JAPANESE MORNING PRESS HIGHLIGHTS 06/06/06

UNCLAS SECTION 01 OF 10 TOKYO 003087

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SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 06/06/06


Index:

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

4) With an eye on the peace process, Prime Minister Koizumi to
add Israel, Palestinian Authority to his Middle East trip

Asia diplomacy:
5) Foreign Minister Aso to visit Iran on 19th to discuss
nuclear issue
6) Meeting of Japanese, Central Asian foreign ministers aims at
tighter measures to deal with terrorism, drugs
7) Japan strengthening influence in Central Asia and with India
8) US, Japan strengthening assistance to earthquake victims in
Java, Indonesia
9) Decision today to unfreeze loans to China aims at softening
bilateral ties

10) South Korea extending its EEZ to the east of disputed
Takeshima islands, further complicating talks with Japan

Political agenda:
11) Arrest of powerful fund manager Murakami for insider trading
deals blow to Koizumi deregulatory reforms
12) Opposition parties plan to pursue Koizumi in Diet for
setting reform stage that they say allowed Murakami fund to carry
out insider trading
13) Minshuto head Ozawa calls Koizumi "irresponsible" for not
extending the Diet despite backlog of important bills
14) In post-Koizumi race, potential candidate Fukuda has been
silent recently, unlike his vocal opponent Abe
15) Former Prime Minister Hashimoto has been hospitalized for
stomach pain
16) LDP launches new policy think-tank

Articles:

1) TOP HEADLINES

Asahi, Mainichi, Yomiuri, Nihon Keizai, Sankei, and Tokyo
Shimbun:
Tokyo District Public Prosecutors Office arrests Yoshiaki
Murakami on suspicion of insider trading; Suspected to have made
profit of 3 billion yen by purchasing NBS shares after learning
of Livedoor's purchase plan in November 2004

2) EDITORIALS

Asahi:
(1) Murakami arrested: Lessons should be learned from fund
scandal
(2) Akita murder case: What drove mother of tragedy to commit
crime?

Mainichi:
(1) Arrest of Murakami: Violator must leave the market
(2) Murder of 7-year-old in Akita: Protecting children is
everybody's business

Yomiuri:

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(1) Marketplace winners willing to break law
(2) Akita murder case: What happened to mother of drowned girl?

Nihon Keizai:
(1) Murakami's arrest underlines need to establish strict
marketplace rules

Sankei:
(1) Murakami nabbed: Betrayal of fund market inexcusable
(2) Murder of 7-year-old: Mysterious points must be uncovered

Tokyo Shimbun:
(1) Murakami arrested: Clear rules essential
(2) Akita boy murder case: Many riddles still remain

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, June 5

NIHON KEIZAI (Page 2) (Full)
June 6, 2006

10:31
Arrived at Kantei.

11:00
Met Canadian Ambassador to Japan Caron, with Foreign Ministry
North American Affairs Bureau Director General Kawai present.
Followed by WHO West Pacific Region Bureau Director General Omi,
with Health, Labor, and Welfare Ministry Director General for
Technology Policy Sotoguchi present.

13:19
Met Policy Research Council Chairman Nakagawa, Acting Policy
Research Council Chairman Amari, and Assistant Policy Research
Council Chairman Ito. Later, met Asahi Breweries advisor Yuzo
Seto, chairman of the Japan-South Korea Economic Association.

15:15
Met Upper House member Yoriko Kawaguchi.

17:01
Attended an LDP executive meeting in the Diet building.

17:48
Met at Kantei with Uzbekistan Foreign Minister Ganiyev,
Afghanistan Foreign Minister Spanta, and others, with Senior Vice
Foreign Minister Shiozaki and others present. All lined up for a
photo shoot.

18:47
Returned to his official residence.

4) Koizumi considering Middle East visit before G-8 summit, with
eye on peace process

SANKEI (Page 5) (Full)
June 6, 2006

Prime Minister Junichiro Koizumi decided yesterday to visit
Israel and the Palestinian territories ahead of the G-8 Summit in
Russia that begins July 15. The aim of the visit is to increase

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Japan's involvement in the Middle East peace process as an
arbitrator between Israel and the Palestinian Authority.

