JAPANESE MORNING PRESS HIGHLIGHTS 03/02/06

UNCLAS SECTION 01 OF 11 TOKYO 001096

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SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 03/02/06


Index:

1) Top headlines
2) Editorials
3) Prime Minister's daily schedule

Visit of Iran's foreign minister:
4) Foreign Minister Mottaki in interview is unbending on Iran's
plan to continue uranium enrichment
5) In interview comments, Mottaki seeks to constrain Japan from
cooperating on sanctions against Iran

6) Money laundering game: North Korea may be washing its dirty
money in another China bank account

7) Japan, seeing "forward-looking relations" slipping away,
reacts sharply to ROK president's latest critical speech

8) China in upcoming talks with Japan may float new proposal
for resolving E. China Sea gas development stalemate

9) Poll of high school kids in US, Japan, China, South Korea
finds only one in four in China, ROK like Japan

Defense and security issues:
10) SDF timetable for withdrawal from Iraq may slip as
escalating religious clashes in country threaten stability of
Iraqi government
11) Town near Iwakuni base would accept Atsugi fighters
conditions on a local economic package
12) JDA finds more information leaks from the SDF

13) Fiscal 2006 budget bill passes the Lower House

Minshuto in turmoil:
14) Local Minshuto organizations want Nagata to quit Diet seat
for fake e-mail fiasco
15) Minshuto head Maehara suddenly finding himself isolated in
the party

Articles:

1) TOP HEADLINES

Asahi:
JAL unveils new management lineup, revealing victory of rebels in
internal strife

Mainichi:
Poll of governors: 27 favor introduction of regional system
(reorganization of prefectures into larger regional blocs with
devolution of central government power),but many opposed to
zoning examples

Yomiuri:
Personnel transfer across ministries and agencies, promotion of
5% decrease in public servants will be specified in
administrative reform promotion legislation

Nihon Keizai:
Firms shifting to long-term perspective on fund-raising plans,
envisioning discontinuation of easy money policy

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Sankei:
North Korea transfers its bank accounts to China, perhaps aiming
to dodge pursuit of money laundering

Tokyo Shimbun:
Minshuto (Democratic Party of Japan) members of Tokyo
Metropolitan Assembly demand lawmaker Nagata's resignation,
reflecting discontent from local chapter members

2) EDITORIALS

Asahi:
(1) Secret diplomatic fund: Ruling should be taken seriously
(2) ODA reform: Efficiency is a long way away

Mainichi:
(1) Ruling on discretionary diplomatic fund: General rule for
disclosure necessary
(2) Review of specially designated industries: No public benefit

Yomiuri:
(1) Report on regional system (reorganization of prefectures
into larger regional blocs with devolution of central government
power): Basis for discussion prepared now
(2) Philippines: Political turmoil not calmed with iron hand

Nihon Keizai:
(1) JAL needs to bring its management back on track swiftly
(2) District court ruling chides Foreign Ministry for its
practice of handling everything as confidential

Sankei:
(1) Ruling on secret diplomatic fund: Outlays for vague reasons
not permitted
(2) Regional system: Institutional design necessary for self-
reliant local governments

Tokyo Shimbun:
(1) Replacement of JAL president: New management lineup urged to
make a fresh start quickly
(2) Secret diplomatic fund: More information should be disclosed

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, March 1

NIHON KEIZAI (Page 2) (Full)
March 2, 2006

10:36
Signed a get-well book for the hospitalized Prince Mikasa at the
prince's residence in Motoakasaka.

10:46
Returned to Kantei.

11:30
Met Cabinet Office Vice Minister Erikawa and Decoration Bureau
Director General Katsuno.

12:39

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Met Education Minister Kosaka.

14:01
Met LDP Secretary General Takebe, followed by National Police
Agency Secretariat Chief Ando, Justice Ministry Correction Bureau
Director General Onuki, and Japan Coast Guard Vice Commandant
Hirata.

15:52
Met Diet Affairs Committee Chairman Hosoda, Diet Affairs
Committee Principal Director Murata, and Lower House Rules and
Administration Committee Chairman Sata.

16:32
Met Administrative Reform Minister Chuma, Administrative Reform
Promotion General Secretary Matsuda, and others.

