JAPANESE MORNING PRESS HIGHLIGHTS 06/27/06

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SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 06/27/06

Index:

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

Koizumi going to Washington, Graceland:
4) Prime Minister Koizumi to leave today for White House to meet
President Bush, play up bilateral partnership
5) Prime Minister Koizumi to leave today for US, other countries
6) Prime Minister Koizumi to leave today for North America, possibly
with Tokyo's political moves, China in mind

Opinion polls:
7) Yomiuri poll shows 46% for next prime minister's visits to
Yasukuni Shrine, 43% against
8) 67% urge central bank chief to quit over investment problem
9) Abe leads Fukuda in post-Koizumi race, support rating for Koizumi
cabinet at 45%

Political, military issues:
10) Prime Minister Koizumi does not rule out Aug. 15 Yasukuni visit

11) Japan yet to confirm whether North Korea fueled Taepodong
missile: JDA chief
12) National Congress on 21st Century Japan urges LDP, Minshuto to
put high priority on policy discussions in selecting presidents

Economic topics:
13) Japan tops US in e-commerce showings: METI report
14) Farm, health ministries to check US beef on site
15) Gov't, ruling parties decide to ax fiscal spending

Japan-China ties:
16) China wooing Japan with open base event, visitors program
17) Japan-China gas talks postponed, Beijing ignores Tokyo's
proposal for resumption

Articles:

1) TOP HEADLINES

Asahi, Mainichi, Yomiuri & Tokyo Shimbun:
Kidnapped female college student unharmed and taken into protective
custody; Two male kidnappers demanding 300 million yen in ransom
detained

Nihon Keizai:
Expenditure reduction plan adopted by government, ruling parties to
resolve revenue shortage

Sankei:
Government's Council on Economic and Fiscal Policy approves
expenditure reduction plan set by government, ruling parties

2) EDITORIALS

Asahi:
(1) Reform of annual expenditure and revenue: Optimistic scenarios
are dangerous
(2) Chuetsu earthquake-hit area: Support needed for rice growing


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Mainichi:
(1) Mega-takeover of steel firm: This is not someone else's problem
(2) Pro-Seoul group Mindan: What will happen next after
reconciliation dropped?

Yomiuri:
(1) Reform of annual expenditure and revenue: Raising consumption
tax implied
(2) Bankruptcy of Yubari City: How to promote rebuilding local
government finances?

Nihon Keizai:
(1) Steel industry as harbinger of global realignment
(2) Proper implementation of annual expenditure cut plan essential

Sankei:
(1) Reform of annual expenditure and revenue: Still a lack of crisis
awareness
(2) Misuse of research funds: A system to prevent recurrence needed

Tokyo Shimbun:
(1) Financial reconstruction: More efficient government is urgently
needed
(2) Emissions trading: We should not miss the right goal

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, June 26

NIHON KEIZAI (Page 2) (Full)
June 27, 2006

10:21
Met at Kantei with Economic and Fiscal Policy Minister Yosano and
Honma and Yoshikawa of the Council on Economic and Fiscal Policy.

11:00
Met Deputy Foreign Minister Yabunaka, followed by Central Nippon
Expressway President Kondo. Afterward met Lower House member
Matsuoka.

13:14
Met Deputy Chief Cabinet Secretary Futahashi, Internal Affairs and
Communications Minister Takenaka, followed by Natural Resources and
Energy Agency Director General Kodaira, Deputy Foreign Minister
Nishida, METI Director General Kusaka, and Finance Ministry
International Bureau Director General Ido.

15:04
Met Nishida, MOFA North American Affairs Bureau chief Kawai,
followed by LDP Secretary General Takebe.

16:05
Met Disaster Prevention Minister Kutsukake, Deputy Chief Cabinet
Secretary for Crisis Management Noda, and others, followed by Vice

SIPDIS
MAFF Minister Ishihara. Afterward handed a letter of appointment to
Science and Technology Policy member Honjo in the presence of
Science and Technology Agency Director General Matsuda and others.