The prime minister was scheduled to go to Israel and the
Palestinian territories when he visited Turkey this January, but
due to Israeli Prime Minister Ariel Sharon's massive stroke,
Koizumi had to postpone the planned visits. The visits are likely
to take place during the July 10-14 period. Arrangements are
being made for a tour to the Gaza Strip in addition to meetings
with Israeli Prime Minister Ehud Olmert and Palestinian Authority
President Mahmoud Abbas.

Since then Prime Minister Tomiichi Murayama visited the
Palestinian territory and Israel in September 1995, no Japanese
prime minister has visited there. Prime Minister Koizumi told
reporters last night: "I was scheduled to go there in January. If
we find the timing appropriate, I would like to go there."

5) Foreign Minister Aso to visit Iran to discuss nuclear issue,
possibly on June 19

SANKEI (Page 5) (Excerpts)
June 6, 2006

The Foreign Ministry yesterday began arranging a visit to Iran by
Foreign Minister Taro Aso to meet Foreign Minister Motaki,
possibly on June 19. Aso plans to exchange views with his
counterpart on Iran's nuclear development and call on Iran to
halt its uranium enrichment activities, giving priority to
coordination with the international community. It remains to be
seen, though, to what extent Japan will be able to exert its
influence.

The US has indicated that it would respond to bilateral talks if
Iran halts its nuclear development program and then join
international talks. Six countries, including the five permanent
members of the United Nations Security Council, have agreed on a
plan to be adopted if Iran suspends its nuclear program and
sanctions in the event it does not.

In a telephone conference with US Secretary of State Condoleezza
Rice on June 1, Aso said: "(Japan) will also play an important
role." The US has already decided to impose sanctions if Iran
refuses to end uranium enrichment activities. Based on this, the
US has been calling Japan through diplomatic channels to also to
take financial sanctions against Iran, including a ban on
remittances.

6) Japan, Central Asian countries in foreign ministerial agree to
strengthen border control as antiterrorism, antinarcotics
measures

SANKEI (Page 5) (Full)
June 6, 2006

Japan and countries in Central Asia held a foreign ministerial
meeting in Tokyo yesterday and adopted an action program
including measures to cooperate in (1) strengthening the border
control as part of antiterrorism and antinarcotics measures; and
(2) constructing roads to transport oil and natural gas
resources. The program also incorporated Japan's assistance
measures. The participants included the foreign ministers from

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Kazakhstan, Kyrgyz, Tajikistan, and Uzbekistan. The foreign
minister of Afghanistan took part as an observer.

In the action program, Japan pledged to offer technology to
promote information exchanges and strengthen border control as
part of antiterrorism and antinarcotics measures. The program
also stressed the importance of constructing a southern route to
transport natural resources in Central Asia to the Indian Ocean
through Afghanistan and Pakistan. Japan will offer cooperation
for road construction.

Central Asian countries have established the Shanghai Cooperation
Organization with China and Russia. By holding an annual foreign
ministerial with Central Asian countries, Japan aims to expand
its influence in the region. The latest meeting was the second,
following the one held last year.

7) Japan on diplomatic offensive toward Chinese, Russian
neighbors

NIHON KEIZAI (Page 2) (Full)
June 6, 2006

The Japanese government is stepping up its diplomatic offensive
toward Central Asian countries, India, Mongolia, and other
countries neighboring China and Russia. Central Asia is a
strategic region where the United States, China, and Russia are
squaring off. The United States is strongly cautious about the
clout of China and Russia in this region under their Shanghai
Cooperation Organization (SCO) initiative. Japan would like to
step up its partnership with India and Mongolia to drive a wedge
in the coalition of China and Russia toward Central Asian
countries.

Japan yesterday held a foreign ministerial meeting with four
Central Asian countries and Afghanistan in Tokyo and agreed on an
action program for cooperation in antiterror, energy, and various
other areas.

