"Head honcho" sounds like something from a Spanish-speaking ranch. It is not. Honcho is Japanese, and the man it names was a sergeant.
The source is hanchō, built from han, "squad" or "corps," and chō, "head" or "chief." Merriam-Webster and Etymonline agree on that breakdown. A hanchō was the leader of a small group, such as a squad or a work gang.
American troops met the word during and after the Second World War. Etymonline says servicemen picked it up in Japan and Korea between 1947 and 1953. Merriam-Webster says it reached American military slang in the mid-1950s, though the exact route is uncertain. A radio feature quotes one Korean War veteran who remembered a Korean corporal as the "honcho" of each work detail, supervising the laborers and linking them to the American unit.
The earliest printed uses are close together. Merriam-Webster gives 1945 as its first known use, without naming the source. Etymonline dates the first English use to 1947. The radio feature cites a 1947 book by the journalist James Bertram, The Shadow of a War, as the first published use, spelled "hancho." The sources disagree by two years.
Merriam-Webster says the word was common American colloquial jargon by the 1960s. According to the radio feature, in January 1964 Senator Barry Goldwater called his campaign director "the honcho" and "the head honcho," after which both forms spread into mainstream use.
That phrase is quietly redundant. The Japanese word already contains "head," so "head honcho" amounts to "head squad head." English speakers did not mind. They had borrowed a word for a small-unit leader and promoted it to mean the person in charge of anything.