Identifier
Created
Classification
Origin
06TOKYO3151
2006-06-08 01:40:00
UNCLASSIFIED
Embassy Tokyo
Cable title:  

JAPANESE MORNING PRESS HIGHLIGHTS 06/08/06

Tags:  OIIP KMDR KPAO PGOV PINR ECON ELAB JA 
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UNCLAS SECTION 01 OF 12 TOKYO 003151 

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 06/08/06

Index:
UNCLAS SECTION 01 OF 12 TOKYO 003151

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 06/08/06

Index:

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

China and the Yasukuni issue:
4) Defense Secretary Rumsfeld says US will not get involved in
Yasukuni issue, seeks to deter China
5) Issue of China policy heating up in the LDP presidential
race
6) Presidential hopeful Abe seeks to avoid making China a
campaign issue
7) Top business executives' (Doyukai) advice to Prime Minister
Koizumi to stop visiting Yasukuni Shrine intended to influence
LDP election
8) Minshuto (Democratic Party of Japan) President Ozawa's
planned trip to China remains up in the air, with concern that
China will use visit politically
9) Minshuto's Noda seeks to check argument that separating
Class-A war criminals will solve Yasukuni issue
10) Junior LDP lawmakers cite Yasukuni chief priest who said
separating Class-A criminals once enshrined is impossible
11) Michael Green: Bad mistake for China to have demanded that
Koizumi stop visiting Yasukuni

12) Foreign Minister Aso wants EEZ demarcation talks with ROK to
be separated from Takeshima issue

Defense affairs:
13) New Komeito head Kanzaki: Bill making JDA a ministry will
pass the Diet this fall
14) Tokyo Shimbun columnist not satisfied with rationale for
raising JDA to ministry status

15) Diet passes 90% of bills sponsored by the government

Economic front:
16) Japan to join oil field development project in Eastern
Siberia
17) LDP tax panel plans basic tax reform in three stages, with
hike in consumption tax likely in FY2009
18) Japan to take cautious attitude toward US deficit at

upcoming G-8 finance ministers' conference for fear of unsettling
exchange rates

Articles:

1) TOP HEADLINES

Asahi, Mainichi and Tokyo Shimbun:
Schindler searched over negligence in fatal elevator accident

Yomiuri:
Police give up on indicting General Management Consultant offices
over quake data fraud

Nihon Keizai:
Skylark restaurant chain to be privatized through biggest
management buyout in Japan

Sankei:

TOKYO 00003151 002 OF 012


Japan Association of Corporate Executives proposes restraint in
visiting Yasukuni

2) EDITORIALS

Asahi:
(1) Government should apologize to and compensate emigrants to
the Dominican Republic
(2) We want to view both the original and plagiarized paintings

Mainichi:
(1) Passage of financial products exchange law: Let's use the
law to enhance transparency of the market
(2) Lawsuit by emigrants to Dominican Republic: Apology and
providing relief is our political responsibility

Yomiuri:
(1) Financial product exchange law: Slick trading practices must
be stamped out
(2) Emigrants to Dominican Republic: Foreign Ministry should
admit its responsibility

Nihon Keizai:
(1) Substantial debate on integration of communications and
broadcasting urged
(2) New law should be used to increase transparency of the
market

Sankei:
(1) Suit by emigrants to Dominican Republic: the government
should come up with satisfactory relief measures
(2) Reinvigorating the Japanese language: Review of limits to
Chinese characters imminent

Tokyo Shimbun:
(1) Emigrants to Dominican Republic: Government must formulate
relief measures
(2) Elevator accident: Danger was ignored

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, June 7

NIHON KEIZAI (Page 2) (Full)
June 8, 2006

09:57
Met Education Minister Kosaka, Kanazawa Mayor Yamade, and others
at the Japan City Center in Hirakawacho. Afterward attended a
national mayoral conference.

10:35
Returned to Kantei.

13:00
Attended an Upper House Budget Committee meeting.

16:30
Met at Kantei with former Ambassador to France Hirabayashi,
followed by Consular Affairs Bureau Director-General Tanizaki.

