JAPANESE MORNING PRESS HIGHLIGHTS 06/05/06

UNCLAS SECTION 01 OF 10 TOKYO 003052

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TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA

SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 06/05/06

Index:

1) Top headlines
2) Editorials
Prime Minister's weekend schedule: None

US, Japan defense chiefs meet:
3) Defense Agency chief Nukaga meets Defense Secretary Rumsfeld
in Singapore, is forward looking about expanding ASDF's Iraq
flights
4) Nukaga, Rumsfeld skirt issue of timetable for GSDF pullout
from Iraq
5) Rumsfeld to Nukaga: Will Japan really pay is share of USFJ
realignment?

China relations:
6) Summit between Japan, China being considered, with Japan
willing to unfreeze yen loan program now
7) Foreign Minister Aso to meet China counterpart in Malaysia
8) Aso to tell counterpart about unfreezing of yen loans to
China
9) Aso in quandary over China policy: does not want to be seen
as "weak-kneed" if concedes on Yasukuni issue to improve
bilateral ties

Iran problem:
10) Government mulling imposing sanctions on Iran if nuclear
talks fail
11) Japan being held virtual hostage by its national oil project
in Iran

Political moves:
12) Prime Minister Koizumi reportedly at first favored Diet
extension but then changed mind due to "changing situation"
13) Minshuto (Democratic Party of Japan) claims to be readying a
no-confidence resolution against Koizumi cabinet
14) Political hopeful Shinzo Abe negative about his faction
running a unified candidate, wants open election
15) Abe will not promise anything on Yasukuni issue, wants it
out of the presidential race
16) Minshuto's Kan calls Abe's dodging of Yasukuni issue
"irresponsible"

Articles:

1) TOP HEADLINES

Asahi, Mainichi, Yomiuri, Sankei, and Tokyo Shimbun:
Mother of drowned girl arrested over murder of 7-year-old boy in
Akita; Admits to charge in outline

Nihon Keizai:
Tokyo District Public Prosecutors Office to arrest Murakami and
three Murakami Fund executives today on suspicion of insider
trading of Nippon Broadcasting System shares

2) EDITORIALS

Asahi:
(1) Iranian nuclear issue: Iran must not pass up historic
opportunity
(2) NHK reform: Reform requires more than reducing channels

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Mainichi:
(1) Fiscal reconstruction: Take steps ahead of schedule by
riding wave of growing tax revenue
(2) New vaccines: Discussion on priority must be conducted
openly

Yomiuri:
(1) National referendum bill: Limiting legislation to
constitutional revision natural
(2) New energy strategy focuses on security

Nihon Keizai:
(1) Technology-based NTT reform argument essential
(2) Oil prices soaring despite growing supply

Sankei:
(1) Yasukuni issue: Mitarai statement appropriate
(2) Telecommunications and broadcasting reform: Concrete steps
not clear

Tokyo Shimbun:
(1) NHK reform: Discussion on public nature neglected
(2) Growing tax revenue will help pursue fiscal reform

3) Nukaga positive about ASDF airlift extension in Iraq

SANKEI (Page 4) (Full)
June 4, 2006

SINGAPORE-Defense Agency Director General Fukushiro Nukaga met
with US Secretary of Defense Rumsfeld at a Singapore hotel today.
In the meeting, Rumsfeld asked Nukaga to extend the scope of Air
Self-Defense Force airlift missions from Kuwait to Baghdad.
Nukaga took a positive stance, saying, "We'd like to consider it
according to the needs."

Nukaga also said he would like to consider when to withdraw
Ground Self-Defense Force troops currently deployed in the
southern Iraqi city of Samawah by factoring in the political
process in Iraq, the development of local security forces, and
the deployment of multinational force troops in Samawah. "Japan
will coordinate well with the United States, Britain, and
Australia," Nukaga added. Rumsfeld asked if Japan could extend
the scope of ASDF C-130 transport operations.