Foreign Minister Taro Aso met the press after the foreign
ministerial meeting and underscored its significance. "We have
expectations for each other, and we're also attaching importance
to our relationships," Aso said, adding, "We reaffirmed this, and
that's important." He also said, "It's a very good message to the
international community."

Aso also held individual talks with those visiting foreign
ministers. Uzbekistan Foreign Minister Ganiyev responded, "I
highly appreciate the dialogue this time as a contribution to
stability in Central Asia."

The four Central Asian countries are SCO members. Last year, the
SCO adopted a joint declaration calling for the United States to
end its military presence in Central Asia, and the United States
has now pulled its troops out of Uzbekistan. In the meantime,
Kyrgyzstan has also notified the United States of a substantial
raise of airport landing fees for US military aircraft. As seen
from such moves, Central Asian countries are trying to eliminate
the US influence.

Japan is now stepping up its dialogue with Central Asia in an aim
to constrain such anti-US sensitivity in this region. For

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another, Japan wants to keep them from moving closer to China and
Russia.

At the same time, Japan is also reinforcing its partnerships with
India and Mongolia, which are geographically near Central Asia.
Japan is developing proactive diplomacy toward India, which is an
SCO observer. This year, India's Finance Minister Chidambaram and
Defense Minister Mukherjee visited Japan. Indian Prime Minister
Singh will also visit Japan this year. Mongolia marks its 800th
national foundation anniversary this year. The Japanese
government has designated this year as "Mongolia Year in Japan"
to promote cultural exchange programs between the two countries.

8) Japan, US to strengthen aid to Java's quake-hit areas

NIHON KEIZAI (Page 9) (Full)
June 6, 2006

JAKARTA-Foreign relief teams from more than 30 countries,
including Japan, have now arrived in the quake-hit districts of
Java, Indonesia, where they are reinforcing their medical
activities.

Japan has also dispatched a second batch of about 100 Self-
Defense Forces members to engage in emergency medical relief
activities. The SDF relief team arrived in the disaster-stricken
province of Yogyakarta yesterday on a commercial charter plane. A
C-130 transport plane loaded with medical equipment has also
arrived at a local airport. The SDF team will join the advance
team and start medical activities in mountainous areas.

Meanwhile, US Secretary of Defense Rumsfeld will visit Jakarta
today and is expected to talk about the US military's additional
aid to the quake-hit districts. The Indonesian Ministry of Social
Affairs yesterday made a downward revision of quake death toll
from 6,234 to 5,782 and the number of injuries from about 46,000
to about 36,000. This is because casualty tallies were duplicated
in some areas.

9) Japan to end freeze on yen loans to China and decide today on
yen loans -- down 10 billion yen -- for fiscal 2005 today

YOMIURI (Page 2) (Full)
June 6, 2006

Yen loans to China for fiscal 2005 had been frozen until now, but
the government will decide to offer such yen loans at a meeting
today of the Council for Overseas Economic Cooperation. This
decision comes, reflecting the recent moves by China to improve
relations with Japan, such as Beijing's agreement to hold the
first foreign ministerial between the two countries in one year.

The total amount of yen loans is expected to be around 75 billion
yen, down 10 billion yen from the previous fiscal year.

The offer of yen loans is usually decided by the end of the
fiscal year, and yen loans are implemented in the next fiscal
year. But in the case of yen loans to China for fiscal 2005,
because of growing opposition in the ruling Liberal Democratic
Party to China's attitude of refusing to hold a summit between
the two countries, the government had frozen the offer of yen
loans to China.

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The Council for Overseas Economic Cooperation in its meeting
plans to confirm the policy of ending yen loans to China by the
time of the Beijing Olympics in 2008.

