DAILY SUMMARY OF JAPANESE PRESS 06/15/06

UNCLAS SECTION 01 OF 12 TOKYO 003319

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: DAILY SUMMARY OF JAPANESE PRESS 06/15/06


INDEX:

(1) Defense Agency plans to cut 7,000 personnel

(2) Gov't to tighten trade controls for antiterrorist
international cooperation

(3) LDP panel decides on annual 4% cut in ODA budget

(4) Opinion column -- Need for explanation about low estimated
number of BSE-infected cattle in US

(5) Reading the data on finances: Deregulation helps improve
potential growth rate

(6) Period of residency for foreign workers to be extended to
five years, according to package of LDP proposals; Foreign
students to be granted one year to find job

(7) Abe supporters (Part 1): Huge "second chance" league launched
to counterattack Fukuda

(8) Abe supporters (Part 2): A highly energetic group of "rogue
samurai" launches 94-member second chance parliamentary league

(9) Japan embassy in US rebuts whaling critics: US newspaper

(10) Editorial: Japan should stress need for continued whaling on
scientific basis

(11) Editorial: BOJ governor must quickly resign

ARTICLES:

(1) Defense Agency plans to cut 7,000 personnel

SANKEI (Page 2) (Full)
June 15, 2006

The Defense Agency has presented a government administrative
reform task force's secretariat with a plan to reduce a total of
7,000 personnel, officials said yesterday. According to the plan,
the agency will reduce about 6,000 in the Self-Defense Forces. In
addition, the agency will also reduce about 1,000 in the National
Defense Medical College (NDMC),located in the city of
Tokorozawa, Saitama Prefecture, and in NDMC hospitals along with
their status change to independent administrative corporations.
As a result of incorporating the NDMC as a standalone entity, the
National Defense Academy, located in the city of Yokosuka,
Kanagawa Prefecture, is also likely to be on the agenda over the
advisability of changing its administrative status to a
standalone.

With the enactment of a law for the promotion of administrative
reform, the government plans to reduce more than 5% over fiscal
2005 in the employment of national public service personnel at
the end of fiscal 2010, thereby reducing its personnel costs. The
government will shortly made a cabinet decision on its overall
personnel reduction plan.

The task force secretariat makes no exception of the Defense
Agency and has requested the agency to reduce 5% or about 12,000
personnel. The agency, however, insisted that the Self-Defense

TOKYO 00003319 002 OF 012


Forces should not be in the same category with other government
employees. The agency has now hammered out a plan to carry out a
personnel reduction of about 6,000 mainly in the Ground,
Maritime, and Air Self-Defense Forces' logistics divisions,
including administrative and welfare sections.

But the planned reduction is half the level requested. So the
Defense Agency chose to incorporate the NDMC and its hospitals
with independent administrative status. This choice was aimed in
part to underscore the agency's belt-tightening of its
organization, according to a senior official of the agency.

The NDMC and its hospitals currently have a total of about 1,000
personnel on their payroll. They include a teaching staff of
about 250, a clerical staff of about 220, and a nursing staff of
about 400. However, all of them will be nongovernmental employees
with the NDMC and its hospitals becoming incorporated with
independent administrative status. However, NDMC students,
monthly provided with about 100,000 yen, will retain their
current status of special government employees.

Deregulation is under way with other national universities
incorporating their medical departments as independent
administrative entities. Meanwhile, the NDMC has been left behind
the cutting edge of medical treatment against the backdrop of its
stagnated research with private- and government-sector
institutions, according to a senior official of the agency. The
agency is also aiming to improve the profitability of NDMC
hospitals with better services, including medical examinations
for local communities.

In the Defense Agency community, however, some people are
cautious about the idea of incorporating the NDMC as an
independent administrative body since the NDMC is a training
institute of SDF medical officers. "The government may also
consider incorporating the National Defense Academy, which is the
gateway for the SDF leadership," one SDF staff officer said.

