JAPANESE MORNING PRESS HIGHLIGHTS 07/20/06

UNCLAS SECTION 01 OF 09 TOKYO 004020

SIPDIS

SIPDIS

DEPT FOR E, P, EB, EAP/J, EAP/P, EAP/PD, PA;
WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST DIVISION;
TREASURY/OASIA/IMI/JAPAN; DEPT PASS USTR/PUBLIC AFFAIRS OFFICE;
SECDEF FOR JCS-J-5/JAPAN,
DASD/ISA/EAPR/JAPAN; DEPT PASS ELECTRONICALLY TO USDA
FAS/ITP FOR SCHROETER; PACOM HONOLULU FOR PUBLIC DIPLOMACY ADVISOR;
CINCPAC FLT/PA/ COMNAVFORJAPAN/PA.

E.O. 12958: N/A
TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA

SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 07/20/06


Index:

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

Yasukuni Shrine issue:
4) Showa Emperor in 1988 memo expressed displeasure that Class-A war
criminals enshrined at Yasukuni, vowed not to visit the shrine
5) High party official in meeting with LDP's Koga in China was
encouraged by trend to separate war criminals from war dead at
Yasukuni Shrine

North Korea problem:
6) Gap between Chief Cabinet Secretary Abe, who wants sanctions soon
against North Korea, and Prime Minister Koizumi, who takes
wait-and-see stance
7) Yomiuri Internet poll: Over half the public see North Korea issue
affecting LDP presidential race

Defense and security affairs:
8) US, Japan sign MOI on handling of missile defense technology
9) US, Japan to sign agreement within year on MD information sharing

10) Minshuto President Ozawa argues against Japan having a
capability to attack enemy bases

Budget ceilings:
11) Government, ruling parties agree on 4.68 trillion yen general
account budget containing 3% cut in foreign aid outlays
12) Defense budget ceiling has only a 1% cut, reflecting special
consideration to USFJ realignment cost

13) Foreign Ministry establishes new international cooperation
bureau as part of ODA reform

Political merry-go-round:
14) Former Chief Cabinet Secretary Yasuo Fukuda may not run in the
LDP presidential race after all
15) The "new Ozawa" appears in public all smiles, exuding patience


Articles:

1) TOP HEADLINES

Asahi:
Elpida Memory to establish new plant for DRAM in Taiwan

Mainichi:
Japan, US to sign accord to share information on missile defense in
wake of North Korea's missile launches

Yomiuri:
Land ministry to finance repair of condos built based on old
anti-quake standards

Nihon Keizai:
Emperor Hirohito thought Yasukuni Shrine should not honor war
criminals, according to memo

Sankei:

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Nihon Keizai Shimbun employee suspected of earning 5 million yen in
profits from insider trading only in four days

Tokyo Shimbun:
Heavy rains leave 12 dead, 11 missing

2) EDITORIALS

Asahi:
(1) Considering the GSDF experience in Iraq

Mainichi:
(1) CO poisoning involving Paloma water heater also caused by
deteriorated safety mechanism
(2) Calmly look into the details of Akita murders

Yomiuri:
(1) CO poisoning caused by Paloma water heater: Company, government
forget safety
(2) Whitepaper on Economic and Fiscal Policy lacks analysis of
income gap

Nihon Keizai:
(1) China must accelerate reform of the yuan
(2) Japan should aim for wide-ranging economic partnership with
India

Sankei:
(1) Additional sanctions must be taken against North Korea
(2) Paloma bears heavy responsibility

Tokyo Shimbun:
(1) Fatal CO poisoning: Information on danger must be thoroughly
disclosed
(2) Whitepaper on Economic and Fiscal Policy: Government urged to
correct income gap among youth

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, July 19

NIHON KEIZAI (Page 2) (Full)
July 20, 2006

11:00
Met with Vice Finance Minister Hosokawa and Budget Bureau Director
General Fujii at the Prime Minister's Official Residence (Kantei).

16:00
Met with Foreign Minister Aso, Agriculture Minister Nakagawa, State
Minister responsible for Economic and Fiscal Policy Nikai and Deputy
Chief Cabinet Secretary Futahashi, followed by Internal Affairs and
Communications Minister (MIC) Takenaka and Local Administration
Bureau Director General Takabe. Then attended a monthly economic
report-related cabinet meeting.

17:48
Policy meeting between the government and the ruling camp.

18:58
Returned to the official residence.


