UNCLAS SECTION 01 OF 13 TOKYO 001577

SIPDIS

SIPDIS

DEPT FOR E, P, EB, EAP/J, EAP/P, EAP/PD, PA;
WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST
DIVISION; TREASURY/OASIA/IMI/JAPAN; DEPT PASS USTR/PUBLIC AFFAIRS
OFFICE; SECDEF FOR JCS-J-5/JAPAN,
DASD/ISA/EAPR/JAPAN; DEPT PASS ELECTRONICALLY TO USDA
FAS/ITP FOR SCHROETER; PACOM HONOLULU FOR PUBLIC DIPLOMACY
ADVISOR; CINCPAC FLT/PA/ COMNAVFORJAPAN/PA.

E.O. 12958: N/A
TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA

SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 03/27/06

Index:

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

Opinion poll:
4) Koizumi Cabinet support rate climbing again: Up 3 points to
48% in Nikkei poll
5) Shinzo Abe still the most popular candidate to succeed
Koizumi with 40% support in Nikkei poll, followed by Yasuo Fukuda
with 14%
6) 38% of public say maintain status quo in US-Japan defense
cooperation, only 7% support Japan paying big share of Guam move

Defense issues:
7) Japan proposes paying $3 billion share of moving Okinawa
Marines to Guam, with $2.5 billion of that in loans
8) LDP's Taku Yamasaki: Half is the maximum that Japan can pay
in moving Marines from Okinawa to Guam
9) Minshuto head Maehara: Japan should not pay lion's share of
cost of moving Marines to Guam
10) Senior working level talks between US, Japan carry over
issue of sharing cost of relocating Marines to Guam
11) Government proposes to Nago City changing the angle of
proposed runway 10 degrees at Camp Schwab to avoid flying over
local homes
12) No agreement yet in talks between JDA chief and Nago mayor
on Camp Schwab runway location issue
13) Final coordination this week on revised plan to relocate
Futenma to Camp Schwab with key to agreement in Nago City's hands
14) LDP's Yamasaki sees settlement of Futenma issue by end of
March
15) Government gives up idea of settling USFJ realignment issues
by end of March as planned

16) Governors' group that sent out questionnaire on SOFA to US
Congress received zero response

17) Prime Minister Koizumi attends Coast Guard Academy
graduation for first time, stresses anti-terror fight in speech

18) Minshuto Secretary General Hatoyama: Lawmaker Nagata should
quit Diet seat over e-mail fiasco

19) Fiscal 2006 budget to pass the Diet today

20) Corporate procurement is at its highest level in seven years

21) Finance Minister Tanigaki meets counterpart in Beijing,
discusses the Renminbi and Yasukuni Shrine

22) At request of friendship groups, China's President Hu will
soon deliver a conciliatory speech toward Japan

Articles:

1) TOP HEADLINES

Asahi:
Son of patient contradicts surgeon's explanation about
disconnecting life support


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Mainichi, Sankei, and Tokyo Shimbun:
Saga Prefecture accepts MOX plan

Yomiuri:
Tens of thousands of marine birds believed to have been killed in
Shiretoko

Nihon Keizai:
Japan's economic recovery continues to gather momentum

2) EDITORIALS

Asahi:
(1) Airlines must secure the safety of the skies
(2) Bill regulating financial products is first step to protect
consumers

Mainichi:
(1) Government, ruling camp should learn from Tottori
Prefecture's suspension of implementing human rights protection
ordinance
(2) Cuts in public servants would change Japan greatly

Yomiuri:
(1) Integrated command to boost SDF's flexibility
(2) Exports of literary works help foreigners understand Japan

Nihon Keizai:
(1) One-Seg to promote integration of telecommunications and
broadcasting systems

Sankei:
(1) Urgent need of guidelines for disconnecting life support
(2) Efforts needed to improve SDF effectiveness with integrated
command

Tokyo Shimbun:
(1) Sales of government's assets would clarify state
government's nonperforming loans
(2) Investigation into abductions: Don't forget to provide
relief to the victims

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, March 26

NIHON KEIZAI (Page 2) (Full)
March 27, 2006

08:03
Left Haneda Airport by Japan Coast Guard (JCG) jet plane.

09:28
Arrived at Hiroshima Airport by JCG's helicopter.