Later in the day, Nukaga met with Australian Defense Minister
Nelson and British Defense Minister Ingram. Ingram told Nukaga
that the southern Iraqi province of Al Muthanna, which includes
Samawah, would be on the list of districts for the multinational
force to transfer security powers to local authorities in the
first place. At the same time, Ingram also showed a cautious
stance, insisting that the multinational force should transfer
its security powers at the right time and should not try to do so
at any inappropriate times. Nelson vowed to continue support for
Japan's troop deployment.

4) Nukaga fails to reveal Iraq pullout schedule

NIHON KEIZAI (Page 2) (Full)
June 5, 2006


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SINGAPORE-Defense Agency Director General Fukushiro Nukaga met
with the defense chiefs of the United States, Britain, and
Australia in Singapore yesterday. Japan has been deploying Ground
Self-Defense Force troops in Iraq. Meanwhile, the Japanese
government is thinking of beginning to withdraw the GSDF troops
after the Japan-US summit scheduled for later this month.
However, the local security situation still remains unstable.
Tokyo therefore has yet to specify when it will recall the GSDF
troops. Multinational force members have also foregone their
decisions to pull out and downsize their troop deployment. Japan
and other countries are now assuming a wait-and-see attitude.

"We'd like to consider what to do from now on, while taking an
overall view of the political process (in Iraq) and the
deployment of multinational force troops in Samawah." Nukaga gave
this explanation to US Secretary of Defense Rumsfeld in their
meeting about the GSDF's assistance with Iraq's reconstruction in
that country's southern city of Samawah. Nukaga also told
Rumsfeld that Japan would like to coordinate well with the United
States, Britain, and Australia about GSDF activities.

Rumsfeld avoided referring to the GSDF's planned withdrawal and
only confirmed that the multinational force members would
continue to cooperate closely. Meanwhile, Rumsfeld tapped Nukaga
for an expanded scope of Air Self-Defense Force airlift missions
in Iraq. Nukaga showed a positive stance, saying, "I'd like to
consider it according to the needs." Rumsfeld said, "I appreciate
it."

Nukaga also met with Australian Defense Minister Nelson and
British Defense Minister Ingram. In his meetings with them,
Nukaga asked for their views of Iraq under its recently
inaugurated permanent government. The multinational force's
transfer of its security powers to local security forces is a
precondition for Japan to withdraw the GSDF troops. However, the
Iraqi cabinet has yet to be fully lined up with the absence of
key ministers, such as the interior minister for public security
and the defense minister.

"It might be too early to state a final outlook." With this,
Ingram showed a cautious view of the local situation. At the same
time, Ingram also remarked that the multinational force would not
have to hurry up its transfer of powers to local security forces.

In the end, Nukaga failed to hold in-depth discussions with his
counterparts on when to pull out or downsize their respective
troops. The local political situation still remains unstable. As
it stands, none of the multinational force's members wants to be
the first to clarify troop pullout since they could be held
responsible if and when the local security situation goes from
bad to worse. The United States is the core of the international
community's assistance with Iraq's reconstruction. Japan, given
its relations with the United States, does not want to be the
first to pull out, according to one government official.

Nukaga has envisioned the GSDF's simultaneous withdrawal along
with British and Australian troops as an "ideal" option for
Japan. In Samawah, a convoy of GSDF and Australian military
vehicles was targeted in a roadside bomb attack on May 31. There
is also a realistic question over whether it is really all right
for the multinational force to transfer its security powers to
local authorities. A tug of war will likely continue between

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Japan and other countries for a while.

5) US Defense Secretary bombards Nukaga with questions about
Japan's share of US force realignment cost

TOKYO SHIMBUN (Page 2) (Full)
June 5, 2006

Singapore, Jiji

In a Japan-US defense summit on June 4, Defense Agency Director-
General Fukushiro Nukaga explained that the government's plan for
the realignment of US forces in Japan was approved at a cabinet
meeting. He also said that the government would take necessary
budgetary measures and legal preparations to that end. In
response, US Defense Secretary Rumsfeld asked many times whether
Japan would be really able to pay for the realignment plans.

