I Ching foretells the arrival of something great and terrible. Tagomi’s anxiety is disrupted by a phone call from Shinjiro Yatabe, who informs him that he has arrived in San Francisco and will have the meeting with him and Baynes in two hours. Tagomi is rather surprised at this sudden meeting, and contacts Baynes, who responds with great delight.
As he is taking a shower in preparation for their meeting, Baynes muses that even if he is caught, it is too late for the SD to do anything. He sings happily in the shower.
Hugo Reiss is deeply displeased to find Kreuz vom Meere waiting for him in his office. Vom Meere says that he has spotted the spy, Rudolf Wegener, at an old Abwehr spot that they had under surveillance. Furthermore, Wegener has been using a cover name - Baynes. Because he is meeting with the Japanese in Japanese-controlled territory, apprehending him may cause some diplomatic tension.
Reiss is skeptical about causing political problems to apprehend this man, but vom Meere already plans to send some commandos to quietly intercept Wegener/Baynes. Their conversation is interrupted by a phone call from Dr. Goebbels, who commands Reiss to cooperate with the German authorities in apprehending Wegener/Baynes. Terrified, Reiss quickly pens the authorization for Baynes' arrest. Still, he ponders how he can botch vom Meere's plans by dragging his feet or delaying the arrest of Baynes.
Around noon that day, Childan heads to Paul Kasoura's office. He is anxious that Betty Kasoura was disappointed by his gift of one of the Edfrank jewelry pieces. Paul says that she was not disappointed because he never gave the pin.
Childan is horrified that he may have offended the Kasouras, but Paul calmly explains that he showed it to his business associates first, who laughed (this does not reassure Childan). Paul notes that he feels a great fondness for this piece, though he doesn't know why; it has no history or story. Yet he thinks that the piece somehow partakes of Tao, and that it is alive in some significant way. The pin has within it a quality that Paul refers to as wu, a powerful serenity.
Paul gives the pin back to Childan, and explains that he should get in touch with one of Paul's business partners to find a way to mass-produce the pins and sell them as good luck charms around South America and Asia. Childan is again filled with puzzlement at the Japanese mind. Though he initially agrees to get in touch with Paul's contact, he eventually decides that this is an insult: the work of American craftsmen is worthless, Paul suggests, until it is turned into profit by Japanese businessmen. This is just another way of saying that America itself is worthless.
Childan blurts out that he has been humiliated, and demands that Paul apologize, to him and to the American artists who made this item. Paul does so, and as he says this, Childan thinks he detects a tiny hint of respect that he has never seen before. He feels a sense of calm and purpose that he has not felt before.
Tagomi arrives at the meeting with Baynes and Yatabe, and instantly realizes that the elderly retiree is in fact General Tedeki, a high-ranking but retired member of the Japanese military forces. Baynes introduces himself as Rudolf Wegener, a Nazi defector who has come at great risk to warn Tedeki of a danger to Japan. Tedeki says very formally that he cannot guarantee if the Japanese government will listen to his message, but he will try.
Wegener/Baynes explains that there is a secret plan in the upper tiers of the Nazi government called Project Dandelion. Despite its innocent-sounding name, Project Dandelion is a plan to completely obliterate the Japanese Home Islands, once and forever removing the only world power standing in the way of German supremacy. Tagomi is rather stunned to hear that Goebbels (who is now in power) supports this plan, while Heydrich opposes it. When Tedeki asks for some evidence of these stunning assertions, Wegener/Baynes gives him data hidden in a cigarette case.
Suddenly, the three men receive news that the SD commandos sent by vom Meere and Reiss have stormed the building, harassing workers there. Tagomi is skeptical that they will get past the guards, but he calmly takes his antique pistol out of his desk, loads it, and waits with it pointing at the door.
Frank and Ed's jewelry business is not going well. Ed is proving to be a very poor salesman, and they have not yet made any money. When he goes outside for a cigarette, he is apprehended by two police officers who first accuse him of trying to blackmail Childan, and then threaten to deport him to the Reich. Frank is Jewish, and all Jews are considered to be property of the Nazis, who kill them immediately.
When two SD commandos break into Tagomi's office to apprehend Baynes/Wegener, Tagomi shoots them both, killing them. Tagomi, a devout Buddhist, is horrified by the act that he has committed and goes into a spiral of despair and guilt. Baynes/Wegener is thankful that Tagomi saved his life, but does not know how to offer support to the grieving man.
Up until now, Childan has humiliated himself before the Japanese occupiers to gain their interest, and has then hated them for doing this. It is only when he is able to assert his own pride in his heritage that he is able to move past this inferiority complex. When Paul suggests that he mass-produce the Edfrank jewelry and sell them as good luck charms, Childan reaches his breaking point. In an intriguing simile, Childan describes art as a concrete worm, a simile that might seem disgusting but instead for Robert conveys something that is "unsmoothed by any passage over or across it" (pg. 183). Childan actually earns Paul's respect when he demands the apology.
In Chapter 12, we learn why Wegener/Baynes has come to the Pacific States of America: to warn the Japanese of a planned strike on the Japanese Home Islands. In a bit of irony, the horrendous German plot to eradicate the Japanese Islands bears the innocent-sounding name of "Project Dandelion."
There is also the stunning fact that Heydrich, previously described as one of the most deranged and cruel Nazis, is in fact opposed to the plan to wipe out Japan. It is possible that this is another example of Dick's unstable reality: the most likely candidate to perpetrate an atrocity is in fact the one who is most opposed to it. It is also possible that Heydrich, who is in charge of the colonization of Mars, does not want resources directed away from his pet project.
Science fiction author Kim Stanley Robinson has suggested that Tagomi's courageous defense of Baynes marks him as the only true American in the novel: he exhibits the cherished American characteristics of resistance, heroism, skill with weapons, courage, and defiance of the enemy.
Ironically, though Tagomi's pistol is likely a fake (and perhaps made by Frank himself), in that it is not an authentic Civil War pistol. However, this gun has very real effects in the world, regardless of its origins.