DAILY SUMMARY OF JAPANESE PRESS 06/12/06

UNCLAS SECTION 01 OF 06 TOKYO 003228

SIPDIS

SIPDIS

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TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA
SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 06/12/06

INDEX:

(1) US diplomat visits Nemuro to have firsthand look at Japan-
Russia relations

(2) Government, ruling coalition submit defense ministry bill to
Diet to demonstrate their eagerness to settle outstanding bills;
Next extraordinary Diet session holds key

(3) Spydrone: Pie in the sky?

(4) LDP to enter home-stretch coordination on spending cuts,
plans to include elastic clause in response to criticism in party

ARTICLES:

(1) US diplomat visits Nemuro to have firsthand look at Japan-
Russia relations

YOMIURI (Page 31) (Full)
June 9, 2006

A diplomat from the US Embassy in Japan visited Nemuro City on
June 7 in order to have a firsthand look at Japan-Russia
relations, including the issue of the (Russian-held) Northern
Territories.

The diplomat is Kathleen Szpila (second secretary) in the
political section of the embassy in Tokyo. Szpila made a tour of
the city hall, the Nemuro Chamber of Commerce and Industry, and
Cape Nosappu. She looked at some of the Northern Islands from the
cape and also met with islanders at Chishima Hall. She eagerly
asked questions about the issue of the northern islands and
relations between Japan or Nemuro and Russia.

At the city hall, Szpila received explanations about the brief
profile of the city, the history and background of the
territorial issue, and exchanges with the four Northern Islands
from administrative department head Masatoshi Ishigaki on behalf
of the mayor and the deputy mayor, who were out of town on
business. When she visited Cape Nosappu, it was unfortunately
cloudy, but she enjoyed looking at the barely visible shape of
Suisho Island. At Northern Hall, Szpila, while going over through
documents on relations between Japan and Russia over the Northern
Territories, earnestly listened to an explanation from Hall
Director Takashi Yonetani.

Szpila stated:

"When I thought I would like to look at relations between Japan
and Russia from a local level ahead of the upcoming G-8 summit,
Hokkaido came across my mind immediately. ... I visited here for
the first time, but it was significant for me because I was able
to listen to the views of local residents. I would like to convey
my experience to the members of the political section in the
embassy."

(2) Government, ruling coalition submit defense ministry bill to
Diet to demonstrate their eagerness to settle outstanding bills;
Next extraordinary Diet session holds key

YOMIURI (Page 4) (Abridged)
June 10, 2006

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On June 9, the government and the ruling coalition submitted to
the ongoing Diet session a bill to upgrade the Defense Agency to
ministry status, though knowing its slim chance of clearing the
Diet. With the heads of the Liberal Democratic Party and the New
Komeito scheduled to step down in the fall, the bill's submission
reflects the two parties' eagerness to settle outstanding bills
under the current leadership. Although the government and the
ruling coalition intend to aim for the bill's enactment in the
next extraordinary Diet session, the opposition camp is
determined to block it. The fate of the "defense ministry bill,"
along with other important bills that are likely to be carried
over to the next Diet session, remains unclear.

Next year's election a concern

Asked by a reporter about the significance of cabinet approval of
the "defense ministry bill," Prime Minister Junichiro Koizumi
said on June 9: "It was a long-standing issue. Thanks to the New
Komeito's cooperation, at long last we were able to submit it to
the Diet following cabinet endorsement. I am certain that the
bill's presentation at this point will lead to good results in
the next Diet session."

The LDP's strong desire to quickly realize a defense ministry
coincided with the New Komeito's wish to speedily settle the
issue in order to minimize the bill's negative impact on the
unified local elections and the Upper House election next year.

Last November, the New Komeito came up with a policy to enact the
defense ministry bill in this year's regular Diet session,
reversing its previous heel-dragging stance. The about-face
reflected a growing sense of urgency in the New Komeito that a
different approach to national security would rock the foundation
of the coalition with the LDP, which had just achieved a
landslide victory in the Lower House election. The New Komeito
also wants to pave the way for settling outstanding issues under
its current leadership, who will retire in October.

The New Komeito leadership was more attentive to siding with the
LDP than to hearing objections in the party and its support base.
Some New Komeito members voiced objections to raising the Defense
Agency to ministry status even at the June 8 Policy Research
Council meeting that endorsed the bill. In an effort to dispel
concerns associated with the defense ministry legislation, New
Komeito Representative Takenori Kanzaki listed three conditions:
1) the Self-Defense Forces must strictly adherence to Article 9
of the Constitution when conducting activities; 2) the right to
collective self-defense must not be exercised; and 3) defense
spending must not be bloated.