17:07
Attended a gender equality award ceremony. Afterward attended a
meeting of the Council on Economic and Fiscal Policy.

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18:43
Returned to his residence.

4) Prime Minister Koizumi off for US today; Japan-US unity to be
shown to the world

YOMIURI (Page 2) (Full)
June 27, 2006

Prime Minister Junichiro Koizumi will leave today for Canada and the
United States. He is expected to meet with his Canadian counterpart
Stephen Harper on June 28. He will then meet on the 29th with US
President George W. Bush and hold a joint press conference. He will
attend a formal banquet. He plans to visit on June 30 Memphis, which
is the hometown of Elvis Presley, of whom Koizumi is a big fan,
along with the president and Mrs. Bush.

In the Japan-US summit, the two leaders will assess their efforts to
strengthen the Japan-US alliance and confirm the perception that the
strengthened bilateral alliance would become the basis for future
Japan-US relations. They will also issue a joint statement
advocating that Japan and the US will maintain and strengthen the
bilateral alliance. The joint statement will also underscore the
significance of the Japan-US alliance in the world. The statement
will stipulate that Japan and the US, with the common values of
freedom and democracy, will cooperate in such areas as politics,
security, and the economy.

While North Korea is showing sings that it is preparing to
test-launch a Taepodong-2 ballistic missile, Koizumi and Bush are
expected to agree to urge Pyongyang to abandon its plan and return
to the six-party talks. The two leaders will also confirm the need
for the bilateral alliance in East Asia in order to respond to the
China's rapid economic growth.

Regarding the Iranian nuclear issue, Tokyo and Washington will urge
Iran to accept a set of proposals complied by the UN Security
Council and Germany. Koizumi will announce that Japan will continue
to provide Iraq with reconstruction assistance even after the Ground
Self-Defense Force troops are withdrawn.

5) Koizumi off today to visit US; Red-carpet treatment being
prepared, reflecting "five years of honeymoon-like personnel ties"
with Bush

TOKYO SHIMBUN (Page 3) (Excerpts)
June 27, 2006

Prime Minister Junichiro Koizumi will leave for Canada and the
United States today and meet with US President Bush on June 29. This
will be the 7th meeting with Bush in the US and the first official
US visit for Koizumi since he assumed office in April 2001.

No Japanese prime minister has made an official visit to the US
since Prime Minister Keizo Obuchi went in April 1999. The president
plans to host a banquet for Koizumi at the White House. In addition,
Blair House, the President's Guest House, will be used as
accommodation for the prime minister.

Since the prime minister is not the head of state, Koizumi's visit
is categorized as an official visit in terms of protocol, but he

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will be treated like a state guest. Cited as a difference in
treatment to him and a state guest, the 21-gun salute is the highest
honor given to a state guest in a welcome ceremony, but Koizumi will
be greeted with a 9-gun salute.

When Chinese President Hu Jintao visited the US this April, only a
luncheon party was arranged for him. The red-carpet treatment for
Koizumi indisputably reflects the firmness of the Japan-US
alliance.

President Bush is also planning to take Koizumi to Memphis,
Tennessee, in which the museum Graceland, the home of Elvis Presley,
is located. The president will use his personal plane, Air Force
One, to go with Koizumi to Memphis from Washington. After enjoying a
tour of the Presley's home, the prime minister will attend a
luncheon meeting hosted by the president and his wife.

Last time, President Bush and Prime Minister Koizumi met in Kyoto
last November. This will be their 13th meeting. Although the two
leaders will meet at the St. Petersburg Summit in mid-July, the
summit in the US will be their last meeting to wind up their five
years of honeymoon-like personal ties.

There are no major sticking points between Japan and the US for now.
Plans for US force realignment in Japan were adopted in a cabinet
meeting on May 30. On the issue of US beef imports, the two
governments agreed to resume trade on June 21. Given this, the two
leaders will discuss mainly international issues.

High on the agenda will be North Korea's nuclear and missile
programs. Now that North Korea appears to be ready to test-fire a
long-range Taepodong-2 missile, Bush and Koizumi are expected to
urge Pyongyang to stop its provocative action and swiftly return to
the six-party talks.