(2) Gov't to tighten trade controls for antiterrorist
international cooperation

SANKEI (Page 2) (Abridged)
June 15, 2006

The Ministry of Economy, Trade and Industry (METI) decided
yesterday to strengthen trade controls in order to prevent
Japanese products from being used for weapons of mass destruction
(WMD) or terrorism. METI is also preparing legislative measures
not only to embargo materials related to nuclear and biochemical
weapons but also to halt their transshipments and transits
through Japan. The government fears that terrorists may take
advantage of trade as a loophole to get through the dragnet of
economic sanctions including asset freezing. METI will therefore
consider a system that can prohibit all export-import trade
transactions for terrorist-related groups and individuals. The
government will also aim at even more effective trade control
under the international regime of counterterrorism.

The Industrial Structure Council, an advisory panel for the METI
minister, will hold a subcommittee meeting today. In this
meeting, METI will show its plan. METI will then set about its
review of cabinet orders and ministry ordinances. METI is
thinking of revising the Foreign Exchange and Foreign Trade

TOKYO 00003319 003 OF 012


Control Law and other relevant laws.

The government will step up its surveillance of port calls and
transits in Japan for WMD-convertible materials. In addition, the
government will also strictly oversee Japanese companies' trade
transactions via third countries. In order to heighten the
effectiveness of economic sanctions against terrorists, Japan
will freeze the assets of 511 individuals or groups designated as
terrorists by the United Nations or Group of Eight (G-8) member
nations and will also freeze their trade in its entirety, whereby
the government will contain the incomings and outgoings of money.
The government will invoke de facto economic sanctions in the
expanded scope of trade controls.

In addition, the government has also discovered more indirect
exports to countries that have military potential. METI will
therefore announce the names of foreign companies that were used
for indirect exports. METI will call on Japanese companies not to
export their products to these foreign companies. The government
has not restricted trade up to 1 million yen or up to 50,000 yen
for North Korea and other countries with military potential. The
government will abolish this small-sum exception.

(3) LDP panel decides on annual 4% cut in ODA budget

MAINICHI (Page 2) (Full)
Evening, June 15, 2006

The Liberal Democratic Party's Project Team on Spending Cuts
decided yesterday to slash the official development assistance
(ODA) budget by 4% annually for the five years starting in
FY2007. In FY2006, 760 billion yen has been set aside for the ODA
budget, but according to the team's calculation, the ODA budget
will be reduced to 620 billion yen in FY 2011.

The government has set up the goal as an international pledge of
increasing the nation's ODA spending by 10 billion dollars over
the total amount of ODA disbursements (8.9 billion dollars) in
FY2004. The actual record for FY2005 was 13.1 billion dollars,
about 4.2 billion dollars more than the previous fiscal year. The
Finance Ministry has viewed it possible to augment ODA
disbursements by relinquishing claims on bad loans to other
countries even if the ODA budget is trimmed.

The Foreign Ministry has reacted to the project team's decision
to slash ODA funds, one official remarking: "In order to form pro-
Japanese international opinion, an increase in ODA disbursements
is necessary as an essential diplomatic means." But a Finance
Ministry official commented: "Now that efforts are being made to
cut spending in a strict manner within the nation, a tough review
of financial assistance to other countries is also unavoidable."

(4) Opinion column -- Need for explanation about low estimated
number of BSE-infected cattle in US

YOMIURI (Page 13) (Full)
June 14, 2006

By Yoji Totsuka, special professor emeritus at Tokyo University

Japan is likely to reopen its market to US beef shortly. These
days, the subject of bovine spongiform encephalopahty or BSE
frequently crops up in daily conversations even around me. This

TOKYO 00003319 004 OF 012


is perhaps because BSE and the variant Creutzfeldt-Jacob Disease
(vCJD) -- a disease that causes spongy degeneration of the brain
and madness -- are allegedly closely linked to each other since
the same agents are involved.

