JAPANESE MORNING PRESS HIGHLIGHTS 06/07/06

UNCLAS SECTION 01 OF 12 TOKYO 003119

SIPDIS

SIPDIS

DEPT FOR E, P, EB, EAP/J, EAP/P, EAP/PD, PA;
WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST
DIVISION; TREASURY/OASIA/IMI/JAPAN; DEPT PASS USTR/PUBLIC AFFAIRS
OFFICE; SECDEF FOR JCS-J-5/JAPAN,
DASD/ISA/EAPR/JAPAN; DEPT PASS ELECTRONICALLY TO USDA
FAS/ITP FOR SCHROETER; PACOM HONOLULU FOR PUBLIC DIPLOMACY
ADVISOR; CINCPAC FLT/PA/ COMNAVFORJAPAN/PA.

E.O. 12958: N/A
TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA

SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 06/07/06

Index:

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

4) Chief Cabinet Secretary Abe meets with envoys, including
Ambassador Schieffer, to make pitch for international solution to
North Korea abduction issue

Iran connection:
5) Iran warns Japan to start Azadegan oil field project by
September of loss development right
6) Iran tells Japan it is considering the US' comprehensive
proposal on the nuclear issue

China ties:
7) Government unfreezing yen loans to China to accelerate
improvement in relations
8) Government awarding China yen loans in order to keep issue
out of the LDP presidential race
9) Another US newspaper calls on next Japanese prime minister
to comply with China's demand and avoid Yasukuni visits
10) Muneo Suzuki continues to pursue the Foreign Ministry in the
Diet, this time on the spy-related Shanghai consulate suicide
case

Defense issues:
11) CNFJ website reveals berth that will be used by nuclear-
powered CARRIER
12) Cabinet to approve on June 9 bill raising JDA to ministry
status

Politics:
13) Former Prime Minister Hashimoto undergoes surgery in lower
intestine; recovery in several months
14) Minshuto (Democratic Party of Japan) experiences surge in
registered "party supporters" thanks to the Ozawa factor

Economic agenda:
15) Government trying to reduce the long-term fiscal revenue
shortfall to 15-17 trillion yen
16) NTT will be completely broken apart over 10 years:
government panel
17) New government financial institution that replaces a number
of obsolete ones will be a stock company completely funded by the
government
18) "Regions are on the brink of collapse," Prime Minister is
told by senior officials

Articles:

1) TOP HEADLINES

Asahi:
Murakami sold NBS shares at peak over period of two days soon
after Livedoor bought NBS shares

Mainichi:
Murakami urged Rakuten to buy NBS shares

Yomiuri:

TOKYO 00003119 002 OF 012


Murakami masterminded buyout of NBS hares

Nihon Keizai:
New government-affiliated financial institutions to be
reorganized into stock corporations in Oct. 2008

Sankei:
Elevator manufacturer to be raided

Tokyo Shimbun:
Ministry of Land, Infrastructure, and Transport starts
investigations on elevators nationwide

2) EDITORIALS

Asahi:
(1) 30,000 suicides: The government must come up with measures
(2) World Cup: Exciting month ahead

Mainichi:
(1) End of freeze on yen loans to China: Both Japan, China
should benefit in the end
(2) Alleged slaying of Iraqis by US soldiers: Strict
investigations needed to build relationship of trust

Yomiuri:
(1) Plans to reform NHK cannot put money first
(2) Can Japan help develop Central Asia?

Nihon Keizai:
(1) Consolidate farmland to improve productivity
(2) Reorganization of stock market through competition

Sankei:
(1) Agricultural reform: Don't fear taboos
(2) Elevator deaths: Prevent future accidents

Tokyo Shimbun:
(1) Central Asia: Can Japan make up for late start?
(2) Energy White Paper: Resource strategy indispensable

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, June 6

NIHON KEIZAI (Page 2) (Full)
June 7, 2006

08:37
Attended cabinet meeting. Administrative Minister Chuma stayed
on. Met Chief Cabinet Secretary Abe.

