DAILY SUMMARY OF JAPANESE PRESS 05/18/06

UNCLAS SECTION 01 OF 08 TOKYO 002740

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SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 05/18/06


INDEX:

(1) Fukuda winds up US visit, solidifying his foundation for post-
Koizumi race; Popularity growing owing to silence

(2) American eyes carefully watching LDP presidential election
campaign

(3) Why the accompanying press was miffed at Yasuo Fukuda during
his rare trip to the United States

(4) US not pinning high hopes on former South Korean President
Kim Dae Jung's Pyongyang visit; Still skeptical about Seoul's
reconciliation strategy toward North Korea

(5) Government to expand investment in oil development due to
high prices

(6) METI greatly shaken

ARTICLES:

(1) Fukuda winds up US visit, solidifying his foundation for post-
Koizumi race; Popularity growing owing to silence

MAINICHI (Page 5) (Abridged)
May 18, 2006

Ryuko Tadokoro, Washington

Upon winding up his weeklong trip to the United States, former
Chief Cabinet Secretary Yasuo Fukuda of the Liberal Democratic
Party will return home today. Fukuda, who appears to be putting
high priority on Asia policy, met energetically with key players
in the Bush administration, such as Vice President Dick Cheney,
and congressional members to demonstrate his stance of attaching
importance to relations with the US as well. Fukuda, who has been
closing the gap with Chief Cabinet Secretary Shinzo Abe in recent
opinion polls on the post-Koizumi race, impressed US leaders as a
promising contender.

During his stay in the United States, Fukuda held talks with over
50 individuals, including Secretary of State Condoleezza Rice,
Secretary of Defense Ronald Rumsfeld, and congressional and think-

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tank members. Although the contents of those talks and the
timetable were not disclosed in detail, Fukuda reportedly
highlighted the need to improve relations with China when
conversation moved to the subject of China, such as the strained
relations between Tokyo and Beijing and China's military buildup.
Former Ambassador to Japan Howard Baker also gave Fukuda a warm
reception at his home, suggesting that he played an important
role in arranging Fukuda's meeting with US leaders.

Fukuda's support ratings are also on the rise. The Mainichi
Shimbun's May 13-14 survey showed an increase of 2 points from
the previous poll, in which his popularity had surged. Polls by
four other news companies also showed increases of 7 to 10 points
for Fukuda. In stark contrast, Abe's support rating dropped 12
points in one survey. Although Abe is still the favorite over
Fukuda, the projected race among four hopefuls -- Taro Aso,
Sadakazu Tanigaki, Yasuo Fukuda, and Shinzo Abe -- has
fundamentally changed.


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A ruling party member described Fukuda's popularity this way: "He
has been doing well while keeping silent. He has been selling
himself as an expert on diplomacy who can handle not only East
Asia but also relations with the US." One cabinet minister also
said, "Mr. Fukuda's popularity has been growing because he has
been quiet." His view is that although Fukuda has yet to announce
his candidacy clearly, his steady diplomatic efforts have made
those unhappy with Prime Minister Koizumi's Asia policy view him
as the ideal replacement.

Fukuda's strategy of determining his chances to run in the race
with a watchful eye on public opinion has been successful. But
many think Fukuda is still undetermined and could say, "I never
said I would run in the race."

Support ratings for Abe and Fukuda

Shinzo Abe Yasuo Fukuda
Mainichi Shimbun 38% (+2 from 20% (+2)
previous survey)
Yomiuri Shimbun 40% (-4) 23% (+10)
Nihon Keizai Shimbun 33% (-7) 21% (+7)
Kyodo News Service 40% (-12) 31% (+9)
NHK 30% (no change) 16% (+7)

(2) American eyes carefully watching LDP presidential election
campaign

SHUKAN SHINCHO (Page 36) (Full)
May 25, 2006

The LDP presidential election is looking more and more like
becoming a close race between two rivals in the same Mori
faction, with former Chief Cabinet Secretary Yasuo Fukuda gaining
rapidly in the polls on Chief Cabinet Secretary Shinzo Abe. Even
in his recent visit to America, Fukuda was able to meet in rapid
succession with a number of influential members of the Bush
administration. Although his treatment was sharply noticed by the
press, it was not at all that unusual a case. Said one Washington-
based special correspondent: "Although Fukuda met with Secretary
of State Rice, Defense Secretary Rumsfeld, and Vice President
Cheney, among others, when Abe and Finance Minister Tanigaki
visited Washington, they received the same treatment. Of course,
there was the calculation that Fukuda perhaps might become the
next prime minister, but it was only protocol to receive such
treatment as a politician who once had held an important post in
the government of Japan, an important US ally. It was not an act
worthy of special mention."