10) ROK decides to extend its EEZ eastward from Takeshima/Dokdo;
Japan-ROK negotiations certain to run into trouble

MAINICHI (Page 2) (Full)
June 6, 2006

Akiko Horiyama, Seoul

Ahead of the upcoming negotiations between Japan and South Korea
on demarcation of the two countries' exclusive economic zones
(EEZ) that will start in Tokyo on June 12, the South Korean
government's project team in charge of the Takeshima/Dokdo issue
late yesterday decided to change the base point of its EEZ from
Ullungdo to Takeshima/Dokdo, although it previously used Ullungdo
as the base point in previous demarcation talks. Because of this
decision by South Korea, the disputed islet is expected to be
used by both Japan and South Korea as their respective base
points for their EEZs. Given this, the upcoming negotiations are
likely to run into difficulties.

Prior to this decision, So Ju Sok, the chief of unification and
foreign and security policy in the Blue House who heads the
project team, said in a KBS Radio interview: "We need to work out
our measures, factoring in recent various factors, particularly
the situation we faced this April (of Japan attempting to conduct
a marine survey). We now have no choice but to assert that we
will use Dokdo as the base point for our EEZ."

Japan-South Korea talks on EEZ demarcation have been suspended
since 2000. Before the suspension, South Korea used Ullungdo as a
base point, perhaps to avoid making Takeshima/Dokdo a territorial
issue, and asserted that the border of the EEZs between Japan and
South Korea would be determined by the equidistant line between
Ullungdo and Okinoshima Island.

11) Council for Promotion of Regulatory Reform finds itself on
hot seat; Chair Miyauchi financed Murakami Fund

SANKEI (Page 2) (Full)
June 6, 2006

The arrest of Yoshiaki Murakami, representative of the Murakami
Investment Fund, has now put the government's Council for
Promotion of Regulatory Reform (CPRR) at a disadvantage. The
reason is that Council Chairman Yoshihiko Miyauchi, chairman of
Orix Corp., helped Murakami to establish the investment fund.

At a news conference at noon yesterday, Miyauchi was asked by
reporters, "Don't you think that the credibility of the Council
for Promotion of Regulatory Reform will be lost?" In response,
Miyauchi made only this comment: "I refrain from commenting on
the matter since I'm not in a position to do so." Chief Cabinet
Secretary Shinzo Abe also did not make himself clear about the

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matter, noting: "I refrain from commenting on individual
investors in the fund."

The CPRR plans to come up with a report by July on reform

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proposals, such as the reform of NHK (Japan Broadcasting
Corporation) and the abolition of regulations concerning the
establishment of boards of education. But a critical view of the
CPRR is emerging in both the ruling and opposition parties. A
veteran lawmaker of the Liberal Democratic Party (LDP) who has
served in three top party posts said: "There's no doubt that the
credibility of any report Mr. Miyauchi will give shape to will be
shaken." Miyauchi is a proponent of market testing (or
competitive bidding between the government and private sector),
but his position has given rise to complaints in the ruling camp,
with a mainstay LDP member remarking, "What he is doing is
helping the private sector to snatch away government jobs to make
money." The CPRR is certain to come under harsh criticism.

Miyauchi has been on friendly terms with Murakami since before
Murakami left the Ministry of International Trade and Industry
(predecessor of the current Ministry of Economy, Trade, and
Industry). When Murakami established the investment fund in 1999,
the Miyauchi-led Orix Corp. put up 45% of the 90 million yen in
capital. This May, Orix withdrew its money invested in that
company as well as its executives, but it still has left fund
management to that company.

When Prime Minister Junichiro Koizumi late yesterday was asked by
reporters about his responsibility for keeping Miyauchi in the
chairman's post of the CPRR, he went no further than to say:
"This has nothing to do with that."

12) Opposition to pursue Prime minister's responsibility for
appointing private-sector people to key reform posts, including
Miyauchi, who has strong ties to Murakami

ASAHI (Page 4) (Excerpts)
June 6, 2006

Business leaders picked as main players in Prime Minister
Koizumi's reform drive are drawing fire. For instance, following
the arrest of bureaucrat-turned-fund-manager Yoshiaki Murakami,
the relationship between Murakami and Yoshihiko Miyauchi, chair
of the government's Regulatory Reform and Private Sector
Liberalization Promotion Council and chairman of Orix Corp., is
again being pointed out. The Social Insurance Agency led by
Kiyoshi Murase, a former deputy president of an insurance
company, is also at the center of an illegal pension exemption
scandal. The opposition camp plans to pursue Koizumi's
responsibility for appointing them to such positions.