The BSE issue draws strong public concern and is given large
coverage by the news media. It is a serious problem, but there is
something unclear about the issue. For example, is it true to say
that Japan is less dangerous than the United States and the
European Union (EU) in terms of the vCJD infection risk and the
discovery frequency of BSE-infected cattle?

Some of scientific statistics are incomprehensible to
nonprofessionals. So most people may think it is better to leave
data analysis to specialists, such as scientists. But I can say,
it is possible to shed light on the issue from various angles in
an easy, simple way by using only the statistics released.

I have worked as a researcher in experimental physics and have
analyzed data from various angles for many years. Based on this
experience, I will show you a simple verification method that can
be of help to nonprofessionals, as well.

The first thing to do to reach this end is to obtain from
international organizations, for instance the World Organization
for Animal Health (OIE),such statistics as the numbers of vCJD
patients, the numbers of discovered BSE-infected cows, and the
amounts of beef consumption, and the numbers of heads of cattle
raised. There is no sign of the diseases vCJD and BSE being
eradicated, for even Japan and the US have one vCJD patient each.

When it comes to the numbers of BSE-infected cattle, although the
United States does not conduct blanket testing, the number of BSE-
infected cattle in that country is estimated as of this March to
be 10 or less if blanket testing were to be carried out there.
This estimate, however, was done, based on several assumptions.
The figure, I think, is credible enough, so I will use it.

Based on the figures obtained from OIE, I will calculate the vCJD
infection risk and the discovery frequency of BSE-infected
cattle. Indices that will be used in this regard are two figures
that can be obtained by: 1) dividing the number of the vCJD
patients by the amount of beef consumption; and 2) dividing the
number of BSE-infected cattle by the number of cattle raised.

The chart here shows the results of this calculation.

US Japan EU
Number of vCJD patients (as of August 2005)
1 1 177
Number of head of BSE-infected cattle (for 2005)
Estimated to be 10 or less 7 438
Number of vCJD patients per area where 10 million tons of beef
consumed (as of August 2005)
0.1 1.2 24
Number of head of BSE-infected cattle discovered per group of 10
million head of cattle raised (2005)
1 or less 15 55

In terms of the number of vCJD patients occurring in each area
where 10 million tons of beef are consumed, the EU has 24 such
patients, followed by Japan's 1.2 and America's 0.1. As for the
number of BSE-infected cattle discovered in each group of 10

TOKYO 00003319 005 OF 012


million head of cattle, the EU has 55, but Japan has 15 and the
US has one or less.

In both cases, Japan is in between the EU and the US, but it is
not correct to say that Japan is safe from BSE. Since the cause
of vCJD has yet to be made crystal clear, what Japan needs to do
is to further raise its safety levels and make efforts to nip in
the bud any possibilities of causing an epidemic of that disease.

Assuming that the estimated number of BSE-infected cattle in the
US is reliably correct, US beef, which Japan is likely to import
again shortly, can be viewed as being safe.

I think many Japanese like me would like the US to give a proper
account of the correctness of the estimated figure in order to
further ensure the safety of US beef.

(5) Reading the data on finances: Deregulation helps improve
potential growth rate

NIHON KEIZAI (Page 5) (Full)
June 15, 2006

Is Japan more strongly regulated than other countries? The
Organization for Economic Cooperation and Development (OECD)
conducts a survey of this kind. In the survey, regulations on
some 800 items are assessed on a scale of six. The OECD made a
comparison between countries with Japan's levels of regulations
in 1998 as 100.

According to this comparison, Japan's levels in 2003 dropped to

68. This was the result of regulations centering on
transportation and telecommunications having been eased 30% or
more.

Compared to the United States and European nations, Japan's
levels of regulations are lower than those of France and Germany.
But the US and Britain, which addressed deregulation earlier than
Japan, are far less regulated than Japan. Japan has just caught
up with the US' levels in 1998. The US eased its regulations to
53 in 2003.