17:00

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Met Deputy Foreign Minister Yabunaka. Afterward attended a
meeting of the Council of Economic and Fiscal Policy.

19:40
Returned to his residence.

4) US to stay away from Yasukuni issue: Rumsfeld

SANKEI (Page 3) (Full)
June 8, 2006

Yoshihisa Komori

WASHINGTON-US Secretary of Defense Donald Rumsfeld has clarified
the Bush administration's stance of staying away from the
Yasukuni Shrine issue lying between Japan and China. In addition,
Rumsfeld has also proposed nonintervention in another country's
attitude over the history of past wars. On the Yasukuni issue, he
called on China to exercise self-restraint.

According to the US Defense Department's press release on June 6,
Rumsfeld, now making a tour of Southeast Asian countries, has
clarified that the Bush administration would stay away from the
Yasukuni Shrine. "We will leave this matter to the parties
concerned in the region," the Pentagon's press release quoted
Rumsfeld as saying when he was asked in Singapore on June 4 if
the United States would intervene in Japanese Prime Minister
Junichiro Koizumi's visits to Yasukuni Shrine for the stability
of Japan-China relations. "Both Japan and China wouldn't need my
advice," Rumsfeld added.

Furthermore, Rumsfeld touched on Yasukuni Shrine and other
history-related issues in his speech and a question-and-answer
session that followed a June 3 meeting in Singapore of the United
Kingdom's International Institute for Strategic Studies (IISS),
according to the Pentagon's press release. Rumsfeld noted that it
would take time to completely make history a thing of the past
when it comes to a war. "However, the United States and Japan
have cleared it up as a thing of the past," Rumsfeld was quoted
as saying. The Pentagon chief further remarked: "If other
countries also can clear up their history as a thing of the past
and look ahead into the 21st century, that would be in the
interests of all these countries." With this, he criticized the
stance of taking up the history of a war in the past as an
international issue for the present.

Rumsfeld underscored the need for Japan and China to clear up
their past history as a thing of the past. This point can be
taken as hinting indirectly that China should exercise self-
restraint over Yasukuni Shrine and other issues.

5) Political horse-trading intensifying over diplomacy toward
China, with eye on LDP presidential race; Debate on Yasukuni
issue refueled

NIHON KEIZAI (Page 2) (Full)
June 8, 2006

The government and the ruling parties are intensifying political
maneuvering over diplomacy toward China, with their eyes on the
Liberal Democratic Party (LDP) presidential election in
September. A group of lawmakers distancing themselves from the

TOKYO 00003151 004 OF 012


Koizumi administration are actively calling for the separate
enshrinement of Class-A war criminals from Yasukuni Shrine,
envisioning the possibility of making the Yasukuni problem a
campaign issue. Meanwhile, Chief Cabinet Secretary Shinzo Abe and
others have begun to mend fences with China by ending the freeze
on yen loans to China and employing other policy measures. In the
largest opposition Democratic Party of Japan (Minshuto),its
President Ichiro Ozawa is looking into a visit to China,
apparently motivated by his desire to shake the ruling camp.

"The best way is for Yasukuni Shrine to make a decision on
separate enshrinement of (Class-A war criminals) from the
shrine." This remark came from Bunmei Ibuki, head of the LDP's
Ibuki faction, when he went yesterday to visit Taku Yamasaki,
head of the Yamasaki faction, and referred to the prime
minister's visits to Yasukuni Shrine in explaining to Yamasaki
about policy proposals the Ibuki faction was considering.
Yamasaki gave the nod to Ibuki as Yamasaki himself is of the
opinion that separate enshrinement is one option to resolve the
Yasukuni issue.

As a realistic approach, many in the LDP are skeptical about an
early realization of separate enshrinement of Class-A war
criminals. The question of separate enshrinement itself has
divided the party. A group of junior lawmakers supporting shrine
visits, including Hiroshi Imazu, yesterday met with Toshiaki
Nanbu, chief priest of Yasukuni Shrine. After the meeting, Imazu
told reporters: "I take special note of the shrine's opinion that
it's impossible to separately enshrine them."

Lawmakers opposing Koizumi as well as Abe share the view that the
first step for them to do for the presidential campaign is to
create a mood for the Yasukuni issue and Japan-China relations to
be made campaign issues along with economic disparities.

