DAILY SUMMARY OF JAPANESE PRESS 04/24/06

UNCLAS SECTION 01 OF 12 TOKYO 002216

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SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 04/24/06

INDEX:

(1) Japan-US defense chiefs' talks; Agreement reached on cost of
relocating US Marines to Guam; Japan to pay 6 billion dollars or
59% of total cost; Barracks and schools to be covered

(2) Agreement of defense chiefs on sharing of cost of Guam
relocation: Need for government to explain appropriateness of
Japan bearing such a large share, double of that at the start

(3) Chief Cabinet Secretary Abe expresses interest in running for
LDP presidency, says "I will not make visiting Yasukuni Shrine a
campaign pledge"

(4) Minshuto goes back to "Ozawa's game plan;" Momentum gathering
under three-headed system; Confidence growing for going on
offensive

(5) With "Koizumi style campaign," LDP suffers stinging defeat in
Lower House by-election; Defeat may provide a new source of
internal trouble for LDP presidential race and Upper House
election

(6) Editorial: Calling off maritime survey - time to speed up
diplomacy to put out the embers

(7) MV-22 Osprey likely to replace Futenma helos: Nukaga

(8) FTC comes up with strict requests prior to privatization of
postal services, including call for opening up of mail delivery
network to other firms

(9) FTC report urges abolishing Japan Post's "privileges,"
focusing on problems left unsolved, like monopolies, legal
preference, to bring about fair competition

(10) Hokkaido to regulate opening of large stores in semi-
industrial areas, loophole in restricting store openings

ARTICLES:

(1) Japan-US defense chiefs' talks; Agreement reached on cost of
relocating US Marines to Guam; Japan to pay 6 billion dollars or
59% of total cost; Barracks and schools to be covered

ASAHI (Top Play) (Excerpts)
Evening, April 24, 2006

Defense Agency Director General Fukushiro Nukaga yesterday
afternoon (morning of April 24, Japan time) met with Secretary of
Defense Rumsfeld at the US Department of State. They discussed
the sharing of the cost of relocating US Marines in Okinawa to
Guam, the focus of USFJ realignment. It was agreed at the meeting
that Tokyo would pay 6.9 billion dollars (approximately 700
billion yen) or 59% of the total amount of 10.27 billion dollars
(approximately 1.19 trillion yen). Prospects have now become
strong that the realignment talks can now be concluded, as Tokyo
and Washington had already agreed in principle on other spending
areas concerning USFJ realignment. The two countries will likely
hold a meeting of the Security Affairs consultative Committee or
a so-called two-plus-two meeting of defense and foreign ministers
to reach a formal agreement on a final report on USFJ
realignment.

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The US side, which had called on Japan to pay 75% of the total
cost, and the Japanese side, which had insisted on bearing
approximately 3 billion dollars (approximately 350 billion yen),
have apparently come to terms. According to explanations provided
by Nukaga, Japan will pay 2.8 billion dollars (approximately 320
billion yen) as a direct fiscal outlay. In addition, it will also
invest 1.5 billion dollars (approximately 170 billion yen) in a
special company to be newly established and extend 1.79 billion
dollars (approximately 21 billion yen) in loans through Japan
Bank for International Cooperation (JBIC). Invested and loaned
money will be used for the construction of houses for families of
Marines, from which rent income can be expected.

Fiscal spending will only cover the facilities that have no
direct connection with military drills, such as barracks,
government offices and schools. Such fiscal payments will not
cover expenses for the construction of training grounds, runways
and entertainment facilities.

Since this is the first time for Japan to render financial
assistance for the construction of US forces' overseas
facilities, the government will embark on the work to enact a law
that provides a legal basis for the bearing of Guam relocation
costs. The plan is to present such a bill when the May
consecutive holidays are over and have it clear the current Diet
by June 18.

Guam relocation cost

(Total cost) 10.27 billion dollars
(Japan's share) 59% = 6.09 billion dollars (of which 2.8 billion
dollars are as fiscal expenditures from the general account)

(US share) 41% = 4.18 billion dollars (of which 3.18 billion
dollars are as fiscal spending)

Breakdown of Japan's share

(Fiscal payment) 2.8 billion dollars
(Loan) 1.79 billion dollars (through JBIC)
(Investment) 1.5 billion dollars

Items covered by Japan's share

(Houses for families of Marines) 2.55 billion dollars (The amount
can be reduced to 2.13 billion dollars, if private housing
facilities are used.)