According to the OECD, the potential economic growth of the US
for 2003-2007 is predicted to be 3% on average; and that of
Britain is estimated at 2.7%. These two advanced nations in terms
of deregulation are predicted to have strong potential for
economic growth. Meanwhile, Japan's potential economic growth is
estimated to be 1.5%, the figure that is the same level as that
of Germany, which resembles Japan in view of the pace of
deregulation.

The OECD points out that Japan still allows the government
sector's strong involvement. Japan needs to push for deregulation
by taking advantage of special zones for deregulation and thereby
to enhance potential economic growth, which through a natural
increase in tax revenues will lead to rebuilding its finances.

(6) Period of residency for foreign workers to be extended to
five years, according to package of LDP proposals; Foreign
students to be granted one year to find job

NIHON KEIZAI (Top Play) (Slightly abridged)
June 13, 2006

TOKYO 00003319 006 OF 012



The Liberal Democratic Party (LDP) is now looking into
comprehensive measures on foreign workers. The draft of the
package was unveiled yesterday. According to the package, the
period for which foreign workers are permitted to stay in Japan
will be extended from three years to five years, in principle.
The length of residency for foreign college graduates who want to
find jobs in Japan will be extended from the current six months
to one year. The aim is to secure a stable labor force with the
arrival of an age of depopulation, but coordination of views on
such extensions will likely encounter complications.

Unified control of residency information

The Special LDP Commission on the Foreign Workers Issue, chaired
by Yoshio Kimura, will finalize the package of proposals before
the end of the month. The LDP intends to call on the government
to revise the Immigration Control Law during next year's regular
Diet session at the earliest.

The period of residency allowed to foreigners is, in principle,
three years under the current system. The entertainment visa is
one year, and the student visa is two years. Advanced technical
workers in such areas as information technology, can stay for
five years. When the termination of their visas draws near,
foreign workers need to go to their nearest immigration control
offices and submit applications for an extension.

Extension of the period for which foreign workers are permitted
to stay is expected to reduce troublesome procedures they have to
undergo. It will also become unnecessary for them to pay fees for
such procedures. As such, calls from foreigners to improve the
current system have grown stronger. Out of concern over a future
labor shortage, business circles are also strengthening their
call that restrictions on their accepting foreign workers should
be eased.

The LDP is seeking to extend the period of residency allowed to
foreign workers to five years, but it now plans to single out
types of jobs eligible for such an extension out of consideration
for the domestic employment situation. A plan to introduce a
green card system like that of the US, under which foreigners
with expertise and technology, such as attorneys, are awarded
permanent residency, has also been floated.

In assisting foreign students, the government in March permitted
foreign graduates of Japanese universities to stay for up to 180
days. However, foreign students are dissatisfied with the
measure, because they think that six months is not sufficient to
find a job. The LDP is calling for a further extension of the
period of residency.

The package also included measures to avoid any impact of the
extended residency of foreigners on security and trouble with
entities that accept foreign workers. To this end, consideration
will be given to a system under which the Justice Ministry
manages foreign workers' registration information, which local
governments are now in charge of, in an integrated fashion, so
that their residency status after entering Japan can be correctly
grasped.

In order to avoid such trouble as nonpayment of wages, a system
for a regular inspection of companies' foreign worker acceptance

TOKYO 00003319 007 OF 012


system will be introduced. Training to nurture quality laborers
and a practical technical trading system will also be proposed.

(7) Abe supporters (Part 1): Huge "second chance" league launched
to counterattack Fukuda

TOKYO SHIMBUN (Page 2) (Abridged)
June 13, 2006

Yuji Yamamoto, 54, and Yoshihide Suga 57 -- both Lower House
members -- began preparing to support Chief Cabinet Secretary
Shinzo Abe, 51, in late May with an eye on the Liberal Democratic
Party presidential election in September. Yamamoto is a member of
the Komura faction, Suga belongs to the Niwa-Koga faction, and
Abe the Mori faction.

A variety of opinion polls conducted in late May showed growing
support for former Chief Cabinet Secretary Yasuo Fukuda, 69. The
view was also prevalent that Fukuda might achieve a come-from-
behind victory.

