DAILY SUMMARY OF JAPANESE PRESS 03/30/06

UNCLAS SECTION 01 OF 09 TOKYO 001689

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: DAILY SUMMARY OF JAPANESE PRESS 03/30/06


INDEX:

(1) Possibility of Futenma negotiations rupturing; Worst case
scenario has air of reality; Government may cut off talks with
local government; Local community reacting sharply to
government's hard-line stance

(2) USFJ realignment: Final agreement postponed; Futenma straying
off course; Gov't struggling, called to pay for making light of
locals

(3) Three LDP factions -- Tsushima, Niwa-Koga, Ibuki -- looking
for new "strong characters" to use in party presidential race

(4) Growing Japanese economy (Part 1): Boom in consumer spending
ignited by increasing household incomes, spending propensity
among baby boomers

(5) Light and shadow of what "Koizumi politics" has created over
the past five years -- Changing society (Part 4): Departure from
Japanese style of employment; One out of three workers is
nonpermanent employee

(6) Bright and dark sides of the five years of Koizumi
administration (Part 5): Social divide expanding; Low- and middle-
income classes financially strapped

ARTICLES:

(1) Possibility of Futenma negotiations rupturing; Worst case
scenario has air of reality; Government may cut off talks with
local government; Local community reacting sharply to
government's hard-line stance

OKINAWA TIMES (Page 2) (Excerpts)
March 30, 2006

In ongoing talks centered on the relocation of the US forces'
Futenma Air Station, Prime Minister Junichiro Koizumi has
declared a policy course of not responding to anything but "minor
revisions" of the Camp Schwab coastal plan at Nago City, and the
government has hardened its previous stance even more. The US has
sought an end to the local coordination going on prior to the
final report on the realignment of US forces in Japan, and the
government is considering jumping the gun if the local government
does not compromise. The sudden death of former Nago City mayor
Tateo Kishimoto also has produced cold, business-like statements,
such as one by a senior Defense Agency official, who said, "The
timetable for the talks will be delayed a little." Local
authorities are reacting strongly to the government's hard-line
stance. The local government is sticking a policy line of moving
the runway over 400 meters into the ocean side, and a scenario
involving a breakdown of the negotiations is quite possible.

Taku Yamasaki: "Saying one centimeter sounds like your not going
to move anything at all; how about saying at least a meter?"

Prime Minister Koizumi: "That would give the message that the
government was flexible. Let's go with one centimeter." The two
were having dinner on the evening of the 28th at a downtown
hotel. Prime Minister Koizumi rejected completely the proposal of
Liberal Democratic Party (LDP) Security Research Council Chairman
Taku Yamasaki for some movement of the location of the runway in

TOKYO 00001689 002 OF 009


the coastal plan.

A high-level government official after their meeting confirmed:
"Nago City's call for 400 meters is inconceivable. Even 100
meters is not possible. You can understand that from that (the
Prime Minister's words)." A top level Defense Agency official on
March 29 expressed his displeasure with Nago City's proposal,
saying, "It is not even on the negotiating table."

The last words of the late mayor

"The coastal plan is unacceptable. Don't compromise." These
reportedly were the last words to Mayor Shimabukuro and other
city officials by former mayor Kishimoto, who died on March 27.
He transmitted to his successor the view of rejecting the coastal
plan, which had been decided over the heads of the local
government. Mayor Shimabukuro, paying his final respects at the
Kishimoto home, wore a drawn expression when he said, "He
entrusted me with the task, telling me to go in with a firm
hand." A prefectural assemblyman from the LDP said with a
painful , "Opposing the coastal plan was like Mr. Kishimoto's
last will and testimony. With Mayor Shimabukuro having accepted
that dying wish, compromise will not be easy to come by. The
government should not let Mr. Kishimoto's death have been in
vain."

(2) USFJ realignment: Final agreement postponed; Futenma straying
off course; Gov't struggling, called to pay for making light of
locals

TOKYO SHIMBUN (Page 2) (Full)
March 30, 2006

Tokyo and Washington have been consulting on specific issues
regarding the realignment of US forces in Japan. In the meantime,
tomorrow is the time limit for the Japanese and US governments to
wrap up their realignment talks for a final agreement. However,
there are still a number of pending issues. The two governments
will forego their release of a final report. The United States
has now asked Japan to pay a huge amount of money in order for
Japan to share the coast of relocating US Marines from Okinawa to
Guam. Another difficult problem is the issue of relocating
Futenma airfield in the city of Ginowan, Okinawa Prefecture.