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4) Emperor Showa (Hirohito) thought Yasukuni Shrine should not
enshrine Class-A war criminals, according to memorandum

NIHON KEIZAI (Top Play) (Excerpts)
July 20, 2006

Emperor Showa (Hirohito) expressed his strong displeasure in 1988 at
the decision made by Yasukuni Shrine to include Class-A war
criminals in the list of war dead honored there. He had told former
Imperial Household Agency Grand Steward Tomohiko Tomita (now
deceased): "That is why I stopped visiting the shrine," according to
a memorandum by Tomita that was obtained by the Nihon Keizai Shimbun
yesterday. The late emperor stopped visiting Yasukuni Shrine
following the enshrinement of Class-A war criminals there in 1978,
but he did not officially disclose the reason. The memorandum also
includes descriptions about the emperor's fight against disease, and
it is of great value as a historical document.

A memorandum detailing the reason the emperor ceased visiting
Yasukuni Shrine has been found for the first time. Many have
speculated that the enshrinement of Class-A war criminals was the
reason, and the memorandum confirms this.

Tomita wrote down the contents of his conversations with the emperor
in his diaries and notebooks in detail. He left 12 diaries
(1975-1986) and some 20 notebooks (1986-1997).

A memo about the emperor's statement on Yasukuni Shrine dated April
28, 1988, was attached to a notebook. According to the memo, the
emperor said: "(Executed) Class-A war criminals were included in the
list of war dead honored at the shrine, including Matsuoka and
Shiratori, though I heard Tsukuba was cautious about it."

"Matsuoka" is former Foreign Minister Yosuke Matsuoka, and
"Shiratori" is former Ambassador to Italy Toshio Shiratori. Both
have been enshrined at Yasukuni Shrine. "Tsukuba" refers to Fujimaro
Tsukuba, the chief priest of Yasukuni Shrine. The Health and Welfare

SIPDIS
Ministry gave approval for the enshrinement of Class-A war criminals
in 1966, but Tsukuba did not enshrine them.

The memo further noted: "I wonder what the current chief priest,
Matsudaira's son, was thinking. He did it so easily. I believe
Matsudaira sought peace, but I think he does not know how his father
was thinking. That is why I have refrained from visiting the shrine
since then. That is my feeling."

"Matsudaira" refers to the late Yoshitami Matsudaira, the last
minister of the Imperial Household, and his eldest son the late
Nagayoshi Matsudaira, who decided to enshrine the Class-A war
criminals in 1978.

5) China expresses hopes for separate enshrinement at Yasukuni
Shrine

ASAHI (Page 2) (Full)
July 20, 2006

Kengo Sakajiri, Beijing

Former Liberal Democratic Party Secretary General (and chairman of
the Japan War-Bereaved Association) Makoto Koga, now visiting China,
yesterday met with Wang Jiarui, head of the International Department

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of the Chinese Communist Party's Central Committee in Beijing. Wang
referred to Koga's proposal for separating Class-A war criminals
from the war dead enshrined at Yasukuni Shrine and indicated his
hopes: "We have paid attention to the idea of separate enshrinement.
If that idea were acceptable in Japan, it would be a good idea."

Wang added: "The Yasukuni issue has stood in the way of Japan-China
relations. We can understand the act of consoling the souls of the
war dead, but mixing up those who caused the war and the general
public must not be allowed."

Afterwards, Koga met with Vice Foreign Minister Wu Dawei in the city
and asked for China's cooperation on the North Korean nuclear and
missile issues, as well as the abduction issue. Wu told Koga: "We'd
like to continue efforts under the six-party framework. The
situation will not make (progress) so easily for a while, but we
think it is necessary to continue behind-the-scenes efforts."

6) Gap between Abe, who is eager for Japan to prepare with US
additional sanctions against North Korea, and Prime Minister, who
takes "wait-and-see" stance

MAINICHI (Page 5) (Excerpts)
July 20, 2006

Chief Cabinet Secretary Shinzo Abe held a telephone discussion
yesterday with US Ambassador to Japan Schieffer to discuss the
imposition of additional sanction measures on North Korea. Abe
stated, "It is important for Japan and the United States to
cooperate closely and move ahead with preparations." Ambassador
Schieffer came out with the same thinking. In contrast, Prime
Minister Junichiro Koizumi told the press corps yesterday, "I think
it is better to wait for awhile to see whether North Korea will
sincerely respond to the UNSC resolution." A perception gap was
revealed between him and Abe, who takes a hard-line stance.

