JAPANESE MORNING PRESS HIGHLIGHTS 07/05/06

UNCLAS SECTION 01 OF 11 TOKYO 003717

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SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 07/05/06

Index:

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

Opinion polls:
4) 65% of Japanese public see North Korea as threat to Japan's peace
and security, 75% appreciate US-Japan security pact
5) Fuji-Sankei poll shows CCS Abe leads Fukuda in post-Koizumi race


DPJ's Ozawa in Beijing:
6) Chinese President Hu avoids touching on Yasukuni issue in meeting
with DPJ President Ozawa
7) Ozawa advocates Japan-US-China 'equilateral triangle' relations

8) Gist of Ozawa-Hu talks
9) China ready to improve relations in earnest
10) Ozawa meets with ex-Foreign Minister, State Councillor Tang
Jiaxuan

China, DPRK issues:
11) CCS Abe urges China to correct anti-Japanese education, implies
pressure on North Korea
12) Prime Minister Koizumi upset at China's setting of guidelines
for Yasukuni Shrine visits

Political, economic, foreign topics:
13) Prime Minister Koizumi tells President Bush why he will leave
office this year
14) Prime Minister Koizumi praises CCS Abe
15) GOJ to apologize to Dominican Republic emigrants
16) Many challenges left behind for GOJ spending plan
17) Tokyo Gov. Ishihara likens Beijing Olympics to Hitler's
18) BOJ likely to end zero-interest policy shortly

Articles:

1) TOP HEADLINES

Asahi:
Government to issue prime minister's statement expressing apology to
emigrants for hardships in Dominica

Mainichi:
Among contracts Japan Racing Association conclude with 12 family
firms in which retired officials land lucrative jobs, 94% are found
private ones

Yomiuri & Tokyo Shimbun:
Yagi gets life for killing girl; Judge: He should atone for his
crimes for rest of his life, calling for careful examination when
authorities consider whether he should be released on parole

Nihon Keizai:
BOJ rules to be reviewed to totally ban on share transactions by
executives

Sankei:
Education and Science Ministry to give priority to assistance for
research activities by doubling subsidy

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2) EDITORIALS

Asahi:
(1) Minshuto head Ozawa expected to show persuasive policy toward
China
(2) In case of killing girl in Hiroshima, were deliberations
conducted thoroughly?

Mainichi:
(1) Economic and Fiscal Policy Guideline for 2006: A host of tasks
likely to be left to Koizumi successor
(2) Ruling on girl-killing case: We must squarely look at mean
incident

Yomiuri:
(1) Improvement in quality should come after cuts in number of
public servants
(2) In meeting with Minshuto Ozawa, Chinese President avoids
Yasukuni issue

Nihon Keizai:
(1) Fiscal reform plans must be implemented

Sankei:
(1) Ozawa-Hu meeting: Japan welcomes dialogue, but ...
(2) In girl-killing case, avoidance of death penalty unreasonable

Tokyo Shimbun:
(1) Public service reform law: private firms must be aware of need
to maintain quality, be responsible for the public
(2) Trials of Pol Pot faction leaders must shed light on massacre
madness

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, July 3

NIHON KEIZAI (Page 2) (Full)
July 4, 2006

10:15
Made a return home report at the Imperial Palace.

10:31
Handed a certificate of recommendation to a candidate-to-be for the
Kagawa gubernatorial election at LDP headquarters, joined by LDP
General Council Chairman Kyuma.

11:05
Attended an award ceremony for those who performed meritorious
safety services at Kantei. Afterwards, met MOFA's Consular Affairs
Bureau Director General Tanizaki and others. Later, met Financial
Affairs Minister Yosano and others. Then met with Finance Minister
Tanigaki and others.

11:50
Met with Chief Cabinet Secretary Abe.

13:28
Met with LDP Policy Affairs Research Council Chairman Nakagawa, its
Deputy Chairman Amari and others.

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14:23
Met with Dominican President Fernandez and others.

15:00
Met with Kyodo News Service's Senior Director Yasutaka Takeda, its
Editorial Bureau Director Kenji Goto and others.

16:00
Met with Rengo (Japan Trade Union Confederation) Chairman Tsuyoshi
Takagi and others, joined by Health Minister Kawasaki, Deputy Chief
Cabinet Secretary Nagase, Chief Cabinet Secretary Abe and others.

16:35
Met with Urban Revitalization Headquarters' Secretariat Chief Sawai,
Assistant Officer Makino and others.

17:03
Attended a meeting of the Council on Economic and Fiscal Policy.

18:16
Met with Minister for Administrative Reform Chuma.