(Others) Barracks, schools, government offices, etc. (The
construction of all these facilities is to be covered by fiscal
payments)

(2) Agreement of defense chiefs on sharing of cost of Guam
relocation: Need for government to explain appropriateness of
Japan bearing such a large share, double of that at the start

ASAHI (Page 3) (Excerpts)
Evening, April 24, 2006

Analysis: With coordination between the Japanese and US
governments stalled over the share of the cost of relocating
Marines on Okinawa to Guam, Defense Agency Director General

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Nukaga directly went to the United States and resolved the issue
through direct negotiations with Defense Secretary Rumsfeld.
Although Japan will assume the bulk of the cost and the US
compromised on the burden, it is hard to say that the
appropriateness and necessity of Japan paying such a huge amount
-- $6.09 billion (approximately 700 billion yen) -- has been
properly explained to the Japanese people, so a clear explanation
is crucial.

"It is like building a new town in the jungle," was the
expression used by a government source, referring to the Guam
relocation. If approximately 17,000 persons are moved, including
family members, the cost of building facilities other than
housing also has to be covered. Considering the situation that no
other place in Japan would accept the Marines, there is a case to
be made for it being unavoidable for the Japanese government to
bear the burden to a certain extent.

It is indeed rare for such a large number of US soldiers to be
transferred outside of Okinawa Prefecture. Chief Cabinet Abe
stressed the significance of that move when he said, "We will
speed up the lightening of Okinawa's burden (by covering the
cost)." With the outlook now for the implementation of the
reversion of US facilities inside the prefecture, the burden on
Okinawa, where 75% of US bases are now located, will indeed by
lightened, looking at the package as a whole.

Still, the overall total of approximately 1.19 trillion yen is a
huge amount, as the government itself pointed out from before.
Although Japan avoided paying for such other facilities as
training areas, one government source stressing, "We will not pay
for anything not related to the move," Japan's burden has doubled
from the amount originally stated to approximately 700 billion
yen.

The main basis for the expenditures as explained domestically by
the Japanese government stems from Japan's request to move them
to Guam to lighten Okinawa's burden, since there was no need to
relocate the Marines to Guam, 2,500 kilometers away from their
command in Okinawa that stands ready to respond to a contingency
on the Korean Peninsula or the like.

However, the opposition already has pointed out that there are
already US Air Force and Navy units deployed to Guam, so the
Marines being transferred there will only strengthen the Guam
bases as a part of the US' global force transformation, which all
along was the US' intention.

Turning to Okinawa, the main fighter unit of the Marines will
remain in the prefecture. Although there has been a resolution of
the Futenma Air Station relocation issue, one more focal point in
the realignment talks, this is for the prefecture only a game of
musical chairs. Okinawa will remain the US forces' strategic hub,
and the reality of the prefecture bearing an excessive burden
will remain.

(3) Chief Cabinet Secretary Abe expresses interest in running for
LDP presidency, says "I will not make visiting Yasukuni Shrine a
campaign pledge"

MAINICHI (Page 1) (Full)
April 22, 2006


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On April 21, Chief Cabinet Secretary Shinzo Abe, who is seen as a
leading contender to succeed Koizumi as prime minister, sat down
for an interview with the Mainichi Shimbun. When asked about
visits to Yasukuni Shrine in the event that he were prime
minister, Abe stated: "In order to keep from making this into a
political or diplomatic issue, I have no intention of proclaiming
that I will go." With this, Abe expressed his intention to part
ways with Koizumi, who made his visits to Yasukuni as prime
minister a public pledge. Abe also stated: "I will continue to
pray for the repose of those who fought and died for the country
and to express my respect for them."

Speaking on the election for the presidency of the Liberal
Democratic Party in September, Abe expressed interest in running,
stating: "Those politicians who would forgo running this time
because the nation is facing serious problems have no
qualification to lead the country."

Following the resignations of Seiji Maehara as president of the
opposition Democratic Party of Japan and the rest of his young
leadership team over the phony email scandal, there are growing
calls within the LDP hoping for someone with more experience than
the 51-year-old Abe. Abe responded to this by saying, "While
maturity and experience are important, the figure of youth is
needed to achieve breakthroughs." Citing the examples of Bill
Clinton and Tony Blair, both of whom took their nation's highest
office in their forties, Abe commented: "The important thing is
what kind of results are going to be achieved. Youth can be
covered for by surrounding yourself with experienced people in
listening to what they say."