"Nago City officials say they don't care about reclaiming land
from the sea. But we'll have to build a facility in the face of
protests (against coastal reclamation)." With this, Defense
Agency Administrative Deputy Director General Takemasa Moriya
exploded his frustration at the city of Nago, Okinawa Prefecture,
when he met the press on March 27.

On March 26, the day before, Defense Agency Director General
Fukushiro Nukaga and Nago Mayor Yoshikazu Shimabukuro met. In the
meeting, Shimabukuro showed his understanding on the government's
proposal of minor changes to its Futenma relocation plan.
However, the mayor rejected the government's proposal just as he
returned to Okinawa. "Minor changes are no good," the mayor said.
His flat refusal touched off the vice minister's anger.

On March 21, the government clarified its intention to modify the
plan to relocate Futenma airfield to a coastal area on the
premises of Camp Schwab, a US military base located in Nago. The
government was ready for minor changes to the plan. Meanwhile,

TOKYO 00001689 003 OF 009


Nago City, which was against the bilateral agreement, sat down at
the negotiating table.

However, the government's proposal was only to turn the runway 10
degrees counterclockwise. The government also implied the
possibility of moving down the construction site to the south.
Its possible moving to that direction was up to 50 meters.
However, Nago City called for the government to build a sea-based
facility at an offshore site 400 meters away from the planned
construction site. The gap is wide.

Nago is persistently insisting on basing the alternative facility
at sea. "That's because the Japanese and US governments changed
the plan in disregard of the wishes of local residents," says a
lawmaker elected from Okinawa.

Last fall, the Japanese and US governments released an interim
report on the US military realignment. Their consultations were
bogged down over modifications to the Futenma relocation plan.
Tokyo worked out a coastal relocation plan in defiance of
Washington's proposal to install a sea-based facility. However,
the government explained it to Nago after the de facto agreement.

The government had initially planned to build a sea-based
facility. But now, the government has given up on that plan.
"That's because we couldn't get much cooperation from Okinawa
Prefecture and Nago City," says one senior official of the
Defense Agency. The government is sticking to a coastal area of
Camp Schwab. That is also because that area is off-limits to
locals and it will be easy to push for construction even without
local cooperation.

The government has knowingly made light of Okinawa, according to
a ruling Liberal Democratic Party lawmaker elected from Okinawa.
And now, the government has to pay for that, facing rough going
in its local coordination.

The Futenma relocation is an issue of top priority for the United
States. The US government, as long as there is no progress on
this issue, will not comply with Japan's proposal to alleviate
Okinawa's base-hosting burden with Marine relocation to Guam and
other specific plans. The Japanese government will have to push
for local coordination on its own responsibility. The government
now appears to have a hard time of it, having only itself to
blame for that.

(3) Three LDP factions -- Tsushima, Niwa-Koga, Ibuki -- looking
for new "strong characters" to use in party presidential race

NIHON KEIZAI (Page 5) (Full)
Evening, March 29, 2006

Now that the fiscal 2006 budget has cleared that Diet, Liberal
Democratic Party (LDP) lawmakers are now turning their interest
toward the party presidential election that will take place in
September. Although efforts by the government of Prime Minister
Junichiro Koizumi to eliminate factional influences have been
promoted, moves by main factions will still likely to
significantly affect the selection of a successor to Koizumi as
president of the LDP. Even those factions whose top posts had
long been vacant have now moved into action, finally having
chosen new leaders.


TOKYO 00001689 004 OF 009


"Only those who don't know anything about politics say that the
age of factions having influence is over," said 76-year-old
veteran lawmaker Yuji Tsushima, speaking enthusiastically to
reporters on last Dec. 15 after a general meeting of his faction
that brought together lawmakers from both Diet chambers. The
faction held such a general meeting for the first time in a year
and six months.

Former Prime Minister Ryutaro Hashimoto, who used to head that
faction, stepped down from the chairman's post to take
responsibility for the decline in the faction's power, as well as
for receiving an illicit political donation from the Japan Dental
Association. The faction split into two camps when selecting its
candidate for the 2005 presidential race. In the aftermath of the
internal split, the House of Councillors members of the faction
declared that they would refrain from factional activities for
the time being. The faction, therefore, was unable to pick
Hashimoto's successor.

Tsushima used to be a member of the Miyazawa faction, which has

SIPDIS
now changed its name. He left the LDP in June 1994 when the
cabinet of Prime Minister Tomiichi Murayama was inaugurated. In
March 1995, he rejoined the LDP and entered the then Obuchi
faction.