19:02
Dined at a Hotel Okura restaurant with former Defense Agency
Directors-General Taku Yamasaki, and Shigeru Ishiba, and JDA
Director-General Fukushiro Nukaga and others.

21:30
Arrived at his official residence.

Prime Minister's schedule, July 4

NIHON KEIZAI (Page 2) (Full)
July 5, 2006

09:31
Attended a staff meeting at LDP headquarters.

10:02
Attended a cabinet meeting at Kantei, and later, attended a meeting
of the Urban Revitalization Headquarters.

10:39
Made a report to the Emperor in private.

11:45
Met with incoming and outgoing Public Prosecutors-General Tadashigi
and Matsuo.

13:45
Met with Chief Cabinet Secretary Abe.

14:50
Met Deputy Foreign Minister Nishida. Afterwards, met with Deputy
Foreign Minister Yabunaka.

15:30
Met with Foreign Minister Aso and MOFA's Foreign Policy Bureau
Director General Kono. Later, met with Securities Dealers
Association of Japan Chairman Koshida. Afterwards, met with Vice
Finance Minister Hosokawa and Budget Bureau Director General Fujii.

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16:42
Attended a tea ceremony at the Imperial Palace.

17:58
Arrived at Kantei.

19:08
Met with leaders of Japanese media companies, such as Sankei Shimbun
Chairman Takehiko Kiyohara.

20:44
Arrived at his official residence.

4) Poll: 65% see North Korea as the largest threat for Japan, 75%
deem Japan-US Security Treaty as useful

YOMIURI (Page 2) (Full)
July 5, 2006

The Yomiuri Shimbun conducted a nationwide survey (by interview on
June 17-18) asking which countries or regions, or international
circumstances are perceived as the most serious threat to Japan's
peace and security, with multiple replies acceptable. Of the
respondents, 65% cited North Korea, followed by 43% listing
activities by international terrorist groups, 37% naming China, and
33% citing the proliferation of weapons of mass destruction like
nuclear weapons.

Those who said the Japan-US Security Treaty has been of help for the
maintenance of Japan's peace and security accounted for
75%,overtaking those who gave a negative reply with 20%. The survey
results show an increasing number of people take the view that the
alliance with the US is indispensable for Japan's security.

Asked about a possible attack on Japan by foreign countries in the
near future, 56% said it would be conceivable, while 40% denied the
possibility. In a survey conducted in July 1999, 57% said yes, while
39% said no.

To a question about the possibility that large-scale terrorist
attacks, like the ones in the US in September 2001, could take place
in Japan, 64% said they were worried, while 34% replied they didn't.
In a similar survey in November 2005, 15%age points more respondents
said they were worried, and those who said they weren't worried were
16 points less than in the latest survey.

5) Poll: Abe's lead over Fukuda widens in LDP presidential race; 70%
call for BOJ Governor's resignation

SANKEI (Page1) (Lead paragraph)
July 4, 2006

The Sankei Shimbun conducted an opinion poll on politics jointly
with Fuji News Network (FNN) on July1-2. The poll results showed
that those who favored Chief Cabinet Secretary Shinzo Abe, 51, as
Koizumi's successor increased to 44.4%,while those for former Chief
Cabinet Secretary Yasuo Fukuda, 69, dropped to 19.1%. Asked if Bank
of Japan Governor Toshihiko Fukui, 70, should resign over his
10-million-yen investment in the Murakami Fund, 69.5% of respondents
said "yes."


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6) Chinese president does not mention Yasukuni issue in meeting with
DPJ head Ozawa

YOMIURI (Page 1) (Full)
July 5, 2006

Ryota Akatsu, Beijing

The Democratic Party of Japan's (Minshuto) President Ichiro Ozawa
yesterday evening met with Chinese President Hu Jintao at the Great
Hall of the People in Beijing and the two agreed to establish an
exchange consultative organ (tentative name) as a forum for Minshuto
and the Chinese Communist Party to meet on a regular basis.
According to Minshuto, Hu did not directly refer to such specific
issues involving the two countries as visits to Yasukuni Shrine.

While no summit has been held between Japan and China for more than
one year, Hu met with a Japanese politician now again, following the
one in March with former Prime Minister Hashimoto and former Foreign
Minister Masahiko Komura, when the two visited China as
representatives of Japan-China friendship organizations.

During the talks with Ozawa, Hu stated: "China-Japan relations have
stalled over the issue of historical views, but the two countries
are located close to each other geographically, and the two can make
up for each other in the economic area. I hope to expand friendly
and cooperative relations in various areas although difficulties
have yet to be removed." Ozawa told Hu: "Given differences between
the two countries as well as the national traits, at times obstacles
could emerge, but both of us should work together to resolve them."