6) Chief Cabinet Secretary Abe trying to contain the Yasukuni
issue to avoid it as a campaign issue

NIHON KEIZAI (Page 2) (Full)
June 8, 2006

"It's undesirable diplomatically if policy is changed arbitrarily
in accordance with a political decision by the government of the
time." Junior coalition partner New Komeito Representative
Takenori Kanzaki made this comment at a press conference
yesterday, criticizing the government's slow decision about
ending the freeze on yen loans to China. Taku Yamasaki of the
ruling Liberal Democratic Party (LDP) echoed Kanzaki: "It must
not be something used as material for diplomatic maneuvering."

At a meeting on June 6 of the Council for Overseas Economic
Cooperation, the government decided to lift the freeze on yen
loans to China and Abe announced the lifting of the freeze.
Meanwhile, it was Abe's aide, Senior Vice Foreign Minister
Yasuhisa Shiozaki who had suggested freezing the yen loans in
March. Abe apparently has taken the lead in government
coordination to decide its stance of "freezing" or "unfreezing,"
many observers said.

The LDP will tomorrow start going though necessary procedures in
the party. A member of the party's Foreign Affairs Division
revealed: "The explanation we hear is that the freeze came due to

TOKYO 00003151 005 OF 012


our division's opposition, but the fact is that the Prime
Minister's Official Residence already had decided on the freeze."

A group of lawmakers who pay attention to former chief cabinet
secretary Yasuo Fukuda, as a rival of Abe in the presidential

SIPDIS
race, took the ongoing move to improve relations with China as a
policy switch to prevent diplomacy toward China from becoming a
campaign issue.

7) Keizai Doyukai Chairman Kitashiro suggests "refraining from
visiting Yasukuni Shrine," envisioning upcoming LDP presidential
election

SANKEI (Page 1) (Excerpts)
June 8, 2006

The details of the April 21 executive meeting of the Japan
Association of Corporate Executives (Keizai Doyukai) that adopted
a set of proposals -- released on May 9 -- on the future of Japan-
China relations came out into the open from statements by several
participants in the meeting. The proposals urge the prime
minister to refrain from visiting Yasukuni Shrine and seek to
build a secular memorial facility for all war victims. The
proposals were adopted unusually following the rule of majority,
asking whether to include the Yasukuni issue in the proposals.
Keizai Doyukai Chairman Kakutaro Kitashiro, chairman of Japan
IBM, then suggested that the proposals envisioned the Liberal
Democratic Party (LDP) presidential election slated for
September. The Sankei Shimbun probes the behind-the-scene story
concerning the adoption of the controversial proposals.

According to participants, the executive meeting was held at the
Industrial Club of Japan at Marunouchi, Tokyo. It began before
noon, and after the lunch, it dealt with such procedural affairs
as a financial report in a businesslike manner. The proposals in
question came up for discussion at around 1:30 p.m. or 30 minutes
before the meeting was to close. After an explanation about the
proposals was given, a heated debate took place between
supporters and opponents.

One participant favoring the proposals that ask the premier to
refrain from visiting the shrine scathingly criticized the
Koizumi administration: "Japan-China relations cannot be restored
under Prime Minister Junichiro Koizumi. I'm looking forward to a
new prime minister who will take office in September." Another
participant indicated he was supportive of the idea of building a
secular memorial facility, arguing: "The problem with Yasukuni
Shrine lies in its religious nature." On the other hand, one
opponent rebutted: "(The proposals) would only help China to take
advantage of our country's weakness, given that the prime
minister is fighting the Yasukuni battle."

When their arguments got them nowhere, China Committee Chairman
Nobuo Katsumata, president of Marubeni Corporation, who shaped
the proposals, explained why the proposals have no mention of the
propriety of the judgment made by the Tokyo Trials that tried
Class-A war criminals enshrined at Yasukuni Shrine and asked
Keizai Doyukai Chairman Kitashiro to make a decision.