10:07
Met with Land, Infrastructure, Transport Minister Kitagawa, JCG
Director General Ishikawa and JCG Academy President and LDP
Policy Affairs Research Council Chairman Nakagawa at JCG Academy,
Kure, Hiroshima Prefecture. Then reviewed the parade of students.

10:49

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Attended the graduation ceremony.

12:00
Inspected vessel operations. Planted a tree to commemorate the
visit. Took a ceremonial photo with students. Inspected a
dormitory.

12:35
Celebration lunch. Took photos with students.

13:56
Left the Academy by JCG helicopter.

14:32
Left Hiroshima Airport by JCG jet plane.

15:40
Arrived at Haneda Airport.

16:27
Arrived at the official residence.

4) Poll: Cabinet support rate rises to 48%

NIHON KEIZAI (Page 1) (Abridged)
March 27, 2006

The approval rating for the Koizumi cabinet reached 48% in a
public opinion survey conducted by the Nihon Keizai Shimbun on
March 24-26, a rise of 3 percentage points from the last survey
taken in February. The disapproval rating was down 3 points to
40%. In the survey, respondents were asked if they thought the
leading opposition Democratic Party of Japan (DPJ or Minshuto)
has handled well the issue of a fake email. In response, those
who answered "no" accounted for 68%, with "yes" at only 17%. The
DPJ's drop in its public support is a big blow to the party.

The cabinet support rate was on the rise after the House of
Representatives was dissolved in August last year. However, it
fell 14 points in this February's survey in the aftermath of the
Livedoor scandal and the US beef embargo. The margin between
approval and disapproval widened from 2 points in the last survey
to 8 points in the latest survey. Broken down into political
party supporters, the cabinet support rate was 81% among those in
support of the ruling Liberal Democratic Party and 26% among
those with no particular party affiliation.

In the breakdown of public support for political parties, the DPJ
dropped 3 points to 19%, while the LDP leveled off at 44%. The
gap between the two parties has increased to 25%.

The survey was taken by Nikkei Research Inc. over the telephone
on a random digit dialing (RDD) basis. For the survey, samples
were chosen from among males and females, aged 20 and over,
across the nation. A total of 1,488 households with one or more
voters were sampled, and answers were obtained from 846 persons
(56.9%).

5) Poll: Abe marks 40% in post-Koizumi race, Fukuda at 14%

NIHON KEIZAI (Page 2) (Abridged)
March 27, 2006

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Chief Cabinet Secretary Shinzo Abe, 51, topped all other post-
Koizumi candidates at 40% in a recent Nihon Keizai Shimbun poll,
maintaining pole position in the race with a big lead. His
popularity rose 2 percentage points from the last survey taken in
February, rebounding to the 40% mark. Former Chief Cabinet
Secretary Yasuo Fukuda, 69, who doubled in the last survey, rose

SIPDIS
1 point to 14%. However, Fukuda could not close in on Abe.
Foreign Minister Taro Aso, 65, and Finance Minister Sadakazu
Tanigaki, 61, were at single-digit levels.

Abe has overwhelmed all others at around 40% since a survey
conducted last November, shortly after coming to fill his present
post. In the latest survey as well, Abe was evenly supported
regardless of gender, age, and occupation. Among those in support
of the ruling Liberal Democratic Party in particular, Abe ranked
first at 53%, with Fukuda in second place at 13%. The lead
widened further in the survey this time.

In the breakdown of reasons given for picking Abe, his
personality and image overwhelmed all other reasons at 52%. Among
other reasons, his diplomatic and security stance scored 22%, and
his structural reform stance 13%. The public choice of Abe seems
to be based on their image of him over their evaluation of his
standpoints or policies.

Among other candidates in the LDP, Foreign Minister Aso stood at
4%, with Finance Minister Tanigaki and Internal Affairs and
Communications Minister Heizo Takenaka, 55, respectively at 2%,
and Taku Yamasaki, 69, at 1%, all leveling off from this
February's survey.

6) Poll: 38% favor Japan-US defense cooperation

NIHON KEIZAI (Page 2) (Full)
March 27, 2006

Japan and the United States are now about to enter into the final
phase of intergovernmental coordination over the realignment of
US forces in Japan. In the latest public opinion survey conducted
by the Nihon Keizai Shimbun, respondents were asked what they
thought Japan should do about its bilateral defense cooperation
with the United States. In response to this question, public
opinion was split, with 38% saying Japan should keep up its
bilateral defense cooperation with the United States at the
present level, 36% saying Japan should scale back on such defense
cooperation, and only 11% insisting on the necessity of stepping
up bilateral defense cooperation.