17:02
Hagi Mayor Nomura in the presence of Chief Cabinet Secretary Abe,
followed by Internal Affairs and Communications Minister
Takenaka.

19:03
Offered condolences for the death of former Agriculture Minister
Mutsuki Kato at the minister's residence.

19:30
Returned to his residence.

4) Iranian foreign minister indicates plan to continue uranium
enrichment activities for research purposes in the nation

ASAHI (Page 3) (Full)
March 2, 2006

Responding to an interview with the Asahi Shimbun yesterday,
visiting Iranian Foreign Minister Manouchehr Mottaki said that
Iran would continue small-scale uranium-enrichment activities for
research purposes within the nation even if it accepts a Russia
proposal. Prior to the regular board meeting of the International
Atomic Energy Agency (IAEA) starting on March 6, Mottaki thus
underscored that Iran has the right to use nuclear materials for
peaceful purposes. An array of difficulties are foreseen in
negotiations on Iran's nuclear issue.

Foreign Minister Mottaki emphatically said: "The right to have
nuclear techniques should be recognized." The Russia proposal has
drawn attention as measures to break the impasse on the issue by
shifting Iran's enrichment activities to Russia. Mottaki, though,
commented that "Iran will continue in the nation even under any
circumstances" such small-scale enrichment activities as those
resumed in February in a laboratory.

Russia and Iran started the fourth round of talks on March 1.
Here, too, heated negotiations are expected because the Russia
proposal is premised on a plan for Iran to completely freeze its
enrichment activities in the nation. Mottaki said: "The focus in
the talks is on where activities should be moved and how long."
It has been reported that commercial-based enrichment activities
to extract nuclear fuel will be subjected to the transfer plan."

As for the period of transfer, a Russian newspaper reported:

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"Iran hopes for two years or less," but Mottaki said: "We have
asked that the period should be as short as possible." He
indicated that enrichment activities for commercial purposes
should be returned to Iran in the end.

Regarding the international community's concern that Iran might
use nuclear materials for military purposes, Mottaki commented:
"There is no place in Iran's defense policy for nuclear weapons
to exist," adding: "We are ready to accept inspections based on
IAEA rules."

5) Iran's foreign minister seeks to check Japan's cooperation in
imposing nuclear-related sanctions

NIHON KEIZAI (Page 1) (Full)
March 2, 2006

Iran's Foreign Minister Mottaki, who is now visiting Japan, gave
an interview in Tokyo yesterday to this newspaper in which he
stressed, "Friendly relations is the basis for economic
cooperation," referring indirectly to that country's nuclear
development issue. The foreign minister's remark may be taken as
trying to constrain Japan from cooperating with possible
sanctions against Iran that the US is considering, and as a hint
that if Japan joints such sanctions, there would be a possibility
that Iran would reconsider such economic cooperation with Japan
as the oil field development project.

Mottaki pointed out: "President Bush's policies instead of
managing crises are inviting new crises." He expressed his view
that even if US-led sanctions were imposed on Iran, they would
not be effective.

Japan relies on Iran for 14% of its oil imports, and in 2004, it
acquired a 75% interest in a project to develop Iran's Azadegan
oil field. The foreign minister noted, "The Azadegan oil field is
a project that symbolizes the cooperation between our countries."
He expressed his expectation for quick development of the field,
and he stated, "We are giving priority to inviting in investment
from Japan, and we are now considering such incentives as
government guarantees." He indirectly urged Japan in this way not
to take a hard-line stand on the nuclear issue.

6) North Korea transfers bank accounts to China, then changes
banks a number of times; Is it trying to escape pursuit of its
money laundering?

SANKEI (Top Play) (Full)
March 2, 2006

According to several Japanese and US government sources, North
Korea, following the financial sanctions imposed by the US
government over its laundering money using a banks in Macau,
transferred its bank accounts to a number of banks in China and
then switched banks several times. Washington and Pyongyang are
scheduled to hold talks on the financial sanctions in New York on
Mar. 7. During the talks, the US government will likely strongly
call on North Korea to stop its illegal financial activities.