In a press conference held yesterday morning by the Regulatory
Reform Council in a government building in Nagatacho, chairman
Miyauchi was asked: "As an investor in the Murakami Fund, you
seem to have a close relationship with Mr. Murakami. That could
hurt the credulity of the council you chair, couldn't it?" In
response, Miyauchi simply said, "I'm not in a position to
comment."

Murakami is Miyauchi's longtime friend. Orix invested in the
Murakami Fund when it was launched. Orix reportedly contributed
working funds to the Murakami Fund. Some in business circles have
been critical of firms that have used the Murakami Fund. Japan
Chamber of Commerce and Industry President Nobuo Yamaguchi said,
"There is a chance this will reflect badly on them."


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Regulatory reform is one of the showcase policies of the Koizumi
administration. A Regulatory Reform Council member voiced fear of
Miyauchi losing momentum: "Many government offices are unhappy
with the aggressive approach taken by the Regulatory Reform
Council. The council may not be able to engage in activities the
way it used to."

Social Insurance Agency chief Murase is also under criticism. On
an NHK news program on June 4, Japanese Communist Party policy
chief Akira Koike said in a strong tone: "Sompo Japan (for which
Murase served as vice president) has been ordered to suspend
operations for violations of law. The Social Insurance Agency did
the same thing. The agency imposed unattainable targets on its
employees."

The Financial Services Agency has imposed an administrative
punishment on Sumitomo Mitsui Banking Corp., for which Japan Post
President Yoshifumi Nishikawa served as president. Opposition
parties have begun raising questions about the responsibility for
appointing such people. Following the revelation of a bridgework
bid-rigging scandal, Central Nippon Expressway Co. President
Tsuyoshi Kondo, who also served as president of Japan Highway

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Public Corp., will step down from the post on June 27. "He has
decided to resign from the post early for taking responsibility
for the scandal," an observer said.

13) Minshuto head Ozawa: Prime Minister Koizumi is irresponsible;
Reluctant to submit no-confidence motion against the Koizumi
cabinet

MAINICHI (Page 5) (Full)
June 6, 2006

Prime Minister Junichiro Koizumi has expressed that he would not
extent the current Diet session. In this regard, the main
opposition party, Minshuto (Democratic Party of Japan) has
heightened its criticism of Koizumi for "lacking drive." The
party leadership is, however, reluctant to submit a no-confidence
motion against the Koizumi cabinet, as it is impossible to have
the motion passed because the ruling camp has a huge majority of
the Diet seats.

Minshuto President Ichiro Ozawa blasted Koizumi in a speech
delivered yesterday in Saga City: "It is irresponsible to take a
stance that it is all right whether an important bill submitted
at the final stage of the current session will be enacted or
not."
The ruling camp has forgone passage of many contentious bills
during the ongoing session. This is a certain achievement for the
opposition camp, but the largest opposition party criticized
"Koizumi's lack of enthusiasm" for it has lost "means of "
attacking the government. In a meeting on June 3 in Shinoyama
City, Hyogo Prefecture, Ozawa stated:

"I think the prime minister does not care about Diet
deliberations because he will step down from office in September
and he will visit the United States (soon after) the current
session ends."

At a press conference yesterday, Ozawa said, the submission of a
no-confidence resolution against the cabinet "is one of our
choices" but "it is meaningless to submit it as an annual event."

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He was negative about a submission.

Secretary General Yukio Hatoyama said yesterday in Nagoya City,

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"It is worth considering" the submission of a no-confidence
motion. One executive member, however, commented yesterday:
"Since support rates for the cabinet are high, it would be
difficult to obtain understanding from the public."