In the meantime, the Japanese and US governments are now facing
rough going in their talks about their respective shares of the
cost of moving US Marines from Okinawa to Guam. Asked about this
cost sharing, only 7% said Japan should pay the bulk of the
costs, with 38% saying Japan's share should be less than the
United States' and 36% urging the United States to pay the bulk
of the cost. The US government estimates the total cost of the
relocation at 10 billion dollars and has asked the Japanese
government to pay 75%. However, the general public is critical of
imposing such a heavy burden on Japan.

Asked about when to withdraw Ground Self-Defense Force personnel
currently deployed in the southern Iraqi city of Samawah to help

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with Iraq's reconstruction, 41% answered that the GSDF should
pull out together with British and other foreign security troops,
with 37% insisting on an immediate withdrawal, and 7% saying
Japan should continue its troop deployment until the United
States pull its troops out of Iraq. As seen from these figures, a
majority hope to recall the GSDF at an early date.

7) Japan proposes paying 3 billion dollars of cost of relocating
Marines from Okinawa to Guam, with 2.5 billion dollars to be
financed by GOJ loans

ASAHI (Page 2) (Excerpts)
March 25, 2006

Japan and the United States yesterday ended their two days of
talks of foreign and defense officials at the senior working
level on the realignment of US forces in Japan. Talks included
the issue of Japan bearing part of the cost of relocating the US
Marine Corps from Okinawa to Guam. According to informed sources
in the Japanese government, Japan proposed that it would defray 3
billion dollars to finance the construction of housing for troops
and their families, as well as other base facilities, while the
US called on Japan to bear 7.5 billion dollars of the 10-billion-
dollar cost. The talks ended without agreement. Both sides agreed
to meet again in the US next week.

In a press conference and a meeting of the House of
Representatives Foreign Affairs Committee held yesterday, Foreign
Minister Aso revealed plans to finance the construction of
housing by Japanese government loans. He said:

"About 17,000 troops and their family members will move (to
Guam). It is necessary for Japan to provide a certain level of
support. ... We will consider such means as offering loans."

According to the government sources, a Japanese representative
explained a public private partnership (PPP) under which Japan
would lend money through a government-affiliated financial
institution for constructing and managing housing and the US,
with rents as capital, would pay back with interest. Japan
proposed to the US that it would provide the US with
approximately 2.5 billion dollars under this formula as expenses
for constructing houses for troops and their families.

8) Yamasaki: Japan can pay up to 50% of cost of relocating
Marines to Guam

TOKYO SHIMBUN (Page 2) (Full)
March 27, 2006

Appearing on a Fuji TV program yesterday, Taku Yamasaki, former
vice president of the Liberal Democratic Party (LDP), revealed
the dominant view in the LDP that Japan would be able to pay up
to 50% of the cost of relocating US Marines from Okinawa to Guam,
although the US has been calling on Japan to foot 75% of the 10
billion dollar bill. Yamasaki said:

"The US request would force us to bear an excessively heavy
burden. Some LDP officials have said that the maximum Japan can
pay is half the total cost."

Yamasaki commented on the transfer of 8,000 Marines from Okinawa

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to Guam:

"Since this plan is based on an agreement between Japan and the
US in line with their determination to reduce the security burden
on Okinawa, we would like to translate it into action without
fail."

Regarding the cost-sharing issue, he said:

"There is discussion on whether to adopt a direct-payment system
or a loan system. I have conveyed to the US the trend of party
and public opinion."

9) Minshuto head Maehara opposes Japan's paying large share of
Marine-relocation cost

TOKYO SHIMBUN (Page 2) (Full)
March 27, 2006

In reference to cost-sharing for relocating the US Marine Corps
from Okinawa to Guam, Democratic Party of Japan (Minshuto) head
Seiji Maehara said yesterday afternoon: "I am opposed to a plan
that would force a huge financial burden on Japan." The
opposition leader, though, added in a press conference in
Kitakata City, Fukushima Prefecture: "We must not allow the US to
come up with the comment that since Japan does not pay, we will
drop the relocation plan, the government must remind the US of
the importance of implementing the plan," stressing the need for
the Japanese government to continue efforts to have the Marine-
relocation plan realized without fail.