"I hope to adopt the proposals without making any change. I'd
like to decide whether to include suggestions about the Yasukuni
issue in the proposals by voting," Kitashiro said and asked the

TOKYO 00003151 006 OF 012


participants to raise their hands if they agreed. The proposals
were approved by a majority. But one opponent insisted, "It's not
wise to submit this kind of set of proposals just before the
prime minister steps down. How about delaying the submission of
the proposals until after his retirement?" Kitashiro, apparently
being aware of the LDP presidential race, argued against him:
"The proposals do not mention 'Koizumi.' They envision the next
prime minister. I'd like you to understand this point."

Kitashiro, however, denied links to the presidential race at a
press conference on May 23, saying: "I have no intention to
submit them by choosing the timing." He added that the proposals
were made as usual as the organization does when the new fiscal
year starts.

8) Minshuto head Ozawa's visit to China in doubt

SANKEI (Page 3) (Full)
June 8, 2006

Ichiro Ozawa, president of the main opposition party, Minshuto
(Democratic Party of Japan),is now hesitant about visiting China
before the September presidential election of the Liberal
Democratic Party (LDP). He is concerned that China may take
advantage of his visit as propaganda against Prime Minister
Junichiro Koizumi's trips to Yasukuni Shrine, which will likely
become a major campaign issue in the upcoming LDP leadership
race. Some Minshuto lawmakers have insisted, however, that Ozawa
should play up a stance of attaching emphasis to Asia through his
China tour, using his communication channels to Chinese
officials.

The visit plan surfaced after Tsutomu Hata, supreme advisor to
the party, traveled to China. During his meeting on May 11 with
Hata, Chinese State Councilor Tang Jiaxuan invited Ozawa to visit
China, saying, "He is an old friend." Referring also to both Hata
and Ozawa, who belonged to the former Tanaka faction headed by
former Prime Minister Kakuei Tanaka, who made efforts to open
diplomatic ties with China, Tang praised their roles in improving
Japan-China relations.

Ozawa and his aides once considered a plan to visit China in July
after the current Diet session ends. Ozawa was expected to
exchange views with Chinese officials on such issues as Yasukuni.

According to an informed source, Ozawa has determined that if he
meets with Chinese leaders, he will be used by the Chinese
government, which has taken a hard-line stance against the
Koizumi government. Ozawa seems to have leaned toward canceling
the planned September visit in order to devote all his effort to
selecting candidates for next summer's House of Councillors
election.

Ozawa stated in April 2002 when he was serving as president of
the now defunct Liberal Party: "Japan could make several thousand
nuclear warheads in a day." China formally criticized him for
"irresponsible and provocative" statement, but the China side
actually said to Ozawa, "You are right." Ozawa threw a wet
blanket this spring in Tokyo on senior officials of the
International Department of the Chinese Communist Party's Central
Committee, saying, "You should not get carried away."


TOKYO 00003151 007 OF 012


The reason why China has sent out positive signals to Ozawa is
because Beijing welcomes recent Ozawa's statements on the
Yasukuni issue. He stated on an NHK talk show on April 9
regarding Class-A war criminals: "Regardless of what China and
South Korea say, they bear the blame for having led the war." On
June 6, too, he proposed removing the Class-A war criminals from
Yasukuni Shrine, saying, "Yasukuni Shrine should be returned to
its original state, under which the Emperor would be able to
visit there formally."

Ozawa's view is that there will be no change in his position even
he visits Beijing or stays in Tokyo.

There is a possibility that China may rattle its saber, using the
Yasukuni issue as a bargaining chip for resuming summits by top
Japanese and Chinese leaders. Ozawa's reluctance stems from his
strategy of watching carefully the development of the LDP
presidential race and moves of the Chinese side.

9) Minshuto's Noda seeks to check calls for removing Class-A war
criminals from Yasukuni

SANKEI (Page 4) (Full)
June 8, 2006

Former Diet Affairs Chairman Yoshihiko Noda of Minshuto
(Democratic Party of Japan) readied a set of questions yesterday
that went: "If there is no problem in mourning the war dead,
including Class-A war criminals, should official visits to
Yasukuni Shrine by the Emperor and the Empress and the prime
minister be constrained for the reason that they would be
mourning Class-A war criminals?" His argument sought to check
calls for removing Class-A war criminals from Yasukuni Shrine.