Ozawa also pointed out: "Promoting economic cooperation is a very
good thing, but the bond relying solely on economic interests would
not be strong. Japan-China relations will not be on a true course
unless trust between the peoples and the leaders of the two
countries are at the basis of the relationship."

The meeting lasted for 45 minutes, joined by Minshuto Vice President
Naoto Kan and Secretary General Yukio Hatoyama.

7) Ozawa calls for Japan-US-China equilateral triangle

SANKEI (Page 1) (Excerpts)
July 5, 2006

Shortly before departing for China, Minshuto (Democratic Party of
Japan) President Ichiro Ozawa said, "An equilateral triangle should
be formed by Japan, the United States, and China." This prompted
Foreign Minister Taro Aso and Chief Cabinet Secretary Shinzo Abe to
raise an objection that China is not Japan's ally. Given strained
relations between Japan and China, the equilateral triangle argument
has suddenly emerged mostly from anti-Koizumi forces.

Appearing on a television talk show on July 2, Ozawa said:

"There are no relations of trust between Japanese and Chinese
lawmakers. (Japan, the United States, and China) must form an
equilateral triangle with Japan serving as its pivot."

On July 4, Aso criticized Ozawa's statement, saying: "Japan shares
universal values only with the United States. An isosceles triangle
could be possible but not an equilateral triangle." Abe also raised

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an objection, saying: "Relations with China are important, but China
is not Japan's ally. Japan's foreign policy is based on its alliance
with the United States. An equilateral triangle is different
fundamentally."

8) Main points of Ozawa-Hu talks

YOMIURI (Page 4) (Full)
July 5, 2006

Ryota Akatsu, Beijing

The following are the main points of the meeting yesterday between
Ichiro Ozawa, head of the Democratic Party of Japan (Minshuto),and
Chinese President Hu Jintao.

Views of Japan-China relations

Ozawa: It is essential for Japan and China to keep friendly
relations for Asia as well as the rest of the world. The two
countries can make contributions to be noted in the history of
humankind if both work together.

Hu: The peoples of China and Japan suffered a great deal of
causalities from (Japan's) prewar militarism. China-Japan relations
have stalled over the issue of history perceptions, but
geographically, the two countries are located next door to each
other, and both can make up for each other in the economic area. I
hope both sides will endeavor to remove political obstacles as
quickly as possible and put bilateral ties on the normal track of
healthy and stable development.

Ozawa: Given differences between the two countries and the national
traits, both sides would at times encounter obstacles. But we should
resolve them by mutual efforts.

Interparty exchanges

Hu: China and Japan should build multidirectional, multifaceted, and
multi-level relations.

Ozawa: Ordinary peoples as well as politicians of the two countries
need to discuss frankly and candidly. I propose establishing an
exchange consultative organ (tentative name) as a forum for
political leaders of the Chinese Communist Party and Minshuto to
meet on a regular basis.

Hu: Not only the governments of the two countries but also political
parties and politicians need to make great efforts. I will promote
exchanges actively and without restraint. I will assign Wang Jiarui,
director for the Communist Party's external liaison affairs, as an
official in charge.

9) China to get down to mending relations with Japan

TOKYO SHIMBUN (Page 3) (Full)
July 5, 2006

Chinese President Hu Jintao during his meeting with Ichiro Ozawa,
chief of the Democratic Party of Japan (DPJ = Minshuto),noted the
importance of Japan-China relations: "Japan and China must cooperate
with each other. It is our duty and responsibility to do so, and it

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is possible."

When Hu invited delegates of seven organizations friendly to China
in late March this year, he criticized Prime Minister Koizumi's
visits to Yasukuni Shrine, but at the same time, he sought further
assistance from Japan, frankly saying, "We would like Japan to help
us so that we can further move forward."

According to a source familiar with Japan-China relations, realizing
that last April's anti-Japanese demonstrations were in fact
anti-government activities, the Chinese leadership has begun
desperately seeking ways to improve China's relations with Japan.
The source also indicated: "They have also realized that they must
cooperate with Japan not only in the economic field but also for the
sake of its serious environmental and energy-conserving issues."

China is most concerned that Koizumi's possible visit to Yasukuni in
August could strongly irritate China's public opinion and rekindle
anti-Japanese demonstrations. For this reason, it is making every
effort to reduce the possibility of Koizumi visiting Yasukuni.