Yamamoto and others had not expected Fukuda to follow Abe so
closely. An innovative idea was necessary to turn the trend
around.

Being a cabinet minister, Abe was tied up, and former Prime
Minister Yoshiro Mori, 68, who headed the faction, had also
strictly ordered the members not to rally around any specific
individuals. Given all those restrictions, it was extremely
difficult to devise ways to divert public attention from Fukuda
to Abe.

They finally came up with the idea of establishing a
parliamentary group to support Abe's policies -- the prototype of
the Parliamentary League to Support a Second Chance. At the time,
the Government's Second Chance Promotion Council, chaired by Abe,
was endeavoring to map out a policy to create jobs for elderly
people and job-hopping part-time workers.

Yamamoto, Suga, and others speedily decided to hold an
organizers' meeting on May 25 and the league's inaugural meeting
on June 2.

The government's promotion council was scheduled to produce an
interim report on May 30. Yamamoto and others picked June 2 to
learn of the contents of the interim report from Abe in person.

They figured that a parliamentarian group to support Abe himself
would elicit a red card, but nobody would complain about a league
to support his policies. In fact, Mori and others did not openly
oppose the idea of launching a new league.

Yamamoto, Suga, and others persistently lobbied mid-level
lawmakers to join the league, while second-term members, such as
Yasutoshi Nishimura, 43, and Isshu Sugawara, 44, sold the group
to junior lawmakers.

Although they told the recruits that the new group had nothing to
do with the presidential race, nobody bought it.

Mid-level and junior members eager to back Abe readily jumped at
the borderline ball, thrown by Yamamoto and others. Their
willingness seemed to reflect the motive to win key posts in an

TOKYO 00003319 008 OF 012


Abe administration by making clear where they stand at an early
stage.

Although LDP executives initially speculated that no more than 50
members would join the league, its aggressive campaign eventually
put the LDP leadership on high alert. Coinciding with the group's
inaugural meeting, the party leadership decided to conduct an
Indonesia earthquake fund-raising drive in Tokyo and solicited
the participation of junior members. "The drive is intended to
squash the league," one complained.

Against all odds, 94 LDP lawmakers showed up at the inaugural
meeting. One member optimistically predicted that the new league
would discourage Fukuda and Foreign Minister Taro Aso from
running in the presidential race.

Representing less than a one-fourth of the LDP membership, a
group of 94 seems too small to determine the trend of the
presidential race. Nevertheless, Yamamoto and other Abe
supporters were overjoyed with the good start of the league,
believing that it successfully held back the rise of Fukuda.

(8) Abe supporters (Part 2): A highly energetic group of "rogue
samurai" launches 94-member second chance parliamentary league

TOKYO SHIMBUN (Page 2) (Abridged)
June 14, 2006

The Parliamentary League to Support a Second Chance was launched
on June 2 as a de facto support group for Chief Cabinet Secretary
Shinzo Abe. But the lineup of its key members made many lawmakers
somewhat uncomfortable.

Shinzo Abe has a number of loyal supporters, such as Senior Vice
Foreign Minister Yasuhisa Shiozaki, 55, Ichita Yamamoto, 48, and
Hiroshige Seko, 43. They are second-generation lawmakers and
policy experts, as is Abe.

The parliamentary league has informally picked Yuji Yamamoto, 54,
as its chairman, Yoshihide Suga, 57, as secretary general, and
Hiroshi Kajiyama, 50, as chief of the secretariat. Totally
distinct from Abe, they are a "group of rogue samurai," so to
speak.

They are a mismatch. They are so different and yet they are
attracted to each other, as are the north and the south poles of
a magnet.

In the 2003 LDP presidential race, Yuji Yamamoto of the Komura
faction backed former Foreign Minister Masahiko Komura, 64.
Komura, who heads a small faction, fought well, garnering 54
votes. Abe, a native of Yamaguchi along with Komura, knows that
Yamamoto orchestrated Komura's good fight.