09:07
Returned to Kantei.

10:03
Met Wakayama Prefecture Plum Queen Tanimoto and others, followed
by Economy, Trade, and Industry Minister Nikai and others.

11:30
Met Defense Agency Director General Nukaga and Vice Defense
Minister Moriya.

TOKYO 00003119 003 OF 012



14:06
Attended a tourism promotion convention held at the Akasaka
Prince Hotel by the National Hotel Unions Federation.

15:15
Met at Kantei with critic Naoki Tanaka, followed by Intellectual
Property Rights Headquarters member Hiroyuki Abe, Kadokawa
Holdings Tsuguhiko Kadokawa, and others.

16:47
Attended a party to celebrate the publication of a book on reform
by mayors, at the City Center Hotel.

17:30
Met at Kantei with Economic and Fiscal Policy Minister Yosano,
Assistance Deputy Chief Cabinet Secretary Saka, followed by
Internal and Communications Minister Takenaka.

19:02
Met at his official residence with Abe, Deputy Chief Cabinet
Secretaries Nagase and Suzuki, and parliamentary secretaries of

SIPDIS
various ministries.

4) Chief Cabinet Secretary asks for cooperation from foreign
ambassadors for resolution to abduction issue: "International
support is essential"

SANKEI (Page 2) (Full)
June 7, 2006

The government yesterday invited US Ambassador to Japan Schieffer
and other foreign envoys from 18 countries and the European Union
(EU) to the Prime Minister's Official Residence (Kantei) to ask
for their cooperation to resolve the abduction issue caused by
North Korea. This meeting was aimed at putting more pressure on
North Korea. The envoys took a position of basically supporting
Japan on the abduction issue. Ahead of the Group of Eight (G8)
Summit in St. Petersburg, Russia, slated for mid-July, the
government intends to strive to gain more international support
so that the abduction issue will be on the major agenda at the G8
Summit.

Envoys of the G8, including the United States, Britain, Germany,
France, and Russia, and representatives of the diplomatic
missions of such countries as China, South Korea, Thailand, and
Sweden were invited to the meeting. China and South Korea sent
ministers on behalf of their ambassadors to the meeting.

During the meeting, Chief Cabinet Secretary Shinzo Abe asked for
international cooperation: "Abductions are acts that are
impermissible in terms of human rights as well as humanity.
Strong support from other countries of the world is essential to
resolve such issues." Deputy Chief Cabinet Secretary Seiji Suzuki
explained the measures the Japanese government has taken, such as
stepping up pressure on North Korea by strictly applying existing
laws in dealing with that country.

Participants in the meeting expressed their willingness to back
up Japan like: "This is an issue that transcends political
principles and positions. We share your rage"; "It is a painful,
tragic incident for families of abductees"; and "The

TOKYO 00003119 004 OF 012


international community should work together to grapple with the
issue."

5) Iranian oil minister warns Japan that it will cancel INPEX's
exploration rights

YOMIURI (Page 2) (Full)
June 7, 2006

Takehito Kudo, Teheran

Iranian Petroleum Minister Kazem Vaziri-Hamaneh said regarding
the development of the Azadegan oilfield, regarding which Japan's
INPEX Corp. has exploration rights: "We cannot tolerate Japan's
delay." He thus warned that Iran would cancel INPEX's exploration
rights if the corporation did not start development work by
September, according to the Iranian national television
broadcaster on June 6.

The oil minister's statement seems to reflect Iran's intention to
place pressure on Japan not to fall in step with the United
States and European countries, who have been searching for ways
to apply sanctions on Iran on the nuclear issue by using a
"coalition of the willing."