In the meeting, Rumsfeld asked "whether Japan is considering
special budgetary measures" and "if a special account will be set
up for such measures." He also asked if "Japan's defense budget,
which accounts for only about 1% of gross domestic product (GDP),
is enough to finance the transfer of Okinawa-based Marines to
Guam."

Nukaga replied that the current Mid-Term Defense Buildup Plan
(Chukibo) (FY2005-2009) does not cover expenses for US force
realignment, adding: "We will consider earmarking the expenses
under a framework separate from the defense budget. The
government is mapping out special legal measures." In conclusion,
Nukaga said: "We will make utmost efforts so that we will not
give you cause for concern." These words finally worked to
relieve Rumsfeld, who replied: "I understand."

6) Japan moving to set stage for Japan-China summit on sidelines
of upcoming G8 Summit; Tokyo to lift freeze on yen loans to China
shortly

SANKEI (Page 1) (Excerpts)
June 4, 2006

The Japanese government yesterday launched an effort to realize a
Japan-China summit between Chinese President Hu Jintao and Prime
Minister Junichiro Koizumi on the sidelines of the upcoming Group
of Eight (G8) Summit in St. Petersburg, Russia, slated for mid-
July. The top-level meeting between the two countries, if
realized, would be the first in 15 months.

Foreign Minister Taro Aso gave a speech in Fukuoka yesterday, in
which he referred to the recent foreign ministerial talks with
China and South Korea in Qatar and noted: "The strained relations
between Japan and China and between Japan and South Korea are
recovering to the point of normalcy."

No summit meeting between Japan and China has taken place since
the last one in Indonesia in April 2005, as China has criticized
Prime Minister Koizumi's visits to Yasukuni Shrine. But during
the recent foreign ministerial between Japan and China in Qatar
held after an interval of one year, Aso urged his Chinese
counterpart Li Zhaoxing to move to realize a Japan-China summit.

Tokyo's position is that "we are always open to dialogue with

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China," according to a senior Foreign Ministry official. Because
the Japan-US alliance has now been strengthened owing to a final
agreement reached between the Japanese and US governments on the
realignment of US forces in Japan and other factors, "China is
becoming willing to break the impasse in the stalled relations
with Japan," the same official said.

7) Foreign Minister Aso to meet Chinese counterpart in Malaysia

YOMIURI (Page 2) (Full)
June 5, 2006

Speaking at meeting of the Liberal Democratic Party in Nagasaki
City, Foreign Minister Taro Aso commented on his next meeting
with China's foreign minister after the one in May, "The next
meeting will probably be in Kuala Lumpur." He revealed that
coordination with the Chinese side was underway on a plan to hold
the talks on the sidelines of a ministerial meeting of the ASEAN
Regional Forum in late July.

Aso stated: "It is nonsense to discontinue our dialogue because
the two top leaders (Prime Minister Junichiro Koizumi and Chinese
President Hu Jintao) will not meet."

8) Foreign Minister Aso considering visit to China in move to
remove the freeze on yen loans toward China

NIHON KEIZAI (Page 1) (Excerpts)
June 4, 2006

Foreign Minister Taro Aso has begun considering a visit to China
after the upcoming Group of Eight (G8) Summit in St. Petersburg
slated for mid-July. His China trip, if realized, would be the
first since his predecessor, Foreign Minister Nobutaka Machimura,
made a visit in May 2005. The government will shortly lift the
freeze on yen loans toward China planned for fiscal 2005 in a
move to accelerate the efforts to set the stage for him to visit
China.