Noda took note of February 2002 transcripts of a private panel to
consider a national mourning and peace memorial facility that
reported to then Chief Cabinet Secretary Yasuo Fukuda. A panel
member then asked: "Would Class-A, Class-B, and Class-C war
criminals be included among the souls of the war dead (to be
mourned at the national memorial service for the war dead)?" In
response, the Health, Labor and Welfare Ministry said: "Our view
is that such individuals would comprehensively be included among
the war dead." Noda called this point into question once again.

Noda's questions read:

"It can be taken that the government has judged that it was no
problem, domestically and internationally, for the Emperor and
the Empress and the prime minister to official mourn the war
dead, including Class-A war criminals, at memorial services and
memorial facilities."

10) Yasukuni Shrine chief priest tells junior LDP members that
removing Class-A war criminals from shrine is not possible

TOKYO SHIMBUN (Page 2) (Full)
June 8, 2006

About 30 members of a group of Liberal Democratic Party lawmakers
supporting visits to Yasukuni Shrine for national interests and
peace held talks with Yasukuni Shrine Head Priest Toshiaki Nanbu
yesterday afternoon. Lower House member Hiroshi Imazu heads the

TOKYO 00003151 008 OF 012


group. To Imazu and others, Nanbu reiterated the shrine's
position that it cannot remove Class-A war criminals from the
shrine.

Imazu quoted Nanbu as saying: "Separate enshrinement has never
been done since Yasukuni Shrine was established. It is
technically impossible, and we have no intention of doing so in
the future." Ahead of their talks with Nanbu, the group toured
the Yushukan museum.

Initiated by then LDP Acting Secretary General Shinzo Abe, the
group was launched last June by junior and mid-level lawmakers.
The membership is about 130.

11) Thoughts on paying homage at Yasukuni Shrine: Interview with
Michael Green, Japan Chair at CSIS: China's asking Prime Minister
to stop visits was a "bad mistake"

SANKEI (Page 3) (Excerpt)
June 8, 2006

By Yoshihisa Komori in Washington

Former senior Asia director on the National Security Council of
the Bush Whitehouse, Michael Green in an interview to this
newspaper, spoke about Japan-China relations and the US' stance.
He criticized China's demand that Japan's prime minister halt his
visits to Yasukuni Shrine as a "bad mistake," and he stated that
to improve relations, China needed to make the compromise. He
noted that the Bush administration had no intention of becoming
involved in the Yasukuni Shrine issue, and that its stance in the
dispute between Japan and China was to support Japan as a
democratic ally.

12) Aso to propose separating Takeshima issue in EEZ negotiations
with South Korea

YOMIURI (Page 4) (Full)
June 8, 2006

In a meeting of the House of Representatives Foreign Affairs
Committee yesterday, Foreign Minister Taro Aso said that he would
go into the Japan-South Korea EEZ (exclusive economic zone)
demarcation talks starting on June 12 in Tokyo based on the
stance of respecting the agreement reached in the 1996 Japan-
South Korea summit. The agreement called for promoting EEZ
negotiations separately from the issue of sovereignty over the
Takeshima/Dokdo islets.

Aso also said that in the upcoming talks, he would propose
establishing rules, including a requirement of prior notification
for maritime research in waters in which an EEZ boundary has yet
to be demarcated. He was apparently keeping in mind the
experience in which bilateral relations became tense in April
over maritime research in waters near the Takeshima/Dokdo islets.

13) Ruling coalition wants Defense Ministry bill passed this
fall: Kanzaki

TOKYO SHIMBUN (Page 2) (Excerpt)
June 8, 2006


TOKYO 00003151 009 OF 012


Takenori Kanzaki, representative of the New Komeito party, a
coalition partner of the ruling Liberal Democratic Party, met the
press yesterday and said the ruling coalition would give top
priority to a bill raising the Defense Agency to the status of a
ministry at this fall's extraordinary Diet session. "We want to
pass the bill without fail," Kanzaki added.