However, there are needless to say close links between politics
in Japan and the US. How do these high officials see the LDP
presidential race? One Washington think-tank source said: "Of
course, if the party were different, their thinking would be
different. But the tone is quite different since he is from the
same party. However, for the Bush administration, which still has
two and a half years left in office, there is a desire to
continue the honeymoon-like relationship that has existed until
now. In that sense, Abe, who has the support of Koizumi, is a
better candidate for the administration."

Another important factor for Washington is the candidate's sense
of distance from China. The same source continued: "In the
current administration, there are officials like Deputy Secretary

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of State Zoellick who are pro-China types, but basically, the
government, like its ally Japan, thinks of China at the
crossroads of becoming a military threat. Therefore, on that
point, they give high marks to Abe. Since Mr. Fukuda is
conciliatory toward China, they have some qualms about him."

Recently, it was reported that House of Representatives Chairman
of the Foreign Relations Committee Hyde (Republican) had written
a letter to the Speaker of the House complaining about Prime
Minister Koizumi's paying homage at Yasukuni Shrine, but that
does not seem to be much to worry about. The special
correspondent cited above stated: "Among one of Hyde's aides is a
staffer who lived a long time in South Korea and is critical of
Japan's having once annexed Korea. Last fall, too, Hyde sent the
same kind of letter to Japanese Ambassador to the US Ryozo Kato,
and the contents were then leaked to the South Korean media.
Although some segments of the Japanese media picked up the
report, most treated it as something having been generated by a
certain "usual suspect."

This time, only the Asahi wrote up the story.

(3) Why the accompanying press was miffed at Yasuo Fukuda during
his rare trip to the United States

SHUKAN BUNSHUN (Page 25) (Abridged)
May 25, 2006

In an opinion poll carried out by Kyodo News on May 13-14, Chief
Cabinet Secretary Shinzo Abe was the top pick with 40.1% of
respondents when asked who they thought was "appropriate to be
the next prime minister." Former Chief Cabinet Secretary Yasuo
Fukuda was next with 31.4%. But only a month ago, there had been
a 30-point spread between the two potential prime ministerial
candidates, indicating that Fukuda is in hot pursuit of the
overwhelming favorite Abe.

Fukuda arrived in the United States for his visit on May 10. His
selling point was not just his Asia policy, He also seemed to
want to show that he has good connections in America, as well,
with meetings set up with such senior Bush administration
officials as Secretary of State Rice, Vice President Cheney, and
Defense Secretary Rumsfeld.

One political correspondent pointed out: "Since he does not now
have a cabinet portfolio, it is quite unusual to be able meet
such illustrious figures. Naturally, I would have liked to find
out a bit of what they had talked about, but Mr. Fukuda's
treatment of us locally was atrocious, so I don't know at all the
contents."

To learn the details, let us go back to the starting point. The
same source revealed: "At the time of his departure, he sent us a
message through his son Tatsuo, who is his private secretary,
that this time, he was not going to provide us with a schedule of
meetings and other events. After he arrived in the US, he met
with Secretary of State Rice from 4:00 pm at the State
Department, but he asked the press corps not to follow him
around, and he said he would provide no briefing."

We in the press then wondered why then were we accompanying him
anyway, as we all stood outside the State Department waiting for
him to come out, said the same source. Fukuda emerged,

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accompanied by Ambassador to the US Ryozo Kato and former US
Ambassador to Japan Baker, but he walked right by the press corps
without a glance. Ambassador Baker, who is knowledgeable about
Japan, was pressed to say something, so he stood before the blur
of cameras to respond. But he would only repeatedly say, "You
have lots of questions, but it was only a courtesy call and they
just chatted about various subjects."

The next day, Fukuda met Vice President Cheney and Defense
Secretary Rumsfeld. The same source continued: "That day, too,

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the comment was the same as the previous day's. When Ambassador
Baker emerged from the Pentagon, the television and camera crews
approached him, but this met with a protest from private
secretary Tatsuo in an exchange that lasted a good 30 minutes.

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After that, Tatsuo sent word to the press, as if he wanted to say
something to them, that time would be made available in the
evening. But by eight o'clock that night when he still had not
contacted them, we realized that we had been stood up."

Finally, on the 13th, Fukuda responded to a round-table with the
press, but on condition that it be completely off record and that
no articles be written. What the press corps had wanted to ask
him about was his round of meetings and about the remark by
former Prime Minister Mori's about not being able to unify the
faction around one candidate, Abe or Fukuda, and what his
reaction was to that. His answers to both queries were curt.