6) Iranian foreign minister promises to give serious thought to
package of proposals

YOMIURI (Page 4) (Full)
June 7, 2006

Foreign Minister Taro Aso held a telephone conversation with
Iranian Foreign Minister Manuchehr Motaki last night in which Aso
again urged Iran to halt nuclear development as well as to accept
a package of proposals for resolving the nuclear issue, produced
by Germany and the United Nations Security Council. In response,
Motaki said: "We will consider the proposals seriously."

7) Japan to resume yen loans to China to improve relations;
Decision splits cabinet ministers

YOMIURI (Page 2) (Full)
June 7, 2006

The Council for Overseas Economic Cooperation, chaired by Prime
Minister Junichiro Koizumi, has decided to lift a freeze on the
disbursement of about 74 billion yen in yen loans to China for
fiscal 2005. The decision is apparently intended to improve
relations with China, which have been strained due to Koizumi's
visits to Yasukuni Shrine and other issues. "The Japan-China
foreign ministerial in May has set the tone for improving
bilateral relations," Foreign Minister Taro Aso noted. The
government intends to accelerate the trend.

Before reporters last night, Koizumi underlined the significance
of the government's decision to resume yen loans to China. At the
same time, he only explained that the decision was made after
considering the matter comprehensively. Chief Cabinet Secretary
Shinzo Abe's explanation was also vague: "The decision was made
after discussing the importance of Japan-China relations, China's
sentiment toward Japan, and other factors."


TOKYO 00003119 005 OF 012


Toranosuke Katayama, secretary general of the LDP caucus in the
House of Councillors, criticized the government's lack of a clear
explanation, saying, "A thorough explanation is necessary to lift
a freeze on financial aid. It's not good to generate an
indecisive impression."

Views were split even along cabinet ministers. Economy, Trade,
and Industry Minister Toshihiro Nikai, known as being pro-China,
commented, "I hope (the resumption of yen loans to China) will
bring good results both to Japan and China." Agriculture,
Forestry, and Fisheries Minister Shoichi Nakagawa raised an
objection, saying, "I don't understand why Japan has to aid
China."

8) Government decides to end freeze on yen loans to China in a
bid to prevent it from becoming a campaign issue in LDP
presidential race

ASAHI (Page 4) (Excerpts)
June 7, 2006

Daisuke Yamamoto

The government yesterday decided to end the freeze on yen loans
to China for fiscal 2005, which will be implemented in fiscal

2006. Behind this decision lies the government's intent to
demonstrate a positive stance on relations with China and also
its political motive to prevent the yen loans from becoming a
campaign issue in the Liberal Democratic Party (LDP) presidential
election. China, however, is opposed to the idea of yen loans
turning into a political issue. The lifting of the freeze on yen
loans to China is unlikely to serve as a diplomatic tool to
improve relations with China.

The Japanese and Chinese governments have agreed to end the yen
loan program in 2008. The government planned to get approval of
this agreement at a cabinet meeting at the end of March but
deferred doing so due to critical views within the LDP. Given
that a Japan-China foreign ministerial was held in a good
atmosphere in May, the Foreign Ministry confirmed its judgment
that ''it is the right time to (lift the freeze on yen loans),as
both nations are now in a lull," according to a senior diplomat.

When the August 15 anniversary of the end of the war draws near,
the question of whether Prime Minister Koizumi will visit
Yasukuni Shrine will draw wide attention; Japan-China relations
will inevitably become tense. A high-level government official
also revealed consideration to China yesterday, noting: "There's
no need to end the yen loans to China at this point. Instead of
rocking the boat, it's wiser to signal a get-along message."

Also, if Japan delayed deciding on lifting the freeze on yen
loans to China, this could become an issue in the LDP
presidential race. The next administration would be forced to
make a decision. Such a situation should be avoided. There seems
to have been such a political judgment. In fact, a Foreign
Ministry official pointed out: "The longer the decision is
delayed, the more complicated the issue will be in terms of
internal politics as well as on the diplomatic front."