14) Questions about raising Defense Agency to ministry

TOKYO SHIMBUN (Page 2) (Full)
June 8, 2006

Masakazu Kaji

The ruling coalition of the Liberal Democratic Party and the New
Komeito yesterday held a meeting of their project teams, in which
the ruling parties approved a bill to upgrade the Defense Agency
to the status of a ministry. In response, the government will
make a cabinet decision tomorrow on the bill and will present it
to the Diet at the current session.

The bill purports to raise the Defense Agency, which is currently
under the Cabinet Office as an external entity, to an independent
ministry and task the Self-Defense Forces with international
activities under the SDF Law. Its specific merits are equivocal.
However, the Defense Agency has long desired the status of a
ministry in order to improve the morale of its personnel.

The Diet, however, does not have enough time to deliberate on the
legislation during the current session. The bill therefore cannot
be expected to get through the Diet in the current session. Even
so, the government will knowingly introduce it to the Diet.

Such a half-baked treatment of the legislation is what the
Defense Agency asked for. Against this backdrop, there was a bid-
rigging scandal involving the Defense Facilities Administration
Agency's bureaucrats.

In the bid-rigging case, the DFAA was found to have allocated
projects to its contractors so that its retirees can land jobs
with them. In 1998, the Central Procurement Office, a one-time
body under the Defense Agency, was involved in a malfeasance
incident. The bid-rigging scandal, however, disclosed that the
Defense Agency has not changed for the better.

The ruling parties sought to raise the Defense Agency to a
ministry. However, the agency came under fire for the bid-rigging
scandal. The government therefore decided in February to forego
introducing the bill to the Diet. Meanwhile, the ruling
coalition, asked by the agency, decided again to present the bill
to the Diet in the current session. That was because the agency
promised to take preventive steps against such a bid-rigging
scandal.

In fact, however, the Defense Agency has yet to come up with a
final report of its in-house investigation of the bid-rigging
incident. The agency has only dismissed those involved in the
scandal and has yet to take oversight responsibility for it.

This is a scam. How can a scandal-tainted office of the
government make a new start without paying for it? There is
something unconvincing about this.

TOKYO 00003151 010 OF 012



The Defense Agency perhaps hopes for a fait accompli in the form
of presenting the bill to the Diet. However, the bill will be
shelved until this fall or later. Before doing so, the agency
should look into the incident, pay off its charges, and
straighten up.

15) Rate of successful government-presented bills at 90.1% --
fourth-highest under Koizumi administration -- due to failure to
take advantage of numerical superiority

MAINICHI (Page 5) (Abridged)
June 8, 2006

The government and the ruling coalition decided yesterday to aim
at getting 82 bills approved out of the 91 government-presented
bills before the ongoing Diet session ends on June 18. The rate
of successful bills would be 90.1% -- the fourth highest under
the Koizumi administration, which has experienced six regular
Diet sessions. The ruling coalition garnered two-thirds of the
Lower House seats in last year's election. Discontent is growing
in the ruling coalition with the government's management of Diet
affairs that has failed to make full use of their numerical
superiority.

The government presented 90 bills as of yesterday. It also plans
to submit a bill on June 9 to upgrade the Defense Agency to
ministry status. Fifty-eight bills had cleared the Diet as of
yesterday. But given the prime minister's decision not to extend
the ongoing session, the government and the ruling coalition
intend to get 24 bills approved, including medical reform-related
bills, and carry 9 bills, including a bill to revise the
Fundamental Law of Education, over to the next session.

The lowest successful rate under the Koizumi administration was
84.3%, marked last year. The low rate was attributable to Lower
House dissolution over postal privatization bills. The rate in
2004 was 94.5% despite the fact that the session was not
extended, as this year.

16) Negotiations underway on Japan's participation in oil field
development in East Siberia

NIHON KEIZAI (Page 1) (Full)
June 8, 2006

The Russian government disclosed yesterday that Japan and Russia
have been engaged in negotiations on Japan's participation in a
project to develop oil fields in eastern Siberia. Both sides are
aiming to bring about an agreement during a Japan-Russia summit
on the sidelines of the G-8 Summit (St. Petersburg Summit) in
July. In order to transport exploited oil to Japan, the Japanese
government also aims to reach an agreement with the Russian
government to speed up its plan to construct a pipeline that
stretches to the coast of the Japan Sea. The two governments will
define the joint oil field development in eastern Siberia as the
main element in their bilateral energy cooperation.