Addressing South Korea's opposition to the proposed maritime
survey near the Takeshima (Dokdo) islets, Abe stated: "I don't
want to make any waves. The best thing would be if the two
countries can reach a diplomatic agreement that paves the way to
a smooth resolution. It is because I have this desire that I
decided to send Vice Foreign Minister Yachi to South Korea."

(4) Minshuto goes back to "Ozawa's game plan;" Momentum gathering
under three-headed system; Confidence growing for going on
offensive

TOKYO SHIMBUN (Page 3) (Abridged)
April 24, 2006

The major opposition Minshuto (Democratic Party of Japan) won
yesterday's House of Representatives by-election for Chiba
Constitution No. 7, which the party's new leadership
characterized as a poll to set the tone for Japanese politics.
The outcome not only blew away the stigma of the e-mail fiasco
but it also signaled the revival of the (invincible) "Ozawa myth"
both to Minshuto and other parties. The party has switched to the
offensive for the first time since its humiliating setback in the
Lower House election last year.

Last night when it became certain that Kazumi Ota would win the
seat, Minshuto President Ichiro Ozawa held a press conference at
party headquarters along with his deputy Naoto Kan and Secretary
General Yukio Hatoyama. Ozawa said: "This election has made us
realize that we can accomplish anything as long as we remain
united, restoring confidence."

Before the official kickoff of the election campaign, every

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Minshuto member had been prepared to face a defeat.

Ozawa's goals were to solidify the all-party approach and to
tighten his grip on the party. The Chiba by-election has
completely realized his two goals.

Minshuto's mood turned around with the establishment of the Ozawa
leadership April 11, the day the election campaign for the Chiba
polls officially kicked off. The Ozawa leadership has effectively
created a tense atmosphere in the largest opposition party, which
had often been mocked as a "college circle."

Ozawa also spearheaded the election campaign himself. He made
five trips to Chiba Constituency No. 7 to stump for Ota at low-
profile places like an industrial complex to solicit votes in
person. The Ozawa leadership also collected from its members
their lists of acquaintances living in Constituency No. 7. In the
final stage of the election campaign, a dozen or so party members
stumped for Ota daily in front of 10 railway stations based on
those lists. Minshuto has never implemented such a meticulous
well-calculated plan, according to a party source.

The Ozawa-Kan-Hatoyama system also gave a boost to Ozawa's game
plan. Campaign speeches by the three Minshuto leaders were as
appealing as those by the LDP's potential successors to Koizumi.

The e-mail hullabaloo had cost Minshuto its public trust due to
its youthfulness and immaturity. There is no doubt, however, that
the triple-headed system led by Ozawa, a seasoned lawmaker, has
helped Minshuto restore public trust as a party capable of taking
the reins of government. The combination of Ozawa, who is strong
in conservatives, and Kan, who is popular among civic groups, has
also helped Minshuto expand its support base.

The Chiba polls, the first national election under Ozawa, have
proven that Minshuto was invincible under the Ozawa-Kan duo.

The Chiba by-election boded well for the Ozawa-led Minshuto, who
aims to force the ruling coalition into a minority in the House
of Councillors election next year.

Tokyo Shimbun exit poll shows unaffiliated voters' return to
Minshuto

The Tokyo Shimbun conducted exit polls at polling stations in the
Chiba No. 7 constituency April 23.

According to the polls, 28.2% of the unaffiliated voters, who had
contributed to the LDP's overwhelming victory in last year's
Lower House election, voted for the LDP candidate, Ken Saito,
while 57.3% voted for Minshuto's Kazumi Ota.

In the exit poll conducted during last year's Lower House
proportional representation election, 32.6% of the swing voters
said they voted for the LDP as against 38.2% for Minshuto. The
diminishing gap tells an ending to the "Koizumi theater" with
many switching their side to Minshuto.

Additionally, 55.3% of all the respondents and 66.4% of the swing
voters expressed hope for the largest opposition party. Even 29.9
% of those voted for the LDP -- more than one out of four -- said
they harbor hope for Minshuto. Although Minshuto had lost public
trust due to the e-mail fiasco, a sense of expectation seems to

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be growing for the larges opposition party due to the appointment
of Ichiro Ozawa as party head and other factors.