North Korea started switching around its bank accounts from
around last October. Deputy Assistant Secretary of the Treasury
Grazer visited Japan in Jan. to investigate North Korea's money-

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laundering activities. He reportedly discussed the issue with
Japanese officials on that occasion. According to authorities
concerned, following the US sanctions, North Korea informed an
organization in Japan under its control of the transfers of bank
accounts to be used for their remittances, providing account
numbers it holds with a number of banks in China. Though the
officials did not reveal the names and locations of the banks,
they said that those banks include a European bank's branch.

One official noted, "North Korea has changed its bank accounts
about once a month. It may be doing so in order to prevent the US
from tracking the money or could be unable to obtain full
cooperation from banks where it opened accounts.

Illegally made profits reach 500 million yen a year

Sources of funds for money laundering by North Korea are believed
to be profits made on illegal activities, such as the printing of
bogus US dollar notes and drug trading.

According to the Sep. 2005 edition of the US government Federal
Register, the US government confiscated 45 million dollars
(approximately 5.2 billion yen) worth of 100-dollar "super notes"
printed by North Korea over the past 30 years. It is estimated
that Pyongyang earned 500 million dollars a year (approximately
58 billion yen) through criminal acts, including drug trading.
The US government insists that it has substantial evidence that
shows North Korea is laundering profits made on such illegal
activities through a bank in Macau. It claimed that Banco Delta
Asia received hard cash, including fake dollar notes, for over
two decades and allowed these to be circulated.

The US Department of the Treasury last September designated the
bank as a principal bank feared to be involved in money
laundering by North Korea in line with the Patriot Act, a law
established after the Sept. 2001 terrorist attacks, and placed a
ban on its business transactions with US banks.

North Korea is calling for the removal of the sanctions, claiming
that it has nothing to do with the bogus money circulation. The
US has taken similar measures against banks in Syria and Burma in
order to prevent the outflow of illegal funds to terrorists and
illegal financial activities by foreign governments, taking the
position that the law is targeted not at a specific
administration but illegal activities.

7) Government, ruling party members react fiercely to South
Korean president's speech, calling it "lacking future-oriented
approach"

YOMIURI (Page 4) (Full)
March 2, 2006

A number of officials in the government and the ruling parties
have voiced dissatisfaction at remarks made by South Korean
President Roh Moo Hyun in a speech yesterday. Roh delivered the
speech to mark the 87the anniversary of Korea's March 1
Independence Movement. A senior Foreign Ministry official
commented: "The speech lacks a future-oriented approach. There
was no reference to or evaluation of Japan's record over the 60-
year postwar period."


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Asked by reporters about the South Korean president's criticism
of his visits to Yasukuni Shrine, Prime Minister Koizumi replied:
"It is reasonable for any country to pay tribute to its war
dead."

In the speech, Roh also remarked: "If Japan aims to become an
ordinary country and one of the world's leading nations, it
should try to win the trust of the international community,
instead of seeking to amend laws and reinforce its military
power." Government and ruling party members, taking this comment
as intended to apply pressure on Japan's moves to amend its
constitution, fiercely reacted to it.

Chief Cabinet Secretary Abe expressed his strong displeasure at
the remark, saying: "What we do with our Constitution is a matter
to be handled by Japan. This is indisputably our domestic issue."

New Komeito leader Kanzaki said: "It is important for Japan to
thoroughly discuss a revision of the Constitution without being
influenced by foreign countries." He added: "We should not revise
the Constitution into one that will pose a threat to neighboring
countries on the military front."

8) East China Sea gas field: China's new proposal likely to come
into focus at upcoming senior working-level talks slated for
March 6

YOMIURI (Page 2) (Excerpts)
March 2, 2006

Japan and China have decided to hold senior working-level talks
on explorations of natural gas fields in the East China Sea in
Beijing on March 6-7. The focus of the first formal bilateral
talks in five months is what proposal China will come up with
about joint gas field development. Another focus is whether Trade
Minister Nikai's recent dialogue in China with its leaders,
including Premier Wen Jiabao, will have a favorable effect on the
upcoming talks.

Attention

China has refused to recognize the equidistance line between
Japan and China as the boundary and consistently maintained the
position that it is exploring gas fields in undisputed waters,
which, however, are located around the equidistant line as
claimed by Japan. In the previous round of talks in last
September, Japan proposed joint development of four gas fields,
including "Shirakaba" or Chunxiao in Chinese, near the median
line, but there has been no response from China.