A reporter on the political desk said: "It is inconceivable that
his conversations with such an array of senior officials were
just idle chatter. Since the taxpayers' money was being used,
with Ambassador Kato accompanying him, to say that he did not
talk about anything in particular only makes fools of the
Japanese people. Fukuda may feel that the press only came along
with him for the heck of it."

Is it all right for such a politician to become prime minister?

(4) US not pinning high hopes on former South Korean President
Kim Dae Jung's Pyongyang visit; Still skeptical about Seoul's
reconciliation strategy toward North Korea

YOMIURI (Page 6) (Full)
May 18, 2006

Washington, Takashi Sakamoto

Washington intends to carefully watch whether former South Korean
President Kim Dae Jung's decision to visit Pyongyang again will
lead to North Korea's return to the six-party talks. The US
government has recently come up with a policy of applying
pressure on North Korea by such means as cracking down on its
wrongdoings and the human rights issue. As such, even if Kim's
visit prompts North Korea to shift to a flexible stance, the US
is unlikely to change its hard-line approach.

Regarding Kim's decision to visit Pyongyang, a spokesperson for
the Department of State noted, "We support dialogue between the
South and the North and reconciliation on the Korean Peninsula."

Assistant Secretary of State Christopher Hill, the chief US
delegate to the six-party talks, will visit South Korea in late
May to coordinate views with the goal of restarting the talks.
The Bush administration, which attaches importance to applying

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pressure on North Korea, is still skeptical about the Roh Moo-
hyun administration's policy, which advocates giving the North
favors in return for coming back to the framework. A US
government official made an ironic comment: "There is no concern
at all over US-South Korea relations deteriorating any further,
because they can only get better." There is little chance the US
is pinning its hopes on a Pyongyang visit by Kim, who essentially
created South Korea's current policy toward the North.

The US government has stressed that if the North comes back to
the six-party talks, it would restart the talks as soon as
tomorrow, as Hill put it. The US has urged the North to
unconditionally come back to the negotiating table. Even if the
talks restart, the US has no intention of rewarding Pyongyang by
providing economic assistance or normalizing ties.

Secretary of State Rice on May 15 announced the US decision to

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restore full diplomatic ties with Libya and remove it from a list
of state sponsors of terrorism, signaling incentives for North
Korea if it follow suit. Abandoning its nuclear development
program is the precondition needed for it to follow the Libya
model.

The US government has already imposed financial sanctions against
banks in Macau, which the North used to launder money. The US is
strengthening pressure on the North on the human rights area, as
well. As part of such efforts, it has started accepting North
Korean defectors. President Bush also met with the mother of
abductee Megumi Yokota.

Focus is on progress on abduction issue

Hajime Izumi, professor at Shizuoka University

Attention is being paid to how various issues will unfold after
Kim's visit to Pyongyang, including the working-level talks under
the six-party talks scheduled for later in the month, the
abduction issue in South Korea, and the issue of South Korean
prisoners that have been kept since the Korean War.

The G-8 Summit to be held in Russia in July will likely discuss
Japan's abduction issue. Should that occur, Pyongyang will need
to respond. The North might think that if there is any progress
on the abduction issue involving South Korea, it could dampen the
momentum of Japan and the US, which are determined to settle the
issue through pressure.

Unlike Japan and the US, South Korea hopes to settle the
abduction issue through economic assistance. Progress in efforts
to settle the abduction issue is also advantageous to it. South
Korea is increasingly alert to China, which is increasing its
influence on Pyongyang through economic assistance. If any
progress can be achieved regarding the abduction issue, Seoul can
justify itself in extending assistance to Pyongyang with its
construction of infrastructure as a measure to counter China.

In this sense, I would not be surprised if Kim's Pyongyang visit
prompts discussions on the confirmation of the whereabouts of
alleged South Korean abductees, the first step in settling South
Korea's abduction issue. Kim will not visit Pyongyang in the
capacity of special government envoy, but his visit is apparently
directly linked to progress in North-South relations.


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(5) Government to expand investment in oil development due to
high prices

NIHON KEIZAI (Page 1) (Full)
May 17, 2006

The government will boost aid for Japanese firms to independently
develop oil and gas fields. Japan will reinstate its independent
development goal, which was ended in 2000, and will increase the
rate of independently developed oil to imports from the current
15% to 40% by 2030. As specific support measures, the government
will increase public funds to be offered to private development
firms and expand debt guarantees. By introducing such measures
for private oil developers, the government aims to secure a
stable supply of oil.

The Research Commission of Comprehensive Resources and Energy in
the Economy, Trade, and Industry Ministry will finalize its draft
report tomorrow specifying this policy switch and also
incorporate it in its report on a new national energy strategy
due out by the end of this month. The new policy will also be
reflected in the Basic Policies for Economic and Fiscal
Management for June.