9) China will continue to blame Japan: US column


TOKYO 00003119 006 OF 012


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

Yoshihisa Komori

WASHINGTON-China will never stop blaming Japan even if Japan's
prime minister in the future pledges not to visit Yasukuni Shrine
in compliance with the Chinese government's demand, a US-based
Chinese journalist said in a US newspaper column.

The New York Sun carried Kin-Ming Liu's article in its column
dated May 16: "Look Who's Talking."

Referring to recent Japan-China relations, the article quotes the
Chinese government as saying Prime Minister Koizumi's repeated
visits have "hurt the feelings of the Chinese people and damaged
the political foundation of China-Japan relations, which is why
the relations have deteriorated." This Chinese assertion is
false, Liu writes in the article. This article argues that China
is critical of Japan's foreign policy in general and that China's
real aim is to keep Japan in a weak position.

"Imagine," Liu continues in the column, "that Japan's next prime
minister announces that he will honestly face history and do the
following things to mend fences with China: 1) he will never
visit Yasukuni Shrine; 2) he will apologize for Japan's World War
II atrocities every time the subject arises; and 3) Japan will
ban all history textbooks that irritate China." The article goes
on: "Would the Chinese then forgive and embrace the Japanese once
and for all if Japan were to perform this ultimate kowtow? No."

Even if Japan's next prime minister refrains completely from
visiting Yasukuni Shrine and fulfills any other demands from
China, the article says, "China will maintain that Japan hasn't
repented enough." Liu further writes: "China will keep opposing
Japan's permanent membership on the United Nations Security
Council. Chinese submarines will still enter Japan's waters,
secretly if necessary. And, of course, anti-Japanese riots will

SIPDIS
always be stirred up."

Liu recounts in the column: "The problem lies not with what Japan
does or doesn't do but what China is. China takes full advantage
of Japan's war guilt to extract concessions from Japan on
whichever current issue is on the negotiating table." With this,
the column says Beijing's attack on Yasukuni visits is one of its
strategies toward Japan.

Liu, who wrote this column, was a Hong Kong daily's copy chief
and was a Washington-based columnist. The writer is now a US-
based journalist on Asia.

10) Aso, Suzuki exchange verbal jabs on issue of suicide of
diplomat in Shanghai

YOMIURI (Page 4) (Abridged)
June 7, 2006

At a meeting yesterday of the House of Representative Committee
on Audit and Oversight of Administration, Lower House member
Muneo Suzuki of the New Party Daichi clashed with Foreign
Minister Taro Aso over the issue of the suicide of a diplomat at
the Consulate General in Shanghai, the Foreign Ministry's

TOKYO 00003119 007 OF 012


measures for improprieties involving ministry officials, and
other matters.

It was the second time for Suzuki to pursue the Foreign Ministry
since last November. Suzuki asked how the Foreign Ministry
responded to the Shanghai suicide case, saying, "When the
official killed himself on May 6, 2004, what did the Foreign
Ministry do? I want to know all the facts." In response, Aso
said:

"The direct cause was intimidation by Chinese security
authorities, a threat, or an act similar to that. The ministry
has repeatedly filed stern protests with China since the
occurrence of the incident. Although it was not immediately
reported to the Prime Minister's Official Residence, the ministry
judged back then that it would cause any problem. I think that
was the decision made by officials concerned."

Given the fact that the person who committed suicide was in
charge of communication, Aso also indicated the ministry had
taken necessary measures to prevent the leakage of secrets,
saying, "Upon confirming that any secrets had not been leaked,
the ministry has changed coded."

Suzuki also criticized the ministry's punishments as too lenient
by pointing out such incidents as a fatal traffic accident by
drunken driving, sexual molestation, and sneaking camera shots of
women.

Aso rebutted, "The ministry punished them properly." But Suzuki
protested, "Anyone committing such a crime outside the
bureaucracy would be fired. Decisions must be made based on
social rules."