On Japan's cost burden, Maehara said:

"It is important to push ahead with the (relocation) plan
smoothly in the process of working out a third way of financing,
such as a loan arrangement. ... Some take the view that (Marines)
will be moved out (of Okinawa) in accordance with Japan's
suggestion, but such a view is unilateral. Unless we interpret
that the relocation plan is also in line with changes in the US
strategy, we would be forced to give in to the US."

10) Japan-US senior working-level talks on USFJ realignment
carries over issue of sharing cost of relocating Marines to Guam

TOKYO (Page 2) (Full)
March 25, 2006

The Japanese and US governments held senior working-level talks
of foreign and security affairs officials March 24 in Tokyo on
the realignment of US forces in Japan. Although discussions
focused on the issue of sharing the cost of relocating US Marines
on Okinawa to Guam, the gap in views between the two sides
remained wide, and discussion was carried over to Washington
where talks would resume next week.

The Japanese delegation offered to directly contribute $3 billion
(approximately 350 billion yen) of the estimated $8 billion
(approximately 944 billion yen) total cost of relocating the
Marines. Japan also offered to pay for half of the US share of
$2.5 billion (approximately 300 billion yen) through loans from a
Japanese government-related financial institution.


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In response, the US delegation stressed that Japan should bear
75% of an estimated total cost of $10 billion dollars (1.180
trillion yen). Agreement was not reached.

11) Futenma relocation: Government proposes moving runway out to
sea and changing its angle 10 degrees

NIHON KEIZAI (Page 2) (Excerpts)
March 27, 2006

Defense Agency Director General Fukushiro Nukaga held talks with
mayor Yoshikazu Shimabukuro of Nago, Okinawa Prefecture, for
about three hours yesterday at the agency to make arrangements
for the planned relocation of the US Marine Corps' Futenma Air
Station. In the talks, Nukaga made some proposals, including one
to turn the angle of the runway to be constructed on the
coastline of Camp Schwab about 10 degrees counter-clockwise. The
defense chief also revealed the government's willingness to
consider moving the plan less than 100 meters further out to sea.
The government hopes that its compromise plans will help soften
up the stance of local areas to reach a settlement before the end
of this month.

Shimabukuro reiterated his request to remove houses in the
Henoko, Toyohara, and Abu districts from the flight paths of US
military aircraft. He also insisted on moving the runway over 400
meters further offshore. Following the Defense Agency's step
toward making changes to the coastal plan, Shimabukuro will hold
another round of talks with the defense chief March 29 based on
talks with the Okinawa prefectural government.

The Defense Agency thinks changing the direction of the runway
about 10 degrees and moving it less than 100 meters out to sea
would help reduce noise levels in Henoko and other districts,
which Shimabukuro fears. The Defense Agency also envisages that
the expanded reclaimed land would bring economic benefits. The
option, however, is certain to adversely affect the environment,
including the habitat of dugongs. Shimabukuro's response will be
a key.

Prior to his meeting with Shimabukuro, Nukaga held talks with
Okinawa Gov. Keiichi Inamine yesterday morning at a hotel in
Tokyo. Inamine said to Nukaga, "We appreciate to a certain extent
the planned relocation of US Marines and return of some US
bases." He also said regarding the coastal plan, "I hope the
government will discuss it thoroughly with affected local areas
based on past developments."

12) Futenma relocation: Nukaga and Shimabukuro fail to reach
conclusion; Nago presents new flight paths

ASAHI (Page 1) (Excerpts)
March 27, 2006

Defense Agency Director General Fukushiro Nukaga held another
round of talks with Nago Mayor Yoshikazu Shimabukuro yesterday at
the agency to discuss the planned relocation of the US Marine
Corps' Futenma Air Station, a focal point in the realignment of
US forces in Japan. In response to the Defense Agency's proposal
to change the direction of the planned runway, the Nago mayor
presented new flight paths to avoid all districts in the city.
The Defense Agency will study whether to accept Nago's request.

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Nukaga and Shimabukuro agreed to reach a conclusion swiftly and
hold another round of talks later this week.

13) Futenma coastal plan: Final coordination on minor changes;
Key to settlement lies in Nago mayor's effort to convince local
areas

SANKEI (Page 2) (Excerpts)
March 27, 2006

Talks continued between Defense Agency Director General Fukushiro
Nukaga and mayor Yoshikazu Shimabukuro of Nago, Okinawa
Prefecture, yesterday on a plan to relocate the US Marine Corps'
Futenma Air Station from Ginowan to the coastline of Camp Schwab
in Nago in the prefecture. As a result, they reached an agreement
to make final coordination on making minor changes to the coastal
plan, such as changing the direction of the runway. But the
situation remains fluid, as there are strong local calls for
moving the coastal plan further to sea, which involves major
revision of the plan.