The Russian Ministry of Industry and Energy's fuel and energy
department head Yanovsky said in an interview with the Nihon
Keizai Shimbun yesterday that negotiations are underway between
the Russian and Japanese governments. He then stated: "We are

TOKYO 00003151 011 OF 012


positively looking into JOGMEC's (Japan Oil, Gas and Metals
National Corporation) participation in the development of oil
fields in eastern Siberia."

According to informed sources, JOGMEC plans to finance 50% of
Japan's oil-exploitation rights. Among Japanese private firms,
Sumitomo Corp. and Inpex Corp. have expressed eagerness to invest
in the project. The Japanese government hopes to pump out oil
jointly with Russian firms and transport extracted oil to Japan
through a pipeline.

Regarding the Pacific pipeline to transport oil in Siberia to the
coast of the Japan Sea, the Russian government plans to
construct, as the first stage, a pipeline stretching from an area
near Lake Baikal to Skolonov and then export the product to China
by railway. The Japanese government has been calling on Russia to
quickly start the second-stage work to construct a pipeline
stretching to the coast of the Japan Sea.

17) LDP tax panel chairman's draft timetable calls for sweeping
reform in three stages, including consumption tax hike in FY2009

NIHON KEIZAI (Page 1) (Excerpts)
June 8, 2006

Chairman Hakuo Yanagisawa of the Liberal Democratic Party 's Tax
System Research Commission has drafted a timetable for bold
reform of the nation's tax system. According to the draft
unveiled yesterday, the commission will discuss corporate tax
cuts in fiscal 2007 as a measure to buoy the economy. The draft
also proposes that the panel will discuss a review of the income
tax system around fiscal 2008, including child-rearing tax cuts,
and then a hike in the consumption tax, possibly in fiscal 2009.
The report suggest that the panel will carry out reform while
carefully watching the moves of tax revenues, but this issue will
inevitably have some effect on policy debates in the campaigning
for the LDP presidential race in September.

18) G8 Finance ministers to meet tomorrow: Cautious debate
expected over rectifying imbalances; GOJ concerned about impact
on forex market

YOMIURI (Page 9) (Full)
June 8, 2006

The finance ministers of the G8 will meet tomorrow in St.
Petersburg, Russia, ahead of the full G8 summit scheduled there
for July. One of the focuses will be "global imbalances," as
exemplified by the massive US budget deficit. In the joint
statement to be adopted on June 10, though, if the G8 strongly
calls for the correction of imbalances, this could have an impact
on the foreign exchange market, including trading of the yen
against the dollar. The Ministry of Finance (MOF) intends to push
for a cautious discussion.

At a G7 meeting of finance ministers and central bankers in late
April in Washington, imbalances in the global economy was taken
up as a major issue. The joint statement read in part: "Greater
flexibility on exchange rates among emerging economies with large
budget surpluses would be desirable." Market players took this to
mean that the G7 had given its blessing to correcting the
imbalances through a weak dollar. IN the three weeks following

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the G7 meeting, the cost of a dollar dropped by 8 yen.

Taking this into account, MOF is concerned about how the issue of
imbalances will be handled at the upcoming summit. At a press
conference following a meeting of the cabinet on June 2, Finance
Minister Tanigaki stated: "Relying solely on adjusting exchange
rates will lead us astray. Each economy needs to address its own
structural problems (such as fiscal reconstruction and economic
structural reform).

It is believed that the United States on its part wants to avoid
a situation in which a much weaker dollar stems the flow of funds
into the country. Based on the bitter experience of the previous
G7 joint statement, many economists believe that the joint
statement will avoid any mention of correcting imbalances.

Nevertheless, there is still strong sentiment in the US Congress
regarding the massive trade surpluses of China and Japan, and
there is a possibility that the issue of imbalances will emerge
at the July summit.

Another issue likely to be debated will be establishing a
foundation for energy use and conservation in developing
countries as a measure to deal with rising oil prices.

SCHIEFFER