The smallest circle means that its radial is, distance from origin to the diameter is smallest.
Let equation of line perpendicular to $y-x=1$ is $x+y=\lambda$
Also, it passes through $(0,0)$.
$\therefore \,\,\,\,\,\lambda=0$
$\therefore $ Perpendicular line is $x+y=0$
The intersection point of lines are $\left(-\frac{1}{2}, \frac{1}{2}\right)$.
Which is the centre of circle.