Following March 25, Nukaga and Shimabukuro discussed the issue
for over three hours yesterday. In making changes to the plan,
Nukaga pointed out three points the government regards as
indispensable: (1) the safety of neighboring residents based on
the coastal plan; (2) environmental matters; and (3) the
feasibility of the relocation plan.

Out of concern for destroying the marine habitat for dugongs, a
protected species, and disruption of construction work by
protests from environmental activists, the Defense Agency has
attached importance to the environmental problem and the
feasibility of the relocation plan. The basic plan presented by
Nukaga reflected the government's intention not to accept Nago's
call for making major changes to the coastal plan to move it
further out to sea.

Based on that policy line, Nukaga specifically proposed turning
the angle of the planned runway about 10 degrees counter-
clockwise. Local residents are opposed to the original plan that
is designed to fly US military aircraft over some houses in the
Toyohara and Henoko districts in Nago. As a result, the
government has proposed changing the direction of the runway to
remove those houses from the flight paths.

In response, Shimabukuro asked the government to remove two other
districts northeast of the coastline of Camp Schwab, such as Abu,
from the flight paths.

14) Yamasaki predicts settlement of Futenma talks before end of
this month

SANKEI (Page 2) (Full)
March 27, 2006

Speaking to the press last night in Naha, Former Liberal
Democratic Party Vice President Taku Yamasaki indicated that
talks on making changes to the plan to relocate Futenma Air
Station would be settled soon, saying, "Talks are centered on
technical matters, passing through the political phase. It is
only a matter of time (before an agreement is reached). The issue
will be settled before the end of this month, at the earliest."

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He also indicated that once an agreement was reached between the
central government and Nago City, Okinawa Gov. Keiichi Inamine
would also accept the plan in the end.

At the same time, Yamasaki suggested that it would be physically
difficult for Japan and the US to produce their final report on
the realignment of US forces in Japan before the end of this
month.

15) Realignment of US forces in Japan: Government abandons
efforts to reach agreement by end of month

ASAHI (Page 1) (Full)
March 26, 2006

The government yesterday gave up on the idea of reaching a final
agreement with the US government by the end of March, which was
in effect made the deadline for the agreement, government sources
revealed. Behind this move is Tokyo's judgment that given the
little progress in coordination of views with the US over such
issues as how to share the cost of relocating troops to Guam,
Japan could be forced to make broad concessions if it insisted on
bringing about an early settlement of the issues. The government
initially intended to reach an agreement by the end of March at
the Japan-US Security Consultative Committee of foreign and
defense ministers, or 2+2, but now Japan has decided to aim to
reach agreement in early April.

The government will hold senior working-level talks of foreign
and defense officials in the United States on March 30-31 to
discuss such items as how to share the Guam relocation costs.
Referring to this, a government official concerned said: "The
possibility has not been ruled out that an agreement will be
reached at the upcoming senior-working-level talks, but it's not
possible to hold a 2+2 meeting, which the Japanese government has
viewed a forum for both sides to reach a final agreement."

This official also stated: "The US is well aware of Japan's
desire to hold a 2+2 meeting. We aim to reach accord in early
April." Another government official also stated: "Even at the
upcoming senior-working-level talks, or even if we hold a 2+2
meeting following them, it will not be possible to reach
agreement."

The focus of local coordination concerning the realignment of US
forces in Japan is on what will happen to negotiations with Nago
City over the relocation of the US Futenma Air Station in Ginowan
City, Okinawa Prefecture. In talks with the US, Japan is
continuing coordination about how to share the Guam relocation
cost.

16) Poll of legislators about SOFA: No reply from US lawmakers,
with responses from only 30% of Japanese lawmakers

TOKYO SHIMBUN (Page 3) (Full)
March 25, 2006

The Liaison Council of Major Governors on Negotiations, composed
of 14 prefectures hosting US military bases and chaired by
Governor of Kanagawa Shigefumi Matsuzawa, yesterday released the
results of a survey of legislators conducted in both Japan and
the United States about the Japan-US Status of Forces Agreement

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(SOFA). No response came from the US legislators, while among the
Japanese legislators the response rate was only 30%.