In the race three years ago, Suga scurried around trying to field
a junior lawmaker. Although his efforts fell short of securing
the necessary support from 20 Diet members, Suga's leadership was
fully recognized among junior members.

Inheriting the political views and determination from his father,
the late Chief Cabinet Minister Seiroku Kajiyama, Hiroshi
Kajiyama is often called the best supporting actor of the
political world.

TOKYO 00003319 009 OF 012



They are far more energetic than Abe's original supporters, such
as Shiozaki. The group of "rogue samurai" is extremely appealing
to Abe in seeking the party's top job.

Yamamoto and other latecomers are also undoubtedly driven by the
ambition to boost their presence in the party by playing a
significant role in launching an Abe administration.

The second chance league is a product of a meeting of the motives
of Abe and the junior supports. Bringing together 94 LDP
lawmakers, Yamamoto and others held an inaugural meeting of the
league by fully utilizing their extensive personal ties.

Abe is taking a hands-off attitude toward the league because, as
a league executive puts it, he has confidence in Yamamoto, Suga,
and other members. They have been in close contact with each
other.

Abe has not left everything to Yamamoto's group, and the group is
not trying to take control of Abe's campaign team.

Yamamoto envisages sharing the role with original Abe supporters
by leaving a policy format, including a campaign manifesto, to
Shiozaki, Seko, and other members.

A combination of the policy-savvy original supporters and the
highly energetic "rogue samurai" would be able to push Abe toward
the summit. But it is extremely difficult for two completely
different groups to resonate with each other in Nagatacho, the
nation's capitol district replete with jealously and
misunderstandings.

(9) Japan embassy in US rebuts whaling critics: US newspaper

SANKEI (Page 2) (Full)
June 15, 2006

WASHINGTON-The Japanese embassy in the United States rebutted US
newspaper articles that hit Japan's research whaling. The
Washington Post carried the articles in its June 2 and June 5
editions. The rebuttal was also carried in the same newspaper
dated June 13. In this rebuttal, the embassy recounts that Japan
plans research whaling in the South Pacific Ocean for 0.1% -0.3%
of all whales there. This research whaling will not affect the
schools of whales there, the embassy stresses.

(10) Editorial: Japan should stress need for continued whaling on
scientific basis

TOKYO SHIMBUN (Page 5) (Full)
June 15, 2006

The International Whaling Commission (IWC) will hold its annual
meeting in St. Christopher and Nevis, an island country in the
Caribbean Sea, starting on June 16. Japan is ready to insist in
the meeting on the need for continued whaling on a scientific
basis.

One Japanese government official said with a stern look: "Japan
will announced a plan to hold a meeting among countries
supportive of or understanding the need of whaling. We would like
to aim at normalizing the IWC through this meeting."

TOKYO 00003319 010 OF 012



Holding a meeting under a different framework from the IWO might
serve as a trigger to break it up. But it is understandable why
Japan made the decision. The establishment of the committee was
initially intended to promote commercial whaling. The US,
Britain, Australia, and other 12 countries set up the
organization in 1948 with the purpose of protecting whales and
developing the whaling industry in an orderly way. Japan joined
it in 1951.

In the 1960s, the US and Britain withdrew from commercial
whaling. Given growing criticism of reckless catches and
movements for humane treatment of animals, antiwhaling activities
intensified. In 1982, a decision was made to introduce a
moratorium on whaling for the next decade. Later Japan and other
countries continued research whaling. The research found that
more than 760,000 minke whales live in the Antarctic Ocean. The
IWC Science Committee accepted the estimated figure.

This number might be changed in the upcoming meeting, but it is
true, as shown by information from eyewitnesses and collisions
between ships and whales, that the number of whales is steadily
increasing. Talks have been held since 1994 in a drive to
complete the so-called Revised Management Scheme (RMS),which
will be the premise for resuming commercial whaling.