Since such veteran faction lawmakers as Tamisuke Watanuki left
the LDP, opposing the government's postal-privatization bills,
Tsushima was chosen as chairman of the faction last November. The

SIPDIS
Tsushima faction intends to work out its own policy proposals

SIPDIS
probably after the Golden Week holiday period. Tsushima, who once
served as chairman of the LDP Research Commission on the Tax
System and other key posts, expounds his theory that the regional
disparity widened by the government's structural reform drive
should be corrected.

As co-chairmen of the faction, 61-year-old Yuya Niwa and 65-year-
old Makoto Koga were chosen on Feb. 23. The faction had its
origin as the Kochikai, having been founded by Hayato Ikeda, a
prime minister in the early 1960s. Kochikai produced four prime
ministers. The chairman's post was vacant from last July, when
Mitsuo Horiuchi stepped down, until Feb. 23. Horiuchi resigned
immediately before the Lower House plenary session took a vote on
the postal-privatization bills.

Koga was initially regarded as the replacement of Horiuchi.
However, Koga disappointed many faction members for walking out
of parliament before the vote on the postal bills. As a result,
the faction selected Koga and Niwa, who served twice as health
and welfare minister, as co-chairmen.

Koga stressed at a party in late February: "If Kochikai and
Heiseiken (Tsushima faction) join hands, politics will be
changed."

Niwa also said in a meeting on March 16 of the faction, "If we
display policy measures for the income gap problem and Asia
diplomacy, we will be able to fulfill a significant role when the
Lower House is dissolved for a snap election."

Bunmei Ibuki, 68, who became chairman of the faction, the
successor to Nakasone's faction, is known as a policy specialist.
Since former Chairman Shizuka Kamei and Takeo Hiranuma, who had
opposed the postal bills, left the LDP, the faction last December

TOKYO 00001689 005 OF 009


forged a collective leadership setup under the leadership of
Chairman Ibuki and Honorary Chairman Yoshinobu Shimamura.

Ibuki now chairs the Lower House Special Committee on
Administrative Reform. While giving positive evaluation to the
government's structural reform effort, he says, "I want the (next
government) to take flexible measures." He wants to regain the
faction's strength taking advantage of the presidential race.

The Tsushima faction is a mere shadow of the former Tanaka
faction, which wielded power. Some junior lawmakers in the
faction call themselves as protgs of Chief Cabinet Secretary
Shinzo Abe.



Koga quipped, "Kochikai has lost its influence."

The three factions do not have any contenders to run in the post-
Koizumi presidential race, even after the chairman's post was
filed. It will be difficult for them to regain their impetus.

(4) Growing Japanese economy (Part 1): Boom in consumer spending
ignited by increasing household incomes, spending propensity
among baby boomers

NIHON KEIZAI (Page 1) (Excerpts)
March 29, 2006

The Japanese economy is about to move into a new growth path. An
increasing number of business sectors are showing better
performance, and personal consumption and capital investment are
also showing positive movements. Although business conditions
overseas and the current strong yen remain as potential risks, a
sustained economic recovery path now lies ahead.

Men's summer suits priced at 70,000 to 80,000 yen have been in
great demand recently in Onward Kashiyama, the men's suit section
of the Takashimaya Department Store in Shinjuku. Suits priced at
50,000 to 60,000 yen sold well last year. Onward Kashiyama
President Shigeru Uemura said: "There are signs of consumers now
prefering higher-priced goods."

Consumers tightened their purse strings when the country faced
deflation, but they have begun to buy better products and are
willing to pay more.

Suntory Ltd. has marketed a new brand of canned beer at a premium
value, "The Premium Malt." Its price is about 40 yen higher than
other brands of beer. A survey in late January showed 7% more men
in their 40s drank this brand of beer more regularly than in late
August of last year.

Younger persons who had tightened their purse strings have also
begun to spend more money. Gusto, a chain of family restaurants
franchised by Skylark, has attracted many young customers in
their 20s and 30s. The chain boosted sales in February over the
previous month for the first time in 17 months.

In a survey of consumer attitudes conducted by the Cabinet Office
in February, the consumer-attitude index was 49.8%, the highest
level recorded in 15 years and eight months. This figure is up
0.3 percentage points over the previous month.

TOKYO 00001689 006 OF 009



The recent improvement in household incomes and the job market
has picked up consumer confidence. Late last year, the number of
job vacancies topped that of job applicants for the first time in
13 years. The total amount of cash earnings in 2005 also grew
0.6% over a year earlier after a hiatus of five years. Daiwa
Securities Co. SMBC predicts that personal consumption in fiscal
2006 would increase by 1.6% over a year ago, owing to household
income increases and improved consumer confidence.