The questionnaires were sent in early February to 80 legislators
belonging to Japan's Lower House Committees on Foreign Affairs
and Security and its Upper House Committee on Foreign Affairs and
Defense, as well as 90 legislators belonging to the US Senate and
House Armed Services Committees. Asking them to answer on an
anonymous basis, the survey inquired about the extent of
understanding of the SOFA and the need to revise the SOFA. The
Liaison Council takes issue with the treatment of US servicemen
suspected of crimes and the restraints on Japanese officials'
access to US bases, as specified by SOFA. The Liaison Council is
demanding a review of the SOFA be put in a final report on the
realignment of US forces in Japan, planned to be released
possibly by the end of the month.

Gov. Matsuzawa said: "US legislators presumably think it is
desirable that their troops stationed abroad are protected, so
they resist revision. They appear reluctant about even touching
on a revision." Referring to Japanese lawmakers, Matsuzawa
stated: "I'd like them to be more interested in it."

17) Prime Minister Koizumi attends Coast Guard Academy's
graduation ceremony for first time

SANKEI (Page 5) (Full)
March 27, 3006

Prime Minister Junichiro Koizumi yesterday delivered a speech at
the graduation ceremony of the Japan Coast Guard Academy (in Kure
City, Hiroshima Prefecture). Koizumi told the graduating cadets:
He told the graduating cadets: "We must continue to stay on the
alert to prevent infiltration by terrorists from the sea and to
guard important facilities such as nuclear reactors and major
ports." He stressed the importance of coming up with thorough
measures to fight against terrorism.

Koizumi is the first prime minister to attend the JCGA's
graduation ceremony. He also told the 41 cadets (including one
foreign national): "In order to prevent and crack down on
international crime, Japan needs to boost cooperation with other
countries in various ways." Although he did not refer to the
issue of gas exploration in the East China Sea, a government
official commented that the prime minister's attendance was a
"message" to show Japan's strong position.

18) Minshuto's Hatoyama urges Nagata to resign voluntarily from
Diet

SANKEI (Page 5) (Full)
March 27, 2006

Minshuto (Democratic Party of Japan) Secretary General Yukio
Hatoyama revealed for the first time his intention to urge House
of Representatives member Hisayasu Nagata to voluntarily give up
his Diet seat to take responsibility for creating the e-mail
uproar. He stated in a speech delivered at the Hiroshima
Prefectural chapter's convention yesterday afternoon:

"I want him to feel his responsibility for causing a political
uproar and giving us great concern about the party's survival.

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Apart from the party's punishment, I intend to press him to take
responsibility."

Hatoyama also said, "I think you, too, feel the party's
punishment was not enough," after pointing out, "I can't tell him
to give up his Diet seat just because he asked questions in the
Diet based on false information." Minshuto suspended Magata's
party membership for six months.

Hatoyama thought that the main opposition would not be able to
obtain public understanding without Nagata taking responsibility
for the email fiasco.

19) Fiscal 2006 budget bill to be enacted today

TOKYO SHIMBUN (Page 2) (Full)
March 27, 2006

The fiscal 2006 budget bill will be passed during an Upper House
plenary session this evening by majority approval by the Liberal
Democratic Party (LDP) and the New Komeito. Following the passage
of the bill, the focus of the remaining half of the Diet session
will shift to deliberations on key bills, such as administrative
reform legislation.

Prior to the plenary session, the Upper House Budget Committee
will hold intensive deliberations on safety in the morning,
attended by Prime Minister Koizumi and relevant cabinet
ministers. The arrangement is that the budget bill will be
adopted at the Budget Committee meeting after general budget
deliberations. It will then be promptly presented to the plenary
session.

The explanation of a set of bills on reform of medical services
designed to constrain swelling costs and a question and answer
session on them will likely take place possibly before the end of
the week, followed by deliberations. A battle between the ruling
and opposition camps over a schedule for deliberations on those
bills, as well as the administration reform promotion bill,
debate on which has already started, will move into high gear.
Regarding the issue of punishing Lower House member Hisayasu
Nagata, who has had his membership in Minshuto (Democratic Party
of Japan = Minshuto) suspended, the Lower House Committee on
Discipline will aim to adopt a resolution on March 29 to summon
Takashi Nishioka, the provider of the email in question as a
witness on April 4. This will bring to an end the uproar over the
fake email.