On Iran's nuclear development program, the US has unofficially asked
Japan to prepare to take financial sanctions against that nation,
but Japan's position is that it is not the proper time to reach an
agreement. Reflecting the stance of Japan, the two leaders are
expected to just call on Iran to give an early reply to the package
of incentives for ending the nuclear program drawn up by the
permanent members of the UNSC plus Germany.

Regarding reconstruction assistance for Iraq, Japan will withdraw
Ground Self-Defense Force troops stationed there, but the prime
minister will reveal a plan to expand the scope of activities by the
Air Self-Defense Force. The Japanese and US leaders will confirm
their countries' continued commitment to reconstructing Iraq.

The two governments are making arrangements to issue a joint
statement touting such achievements in the summit. No joint
statement has been issued since Koizumi and Bush met for the first
time in June 2001.

The statement, as a conclusion of the honeymoon-like relations
between Japan and the US over the five years, will play up "the
Japan-US alliance in a global context" to jointly deal with global
challenges.

6) Koizumi departs for North America today; May use foreign trips
politically and to constrain China


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SANKEI (Page 4) (Abridged slightly)
June 27, 2006

Prime Minister Junichiro Koizumi will depart for the United States
and Canada today to highlight the Japan-US alliance in a global
context -- the fruit of his diplomacy of five years -- to the people
of Japan and the world. Besides those countries, Koizumi's
diplomatic timetable is packed with such destinations as the Middle
East and Mongolia. Speculation is afoot that he will use such
foreign trips for the Liberal Democratic Party's presidential
election in late September.

After returning home on July 1, Koizumi will visit Israel, the
Palestinian region, and Jordan in mid-July and then directly head
for St. Petersburg to attend the G8 summit. In August, he is
scheduled to visit Mongolia, and on September 10-11, he will attend
the Asia-Europe Meeting (ASEM) to be held in Helsinki. Additionally,
there has been talk that he would deliver a speech at the UN General
Assembly to be held in New York generally in tandem with the LDP
presidential election. Koizumi may visit a couple of other
countries, according to a senior government official.

Koizumi's true motive behind all those foreign trips remains
unclear, however. One government official explained: "The prime
minister will visit the Middle East and Mongolia to discourage China
from wielding influence on those countries."

In the wake of his decision to pull out Ground Self-Defense Force
troops from Samawah, some observers anticipate that Koizumi will
make a surprise visit to Iraq in the days surrounding the Middle
East-Mongolia trip. But a mid-level LDP lawmaker thinks that the
prime minister will visit the countries he simply wants to travel to
partly as his summer vacation.

Another former cabinet minister took this view: "The prime minister
has always used his foreign trips to the maximum as a political
tool." In fact, during his European tour in the fall of 2003,
Koizumi aides, in an effort to pick off anti-Koizumi forces, warned:
"The prime minister will dissolve the Lower House if he is defeated
in the presidential race." During his African tour this May, Koizumi
told accompanying reporters that the Mori faction should not try to
field a single candidate, causing a stir.

For Koizumi, foreign trips are a good chance to draw attention and
to send out messages by shutting off noise from the Japanese
political community.

Given the high likelihood that Koizumi will visit Yasukuni Shrine on
August 15, an LDP cabinet-level member speculates that he will make
the next move during his foreign trip.

7) Poll: 46% support next prime minister visiting Yasukuni Shrine,
43% opposed

YOMIURI (Page 2) (Full)
June 27, 2006

According to a Yomiuri Shimbun survey conducted on June 17-18, 46%
said they would support Prime Minister Junichiro Koizumi's successor
visiting Yasukuni Shrine, while 43% answered that they would oppose
such a visit by the next prime minister. The figure of those
favoring the visit was 4 points lower than a similar survey

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conducted in February, while those opposed slipped 1 point.

Asked whether Japan should attach more importance to diplomatic
relations with neighboring countries, including China and South
Korea, 79% agreed and only 16% disagreed. The result suggests many
people consider it necessary to improve strained relations with
China and South Korea.