After the North Korea missile launches, Prime Minister Koizumi
strongly avoided being out front, entrusting the handling of the
issue to Abe and Foreign Minister Taro Aso. In that context, the two
cabinet officials met frequently with Ambassador Schieffer and often
exchanged information.

In the discussion yesterday, the Ambassador noted: "It was a great
achievement for Japan to have the UNSC adopt the resolution by a
unanimous decision. This is proof of the firm alliance relationship
between the US and Japan. I thank Japan for its efforts." Abe also
expressed his appreciation for the US' coordinating and cooperative
stance, saying, "I would like to continue efforts at the working
level."

7) Over 50% of public surveyed by Internet monitor poll think North
Korea will be a campaign issue in the LDP presidential race

YOMIURI (Page 2) (Excerpt)
July 20, 2006

In a second Internet-monitor survey carried out by the Yomiuri
Shimbun (July 7-11) on the next prime minister after Koizumi, 55% of
participants in the poll thought (answering a multiple choice
question) that the North Korea problem would be a campaign issue in
the September election to pick the president of the Liberal
Democratic Party (LDP). This was a 10% jump from the first poll in

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June.

In the first poll, North Korea ranked seventh in importance. This
time, the issue had risen to third place, following "reform of the
social welfare system, including pensions and medical care" with 77%
, and "making the fiscal system sound" with 57% . It seems that the
launching of seven missiles by North Korea, as well as the press
interview by a South Korean abductee who was married to Japanese
abductee Megumi Yokota had an influence on public thinking.

8) Japan, US sign MOI on provision of MD technology

TOKYO SHIMBUN (Page 2) (Full)
July 20, 2006

The government formally decided yesterday to provide the United
States with Japan's weaponry and arms technology regarding the joint
development of the sea-based SM-3 interceptor missile system as part
of missile defense (MD). The government also signed a memorandum of
implementation with the US government prohibiting the use of such
for purposes other than the original intent and shifting them to a
third country.

The MOI stipulates specific conditions for the provision of weaponry
and arms technology based on the notes exchanged between the two
countries in June on joint development. This allows Japan to export
second-stage rocket motors and warhead covers.

9) Japan, US to conclude agreement on intelligence sharing on
missile defense before year's end

MAINICHI (Top play) (Full)
July 20, 2006

The Japanese and US governments decided yesterday to conclude an
agreement that will serve as guidelines on intelligence sharing in
jointly operating missile defense (MD). When North Korea recently
launched several ballistic missiles, the two countries failed to
share intelligence swiftly in some areas. This led to the decision
to make clear rules speedily. The two governments plan to map out
rules by December when US Forces Japan (USFJ) starts operating PAC-3
ground-based interceptor missiles at its Kadena Air Base in Okinawa
Prefecture.

The planned agreement will stipulate situations requiring
intelligence sharing and their areas and scopes. Tokyo and
Washington will coordinate their views on whether to exchange
intergovernmental notes or an agreement between Japan's Defense
Agency and the US Defense Department.

When North Korea launched ballistic missiles on July 5, US military
early warning satellites detected them. The Maritime Self-Defense
Force and the US military also deployed Aegis vessels capable of
tracking ballistic missiles. Japan and the US also jointly tracked
them using all sorts of radars, including the USFJ's X-band radar in
Aomori and the ASDF's FPS-XX radar in Chiba. "We share intelligence
at all levels," US Ambassador Thomas Schieffer said in describing
close cooperation between Japan and the United States.

But a senior SDF official voiced a different view:

"The US hardly conveyed early warning satellite intelligence to the

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SDF swiftly. It exposed the fact that hardware has been improved
tremendously but Japan and the US have yet to create rules on
intelligence sharing."

The US is scheduled to begin operating the PAC-3 before year's end
and to deploy the USS Shiloh carrying sea-based SM-3 missiles to the
USFJ in August.

Japan will also deploy the PAC-3 at the ASDF Iruma base in Saitama
by next March and upgrade the Kongo Aegis vessel to carry SM-3 by
the end of fiscal 2007.

10) Ozawa describes the enemy base strike argument as "absurd,"
calls for solid Japan-US-China relationship

SANKEI (Page 5) (Excerpts)
July 20, 2006

Following North Korea's recent launching of missiles, President
Ichiro Ozawa of Minshuto (Democratic Party of Japan) has criticized
the government's North Korea policy, describing the growing enemy
base strike argument as "absurd." Ozawa basically perceives that
Japan's UN-centered policy is not working and that a trilateral
relationship among Japan, the United States, and China has yet to
take shape.