20) Issuance of new stocks, corporate bonds likely to hit seven-
year high of 11 trillion yen in fiscal 2005; Brisk capital
spending, M&As

NIHON KEIZAI (Top Play) (Excerpts)
March 26, 2006

Japanese companies' equity finance and corporate bond issuance
are on the rise. The amount of capital procured through domestic
and overseas capital markets in fiscal 2005 will likely reach
11.1 trillion yen in fiscal 2005, up 10% from the previous year.
This is the highest amount since the 13 trillion yen registered
in fiscal 1998. As business performance improved, capital demand,
such as investment in plant and equipment and mergers and

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acquisitions (M&A), has expanded. The rising stock prices and the
strong anticipation of higher interest rates are prompting
companies to procure more capital.

Companies' procurement of capital has been continuing on a
recovery path after bottoming out in fiscal 2002 at 8.8 trillion
yen and is now expected to top 10 trillion yen for the second-
consecutive year in fiscal 2005. The increase has been noticeable
in the domestic market in the current fiscal year, reaching 9.6
trillion yen, up 21%. The amount is close to the level (9.8
trillion yen) of fiscal 2000, during the IT bubble. The
mainspring of the uptrend is a 32% increase in domestic equity
finance to 2.7 trillion yen, as can be seen in the procurement of
approximately 200 billion yen by Mitsui & Co. through public
stock offerings this February for the first time.

The issuance of straight corporate bonds on the domestic market
is also expected to reach 6.9 trillion yen, up 17%. Sony issued
straight bonds worth 120 billion yen last September for the first
time in about four years and another 100 billion yen worth this
February. Some 29 companies issued straight bonds, including Fuji
Television Network and Towa Real Estate Development. Amid growing
anticipation that the Bank of Japan will end its zero interest
rate policy, an increasing number of companies are now planning
to issue corporate bonds.

21) Japan-China financial dialogue: Agreement reached to hold
dialogue once a year; Japan urges China to expand range of yuan
fluctuation

NIHON KEIZAI (Top Play) (Excerpts)
March 26, 2006

Finance Minister Sadakazu Tanigaki and Chinese Finance Minister
Jin Renqing on March 25 held the first bilateral financial
dialogue to discuss economic and financial issues. They agreed to
hold a financial dialogue once a year, based on the perception
that the interdependency of the Japanese and Chinese economies
was deepening. The dialogue will be held in Tokyo next year.
During the meeting, the Japanese side urged China to expand the
range in which the yuan is allowed to fluctuate, but the Chinese
side simply explained the present state of the reform of its
exchange system.

Jin criticized Prime Minister Junichiro Koizumi's visits to
Yasukuni Shrine. He also noted that it was regrettable that Tokyo
decided to put off a cabinet decision on yen loans to China for
fiscal 2005 until after April. Commenting on yen loans to China,
Tanigaki said, "We will consult on the matter under the
initiative of the Foreign Ministry while taking the current state
of bilateral relations into account." But he stopped short of
referring to when a cabinet decision on the matter is made.

22) Chinese premier to avoid reference to Yasukuni, Class-A war
criminals, emphasize history of friendship instead, according to
draft of his speech aimed at Japan

ASAHI (Page 1) (Excerpts)
March 26, 2006

Nobuyoshi Sakajiri, Beijing


TOKYO 00001577 013 OF 013


An outline of an important speech Chinese President Hu Jintao
will deliver in a meeting on March 31 with Japanese
representatives from seven Japan-China friendship organizations
was revealed. According to it, Hu intends to avoid direct mention
of Prime Minister Koizumi's continued visits to Yasukuni Shrine
and Class-A war criminals and emphasize instead why China
attaches importance to the history issue. This stance comes
apparently from China's reflection on the past circumstances,
namely that its continued scathing criticism of Koizumi's shrine
visits has antagonized the Japanese public. Calling the planned
speech a message to the Japanese people, China will seek
understanding at various levels.

This was revealed by more than one source familiar with Japan-
China relations. The draft speech prepared by Chinese government
officials has already been handed to Hu to receive his final
decision. Depending on Hu's own political judgment or the
immediate situation before the meeting, the draft might be given
some modifications.

The draft avoids making a direct reference to visits to Yasukuni
Shrine, which has enshrined Class-A war criminals.

SCHIEFFER