Aso recently met with Chinese Foreign Minister Li Zhaoxing in
Qatar, and the two foreign ministers agreed on the need for
reciprocal visits between them. Based on this shared view, Japan
is considering a plan for Aso to visit China after the G8 Summit.
Tokyo, along with its plan to lift the freeze on yen loans toward
China, intends to convey Aso's desire to visit China and then to
promote preparations for such a visit in concrete terms.

In this regard, Aso referred to the recent Japan-China foreign
ministerial talks at a gathering of the Liberal Democratic
Party's Fukuoka Chapter on June 3 and pointed out: "It would seem
that strained relations between Japan and China and between Japan
and South Korea are recovering to the degree of returning (to a
normal track)?" He stressed that Japan's ties with the two
countries are beginning to move in a favorable direction.

9) Aso in quandary over stance toward Yasukuni issue

TOKYO SHIMBUN (Page 2) (Full)
June 5, 2006

Foreign Minister Taro Aso has been in a great quandary over what
stance he should take over Prime Minister Junichiro Koizumi's

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visits to Yasukuni Shrine. In his earlier meeting with his
Chinese counterpart, he succeeded in finding a clue to break the
impasse in the current strained relations between Japan and China
by indicating that he would not visit the shrine if he won the
presidential election in September. But if he ends up giving the
impression that he has yielded to China's pressure, he might be
criticized as weak-kneed.

In the Japan-China foreign ministerial in Qatar, Doha, on May 23,
Aso said regarding the possibility of his visit to Yasukuni
Shrine: "I will properly make a judgment, based on my own belief
and public position," though he had only said before: "I will
properly make a judgment."

Chinese press officer Liu Chien-chao highly evaluated Aso's
comment, saying: "Foreign Minister Aso is a necessary and
important partner in order to improve and develop ties between
China and Japan."

Just after assuming the current post, Aso gave high marks to
Prime Minister Koizumi's Yasukuni visits. He had repeatedly made
such provocative remarks as: "The more China protests, the more
the prime minister will have to visit (Yasukuni Shrine)."

Recently, however, Aso has been eager to find solutions.
Regarding Yasukuni enshrining Class-A criminal, about which China
has lashed out, he has indicated that the status of Yasukuni
Shrine should be reviewed to make it possible to remove such
criminals from the shrine, remarking: "The problem lies in the
fact that the important matter of honoring the war dead has been
entrusted to one religious corporation."

In the LDP presidential race, popularity rates for former Chief
Cabinet Secretary Yasuo Fukuda, who is cautious about Yasukuni
visits, are remarkably picking up recently, gradually catching up
with Chief Cabinet Secretary Shinzo Abe, who takes a cautious
stance. Probably keeping this public trend in mind, Aso has begun
to take a cautious view.

Aso, though, has openly said that he has frequently visited the
shrine since he went there when he was an elementary school
student. Aso's recent policy switch might allow hardliners toward
China in the LDP to turn away from him.

10) Government considering possibly imposing financial sanctions
of Iran if that countries continues nuclear development program

YOMIURI (Page 1) (Excerpts)
Evening, June 3, 2006

The government today has begun to consider the possibility of
imposing financial sanctions on Iran in the event that it refuses
to halt its nuclear development program, including enrichment of
uranium, as sought by the permanent members of the United Nations
Security Council and other organizations. It is presuming such
sanctions as halting the flow of remittances to Iran under the
Foreign Exchange and Foreign Trade Law.

Japan has maintained a stance aiming at a diplomatic and peaceful
resolution of the Iran nuclear issue. However, because Iranian
President Ahmedinejad on June 2 rejected a comprehensive
resolution proposed by UNSC members and Germany, the judgment was

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made, according to senior Foreign Ministry official, "It would
not be possible for only Japan to refuse sanctions declared by
the United Nations or the coalition of the willing centered on
the United States."

In case Japan imposes sanctions on Iran, Iran has threatened to
impose countermeasures, including cutting off exports of oil.
This would deal a major blow the Japanese economy, which depends
on Iran for 15% of its imports. In addition, it is likely that
the joint Japan-Iran development of the Azadegan oil field would
inevitably halted, as well.