Furthermore, 19.2% of those who had voted for LDP candidates in
the 2005 Lower House lection said they cast their ballots for the
Minshuto, while 13.8% of those who had supported Minshuto
candidates in the 2005 polls said they voted for the LDP
candidate in the Chiba race.

(5) With "Koizumi style campaign," LDP suffers stinging defeat in
Lower House by-election; Defeat may provide a new source of
internal trouble for LDP presidential race and Upper House
election

NIHON KEIZAI (Page 3) (Excerpts)
April 24, 2006

The Liberal Democratic Party (LDP) is increasingly alarmed, since
the party's candidate was defeated in Sunday's House of
Representatives by-election election for the Chiba No. 7
district. It is unavoidable that its defeat will kill the LDP's
momentum that brought about an overwhelming victory to the LDP in
last year's Lower House election. Chances are that many LDP
members will strengthen criticism of the Koizumi reform drive for
downplaying regional cities and will be increasingly dissatisfied
with the party leadership's top-down management. The defeat in
the by-election has provided a new source of trouble for the
September party leadership race and next summer's Upper House
election.

LDP Secretary General Tsutomu Takebe stressed in a press
conference held last night following the defeat: "The focus was
on the new Minshuto leadership. We don't need to be discouraged."
However since the LDP was defeated even though it fought the
election with concerted efforts, some LDP lawmakers said that the
tide might have turned.

In the wake of the uproar in Minshuto due to the fake email
fiasco, many LDP members initially looked to the by-election with
some optimism. With Ichiro Ozawa's assumption of the Minshuto
presidency, concern quickly spread in the LDP. "We took time to
make up for the delay," said Takebe. "It was a mistake that we
forced Mr. Seiji Maehara to step down from the presidency," LDP
General Affairs Council Chairman Fumio Kyuma stated.

During the campaign, Prime Minister Koizumi made only one
campaign speech, but such post-Koizumi contenders as Chief
Cabinet Secretary Shinzo Abe and Yasuo Fukuda delivered speeches
in Chiba for the party's candidate. Takebe visited the electoral
district almost every day. Koizumi protgs elected to the Diet
in last year's Lower House election, including Taizo Sugiura,
supported the campaign.

However, voters took a cool view toward such campaigning. Ozawa,
however, steadily called at organizations and companies and
scored with unaffiliated voters. An LDP Diet Affairs Committee
member said: "Criticism of Mr. Takebe will inevitably come up.
Koizumi's protgs elected to the Diet will weaken." The LDP will
likely be forced to review its campaign strategy with next year's
Upper House election in mind. Taku Yamasaki released a comment:
"A little neglect may breed mischief."

(6) Editorial: Calling off maritime survey - time to speed up

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diplomacy to put out the embers

MAINICHI (Page 5) (Full)
ll)
April 22, 2006

A resolution to the dispute between Japan and South Korea over a
Japanese maritime survey around the Takeshima (Dokdo) islets was
achieved at the last minute through tense vice-foreign-minister-
level talks.

While we welcome the fact that a collision has been averted for
the time being, it is not as though an agreement was reached
regarding the nature of the maritime survey that was the
proximate cause of this dispute. We must keep in mind that this
issue could reemerge at any time.

Learning lessons from this dispute, we see that it is necessary
to speed up discussions toward the quick establishment of rules
regarding maritime surveys in what each nation claims as its own
exclusive economic zone (EEZ) and that these talks should be held
in parallel with negotiations regarding demarcating the actual
EEZs.

This dispute began when the South Korean government moved to
propose Korean names for underwater topography in the area at a
meeting of the International Hydrographic Organization in Germany
in June, including an attempt to change the name of the Tsushima
Basin to Ulleung Basin.

Every country has the right to name undersea topography. South
Korea decided, however, that if it were to give Korean names to
the underwater features near Takeshima, its claim to sovereignty
would be bolstered.

Roughly 30 years earlier, Japan conducted a maritime survey of
the area ahead of South Korea, and the name Tsushima Basin made
its way onto nautical maps. In response, South Korea has been
conducting oceanic surveys for the past four years. Rather than
simply renaming undersea topography, South Korea's real aim is
connected with the issue of sovereignty.