The economic recovery in the US since 2001 has been supported by
strong personal consumption. Even in Japan, which is said to
"have excessive savings with sluggish personal consumption,"
signs of a long-term boost in consumer spending are appearing.
The ratio of spending to disposal income in the case of both
working worker households and retired elderly families was 83.4%
in 2005, marking a 7.5-point increase over that of seven years
ago. In addition to the recent economic recovery, so-called
"active seniors" -- baby boomers aged over 60 - have taken the
lead in boosting spending.

Compared with elderly persons of long ago, recent senior citizens
have contributed more to private consumption growth. The ratio of
spending to disposal income in the case of those aged 60 years or
older increased to 90% in 2005 from 77% in 1995.

The ratio of overseas travelers 50 years of age or older to all
such travelers increased about 10 points from 14 years ago to 34
% in 2004. A JTB travel official said: "Not only younger persons
but senior citizens, too, are now the central players in the
overseas travelers market." Senior members are not hesitant to
pay money for satisfactory goods.

Another reason for the spending propensity recently observed
among elderly persons is because they have psychological leeway
to spend money instead of increasing saving, seeing the
government steadily preparing a system to protect their
livelihood. The Bank of Japan analyzes: "The nursing insurance
system that was introduced in 2000 has served to mitigate elderly
persons' concerns about their future and has encouraged them to
use money."

Stock movements are cited as a cause for anxiety. A plunge in
stock prices will unavoidably put a damper on personal
consumption.

In addition, if the employment situation surrounding the younger
generation remains stagnant, consumer confidence might be
undermined. The number of jobless persons aged 34 years or
younger decreased about 300,000 over the past three years. But
many of workers are part-timers, and there are still 2 million
job hoppers. The level of their consumption stays lower than that
of regular workers.

As it stands, personal consumption has finally picked up. In
order to expand spending further, it is imperative for the
government to continue to earnestly carry out reforms that will
contribute to raising public expectations for their future, such
as reviews of the pension and medical systems, as well as
measures to increase jobs for the younger generation.

(5) Light and shadow of what "Koizumi politics" has created over
the past five years -- Changing society (Part 4): Departure from

TOKYO 00001689 007 OF 009


Japanese style of employment; One out of three workers is
nonpermanent employee

TOKYO SHIMBUN (Page 1) (Full)
March 29, 2006

"One reason why Nissan Motors slid into a financial crisis was
too many employees were wallowing in vested interests. With the
destruction of this corporate climate, capable workers are now
evaluated based on their performances." A Nissan employee used
these words to explain his company's miraculous V-shaped comeback
under the leadership of CEO Carlos Ghosn, who rescued it from the
edge of disaster.

Ghosn has been at the spearhead of Nissan restructuring programs
since 1999. He took drastic measures, for instance, closing down
main factories, cutting down purchasing costs and retrenching
personnel. Meanwhile, he put an end to the Japanese style of
employment characterized by its seniority-based pay and promotion
system. In 2000, he introduced a merit system so that employees
would receive pay determined by the degrees of their
contributions to the company. Presumably, stimulated by Ghosn's
reforms, other Japanese firms began planning to depart from the
conventional Japanese style of employment.

"(The important thing to pursue reforms) is whether the leader
can win public trust, and your story is of great help to me,"
Prime Minister Junichiro Koizumi told Ghosn in a meeting at his
official residence in June 2001, only two months after his
administration started. Koizumi, having an interest in Ghosn's
way of corporate restructuring, took his cue from the CEO for his
own reform agenda.

The two leaders shared a common view of breaking up vested
interests. Last year, Nissan installed a 28-year-old woman in
position of section chief in the administrative division. Under
the new personnel system, employees even in their 20s can be
picked for an executive post. A female administrative worker, 26,
with four years of service at the company said the system
inspires employees to make more efforts, explaining: "Employees
are now evaluated on the results they achieved after strenuous
efforts, so the reason for promotion has become clear."

However, the truth is that weak workers coming out of the old
system can suffer from the new system.

Case of Shinya Kobayashi, worker lives in Tokyo

A 65-year-old-worker who we will call Shinya Kobayashi is a "sole
proprietor" who had concluded a consignment contract with a firm,
under which he had received a portion of the proceeds from the
sale. He is called a proprietor, but in actuality, he is no more
than one employee. Last year, he was told by the firm one-
sidedly, "Our contract with you will be shifted to a part-timer
contract starting next year." He then keenly realized he was in a
weaker position than regular employees.

"The economy has definitely not recovered as the government
announced. The company appears to be imposing part of their
hardship on workers in various forms," Koyabashi noted.