In informal talks this January, China frowned on Japan's
proposal, but stated: "Considering Japan's proposal, we will come
up with a new suggestion." China is less likely to recognize the
equidistance line, given its boundary issue with other nations
over, for instance, the Spratly Islands, but how far China's new
proposal will refer to about joint development is likely to draw
international attention.

Flexible

When Nikai met with Wen in February, the two leaders did not
exchange in-depth views over the gas field issue, but agreed on

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some plans, for example, to host a forum aimed at promoting
cooperation in the areas of energy saving and the environment in
Tokyo in late May. Nikai's China visit set the stage to mend the
currently chilly relations with China.

The initial timetable for the upcoming working-level talks was
that they would be held in October of last year. And in the
informal talks this past January, such working-level talks were
scheduled to occur sometime from late January to mid-February,
but they were not realized. Thus the working-level talks have
been delayed without any clear reasons and time has been wasted
to date.

9) 4-nation poll: One-fourth of Chinese, South Korean high school
students like Japan; US stands at 40%, China at 10% among
Japanese students

MAINICHI (Page 2) (Abridged)
March 2, 2006

In China and South Korea, only one-fourth of high school students
like Japan, a sign that Japan's bilateral relationships with
these two countries have soured, according to findings from a
poll released yesterday by the Japan Youth Research Institute, a
Shinjuku-based think tank. However, the levels of liking for
Japan among high school students in China and South Korea were
higher than that for these two countries among Japanese high
school students. The poll also found that over 70% of Chinese and
South Korean high school students eager to improve their results
at school, while the proportion of Japanese high school students
hoping to do so was only 30%.

The survey was conducted from October through December last year
in Japan, the United States, China, and South Korea. For the
survey, a total of 7,300 high school students were chosen in the
four countries. In the survey, they were asked if they like
Japan. In the United States, "yes" accounted for 45.2%, topping
all other countries. In China and South Korea, the pro-Japan
figure was respectively at 24.5% and 24.0%.

In Japan, 39.6% chose the United States as a country they like,
followed by South Korea at 16.7% and China at 10.2%. Japan and
the United States were popular among each other's high school
students. Respondents were also asked if they like Japanese
comics or animations. In response to this question, 73.3%
answered "yes" in China, and 81.4% in South Korea. Among those
who like Japanese TV programs or books, the degree of liking for
Japan rose to 40.5% and 39.1% in South Korea. Among those who
have ever been to Japan, the figure was even higher, reaching
48.6% in China and 40.3% in South Korea.

10) Gloomy outlook hangs over Japan's plan to begin withdrawing
GSDF troops from Iraq

TOKYO SHIMBUN (Page 2) (Full)
March 2, 2006

Dark clouds are hanging over Japan's plan, now in its final
phase, to withdraw Ground Self-Defense Force (GSDF) troops from
Iraq. The reason is because with the religious conflict between
Shiite Muslims and Sunnis intensifying, there is no telling when
Iraq can install a legitimate government. Although the government

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intends to begin pulling the GSDF out of Iraq later this month
and finish up in May, if tensions grow further in Iraq, the
planned withdrawal may be delayed.

The religious conflict was triggered by the bombing on Feb. 22 of
the Al Askari Mosque, a key Shi'a shrine, in the central Iraqi
city of Samarra. The bombing triggered a series of bloody
conflicts between Shiites and Sunnis in Baghdad and other cities,
producing a large number of victims. Shiite residents of Samawah
where GSDF troops are stationed have also staged a massive
protest.

A senior GSDF officer said, "Suppressed hostility toward each
other has exploded. Iraq may fall into a state of civil war."
Following the legislative election in December, talks have been
held with the aim of establishing a grand coalition encompassing
all religious and ethnic groups. But achieving that goal at an
early date seems extremely difficult.

The Japanese government has been making preparations for the
planned GSDF withdrawal based on progress in the political and
security situations in Iraq. But the environment surrounding Iraq
has now completely changed. A government source lamented,
"Although the establishment of a legitimate government is not a
condition per se, we cannot pull troops out of Iraq when there is
no prospect for it."

British and Australian forces that have been conducting security
duties in Samawah have also studied plans to leave the country
after transferring powers to local security authorities. Unable
to transfer powers under the unstable situation in Iraq, their
plans may also have to be shelved. That would make it even more
difficult for the SDF to leave the country.