Hu's accepting Minshuto delegation, including leader Ozawa, is part
of such an effort. In addition, China apparently wanted to once
again send a clear message to Japan that it wants to improve its
relations with Japan.

10) Ozawa holds talks with Tang in Beijing

YOMIURI (Page 2) (Abridged slightly)
July 4, 2006

Ryota Akatsu, Beijing

Minshuto (Democratic Party of Japan) President Ichiro Ozawa held
talks with Chinese State Councilor and former foreign minister Tang
Jiaxuan at the Diaoyutai State Guesthouse in Beijing on the night of
July 3. At the outset of the meeting, Tang welcomed the leader of
Japan's largest opposition party, saying, "(Ozawa's China visit)
indicates that his party puts high priority on relations between
China and Japan." In response, Ozawa said, "Minshuto, including
myself, is aware of the importance of relations between the two
countries."

Acting Minshuto President Naoto Kan, who was also present at the
Ozawa-Tang meeting, urged China to exercise a good influence on
North Korea in connection with the six-party talks over the North's
nuclear issue. In response, Tang indicated that China would deal
with the matter positively, saying, "We would like to denuclearize
North Korea and push ahead with the six-party talks with a resolute
belief."

Ozawa held talks with Wang Jiarui, head of the International
Department of the Communist Party's Central Committee, on the
evening of July 3. At the outset of the meeting, Wang told Ozawa
that Chinese President Hu Jintao would see him on the afternoon of
July 4. Wang also indicated that the Chinese Communist Party would
promote exchanges with Minshuto, saying, "Exchanging views for
removing obstacles to relations between China and Japan would lead
to the smooth development of bilateral relations." Ozawa said in
response, "We must continue developing cooperative relations based
on the history of Japan's long friendly relations with China."
Ozawa, who assumed the Minshuto presidency in April, chose China for

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his first foreign trip as Minshuto head.

11) Chief Cabinet Secretary Abe says, "China needs to rectify
anti-Japanese education," hinting at increasing pressure on North
Korea

NIHON KEIZAI (Page 2) (Full)
July 5, 2006

In a speech yesterday at the Liberal Democratic Party's
headquarters, Chief Cabinet Secretary Abe referred to China's
continued refusal to hold a summit with Japan because of Prime
Minister Junichiro Koizumi's repeated visits to Yasukuni Shrine,
noting: "The Chinese Communist Party is trying to keep in place its
current attitude with its economic growth and patriotic education.
The issue won't be resolved unless the fundamental structure
underlying anti-Japanese education is dealt with." Abe thus called
on China to rectify its anti-Japanese education.

Speaking of North Korea, Abe implied that Japan would step up
pressure on it, saying: "It's not possible to negotiate with it,
expecting its goodwill." "The Taepodong missile could reach
America's mainland. North Korea must be well aware that
(test-launching a missile) will take a very great risk," Abe added.

12) Prime Minister Koizumi: Everybody is free to visit Yasukuni
Shrine

YOMIURI (Page 4) (Full)
July 5, 2006

Prime Minister Junichiro Koizumi expressed his annoyance with
Chinese Vice Foreign Minster Wu Dawei's indication that China would
go along with visits to Yasukuni Shrine by Diet members, excluding
the prime minister, foreign minister and chief cabinet secretary.
Koizumi told reporters last night, "Everybody is free (to visit the
shrine)." Asked if he meant that China has no right to say that,
Koizumi replied: "That's right. It is only natural that China should
accept Yasukuni visits by Japanese lawmakers (including the prime
minister)."

13) Bush asked Koizumi, "Why do you have to resign as prime
minister?"

MAINICHI (Page 5) (Abridged slightly)
July 5, 2006

"Why are you going to quit as prime minister?"

"Because my term of office will expire."

Prime Minister Junichiro Koizumi introduced the above conversation
he had had with President George W. Bush during his recent visit to
the United States when he met a group of members representing media
companies in Tokyo last night.

Koizumi also quoted Bush as saying, "You can (extend your term) if
you want to, can't you?" But Koizumi told him that such would not be
possible.

An attendee asked regarding Chief Cabinet Secretary Shinzo Abe, who
is regarded as the top post-Koizumi contender, "Will he really grow

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with your forcing culture-like approach?" In response, Koizumi said,
"People grow with posts. He has markedly grown."

Regarding former Chief Cabinet Secretary Yasuo Fukuda, who remains
mum about his candidacy, the attendee also quoted Koizumi as saying,
"It's good that (his true intention) is not known."

Koizumi also reiterated his intention to reveal the name of a person
he would support after the LDP formally announces its presidential
election on September 8.