11) Yokosuka base berth for nuclear CARRIER use: US Navy website

MAINICHI (Page 27) (Full)
June 7, 2006

The US Navy has now announced a plan to deploy a nuclear-powered
aircraft CARRIER in 2008 to Yokosuka base in the city of
Yokosuka, Kanagawa Prefecture. At the base, Berth 12 was expanded
with construction work starting in 2003. The US Navy had
explained on its website that the berth's expansion was intended
to moor a nuclear-powered AIRCRAFT carrier. The Defense
Facilities Administration Agency's Yokohama bureau, which ordered
the expansion work, has recounted that the berth was renovated
because it became too old to use. The DFAA bureau has also
explained that the expansion work has nothing to do with the
planned deployment of a nuclear-powered AIRCRAFT carrier. The
DFAA is thinking of filing a protest with the US Navy. The
Yokosuka city government, which has yet to decide on whether to
accept the nuclear CARRIER deployment plan, is also upset. The US
Navy will correct the website information.

The explanation in question was given in a May 25 article of
"Navy News" released by US Naval Forces Japan on its website.
"Berth 12 has been expanded for the USS George Washington, which
will be deployed to Yokosuka in 2008," the English-language news
blog said.

Berth 12 was extended from its overall length of 277 meters to

TOKYO 00003119 008 OF 012


410 meters, and the expansion work was completed in late March
this year. In yesterday's ceremony at the berth, DFAA Yokohama
Bureau Director General Takamizawa gave a speech, in which he
said the expansion work was for the USS Kitty Hawk, a US flattop
currently deployed to Yokosuka.

"We will inquire of the US Navy about the article," a DFAA
Yokohama bureau official commented. The official added, "We need
to consider filing a protest." Meanwhile, Yokosuka City has asked
the United States to deploy a conventional flattop. "They
probably thought to deploy a nuclear CARRIER because they've
agreed with the Japanese government," said Base Relations
Division Director Akimoto at the Yokosuka city government office.
Akimoto also said, "They don't understand our standpoint."

A US Navy official at USNFJ headquarters told the Mainichi
Shimbun that the berth expansion work had nothing to do with the
USS George Washington's planned deployment to the base. The
official also said the article would be corrected.

12) Cabinet to adopt on June 9 bill upgrading the Defense Agency
to a ministry

SANKEI (Page 5) (Full)
June 7, 2006

The Liberal Democratic Party (LDP) endorsed yesterday a bill to
upgrade the Defense Agency to a ministry. After approval of the
New Komeito, the LDP's coalition partner, the government is
expected to adopt the bill at a cabinet meeting today. With Prime
Minister Junichiro Koizumi seeking no extension of the current
session ending June 18, the bill will probably be carried over to
the next session for deliberations.

The bill would change the Defense Agency, now affiliated with the
Cabinet Office, into an independent ministry.

It also calls for making international cooperation, including UN
peacekeeping operations and activities based on the terrorist and
Iraq special measures laws, a main duty of the Self-Defense
Forces. Following this, international cooperation and responses
to contingencies surrounding Japan would be stated in the
advisory items to the National Security Committee.

13) Former Prime Minister Hashimoto underwent operation to remove
parts of intestines; Recovery to take several months

YOMIURI (Page 4) (Full)
June 7, 2006

Former Prime Minister Ryutaro Hashimoto, 68, underwent emergency
surgery at a Tokyo hospital on June 5 to remove a large part of
his large intestine and part of his small intestine and to attach
an artificial anus, his son revealed, Lower House member Gaku
Hashimoto of the Liberal Democratic Party, in a press conference
yesterday in Tokyo. The former prime minister remains in
intensive care and is conscious. But it could be several months
before Hashimoto can resume his daily routine.