In a working-level talks held between Japan, the US, Britain, and
Australia, the government presented a plan to begin withdrawing
the GSDF in late March. The government also plans to allow the
Air Self-Defense Force to continue its Kuwait-based transport
mission with more airlift hubs. Such plans of Japan obtained the
understanding of other countries.

But the working-level meeting discussed each country's withdrawal
plan on the assumption that Iraq would soon install a legitimate
government. However, given the increasingly unstable security
situation in Iraq, each country may reexamine their troop
structure.

The government has been making arrangements for Prime Minister
Junichiro Koizumi to formally announce the withdrawal in mid-
March or later. Given the murky outlook for the security
situation in Iraq, though, the government will likely find it
difficult to make such a decision.

11) Mayor accepts Iwakuni redeployment plan

YOMIURI (Page 4) (Full)
March 2, 2006

The town of Yu, which neighbors the city of Iwakuni in Yamaguchi
Prefecture, has accepted the planned redeployment of US carrier-
borne fighter jets from the US Navy's Atsugi base, which is
located across the city of Yamato and other municipalities in

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Kanagawa Prefecture, to the US Marine Corps' Iwakuni base in the
city of Iwakuni. The town's mayor, Toshimitsu Makimoto, visited
Defense Agency Director General Nukaga, Chief Cabinet Secretary
Abe, and other government officials yesterday, and the mayor
handed a written petition regarding the planned realignment of US
forces in Japan. "We are opposed to a further buildup of the
base," the petition says. However, the petition also notes, "We
cannot say our living environment will be further affected along
with the realignment." With this, the petition shows the town's
de facto acceptance of the redeployment of carrier-borne fighters
to the base. The petition, however, conditions the town's
acceptance on an expanded package of economic stimulus measures
from the government for base-hosting local communities.
Meanwhile, Iwakuni City is scheduled to poll its residents on
March 12 to ask them whether to accept the redeployment.

12) GSDF also leaked info for bid rigging

NIHON KEIZAI (Page 43) (Full)
March 2, 2006

The Ground Self-Defense Force was recently found to have rigged
bids for dry cells ordered for its communication equipment. In
this bid-rigging case, GSDF officials had leaked information,
such as estimated prices, to battery makers, the Defense Agency
found yesterday from its internal investigation. The agency is
considering punitive measures for those GSDF officials.

According to the Defense Agency, administrative officials and
GSDF personnel assigned to the GSDF Central Supply Command
provided budget memos describing quantities and unit prices to
battery-manufacturing companies' officials from April 1996
through March 1999. Around 1997, an administrative official of
the GSDF Communication Supply Command (currently the Kanto Supply
Depot),when asked by officials from battery makers, told them
that the estimated price would be the same as last year's.

In December 2000, the Fair Trade Commission warned four battery-
manufacturing companies against their violation of the
Antimonopoly Law. The four companies are Fuji Denki Kagaku Co.,
Ltd. (FDK),Matsushita Electric Industrial Co., Ltd., Toshiba
Battery Co., Ltd., and Toyo Takasago Dry Battery Co., Ltd.
(Tokan).

In November 2004, the Defense Agency instituted a lawsuit at the
Tokyo District Court, claiming back approximately 700 million yen
as an unreasonable profit.

In July last year, the four companies stated before the court
that the Defense Agency rigged the bids on its own initiative.
They submitted budget memos from Central Supply Command officials
describing items and prices.

However, the Defense Agency comments: "They were asked by the
makers to provide that information. The Defense Agency did not
initiate the bid rigging."

13) Lower House to approve FY2006 budget bill today

YOMIURI (Page 4) (Full)
March 2, 2006


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The House of Representatives Steering Committee decided in its
board meeting yesterday to take a vote on the budget bill for
fiscal 2006 at a Lower House plenary session this evening. The
bill is likely to be approved by a majority from the ruling
parties and sent to the House of Councillors.

The budget bill is now certain to be enacted by the end of this
fiscal year. Based on constitutional rules, if the bill passes
the Lower House today, it will be enacted at 12:00 a.m. on Apr. 1
even without voting at the Upper House.