14) Prime Minister Koizumi praises Abe

ASAHI (Page 4) (Full)
July 5, 2006

Prime Minister Junichiro Koizumi dined last night at a Tokyo hotel
with senior media company officials. Koizumi was quoted as telling
them that Chief Cabinet Secretary Shinzo Abe has greatly grown up.
According to one participant, Koizumi, referring to former Chief
Cabinet Secretary Yasuo Fukuda, who has gained support as a
post-Koizumi contender, said: "We don't know (if Fukuda will run in
the race). I think that's good for now."

Koizumi expressed anew that he would reveal whom he would support as
his successor after the Liberal Democratic Party announces its
presidential election. Regarding his serving in the prime minister's
post for more than five years, Koizumi said: "I was lucky. Nobody
thought this would happen and neither did I. I think common sense
wins."

15) Prime Minister Koizumi to apologize in statement for Japanese
emigrants to Dominica

ASAHI (Top Play) (Lead para.)
July 5, 2006

The government, sued by a group of Japanese emigrants to the
Dominican Republic, won the lawsuit in June, but the Tokyo District
Court pointed out that the then government's emigration policy was
unconstitutional. Taking the court's indication seriously, the
government has now started a study to release a statement by Prime
Minister Koizumi expressing an apology to the emigrants. In addition
to the government's apology, the statement would stipulate relief
measures, including a gift of money in token of the government's
sympathy up to 2 million yen. If the government obtains the
emigrants' understanding, the cabinet will decide to release the
statement as early as July 21 in order to put an end to the lawsuit
issue.

16) Government, ruling camp adopt draft basic policy guidelines on
economic and fiscal management and structural reforms, leaving
unfinished tasks, including, USFJ realignment cost, social security
expenses, cuts in local finances, for future

MAINICHI (Page 3) (Lead paragraph)
July 4, 2006

The government on July 3 adopted draft basic policy guidelines on
economic and fiscal management and structural reforms, which
included spending cuts up to 14.3 trillion yen for reform of
revenues and expenditures, but left out the tax hike issue. The

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package does not indicate specific policies for many areas,
including a budget for USFJ realignment-related expenses and social
security spending cuts. Since it clearly seeks to burden individuals
and local governments further for fiscal reconstruction, the agenda
for the post-Koizumi administration is to what extent it can
persuade the people.

17) Tokyo governor in speech: "2008 Beijing Olympics seems similar
to the one held by Hitler"

ASAHI (Page 33) (Full)
July 5, 2006

In a speech in Tokyo yesterday, Tokyo Governor Shintaro Ishihara in
criticizing China commented: "The Beijing Olympics in 2008 seems
similar to the political Olympics carried out in Berlin by Hitler."

The theme of the speech was the joint development of medium and
small jetliners with Asian countries. Touching on China in the
speech, Ishihara said:

"The average income (per capita) will never reach one-20th of
Japan's level even 10 years from now. ... Many people suggest me not
to speak ill of China because Beijing would oppose (Tokyo's possible
bid to host the 2016 Olympics),but I have to speak against it. ...
People there cannot drink city water because waterworks have yet to
be done."

18) Government increasingly in favor of early lifting of zero
interest rate policy; BOJ to judge, while monitoring stock prices

NIHON KEIZAI (Page 1) (Full)
July 5, 2006

An increasing number of government officials yesterday indicated a
view in favor of supporting an early lifting of the zero interest
rate policy by the Bank of Japan's (BOJ). Following the Bank of
Japan's quarterly business survey results, released on July 3, which
reported a clear uptrend of the economy, a number of officials
indicated the view that conditions for removing the zero interest
rate policy are beginning to be met. State Minister for Economic and
Fiscal Policy Kaoru Yosano yesterday told a news conference: "It is
the role of the BOJ to make such a judgment, whether it comes in
July or August. I believe it will reach a judgment on its own
responsibility and with insight." Commenting on cautious views
voiced by some cabinet ministers, Prime Minister Junichiro Koizumi
on the evening of the same day noted, "I do not think there is much
difference between the two opposing views. I think it is just a
matter of nuance."

The government is empowered to call on the BOJ to postpone the
adoption of its policy change proposal until the next policy-setting
meeting. However, the outlook is that if the BOJ makes such a
proposal, the government will not call on the BOJ to put on hold the
proposal.

In response to a growing mood among government officials for
approving the removal of the zero interest rate policy, the BOJ
plans to discuss the propriety of lifting such a policy at the
meeting. It will monitor the movements of the US economy and stocks,
and cautiously judge other conditions, including the possibility of
the economy returning to a deflationary trend.

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SCHIEFFER