14) Minshuto's rank-and-file members, supporters greatly increase
to 240,000 due to "Ozawa effect"


TOKYO 00003119 009 OF 012


TOKYO SHIMBUN (Page 2) (Full)
June 7, 2006

The number of supporters and rank-and-file members of Minshuto
(Democratic Party of Japan) reached about 244,000 at the end of
May, as reported yesterday to a standing secretaries general
meeting of the main opposition party. Although the figures were
less than the party's target of a membership of 250,000, the
supporters and rank-and-file members substantially increased by
about 100,000 compared to the previous year. Minshuto had its
largest membership of about 310,000 in 2002, as tallied prior to
its presidential election in September that year. The supporter
system is Minshuto's unique arrangement introduced in 2002. A
supporter has to pay an annual registration fee of 2,000 yen,
while each rank-and-file member is required to pay 6,000 yen
annually for the party membership fee. Both supporters and
members are given the right to vote.

The party's action plan for fiscal 2006 set a target of securing
250,000 supporters and rank-and-file members. To attain the goal,
the party obliged each of its lawmakers to enroll 1,000
supporters or rank-and-file members of at least 500. The party
imposed a penalty on those who failed to collect 500 names, and
awarded those who secured more than 1,000.

Minshuto suspended its recruitment due to the falsified email
issue. In the wake of Ichiro Ozawa's assumption of the party's
presidency in April, Minshuto won the Lower House by-election for
the Chiba No. 7 constituency and it then accelerated the drive to
recruit new members. The "Ozawa effect" led to the great increase
this time of supporters and rank-and-file members.

The showcase of the supporter system is that both supporters and
members can vote in the presidential election, but no
presidential election has been conducted since September 2002.
This is because all the past four presidents stepped down before
serving out the presidential term; and so, the party had to carry
out a vote of only its Diet members. The possibility is that
Ozawa will be elected without going through a vote. The
supporters, therefore, again may be unable to use their right to
vote in September's election.

15) Government, ruling parties plans to shift primary balance
into black in FY2011 by reducing revenue shortage to 15 to 17
trillion yen

NIHON KEIZAI (Page 1) (Excerpts)
June 7, 2006

The government and the ruling coalition yesterday started looking
into setting the total amount of shortages in revenues to fund
policy-related expenditures, without depending on loans, for
fiscal 2011 at 15 to 17 trillion yen. This is a hot issue in
discussions on a simultaneous reform plan for revenues and
spending. The Cabinet Office had estimated the amount at
approximately 20 trillion yen, but the amount will be revised
downward, given estimated tax revenues put on an upward trend
owing to the recent economic recovery and also because it now
seems to be possible to cut spending on some certain policy-
related items.

The government plans to turn the primary balance into the black

TOKYO 00003119 010 OF 012


in fiscal 2011. The primary balance is an indicator to show
whether policy spending will be covered with tax and other
revenues through the reform of revenues and expenditures. The
government intends to make up for the expected revenue shortfall
by spending cuts and tax increases.

Assume that the amount of revenue shortages would be set at 17
trillion yen. In this case, if a 10-trillion-yen cut in
expenditures is realized, the shortage will be covered by tax
increases worth only 7 trillion yen. Should a thorough cut in
expenditure be carried out, a hike in the consumption tax rate
will be modest.

The government will announce tax revenues for the last fiscal
year by the end of this month. The amount is expected to be up 2
trillion yen over the estimate. In addition, the growth of
spending in such areas as social security is likely to be held
down more than expected. In the government and ruling parties,
the view is gaining influence that it would be possible to reduce
the revenue shortage for fiscal 2011 by more than 3 trillion yen.
If the government comes up with a more bullish outlook on
economic growth, the amount of estimated revenue shortage might
be further reduced to upper 10 trillion yen.

16) Telecommunications panel advises NTT to completely split
group in 10 years, NHK to reduce the number of channels to five

MAINICHI (Page 7) (Excerpts)
June 7, 2006

The council on telecommunications and broadcasting, an advisory
panel to Internal Affairs and Communications Minister Heizo
Takenaka and chaired by Toyo University Professor Satoshi
Matsubara, compiled a final report on NHK and NTT reforms. On the
sticky issue of NTT's organization, the report recommended that
the current holding-company system should be scrapped in 2010 to
completely separate the equity links in the group company. For
NHK, the report included measures to lower the subscription fees,
separate the sports and entertainment sections from its main
business, and reduce the number of channels to five.