Delivering a speech in Tokyo on July 17, Ozawa said regarding the UN
Security Council's adoption of a resolution condemning North Korea:

"Japan was forced to play a hard-line role, while the US, China, and
Russia colluded in their views behind the scenes. Japan was forced
to agree to drop (the UN Charter's) Chapter 7 allowing imposing
sanctions from the resolution. (Japan) was probably not aware of
what the US had discussed with China and Russia or of Washington's
true intention."

Ozawa thus indicated that Japan and the US were not necessarily
monolithic.

He also criticized the government's plan to impose sanctions on the
North under the Foreign Exchange and Foreign Trade Control Law:

"Results cannot be achieved unless major countries take part.
Policymakers must make a decision after taking such a factor into
account."

Ozawa also explained his view this way:

"There is no solid trilateral relationship among Japan, the US, and
China. Japan must serve as a coordinator between the US and China in
order to achieve political and economic stability."

11) Ceiling of budget estimates for fiscal 2007: Government, ruling
parties agree to cap general-account expenditures at 46.8 trillion
yen; ODA to suffer 3% cut

TOKYO SHIMBUN (Page 1) (Abridged)
July 20, 2006

The government and the ruling camp yesterday held a meeting and
discussed budget request guidelines for the fiscal 2007 budget.
Participants in the meeting agreed that policy-related

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general-account expenditures be capped at approximately 46.8
trillion. While public-works-related spending and official
development assistance (ODA) will suffer a 3% cut from the original
fiscal 2006 budget, social security expenses will increase due to
the graying society. As a result, the fiscal 2007 budget will exceed
the previous year's initial budget by 400 billion yen. The
government will adopt the guidelines at a cabinet meeting to be held
tomorrow.

The government set the budgetary cap in line with the basic policy
guidelines on economic and fiscal management and structural reforms
for the fiscal 2006 national budget, which incorporated spending
cuts up to 14.3 trillion yen over five years starting in fiscal

2007.

Some 220 billion yen will be cut from the expected natural increase
in social expenditures due to the aging society, such as by lowering
the state's share of employment insurance. Natural increases in
fiscal 2007 were expected to reach 770 billion yen, so spending on
social security will increase by 550 billion yen after the cuts. The
budgetary cap on the general-account expenditures topped the 46.4
trillion yen of the initial budget for the fiscal 2006 because of
extra expenditures for the Upper House election next summer.

12) Budget request guidelines: Defense spending cut 1% ; Government,
ruling camp to treat expenses for USFJ realignment as exception

MAINICHI (Page 2) (Almost Full)
July 20, 2006

The government and the ruling parties yesterday agreed to cap the
fiscal 2007 general account budget at 46.8 trillion yen. According
to the guidelines, growth in social security expenditures will be
held to 550 billion yen. Defense-related spending and subsidies to
private schools will also suffer a 1% cut from the previous year.
Other spending items, such as discretionary expenditures and
public-works-related spending, will be slashed 3% from the previous
year. As a result, the overall increase over the previous year's
budget will be held to 440 billion yen. As part of a plan to jointly
reform revenue and expenditures, certain budgetary items have been
slated for cuts over the next five years, meaning that the budget
request guidelines for fiscal 2007 have been set in a more detailed
manner than in the past.

The guidelines set a 22 billion yen cut in public works expenditures
from the preceding year and a 140 billion yen reduction in other
expenditures, though 200 billion yen was allocated to cover the cost
of the Upper House election next summer and 50 billion yen for
priority spending items. As a result, general account expenditures
will expand by 440 billion yen from the previous year, but the
Finance Ministry intends to further cut expenditures in the budget
compilation process at the end of the year.

For the promotion of efficiency and prioritization of spending
items, the guidelines incorporated a 1% cut in subsidies to public
utility corporations, standardizing discretionary contracts with
public utility corporations, and reducing subsidies to local
governments.

As exceptions to the budgetary cap, the government and the ruling
camp will discuss expenses for the USFJ realignment and a revision
of child allowances as part of measures to deal with the declining

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birthrate in a separate framework in the run-up to the year-end
budget compilation.

The government will present the budget request guidelines to the
Council on Economic and Fiscal Policy, which is to meet on the 20th,
and adopt it at a cabinet meeting on the 21st. Each government
agency will submit budgetary requests by the end of August.