14) Minshuto's Tokyo Metropolitan Assembly members demand
resignation of lawmaker Nagata, Local chapters express
unhappiness with the party executive's response

TOKYO SHIMBUN (Top Play) (Full)
March 2, 2006

The main opposition party Minshuto (Democratic Party of Japan)
started yesterday the work of picking the replacement of
Yoshihiko Noda, who quit his post as the party's Diet affairs
chief to take responsibility for disrupti9ng the Diet by giving
party lawmaker Hisayasu Nagata the go-ahead to bring up an e-mail
allegedly sent from Livedoor Co. founder Takafumi Horie ordering
his staff to transfer money to Liberal Democratic Party (LDP)
Secretary General Tsutomu Takebe's son. After deciding on what

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punitive measures to impose, Minshuto is now putting energy into
quelling internal party disorder. However, Akihiko Nakamura,
secretary general of Minshuto's Tokyo Metropolitan Assembly

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members, and other assembly members called on Minshuto's
Secretary General Yukio Hatoyama at party headquarters to hand

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over a letter demanding the resignation of Nagata from the Diet.

The letter included such charges as that the party would
otherwise never secure public understanding and that party
leaders did not realize the seriousness of the situation. The
assembly members wanted Nagata to voluntarily give up his Diet
seat. Hatoyama responded by saying, "I would like to do my best
to restore public confidence in the party in consideration of
your views."

The party executive will explain in a meeting on March 4 the
punitive measures they have decided and seek party members'
understanding. Party regional chapters will inevitably intensify
criticism of the party's responsibility for the e-mail uproar.

Party President Seiji Maehara is now working on the selection of
new Diet affairs chief. He has already asked former party head
Naoto Kan and Vice President Yoshiaki Takagi to assume the post,
but both Kan and Takagi turned down the offer. He intends to pick
Noda's successor from veteran lawmakers based on an advice by a
senior party member that it would be desirable to pick a person
with the experience of dealing with Diet affairs since the
personnel change came during deliberations on the fiscal 2006
budget.

The party has decided to set up a taskforce headed by Acting
Secretary General Koichiro Genba to examine the party executive's

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response to the e-mail issue and to look into measures to prevent
a recurrence. The taskforce will hold its first meeting today. It
will come up with a report by the end of March after hearing
views of experts on crisis management.

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15) Livedoor e-mail uproar: Minshuto President isolated in party
due to resignation of Noda as Diet affairs chief

MAINICHI (Page 2) (Excerpts)
March 2, 2006

Minshuto (Democratic Party of Japan) Diet Affairs Committee
Chairman Yoshihiko Noda stepped down from his post to take
responsibility for throwing the Diet into confusion by allowing
false allegations to be raised in the Diet by lawmaker Hisayasu
Nagata. However, coordination on the selection of Noda's
successor has run into trouble. The situation reflects the fact
that Minshuto President Seiji Maehara is now isolated in the
party. While the party leadership losing momentum, other internal
forces have begun distancing themselves from Maehara by refusing
his offer to assume the party's Diet Affairs Committee
chairmanship. Given this situation, Maehara is busy trying to
coordinating views in the party.

"I would like to fulfill my duty until my successor is picked,"
said Noda in a meeting yesterday of the party's Diet Affairs
Committee members. His remark impressed that the party was having
a difficult time in selecting Noda's replacement.

Secretary General Yukio Hatoyama told reporters yesterday

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morning, "We want to pick the replacement today," but he said
later in the day, "It has not been that easy."

Maehara is trying to give top priority to internal harmony by
installing in the vacant post a veteran lawmaker, and not a mid-
level or junior member. While communicating with Secretary
General Hatoyama, Maehara called up several candidates to offer
the post. However, his offer was rejected by former party head
Naoto Kan on Feb. 28 and by Vice President Yoshiaki Takagi, of
the now defunct Democratic Socialist Party, on March 1. A mid-
level lawmaker commented that nobody wanted to board a sinking
ship.

Maehara's advantage is that he is not obsessed with preserving
internal harmony. He has the support of junior lawmakers because
of his motto to "break the shackles." But the fact that he let
only a few persons know about a copy of the e-mail in question
has worked against him. His party management supported by mid-
level and young lawmakers has now come under fire in the party.

SCHIEFFER