The LDP was eager from early on to turn the Defense Agency into a
defense ministry when highly popular Prime Minister Koizumi is in
office. But the New Komeito hardened its stance following the
revelation of a bid-rigging scandal involving the Defense
Facilities Administration Agency. The LDP patiently waited for
the New Komeito to soften its stance until now, days before the
adjournment of the ongoing Diet session.

Contrary to calculation by defense ministry advocates, Prime
Minister Koizumi also adamantly refused to extend the ongoing
Diet session.


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Advocates are bent on getting the dense ministry bill approved in
the next extraordinary Diet session.

Important bills carried over to next Diet session; Order of
importance not clear

Diet approval may slit to after Upper House lection

A gloomy outlook also hangs over the passage of the defense
ministry bill.

In addition to the defense ministry legislation, a number of
important bills are likely to be carried over to the next extra
Diet session, such as a bill to amend the Fundamental Law of
Education and a national referendum bill stipulating a set of
procedures required for amending the Constitution. The order of
importance of bills and the period of the next extra Diet session
are unclear, which will be the first Diet session under the
successor to Koizumi.

Minshuto (Democratic Party of Japan) Secretary General Yukio
Hatoyama said in a press conference on June 9: "Nobody has taken
responsibility for the bid-rigging scandal involving the DFAA.
The stage has not been set to make the Defense Agency into a
defense ministry."

A Defense Agency official expressed hope for upgrading the agency
to ministry status in the current fiscal year. One opinion also
being heard in the New Komeito is that Diet approval should wait
until after the unified local elections and the Upper House
elections so as not to taint the party's image.

(3) Spydrone: Pie in the sky?

SANKEI (Page 4) (Full)
June 9, 2006

The Defense Agency has studied the feasibility of introducing
unmanned reconnaissance aircraft. This spydrone initiative,
however, is now up in the air. Unmanned aircraft reconnaissance
is one of the areas specified for Japan's cooperation on the
planned realignment of US forces in Japan. The agency has already
set forth a plan to introduce a US skybird model for spying
missions with its next fiscal year budget. The initiative, in a
way, is a commitment to the United States. The agency's
bureaucrats have their own operational plans for unmanned
reconnaissance activities. However, the Self-Defense Forces'
uniformed staffs are raising objections to such civilian plans.
Some in the agency are now beginning again to insist on the
option of developing an indigenous model of Japan's own. The
agency's feasibility study is now about to collapse.

In January this year, Defense Agency Director General Fukushiro
Nukaga visited the United States. On his way to the United
States, Nukaga stopped over in Britain, where he announced the
idea of introducing US unmanned reconnaissance aircraft. In
October last year, the Japanese and US governments released an
interim report of their talks over the US military realignment,
incorporating their agreements on specific realignment plans. The
interim report also specified unmanned reconnaissance activities
for bilateral defense cooperation to be strengthened.

The planned spydrone is of high-altitude, long-endurance

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airworthiness for flight missions in the skies above the altitude
of commercial jet airliners. The Defense Agency plans to
introduce this robot spydrone in order to: 1) detect North
Korea's ballistic missile launches; 2) conduct warning and
surveillance activities in waters around Japan, such as spotting
and tracking unidentified vessels; 3) grasp the movements of
enemy troops in their incursions on Japan's outlying islands; and
4) gather intelligence in the event of natural disasters.

In fiscal 2003, the Defense Agency began to study the feasibility
of developing a robot scouting plane of Japan's own. However, it
will take more than 10 years to deploy the first indigenous one.
Given the threat of North Korea's ballistic missiles, the agency
plans to introduce an actually operational model from the United
States for early deployment. For another, the US government has
urged Japan to buy a US model, according to an SDF brass officer.

The candidates have now been narrowed down to two US models. One
is the Global Hawk, which can fly at altitudes up to 20
kilometers for as long as 35 hours. The other model is the
Predator, which can fly at altitudes up to 14 kilometers and is
durable for 40 hours in the skies. The Global Hawk is priced at
approximately 6.4 billion yen, and the Predator at about 1.4-1.8
billion yen.

The Defense Agency's civilian officials have worked out
operational plans for unmanned reconnaissance activities. In that
process, however, the SDF brass raised strong objections to the
agency's plans.