On the question of whether the prime minister should not visit the
shrine in order to help mend relations with China, 51% disagreed,
while 42% answered yes. China has pressed Japan to stop the visits
to the shrine by the prime minister as a condition for China to
resume exchanges between leaders of the two countries. But the
result of the survey indicates that many Japanese oppose China
making such conditions a prerequisite for improving bilateral ties.

Japan is at odds with China over gas field development in the East
China Sea and with South Korea over the sovereignty of the
Takeshima/Dokdo islets. Regarding such disputes, 68% said that Japan
should stick to its position, while 24% answered that Japan should
take the opinions of other countries into consideration. The result
indicates that many Japanese thought that Japan should pursue
diplomatic efforts in consideration of the nation's interests.

8) Poll: 67% urge BOJ head to resign

ASAHI (Page 1) (Abridged)
June 27, 2006

The Asahi Shimbun conducted a telephone-based nationwide public
opinion survey on June 24-25, in which 67% of respondents answered
"yes" when they were asked if they thought Bank of Japan Governor
Toshihiko Fukui should resign over his investment of 10 million yen
in the Murakami Fund and his profit of 14.73 million yen. Meanwhile,
"no" accounted for 25%. Respondents were also asked if they thought
Fukui hurt BOJ monetary policy. In response to this question, 70%
answered "yes," with 25% saying "no." The poll shows the public's
severe view of the problem.

In the survey, respondents were further asked if they thought
Fukui's investment for such profit-making purposes was a problem. In
response, "yes" accounted for 80%, with "no" at no more than 15%.

9) Poll: Abe stands at 45% in post-Koizumi race, Fukuda at 25%

ASAHI (Page 1) (Abridged)
June 27, 2006

The Asahi Shimbun conducted a telephone-based nationwide public
opinion survey on June 24-25, in which respondents were asked who
they thought would be appropriate for the next prime minister. In
response to this question, 45% picked Chief Cabinet Secretary Shinzo
Abe, with 25% preferring Yasuo Fukuda, one of Abe's predecessors in
the CCS post. In a previous survey taken in May, Abe stood at 41%,
with Fukuda at 29%. In the latest survey, the margin between the two
was wider than in the last survey. Among other post-Koizumi
candidates, Foreign Minister Taro Aso marked 5% and Finance Minister
Sadakazu Tanigaki at 3%. Among those who picked Abe, 52% or more
than half of those surveyed cited his personal character and image.

The approval rating for the Koizumi cabinet was 45%, leveling off
from the last survey. The disapproval rating was 39%.

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10) Prime Minister Koizumi does not rule out possibility of visiting
Yasukuni Shrine while in office, including Aug. 15

ASAHI (Page 5) (Full)
June 27, 2006

Prime Minister Koizumi, when asked yesterday, "Do you plan to visit
Yasukuni Shrine on Aug. 15?" said: "I recently attended the memorial
service for the war dead in Okinawa. The representative of the war
bereaved families stated that they hope I will continue the shrine
visits in the future, as well." Bearing in mind the Liberal
Democratic Party (LDP) presidential race in September, Koizumi said:
"The shrine visit should not be made an issue, should it?" He was
thus replying to reporters at his official residence.

When asked about his shrine visits, Koizumi until recently had said,
"I will make a decision properly." But yesterday, Koizumi, citing
the words of the representative of the war-bereaved families, did
not deny the possibility of visiting the shine while he is in
office, including Aug. 15.

On the other hand, referring to LDP Policy Research Council Chairman
Hidenao Nakagawa's proposal made on June 23 to expand the
Chidorigafuchi National Cemetery by dismantling the government
servants' compounds, Koizumi explained: "If there were
government-owned land, it would be good to rebuild it as a park, and
it would be good if such a park is welcomed by people. I asked him
to have in-depth discussions on that."

11) Defense chief Nukaga: Whether North Korea has fueled Taepodong-2
is uncertain

YOMIURI (Page 4) (Full)
June 27, 2006

In a party yesterday evening of House of Representatives members of
the Liberal Democratic Party (LDP) in Osaka, Defense Agency Director
General Fukushiro Nukaga said: "It is probably true that a
Taepodong-2 long-range ballistic missile has been mounted on a
launch pad. But it is uncertain whether North Korea has fueled the
missile."