While South Korea was conducting maritime surveys, Japan
refrained from doing so in the same area. However, when it became
clear that South Korea was going to propose Korean names at the
conference, it was decided that survey ships from the Japan Coast
Guard would be sent to the area.

In response, the South Korean government reacted in a manner
devoid of cool-headedness, mobilizing its police vessels and
threatening to seize Japanese ships, transforming the issue of
undersea topography into a volatile dispute over territory.

In the meeting in Seoul between Vice Foreign Minister Shotaro
Yachi and South Korean First Vice Minister for Foreign Affairs
and Trade Yu Myung Hwan, a clash was narrowly averted with an
agreement for Japan to cancel the survey while South Korea would
hold off on proposing its own names at the conference in June.

South Korea maintains on the issue of the names, however, that it
will "pursue the matter at an appropriate time," meaning that
Seoul has not said it has given up on the idea. If South Korea
decides at a future conference that the time is "appropriate" and

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Japan reauthorizes a survey, the same problem will recur.

The agreement between Japan and South Korea also stated that the
two countries will resume negotiations on demarcating their
respective EEZs in May. But with South Korea contending that a
return of Takeshima is "not up for discussion," negotiations on
the EEZs will not be easy.

More than anything else, it is crucial for Japan and South Korea
to quickly agree on principles for maritime surveys in the
Takeshima area in line with international treaties.

And in order to keep the academic question of naming undersea
topography from leading to territorial rows, Japan should work on
international organizations to create new rules, such as
suspending naming such undersea features until disputes are
resolved.

(7) MV-22 Osprey likely to replace Futenma helos: Nukaga

OKINAWA TIMES (Page 2) (Full)
April 21, 2006

TOKYO-The US Marine Corps will likely deploy the MV-22 Osprey, a
tiltrotor vertical/short takeoff and landing (VSTOL) aircraft, to
a new facility to be built in a coastal area of Camp Schwab in
the city of Nago, Okinawa Prefecture, as an alternative for
Futenma airfield in the prefecture, Defense Agency Director
General Fukushiro Nukaga stated before the House of
Representatives Security Affairs Committee in its meeting held
yesterday. "I hear that the US Marine Corps has plans to replace
the carrier helicopters with the Osprey in the future," Nukaga
said. It is the first time the defense chief admitted to the
possible deployment of MV-22s in Okinawa on an official occasion.
He was replying to a question asked by Akihisa Nagashima, a
member of the leading opposition Democratic Party of Japan (DPJ
or Minshuto).

However, Nukaga reiterated his usual explanation, stating: "In
February, the Foreign Ministry inquired of the US government
through diplomatic channels. Their answer was that they have no
specific plans to deploy the MV-22 Osprey in Japan." With this,
Nukaga stressed that the United States has yet to decide on its
deployment.

The alternative facility for Futenma airfield is designed to have
a V-shaped pair of airstrips with an overall length of 1,800
meters (1,500 meters excluding buffer zones or overrun areas at
both ends). "I don't know why they need to build two runways for
only three liaison airplanes (to be redeployed from Futenma
airfield)," Nagashima noted.

"The (Futenma-based) CH-46 midsize carrier helicopters and CH-53
heavy-lift helicopters have now become superannuated," Nagashima
stated, adding: "Their follow-on aircraft model, the MV-22
Osprey, reportedly needs a 1,550-meter runway. This exactly
matches (the length of the alternative facility's tarmacs)." With
this, Nagashima asserted that the Osprey's deployment might be in
mind.

Nagashima also presented a US Defense Department document, which
says the Pentagon's renovation-purpose budget intended to extend
the service life of CH-46 choppers will run out in the US

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government fiscal year of 2008. "Judging from this budgetary
document, it's logically conceivable that they will replace those
CH-46 helicopters with MV-22 Osprey aircraft after fiscal 2008,"
Nagashima pursued.

"Last fall," Nukaga replied, "the Japanese and US governments
released an interim report (on the realignment of US forces in
Japan),incorporating an agreement to lay down a 1,800-meter
runway." The defense chief added, "Based on it, we held talks
with the local hosts."