First of all, SDF officers wondered if a robot plane would be
effective enough to detect a ballistic missile. At present, Japan
depends on US early warning satellites for detection in boost
phase. However, Defense Agency bureaucrats stressed that Japan,
if it has a drone, would be able to conduct intelligence-
gathering activities in its own way. In concrete terms, an
unmanned plane-which is loaded with a synthetic aperture radar
system and a high-performance sensor like reconnaissance
satellites-will fly over the Sea of Japan. The aircraft will
photograph missile sites in North Korea, and its infrared sensor
can detect heat that is given off when a missile is launched,
according to agency officials.

"It's possible to photograph crossly," said one SDF officer.
"But," he added, "the aircraft has to get close to North Korea's
territorial airspace, or you can't get a clear-cut image." His
rebuttal went on: "It's difficult to do so in the skies over
international waters."

The unmanned airplane is also supposed to spot and track
suspicious ships at sea. This airborne scouting task, however,
overlaps with P-3C patrol aircraft missions. For this reason, the
Maritime Self-Defense Force, now developing a follow-on model
(PX) to replace the P-3C, is angry, thinking its PX project could
be junked. The MSDF has even boycotted a meeting with the Defense
Agency's bureaucracy, according to one MSDF officer.

The government has cut down on defense spending over the past
four years. Meanwhile, the unmanned aircraft's cost efficiency is
foggy, according to one MSDF staff officer. The MSDF therefore
does not want its manpower and hardware acquisition affected as a
result of introducing the unmanned aircraft. As it stands, the
three SDF branches are all reluctant to undertake the unmanned

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scouting task, according to a senior official of the Defense
Agency. Another official said, "The government has already spent
more than 2 billion yen to develop Japan's own model, so Japan
should go on with its own development project."

The Japanese and US governments will shortly hold a working-level
meeting of senior officials to talk about reconnaissance
activities. However, the government will likely forego its
planned acquisition of the skybird for next fiscal year.

(4) LDP to enter home-stretch coordination on spending cuts,
plans to include elastic clause in response to criticism in party

NIHON KEIZAI (Page 2) (Full)
June 12, 2006

The Liberal Democratic Party (LDP) starts last-minute
negotiations today to draft a plan for spending cuts. The party
leadership would like to win understanding from party members by
setting up an elastic clause to enable the government to review
its reforms in accordance with changes in the economic situation.
With an eye on the House of Councillors election next summer,
though, some LDP members have strongly reacted to future spending
cuts for public works projects and social insurance. It remains
to be seen to what extent the LDP will be able to reduce
expenditures.

Up to 13 trillion yen in spending cuts

The government and the ruling coalition will hold working-level
talks of the Fiscal and Economic Reform Conference this morning.
The participants will set about 15.5 trillion yen as the amount
of fiscal resources necessary to turn the primary budget into the
black by fiscal 2011. To achieve this goal, the panel plans to
reduce spending by up to 13 trillion yen.

In the LDP, too, the spending reform project team, chaired by
Policy Research Council Chairman Hidenao Nakagawa, and the budget
division held a joint meeting this afternoon to discuss an
interim plan drafted by the project team. The plan lists sector-
specific items up for spending cuts, and the proposed measures
are all implemented, the government's initially projected
revenues needed for policy-related expenditures will be slashed
by about 13 trillion yen.

Upper House Secretary General Toranosuke Katayama, however,
criticized the plan in a press conference on June 9: "It is a
mistake to feel satisfied about piling up numbers like a house of
cards." In an informal meeting with construction-related
associations on June 7, Upper House LDP caucus head Mikio Aoki
also emphatically said that public works spending "should not be
slashed every year."

Upper House election kept in mind

On the ballot in the Upper House election next summer will be
those who were elected in the 2001 election, helped by the
Koizumi boom. Upper House LDP members anticipate that the
election will be a hard battle for the LDP. In a move to find
ways to regain organized support, they are cautious about
spending cuts. A senior Upper House caucus member categorically
said: "We will oppose" the spending-cut plan now under
consideration.

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Floating under such circumstances is an idea of incorporating an
elastic clause in the plan. Since such rules are not included in
the Fiscal Structural Reform Law, enacted in 1997, the government
was unable to flexibly respond to an economic stagnation, so it
had to freeze the law. Reflecting on this experience, State
Minister in Charge of Economic and Fiscal Policy Kaoru Yosano and
Nakagawa, who were engaged in enacting the law, are reportedly
positive about including an elastic clause.

In reforming spending and revenue, it will become necessary to
increase tax revenues to cover the portion worked out by deducing
the amount of spending cuts from the 15.5 trillion yen in revenue
shortage. Based on the perception that "thoroughly reducing
spending is indispensable in order to minimize an increase in the
burden on the public," Nakagawa and other officials intend to
give priority to securing major spending cuts.

SCHIEFFER