12) National Congress on 21st Century Japan urges LDP, Minshuto to
put high priority on policy discussions in selecting presidents

TOKYO SHIMBUN (Page 2) (Abridged slightly)
June 27, 2006

The National Congress on 21st Century Japan, an expert panel,
released a set of proposals yesterday calling for thorough
discussions on policies in the Liberal Democratic Party and Minshuto
(Democratic Party of Japan) prior to their respective presidential
elections.

The proposal urged the LDP leadership to examine and release the
party's achievement of its manifesto produced for last year's Lower
House election prior to the upcoming presidential election. The
report also urged prospective candidates to announce their
presidential manifestos, which include the following: (1) whether or
not to continue with the party's manifesto, released last year for
the Lower House election; (2) specific approaches to foreign

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affairs, fiscal reconstruction, and decentralization; and (3) the
party's decision-making rules and the relationship between the
government and the ruling bloc.

The panel also urged prospective Minshuto presidential candidates to
produce their manifestos. Additionally, the proposal advised the
largest opposition party to discuss its future image more thoroughly
than the LDP.

13) E-commerce reaches 224 trillion yen, topping US, according to
last year's market survey

MAINICHI (Page 11) (Lead para.)
June 27, 2006

The 2005 market survey on e-commerce released yesterday by the
Ministry of Economy, Trade, and Industry (METI) found that Japan's
e-commerce market came to 224 trillion yen, exceeding the 189
trillion yen recorded in the US. In terms of the e-commerce rate,
which reflects the difference in the scale of the two countries'
economies, the difference is still greater, with that of Japan
reaching 20.6% while that of the US stands at 11.9%. The survey
found that Japan is ahead of the US in terms of making Internet
trading more efficient.

14) MAFF, MHLW to start prior inspections of US meatpackers

NIHON KEIZAI (Page 5) (Full)
June 27, 2006

Following the agreement to resume US beef imports, the Ministry of
Agriculture, Forestry, and Fisheries (MAFF) and the Ministry of
Health, Labor, and Welfare (MHLW) will start prior inspections of 35
US meat-processing plants authorized to export products to Japan
starting on June 26, US time. The plan is that the inspections,
which will be carried out by three teams, will be completed on July

21.

Prior inspections are one of the conditions for reinstating the beef
trade. Inspectors will check whether the US meat-processing plants
are fully equipped with processing facilities and employees are
familiar with conditions for exporting products to Japan.

Once the schedule is completed, MAFF and other concerned
organizations will vet the details of the inspection reports and
authorize imports from the plants that had no problems. US beef will
be on store shelves in late July at the earliest.

Tokyo and Washington on June 21 agreed to resume US beef imports by
Japan. As conditions for that, the US has pledged to allow the
Japanese side to conduct prior inspections and observe surprise
inspections by the US. Japan has pledged to strengthen its
quarantine system.

15) More than 70%, or 11.4-14.3 trillion yen, of fiscal
reconstruction to be funded with spending cuts, government, ruling
camp decide; Consumption tax hike to come into focus

NIHON KEIZAI (Top Play) (Lead para.)
June 27, 2006

The government and the ruling camp yesterday adopted a spending cut

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plan to be implemented over the next five years as a cardinal
feature of unified reform of revenues and expenditures aimed at
reconstructing national and local finances. The government will cut
expenditures by 11.4 to 14.3 trillion yen with the aim of moving the
primary balance of the national and local governments into the black
in fiscal 2011. To that end, approximately 16.5 trillion yen is
needed. The plan is to make up for more than 70% of that amount with
spending cuts, and the remaining 2-5 trillion yen will be financed
with tax hikes and other means. The margin of a hike in the
consumption tax and when such an increase should take place will now
become a focus of attention.