14) 2006 LDP presidential race: Fukuda still not saying whether
he will run

SANKEI (Page 5) (Excerpts)
June 6, 2006

Chief Cabinet Secretary Shinzo Abe and his aides have been moving
into action with an eye on the September presidential election of
the Liberal Democratic Party (LDP). All eyes are now focused on
the moves of former Chief Cabinet Secretary Yasuo Fukuda, who has
obtained the second-highest support rates, following Abe, in
recent opinion polls. Although Fukuda has been vague about
whether he will run in the presidential race, he has begun making
clear a position of distancing himself from Prime Minister
Junichiro Koizumi on the consumption tax and Yasukuni Shrine.

Last night Fukuda attended a party hosted by Seishiro Eto, a
former defense chief who has clarified his support for Fukuda in
the LDP leadership race. Fukuda in a speech fended off calls for
him to run in the election, just saying: "Since (Mr. Eto) does
not go too far, I have confidence in him. I think, however, that
I cannot be pulled around by his proficient knowledge of reading
the future of politics."

Asked about his impression of the launch of a parliamentary group
supporting Abe's policy of helping those who fail gain a second
chance, Fukuda simply replied, "I think that's good."

It is, however, true that Fukuda's silence has raised his public
approval. Secretary General Tsutomu Takebe stated in the party
last night:

"Support for Mr. Fukuda and Mr. Abe goes up because Mr. Yoshiro
Mori says that he is having difficulties in unifying candidates.
Mr. Mori is a genius if he says so with the intention of boosting
their popularity."

Veteran lawmakers of the Mori faction have mixed feelings about
the present situation. Justice Minister Seiken Sugiura, a Mori
faction member, said: "Since we (Mori faction members),who are
now serving in our fifth-terms or more in the Diet, we cannot
take any action. We are having a difficult time choosing between
duty and sentiment."

Fukuda has played up his own political identity regarding issues
that might become major campaign issues in the election. In a
speech delivered on May 27, he criticized Koizumi's visits to
Yasukuni Shrine, arguing, "It's terrible that both the top leader
and the public are too emotional." He has also introduced an idea
of raising the consumption tax rate to 10% for the purpose of
fiscal reconstruction. He said, "I need your cooperation. When
the time comes, I will ask you."

15) Former Prime Minister Hashimoto in hospital for stomach pain

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SANKEI (Page 5) (Full)
June 6, 2006

Former Prime Minister Ryutaro Hashimoto, 68, has been
hospitalized in a Tokyo hospital, said informed sources
yesterday. According to his close aides, Hashimoto was taken to
the hospital by ambulance after suffering abdominal pain and was
admitted by doctors on June 4. The aides said: "It is not a life-
threatening illness." Hashimoto was hospitalized in February 2002
for breathing difficulty. At that time, he underwent an
operation.

16) LDP sets up think-tank independent from bureaucracy; Fund-
raising a challenge

YOMIURI (Page 2) (Excerpts)
June 6, 2006

A new policy research organ of the ruling Liberal Democratic
Party (LDP) yesterday held an opening ceremony for its office,
which is located in Tokyo's Toranomon district. The new organ
called "Think Tank 2005 Japan" is headed by Takahiro Suzuki, a
visiting professor at Chuo University. Like the Public Policy
Platform that Minshuto (Democratic Party of Japan) established
last November, the LDP's think tank is expected to be independent
from the bureaucracy in drafting policies.

Both the LDP and the main opposition party do not post full-time
researchers in consideration of profitability. There are many
challenges, such as the effective use of the think-tank and how
to raise funds.

At the opening ceremony, LDP Policy Research Council Chairman
Hidenao Nakagawa stated: "It is no longer permitted for the
ruling camp to regard the bureaucracy as its think-tank, not
accepting ideas from other organs."

However, the LDP's notion of creating a policy research
organization has not gone smoothly. The notion was advocated by
Chief Cabinet Secretary Shinzo Abe when he was serving as
secretary general of the LDP. The initial idea was to use full-

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time researchers, but it was decided later that policy research
should be outsourced due to financial difficulties.

SCHIEFFER