"The Defense Facilities Administration Agency has definitely
denied the Osprey's deployment," Ginozason Village's Mayor Hajime
Azuma said. According to a senior official of the Nago city
government, Nukaga also nixed the Osprey's deployment in his
recent talks with the city's officials.

(8) FTC comes up with strict requests prior to privatization of
postal services, including call for opening up of mail delivery
network to other firms

ASAHI (Top Play) (Full)
April 21, 2006

The postal privatization process will start in October of next
year. Prior to the privatization of the mail delivery service,
the Fair Trade Commission (FTC) has finalized a report that
includes measures to ensure fair competition between the
privatized company and private-sector entities, from the
viewpoint of the principles of the Antimonopoly Act. The report
will be released today. The report calls for measures to
significantly ease market-entry restrictions in the business of
delivering general mails, such as letters and post cards, which
is now dominated by Japan Post. It also proposes enabling other
entities to make access to its postal mail network. The report is
likely to have a major impact on the business operation of the
new firms to be set up after Japan Post is split.

Under the Postal Privatization Law enacted last year, Japan Post
will be split in October of next year into four businesses,
including mail delivery and financial service, under a holding
company. The government plans to reduce its capital in these
firms gradually, but the government's Committee on Postal
Privatization is still engaged in discussing how to secure fair
competition.

The FTC report singles out problems expected to arise in the mail
delivery business, reflecting concerns among private-sector firms
about possible pressure from the newly established mail delivery
company on their business operations, given Japan Post's decision
to advance into the international logistics service. The report
notes that if Japan Post offers the parcel and international mail
delivery services while monopolizing the mail delivery business,
the company will be able to enjoy an advantage in competing with
private firms in the same line as it can save money by using
common mail trucks and other equipment in its several businesses.

"Providing uniform service nationwide" is a precondition for
firms in different lines to launch the mail delivery service. The
FTC, though, emphasized the need to abolish this condition.

The report sees it desirable for the privatized firm to allow
trucking companies and international distribution companies to

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use its mail delivery network for a charge. It also suggests that
the usage charge for the privatized firm and such private-sector
companies should be the same.

The report also calls for reviewing the exemption of mail vans
from the application of such regulations as parking and passage
prohibition, the mail forwarding system under which the new
addresses of those who moved out are available, and simplified
customs clearance procedures, calling them "public privileges."

Should these measures be taken, the FTC intends to judge whether
or not acts infringes on the Antimonopoly Act in a stricter
manner.

The report noted: "The future application of the system is
extremely important in privatizing postal services," adding:
"Unless equal competitive conditions (between the privatized firm
and private-sector firms) are secured, the basic principle of
postal privatization will lack a finishing touch."

Regarding the report, the FTC will solicit views from many
persons and consult with experts and related institutes. In
applying the Antimonopoly Law to the privatized firms, the
watchdog intends to use the report as its basic set of
guidelines.

(9) FTC report urges abolishing Japan Post's "privileges,"
focusing on problems left unsolved, like monopolies, legal
preference, to bring about fair competition

ASAHI (Page 8) (Full)
April 22, 2006

A report released by Fair Trade Commission (FTC) yesterday
focuses on problems left unresolved in privatizing Japan Post,
such as how to liberalize the mail delivery business, which is
now dominated by Japan Post, and how to promote the
liberalization of Japan Post's postal delivery network to private-
sector rivals. The report also indicates an eagerness to set up
general rules when Japan Post enters the private sector. The
report is likely to have a major impact on privatization plans
involving government-affiliated financial institutions.

"The same situation could occur in Japan as those in Germany and
France," said an FTC official responsible for the report.

When postal services were privatized in Europe, the issue of
monopoly was taken up as a problem. Since postal services were
privatized in 1995, its rival firms have criticized Germany Post
for its overseas businesses through corporate buyouts as "using
the funds earned in the areas it monopolizes to buy companies."
In actuality, the privatized German firm was charged on setting
unfairly low prices in its monopolizing areas in violation of the
European Community (EU) Competition Law.

When the Mail Delivery Law was enacted in 2003, the Ministry of
Internal Affairs and Communications (MIAC) allowed Japan Post to
exclusively handle mail with a weight lighter than a certain
level, assuming liberalization measures to bring down the minimum
weight level little by little.