Takenaka would like to carry out coordination with the Liberal
Democratic Party first and then reflect the panel's
recommendations in the government's basic policy on economic and
fiscal management for 2006 due out in July. The LDP, however, has
opposed a reduction in NHK's subscription fees, as well as an
early review of its organization. Given this, stormy negotiations
are expected, and it is still uncertain to what extent the
panel's recommendations will be adopted in the government's
policy.

17) Public lenders to be turned into stock firms in Oct. 2008

NIHON KEIZAI (Top Play) (Excerpts)
June 7, 2006

The government's plan to reform public financial institutions was
unveiled yesterday. Such institutions as the Japan Finance
Corporation for Small Business (JFCSB) and the National Life
Finance Corporation (NLFC) will be integrated into a stock firm -
fully financed by the government - in October 2008. The new firm
will apply a corporate accounting system in accordance with the

TOKYO 00003119 011 OF 012


Corporate Law. An expert committee will monitor whether the
company is doing business effectively. The reform plan will
provide the basis for a financial reform bill to be submitted to
the Diet by the start of next year's regular Diet session. The
government, however, intends to have the new firm continue
offering loans to bluechip firms, so uncertainty is still looming
over whether the new company would squeeze the private sector.

Under the Administrative Reform Promotion Law, enacted in the
current Diet session, the eight government-affiliated financial
institutions will be reorganized or privatized. It has also been
decided in general that some businesses of JFCSB, NLFC, and other
institutions will be integrated into a new government-affiliated
institution and that the Development Bank of Japan and the Shoko
Chukin Bank will be privatized. But since the law presents no
specific measures, the government is working out details.

Main points in reform plan for public lenders

Reorganize or privatize government-affiliated institutions
in October 2008.
Submit reform-related bills to the next regular Diet
session.

(New government-affiliated firm)
Establish a 100% state-owned stock company.
Separate the accounts of domestic and international
businesses. Clarify profitability.
Have an expert panel monitor whether the new firm is doing
business effectively and whether the firm is exerting pressure on
e on
the private sector.

(Shoko Chukin Bank and Development Bank of Japan)
Completely privatize the institutions.
Apply the Banking Law.
Have an expert panel examine the privatization process.

(Response to crisis)
Set up a designated financial institution system designed to
enable short-term funds to be offered quickly.

18) Parliamentary secretaries complain to prime minister: "Local
economies are on verge of collapse"

ASAHI (Page 4) (Full)
June 7, 2006

"Local economies are on the verge of collapse." "Because of the
Koizumi reforms, we might have lost votes." These remarks came
from parliamentary secretaries last night when they dined with
Prime Minister Koizumi at the Prime Minister's Official
Residence. The Koizumi administration's reform line is again
drawing criticism, following the Murakami Fund scandal. Koizumi
promptly rebutted them: "I don't agree."

According to a participant, Parliamentary Secretary for
Environment Wataru Takeshita (Liberal Democratic Party) and
and
Parliamentary Secretary for Land, Infrastructure, and Transport
Masatoshi Ishida complained to the prime minister. Ishida told
Koizumi: "In the previous elections, our party saw a drop in

TOKYO 00003119 012 OF 012


votes in three municipalities. Isn't this the results of the
Koizumi reforms?" Takeshita criticized the widening regional
disparities: "Local economies are experiencing hardship and are
on the verge of collapse. Japan cannot grow unless it keeps a
balance between urban and rural areas."

Koizumi elaborated: "Even when we think things are no good, there
is always hope." He appeared not to be attentive to the candid
advice of others.

SCHIEFFER