16) China now ardently trying to enhance friendship with Japan, but
wary of Yasukuni visit

ASAHI (Page 3) (Full)
June 27, 2006

Nobuyoshi Sakajiri, Beijing

China is actively signaling Japan that it wants to improve relations
between the two countries. President Hu Jintao has expressed his
intention to make a visit to Japan, even though he has attached some
conditions. Since then, China has been playing up the need to expand
bilateral exchanges, as well as the transparency of its military.
Beijing has paid close attention to whether Prime Minister Koizumi
will visit controversial Yasukuni Shrine on Aug. 15, the anniversary
of the end of World War II, and to the Liberal Democratic Party
(LDP) presidential election to determine who will succeed Koizumi.
China's ulterior motive is to create an environment as favorable as
possible to it by displaying its willingness to enhance its
friendship with Japan.

"Apparently, China has turned around."

This remark came yesterday from one of the 6th Self-Defense Forces
(SDF) delegation of field-grade officers to China. China has
promised that it would open, for instance, its naval base at
Zhanjiang, Guangdong Province, which is drawing attention in
connection with gas field development in the East China Sea to SDF
personnel this year. This will be the first time for China to open
its military facilities to people from other countries. Yesterday,
the first day of their China tour, SDF delegates visited a main tank
regiment in the Beijing military area.

During the events in Huludao, Liaoning Province, commemorating the
60th anniversary of the repatriation of Japanese soldiers, State
Council Councilor Tang Jiaxuan delivered a speech in which he said:
"Development of China-Japan relations will be highly beneficial to
the peoples of the two countries."

In addition, the All China Youth Federation, a unified front
composed mainly of China Youth Communist Federation members, is
planning to invite the 3,000 Japanese who visited China in 1984 to
revisit. This plan has come in response to President Hu's desire and
is drawing attention. Hu once belonged to the Youth Communist
Federation.

A diplomatic source in Beijing said: "Around the time President Hu
indicated to Japanese Ambassador to China Yuji Miyamoto his
intention to visit to Japan with conditions, China turned around and
since then has undertaken a friendship offensive."

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Lying behind this move by China is its desire to prevent Koizumi and
his successor from visiting Yasukuni on Aug. 15 by easing anti-China
sentiment in Japan and instead increasing Japanese public calls for
improvement in Japan-China relations. China has invited Democratic
Party of Japan (Minshuto) President Ichiro Ozawa to visit China.
This invitation is perhaps intended to shake the LDP.

An expert on relations with Japan here said: "China is well aware
that it is highly likely that Prime Minister Koizumi will visit
Yasukuni Shrine on Aug. 15. China is making efforts now to prevent
such a situation and even if such a situation happens, to prevent
China-Japan relations from falling into in an irreparable situation.
The fact that China is doing this before Prime Minister Koizumi's
last visit to the United States as prime minister would send a
strong message to the US."

17) Gas field talks not to be held until July or beyond with China
disregarding Japan's call

SANKEI (Page 2) (Excerpts)
June 27, 2006

Tokyo and Beijing were to resume bilateral bureau-chief-level talks
to discuss gas fields in the East China Sea within this month.
However, the talks are now certain to be put off until July or
beyond. Japan is calling for an early resumption of the talks, but
China has made no clear response. Instead, it is working to create a
fait accompli. As part of such a move, the State Oceanic
Administration has revealed that it will shortly start operations at
the Shirakaba Field (Chunxiao in Chinese).

Commenting on the postponed talks, a senior Foreign Ministry
official indicated his view that China might be using the scheduling
of the talks as a bargaining chip. He said, "China has delayed the
scheduling of the talks in the past as well, giving various
reasons."

Tokyo and Beijing have been diametrically opposed in talks to
jointly develop gas fields in the East China Sea and draw their
exclusive economic zone boundary. Since the matter involves the
deep-seated issue of the ownership of the Takeshima/Dokdo islets,
the talks remain stalemated.

Progress cannot be hoped for all the more due to the fact that China
is reluctant to hold talks while Prime Minister Junichiro Koizumi is
in office.

Amid the stalemate, China is frantically trying to establish a fait
acompli.

DONOVAN