However, Prime Minister Koizumi insisted on the need for
newcomers to offer mail delivery services nationwide. The

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administration carried out coordination to require companies
intending to start regular mail delivery services to set up
100,000 postal boxes across the nation, and it eventually set up
a system that makes it difficult for newcomers to start a mail
delivery service. In the discussions on postal privatization held
so far, no discussion was conducted on this issue, either.

The report also pointed out Japan Post's hidden advantages. Tobu
Department Store formed a business tie-up with Japan Post on
delivery services last year, stopping its long lasted partnership
with Yamato Transport Co., focusing on Japan Post's ability to
learn new addresses and other strong points. Japan Post's
delivery vehicles are also permitted to stop in no-parking zones.
Calling these advantages "public privileges," the report called
for reviewing the privileges.

MIAC has also made efforts to deal with this issue. This January,
after a decision was made on the privatization of postal
services, a private panel was set up under MIAC Minister
Takenaka. On April 20, the ministry also put together into a
report measures to open up Japan Post's mail delivery network to
private-sector rivals and to allow newcomers to offer mail
delivery services in only certain districts. It will soon start
discussing details on these measures.

FTC gives warning for privatized firms

The FTC judged it necessary to give a warning before the Koizumi
cabinet sets new frameworks for privatized firms under its slogan
of "shifting authority from the public sector to the private
sector."

Related industries have already expressed concerns about possible
pressure on their businesses from the postal savings and Kampo
life insurance corporations in addition to the mail delivery firm
to be established after Japan Post enters the private sector. A
decision has been made to privatize the Development Bank of Japan
and the Shoko Chukin Bank in fiscal 2008, but discussion has yet
to start on their future business options after they are
privatized.

The report said: "There will be more areas in which 'public
firms' pressure on private-sector firms' is being taken up as a
problem but no clear-cut rules are set." An FTC official said
that the commission wanted to discuss how to apply the
Antimonopoly Act and "would like to be actively involved in the
privatization process from the stage of forming systems of the
privatized firms."

The FTC issued a similar warning when public deregulation
measures were taken in the public sector, such as on the
occasions of the breakup and privatization of Japanese National
Railways and the breakup and reorganization of NTT. But some
officials in the FTC have complained: "Such warnings have not
been taken seriously."

In actuality, the FTC repeatedly asked the private panel under
Takenaka to join its discussions on future options for mail
delivery services as an observer, but the panel declined the
request.

Attention is to be paid to how the competition watchdog will turn
the principles in the report into action.

TOKYO 00002216 012 OF 012



(10) Hokkaido to regulate opening of large stores in semi-
industrial areas, loophole in restricting store openings

ASAHI (Page 1) (Full)
April 24, 2006

Hokkaido will adopt location guidelines that regulate the
openings of large stores as early as June. The aim is to prevent
downtown shopping areas from becoming hollowed out due to the
opening of large shopping malls in the suburbs of large cities.
The government has already presented bills amending three town-
building laws, including the City Planning Law, with the same
purpose. Hokkaido has decided to regulate the opening of large
stores on its own, judging that government regulations cannot
stop the opening of large stores in semi-industrial suburban
areas.

Under the planned guidelines, Hokkaido will urge each
municipality to designate suburban areas categorized as semi-
industrial areas in city planning as special-use areas in
accordance with the City Planning Law. Since large stores can be
opened in semi-industrial areas under the government-sponsored
revisions, Hokkaido will designate such areas as special-use
areas so that it can regulate the floor space and height of
stores to be opened there.

Hokkaido has determined that it will not be able to prevent
traditional shopping areas from being eviscerated unless it
regulates the opening of larges stores in semi-industrial areas,
because large stores that opened in such areas account for 40% of
total large stores that opened in Hokkaido over the past five
years in terms of floor space. The guidelines are not legally
binding, but Hokkaido will urge each municipality to act in
accordance with them.

Outline of location guidelines to be introduced by Hokkaido
(Request to companies that will open stores in Hokkaido)
Notification of store-opening plans three months earlier
than the timeframe set under the existing law
Early holding of briefings to concerned local communities
Presentation of measures that will contribute to host
communities

(Requests to municipalities)
Designate semi-industrial areas as special-use areas and
regulate the floor space and height of stores to be opened in
such areas

(Role of Hokkaido)
Disclose store-opening and local contribution plans
submitted by companies
Disclose opinion papers submitted by local governments,
residents, and companies

DONOVAN
NOVAN