The government had set the goal of raising the rate of
independent development to 30% since the 1960s, but it withdrew
that goal in 2000 in response to the declining significance of
independent development due to the spreading view that oil would
always be available on the market. Amid heated global competition
for oil given surging prices to the level of around 70 dollars
per barrel, however, the government has judged that it should
commit itself to ensuring a stable supply of oil.

A key measure is to expand investment by Japan Oil, Gas, and
Metals National Corporation (JOGMEC),which has taken over the
business of the defunct Japan National Oil Corporation (JNOC).
When a project to exploit gas or oil is carried out, it is common
for oil companies or trading houses to provide funds and
establish a development firm capitalized at billions to ten of
billions of yen. The government will study a measure to raise the
maximum rate of investment in such development firms from the
current 50% to 70%.

A development company needs a 100-billion-yen-level plant fund to
start full-scale production. To help developers borrow money from
banks, the government intends to raise the maximum debt-guarantee
percentage from the current 50%. To secure financial resources to
cover such disbursements, the government plans to trim
unnecessary projects when the special accounts for oil and power
development are integrated in fiscal 2007.

As a result of the Japan National Oil Corporation investing in or
offering loans for unprofitable projects, the corporation had an
accumulated debt of over 700 billion yen. Reflecting on this,
JOGMEC will offer aid only for projects whose rate of return is
over 10%. An audit group composed of experts will select eligible
projects, and a system to check profits every year will also be
established.

(6) METI greatly shaken

BUNGEISHUNJU (Pp. 235-236) (Abridged slightly)
June 2006

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The Liberal Democratic Party suffered an expected defeat in the
April 23 Lower House Chiba by-election, which was a proxy battle
between Prime Minister Junichiro Koizumi and Minshuto (Democratic
Party of Japan) President Ichiro Ozawa. The Ministry of Economy,
Trade and Industry (METI) was badly shaken by the outcome,
including Administrative Vice-Minister Hideji Sugiyama (who
joined METI's predecessor, Ministry of International Trade and
Industry (MITI),in 1971).

METI officials had been optimistic that the LDP's publicly
recruited candidate Ken Saito, a former METI official who once
held the position of vice governor of Saitama Prefecture, would
easily defeat the 26-year old Minshuto candidate Miwa Ota, a
former Chiba prefectural assembly member.

The election upset explains the rage felt by METI Minister
Toshihiro Nikai, who reportedly was influential in picking Saito
from among 200 applicants as the LDP candidate. Vice Minister
Sugiyama and other senior ministry officials may punish
Minister's Secretariat Assistant Vice-Minister Kazuo Matsunaga
(1974),who served as a coordinator for the Chiba race.

It has been traditional since the MITI period that when retired
or incumbent officials run in national elections, eight METI
regional bureau chiefs establish a ministry-wide support system
centering around the assistant vice-minister of the Ministers'
Secretariat. In the case of the Chiba by-election, Matsunaga and

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Kanto Bureau chief Takehide Takahashi (1976) assumed that
responsibility. Their failure infuriated METI Minister Nikai.

METI's support system reportedly did not work because of strong
factional rivalry between alumni of Komaba High School -- a
school attached to the former Tokyo University of Education that
is now the University of Tsukuba -- and alumni of Azabu High
School.

Rivalry between the two groups has been rampant since the MITI
days across the board, including personnel affairs. Saito is a
graduate of Komaba, whereas Matsunaga and Takahashi are from
Azabu. Traditional enmity between the two academic cliques worked
against Saito.

Nikai, who has close ties to the Kansai Electric Power Co.,
thinks Matsunaga treated the power industry coldly when he was
director general of the Nuclear and Industrial Safety Agency. For
this reason, it was certain that Nikai would sack Matsunaga this
summer, regardless of the outcome of the Chiba poll.

What is the lineup of the Komaba faction look like? There are
many promising members who are close to Saito in age, such as
Economic and Industrial Policy Bureau Economic Analysis Office
Director Kazuaki Hasegawa (1982),Industrial Finance Division
Director Masakazu Ichikawa (1983),Regional Economic and
Industrial Policy Division Director Kensuke Yamamoto (1981),and
Trade and Economic Cooperation Bureau Trade Finance and Economic
Cooperation Division Director Hitoshi Ito (1982).

But they did not throw their total support behind Saito. The
reason was probably because Saito, who was eager to enter
politics all along, once briefly leaned toward Minshuto
(Democratic Party of Japan).


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Saito's lonely battle brought about unexpected consequences.

SCHIEFFER