The RMS is a new whale stock management and monitoring system. In
connection with this system, however, antiwhaling countries have
brought up difficult issues related to monitoring methods,
expenses, and ways of catching and killing whales. The working-
level meeting this spring faltered as antiwhaling countries
rejected any compromises, claiming that the introduction of the
RMS would lead to resuming commercial whaling.

As of now, 70 countries belong to the IWC. Excluding one country
that has no voting rights, 36 countries support whaling, while
the remaining 33 are against it. In order to resume whaling,
though, it is necessary to obtaining support from more than three-
fourths of all the member countries. Globally, antiwhaling
countries still have a stronger voice. A number of developing
countries are also included among the supporters, in addition to
Japan, Norway, Denmark, Russia, China, and South Korea.

Under the current situation, it seems difficult to reach an
agreement between antiwhaling countries and supporter countries.
Given that antiwhaling countries have rejected any compromise
while avoiding a discussion based on scientific grounds, there is
no other choice but for Japan to reveal a plan to hold a new
session.

Even so, a cool-headed judgment is necessary now. The IWC annual
meeting is an important arena to stress the need for scientific,
sustainable whaling. In a bid to secure safe and plentiful meat
resources for the future, it is imperative for Japan to make
persistent efforts to persuade other countries. Because the
meeting will provide a good opportunity to turn around
international opinion on whaling, details about the new session,
including its timing, must be carefully discussed.

(11) Editorial: BOJ governor must quickly resign

TOKYO SHIMBUN (Page 5) (Full)
June 15, 2006

TOKYO 00003319 011 OF 012



It has been revealed that Bank of Japan (BOJ) Governor Toshihiko
Fukui invested 10 million yen in the Murakami Fund in the fall
1999 when he was serving as Fujitsu Research Institute president.
The news has caused a stir, posing a question about the central
bank's independence from the financial market. Now that he has
lost public confidence, Fukui should quickly step down.

This is an unprecedentedly abnormal case. Governor Fukui invested
10 million yen in the Murakami Fund established by Yoshiaki
Murakami, who has been arrested on suspicion of insider trading
in violation of the Securities and Exchange Law. Fukui admitted
in a Diet session that he had earned profits from the investment
until he cancelled the contract in February this year.

Fukui said that he invested the money to back up the Murakami
Fund in response to Murakami's remarks that "I have no confidence
in collecting money."

Confidence was indispensable for a new type of business. Fully
aware of becoming a poster figure, Fukui might have volunteered
to invest.

The Murakami Fund is a special fund in which only limited persons
or organizations can invest. When Fukui assumed the top post of
the BOJ, he should have emerged from such a fund, because the
central bank is required to be neutral and transparent. His
failure cannot be dismissed only with the words that he was
careless.

The fact of his cancellation of the contract in February also
makes us skeptical of Fukui's deeds. In February, the Securities
and Exchange Commission and the Tokyo District Court Special
Investigation Squad were conducting secret investigations into
the Murakami Fund. There were even rumors saying that a criminal
investigation of Murakami would be started. In March, the BOJ
decided to end its monetary-easing policy.

Every information on economic affairs goes to Fukui. If he
cancelled the contract upon learning the circumstance, his action
might come under the category of "ultimate insider trading."

Ordinary people can earn little interest income with low-interest
money. How much did Fukui earn profits?

Some market players have begun to take the view that "since the
BOJ governor owes a lot the government because of its protection
of him, the BOJ may not be able to end the money-easing policy
over the opposition of the government." This observation will
haunt Governor Fukui forever as long as he stays on. This is
detrimental to Fukui as BOJ governor.

Fukui has no longer been regarded as "the governor who can
implement monetary policy measures while seeing the economic
situation and commodity prices in a pure and objective manner."
In relations with the government, the central bank has suffered a
serious injury in terms of independence.

The BOJ has held talks on monetary policymaking since June 14. A
removal of the policy of zero-interest rates is one of the key
issues in the meeting. It can hardly be expected, though, that
the governor will be able to make judgment on important issues.
Fukui should resign as BOJ governor.

TOKYO 00003319 012 OF 012



SCHIEFFER