11) Iranian nuclear issue: Japan torn between Iran's oil and US
call for sanctions

TOKYO SHIMBUN (Page 2) (Abridged slightly)
June 5, 2006

Concern is growing that Japan will face a dilemma between the
United States and Iran over Iran's nuclear development. Given a
fierce tug-of-war between the United States and Iran over the
latter's uranium enrichment program, Japan is certain to come
under strong pressure from the two countries.

In a press conference on June 2, Foreign Minister Taro Aso urged
Iran to accept a package of incentives compiled by six countries,
including the US, and begin talks with them, saying, "If Iran
fails to respond to talks, the consequences will be severe."

Prime Minister Junichiro Koizumi held telephone talks with US
President George W. Bush late last month. "The president asked
for Japan's cooperation regarding the Iranian issue," a Foreign
Ministry official revealed. "It means the question of talks (on
the Iranian nuclear issue) has now entered the final stage,"
anther official explained.

Although the US had rejected talks with Iran, it has announced
its willingness to join talks with Britain, Germany, and France
on the condition that Iran stop its uranium enrichment
activities. The US has consequently produced a package of
incentives for Iran in collaboration with Britain, France, China,
Russia, and Germany.

The US has informally asked Japan if it is possible to impose
economic sanctions on Iran under the Foreign Exchange and Foreign
Trade Control Law. The law allows Japan to prohibit cash
remittances and exports of specific items at its own discretion
without an international accord, such as a UN resolution.

The US is considering sanctions by a "coalition of the willing"
outside the UN Security Council. A failure in its efforts to drag
Iran to the negotiating table is certain to lead to greater
pressure on Japan to join the "coalition of the willing."

Japan cannot fall in step with the US so easily because of is
unique circumstances.

About 14% of Japan's crude oil comes from Iran. If Iran were to
halt oil exports, it would damage the Japanese economy
tremendously.

In February 2004, Japan also won exploration rights on the

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Azadegan oilfield in Iran, which is estimated to have 5-25
billion barrels of oil reserves. There is a danger that Japan's
"national oil project" in Iran could be taken hostage.

The National Iranian Oil Company warned Japan in May that it
would cancel its contract with Japan if there were no prospects
for starting development by this September.

The warning was unmistakably intended to prod Japan not to take
joint steps with the US regarding the nuclear issue.

The Iran issue is certain to take center stage in talks between
Prime Minister Koizumi and President Bush later this month and at
the G-8 St. Petersburg Summit in mid-July. Given growing tensions
between the US and Iran, Japan is certain to be torn between oil
and relations with the US.

12) Katayama: Prime Minister approved extension of Diet in early
May, but changed his mind late last month

MAINICHI (Page 2) (Full)
June 5, 2006

It has been learned that Prime Minister Junichiro Koizumi had
formerly made a remark that could be taken as approving an
extension of the current Diet session but then changed his stance
late last month. In a TV discussion program yesterday, House of
Councillors Liberal Democratic Party Secretary General Toranosuke
Katayama disclosed that Koizumi had made such a remark to the
Upper House LDP leadership in early May.

According to Katayama, when Upper House LDP caucus head Mikio
Aoki told him on May 8: "We must have a bill amending the
Fundamental Law of Education passed (in the current Diet
session)," Koizumi replied: "I think so. Let's discuss the matter
at the last moment." Upper House LDP caucus members had believed
that the length of extension would be discussed in the final
phase of the session, taking the prime minister's repeated
remarks as part of his "feint operation."

The prime minister, however, clearly told Katayama on May 30: "I
do not want to extend the session." Katayama claimed: "You told
Mr. Aoki that you would discuss with Mr. Aoki an extension of the
session at the last moment," but the prime minister just replied:
"The situation has changed."