The number of part-timers, temporary employees and dispatched
employees like Kobayashi is on the increase. The number of non-

TOKYO 00001689 008 OF 009


regular workers was 13,600,000 persons in 2001 but rose to
16,690,000 at the end of 2005.

Behind this movement is employment-related deregulation advanced
by the Koizumi administration in the name of the diversity of
working patterns. With the enforcement in 2004 of the amendment
to the Worker Dispatch Act, the manufacturing industry is allowed
to use temporary employees. One out of three workers is a
nonpermanent employee at present.

According to the Japan Community Union Federation (JCUF),a
national organization that nonpermanent employees also join, it
is not a rare case that regular workers are forced by their
companies to conclude a consignment contract as a sole
proprietor. Recently, the JCUF has received inquiries from
temporary workers about the case of being forced to accept a wage
that is below the minimum wage level. JCUF Secretariat Chief
Akira Takai pointed out: "The quality of employment is
deteriorating."

Why are nonpermanent employees on the increase? The reason is
because companies can hire them at lower wages and easily adjust
employment if they hire them on a short-term contracts.
Apparently, firms have abandoned the previous Japanese style of
employment in order to bolster their earnings.

Takai said angrily: "The so-called Koizumi reforms have brought
competition as the panacea for every problem. Corporate managers
who are under pressure to generate profits in a short run are no
longer eager about educating and giving training to employees.
Even employees are something disposable now."

(6) Bright and dark sides of the five years of Koizumi
administration (Part 5): Social divide expanding; Low- and middle-
income classes financially strapped

TOKYO SHIMBUN (Page 1) (Abridged)
March 30, 2006

In April 2003, Roppongi Hills opened as Tokyo's new landmark. The
54-story Mori Tower dominates the complex, which houses
information technology firms, financial institutions, and many
other up-and-coming global companies.

Also located in the complex are the Roppongi Hills Residences,
which house 800 upscale apartments, including one unit renting
for over 4 million yen a month. They are all occupied. Hills
occupants, mostly successful young entrepreneurs, often throw
lavish parties. Office workers also frequent luxury brand shops
in the complex.

President Minoru Mori of Mori Building Co., which undertook the
Roppongi Hills project, explained the reason why the company
targeted wealthy people: "There are many companies that target
average people, but is there any other firm that deals with the
tough high-end class?"

In 2003, the Koizumi administration temporarily lowered the tax
rate on capital gains and dividend from 20% to 10 %. The
administration also decreased the maximum inheritance tax rate
from 70% to 50%. The steps were intended to favor those
possessing stocks and assets.


TOKYO 00001689 009 OF 009


At the same time, the Koizumi administration has forced greater
burdens on the public in many ways.

The administration also raised the liquor tax on highly popular
low-malt beer, the "third beer," and abolished the added spouse
tax credit in 2004. The fixed-rate tax cut will also disappear
next year.

Additionally, the portion of medical expenses borne by salaried
workers went up from 20% to 30% in 2003. Employee pension
premiums, which had been frozen for years, and the national
pension premium have been increasing annually since 2004 and
2005, respectively.

Those increases may not mean much to the nation's well-to-do
population, which is small, but they are a heavy burden on the
remaining low- and middle-income classes.

Atsushi Hirai, 44, who works at a mid-sized Tokyo machine maker,
complained: "My wife has been struggling to make ends meet daily.
I always take lunch to work. At home, I drink low-malt beer,
which is cheaper than regular beer."

His company's profits have been growing steadily. In his 25th
year with the company, Hirai makes slightly over 8 million yen
annually.

But he has a mortgage on his house in Chiba Prefecture. He also
has a daughter and a son who will enter a private university and
a private high school, respectively, this spring. Their tuitions
and fees will cost him 1.4 million yen a year. Prioritizing the
present over sunset years, his family dug into their savings. Tax
hikes and a growing social security burden are strangling the
economy of the average household, like Hirai's.

Last November, the Central Council for Financial Services
Information released the results of a 2005 survey on financial
assets that showed a record 23.8% of households had no savings.
The figure has nearly doubled from 12.4% in 2000 before the
establishment of the Koizumi administration.

The average financial assets came to 15.44 million yen in 2005,
up 1 million yen from 14.48 million yen in 2000.

This showed that the rich has become richer and the poor has
become poorer over the last five years under the Koizumi
administration.

Hirai also noted:

"I'm aware of the need for reform, but a high-handed approach
will not help Japan turn for the better. The Japanese system has
been destroyed over the last five years. I'm afraid that the
prime minister will just call it quits and step down."

DONOVAN