13) Foreign Ministry to establish an international cooperation
bureau as part of ODA reform, bolster policy planning capability

SANKEI (Page 3) (Full)
July 20, 2006

The Ministry of Foreign Affairs (MOFA) will dismantle the existing
Economic Cooperation Bureau and establish in its place an
International Cooperation Bureau in order to strengthen the
ministry's policy planning functions. Working directly under the
chief of this new bureau will be a deputy director-general in charge
of global scale issues. The deputy director-general will deal with,
for instance, environmental issues and avian flu. MOFA will also
establish a Southern Asia Department in charge of Southwest Asia and
ASEAN. This reorganization plan will be given approval at a cabinet
meeting tomorrow.

As part of the reform of Japan's official development assistance
(ODA),the government will establish an Overseas Economic
Cooperation Council, which will map out ODA strategy under the
leadership of the prime minister. The ODA implementation agencies
will be consolidated into the Japan International Cooperation Agency
(JICA). Following this reform plan, MOFA will review the current ODA
system -- under which the Economic Cooperation Bureau is in charge
of ODA on a bilateral basis and the Global Issues Department is in
charge of ODA on a multilateral basis -- in order to bolster the
functions of ODA planning and consolidate these two offices into the
International Cooperation Bureau.

A Multilateral Cooperation Division, a Specialized Agencies
Division, and a Global Environment Division, all to be newly
created, will come under the supervision of a deputy
director-general, who will work under the direct control of the
director general of the International Cooperation Bureau.

The United Nations Administration Division under the Global Issues
Department will be reorganized into a United Nations Coordination
Division, which will come under the control of the Foreign Policy
Bureau responsible for reform of the UN Security Council and other
reforms. Under this new system, "We will pursue strategic
UN-centered diplomacy," a senior MOFA official said.

With the establishment of a Southern Asia Department under the Asian
and Oceanian Bureau, the principal aim will be to make clear Japan's
diplomatic position of attaching importance to India, which is
increasing its presence on both the political and economic fronts,
as well as "to prepare a system for us to pay due attention to Asian
countries surrounding China," the same official added. The
implication is to counter a rising China.

14) Fukuda may not run in LDP presidential race

ASAHI (Page 1) (Full)
July 20, 2006

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Former Chief Cabinet Secretary Yasuo Fukuda informed the Liberal
Democratic Party (LDP) Tokyo chapter that he would not attend its
general assembly slated for July 28, sources revealed yesterday.
This general meeting is viewed as a forum for contenders for the
post of the prime minister to speak about their policies ahead of
the LDP presidential race in September. Whether Fukuda would attend
the forum and express his willingness to run drew much attention,
but now that it has become certain that he will not attend the
forum, many in the party are beginning to speculate that he will not
run in the presidential race.

Chief Cabinet Secretary Abe, Foreign Minister Aso, Finance Minister
Tanigaki, State Minister for Financial, Economic, and Fiscal Policy
Yosano, and Fukuda had been all invited to the general meeting.
Except for Fukuda, all the others will attend, with Aso taking part
via a video feed.

According to various polls, Fukuda has enjoyed the second highest
support rate after Abe. But he has not made clear whether he will
declare his candidacy, thereby fueling the view in the LDP that Abe
is likely to enjoy an easy run.

15) Smiling "new Ozawa" meets foreign correspondents in public
relations event

TOKYO SHIMBUN (Page 2) (Full)
July 20, 2006

Ichiro Ozawa, head of the Democratic Party of Japan (DPJ =
Minshuto),yesterday gave an interview to foreign news companies at
the Foreign Correspondents' Club of Japan in Tokyo, to present to
them the image of a "new Ozawa."

In a speech given at the outset of the interview, he unusually
cracked up the audience with a joke, "Since I am not as smart as
Ichiro of the Seattle Mariners, I am frequently criticized by the
media." Presumably out of a desire to change his image of being
strong-arm and opinionated, he referred to his effort to transform
himself: "I used to offered rebuttals before by firmly stating my
policy. However, I am now trying to be patient and respond with a
smile as much as possible. That is where I have changed a little, if
you say I have changed."

He politely replied to questions during the one-hour interview,
wrapping it up by playing up his determination to take over the
reins of power: "Human beings cannot do anything that is beyond
their capacity. I am a country bumpkin, but I am now doing my utmost
in my own way to capture the reins of government."

SCHIEFFER