Seeing the prime minister's "about-face," some LDP members
speculate that the recent surge in support ratings for former
Chief Cabinet Secretary Yasuo Fukuda in the run-up to the LDP
presidential race might have prompted the prime minister to
decide to swiftly end the current Diet session so that Chief
Cabinet Secretary Shinzo Abe, an incumbent cabinet minister,
would find it easier to prepare his presidential election
campaign.

13) Minshuto to consider submission of no-confidence motion
against the Cabinet

YOMIURI (Page 2) (Full)
June 5, 2006

Naoto Kan, acting president of the main opposition party,

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Minshuto (Democratic Party of Japan),revealed in a press
conference yesterday afternoon in Sapporo City that his party
would consider submitting a no-confidence motion against the
Cabinet, stating, "Whether to submit a no-confidence motion is
our party's major strategy for management of the Diet. Time to
discuss the matter will soon come naturally."

14) Abe negative about Mori faction's fielding only one candidate
for LDP presidential race

ASAHI (Page 2) (Full)
June 5, 2006

When asked about the possible candidacies of both Chief Cabinet
Secretary Shinzo Abe and former Chief Cabinet Secretary Yasuo

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Fukuda for September's presidential race of the Liberal
Democratic Party, Abe said on television programs, including NHK
and TV Asahi talk shows:

"I think it will be difficult for two members of the group to
compete. There should be an open campaign involving the entire
party. The party president should not be chosen by a backroom
deal as the party did in the past."

He expressed his view negative about the idea of the faction
fielding only one candidate.

Asked whether he would raise the consumption tax rate when he
assumed the prime minister post, Abe responded:

"If a tax hike is needed for finance reconstruction, I will do so
without fail. However, before doing so, I will adopt an economic
growth strategy, while implementing spending reform.
Consideration also will be given to the economic situation."

15) Abe not include Yasukuni issue in campaign pledges for LDP
presidential race to avert hot debate among contenders

TOKYO SHIMBUN (Page 1) (Excerpts)
June 4, 2006

Chief Cabinet Secretary Shinzo Abe decided on June 3 not to
incorporate in his set of campaign pledges for the election
campaign in September for Liberal Democratic Party (LDP)
president the question of whether he would visit the
controversial Yasukuni Shrine should be become the LDP president
and thus the next prime minister. Abe has paid his respects at
the Shinto shrine every August 15, the anniversary of Japan's
surrender in World War II, before he assumed the chief cabinet
secretary post last fall. He is positive about continuing to pay

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homage at the shrine. However, he seems to have determined that
if he refers to the shrine issue in the campaign pledges, it
would become a hot issue in the race, leading to further
deterioration of Japan's relations with China and South Korea.

Abe intends to formally announce his candidacy after the mid-July
Group of Eight summit in St. Petersburg. In an attempt to narrow
the income gap in sociey that has widened because of the reform
drive by Prime Minister Junichiro Koizumi, he is now drafting an
administrative vision that would help jobless, part-time workers
and entrepreneurs.


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16) Minshuto Acting President Kan criticizes Abe as "being
irresponsible" for sidestepping Yasukuni issue

ASAHI (Page 2) (Full)
June 5, 2006

Democratic Party of Japan (Minshuto) Acting President Naoto Kan
held a news briefing in Sapporo yesterday, in which he brought up
Chief Cabinet Secretary Abe's statement regarding whether to
visit Yasukuni Shrine -- "It is not a matter for me to say this
or that in connection with the party presidential race" -- and
criticized his attitude, saying: "Prime Minister Koizumi made
that question an issue in the presidential race. Mr. Abe is
irresponsible as a politician because he, while courting the
prime minister, has asserted that question should not be made an
issue in the race."

Speaking of the issue of visits to Yasukuni Shrine, Kan remarked,
"Prime Minister Koizumi unnecessarily made this an issue; as a
result, it has become a major problem during the past five
years." "If what Mr. Koizumi has done in the past is wrong, he
(Abe) should say so clearly," Kan added.

SCHIEFFER