JAPANESE MORNING PRESS HIGHLIGHTS 07/26/06

UNCLAS SECTION 01 OF 06 TOKYO 004151

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 07/26/06
Part-1
Index:
1) Top headlines


2) Editorials

3) Prime Minister's daily schedule

4) LDP presidential contender Shinzo Abe to leave Mori faction to
broaden his party appeal prior to start of election campaign 4
5) Difficult for LDP factions to organize around a single candidate
to go up against frontrunner Abe in the LDP presidential race

6) LDP faction leader Mori explains to Prime Minister Koizumi why
Yasuo Fukuda suddenly dropped out of presidential race

7) JDA chief Nukaga is cautious about entering the LDP presidential
race

8) MOF Minister Tanigaki campaigning in LDP race by promising to
raise consumption tax

9) Opposition Minshuto (Democratic Party of Japan) will attack LDP
candidate Abe on perceived weakness of diplomacy

10) Prime Minister Koizumi on visiting Yasukuni Shrine: Plans trip
to Mongolia around August 10 but says "must be in Japan on August
15"

Articles:
1) TOP HEADLINES

Asahi:
South Korean government admits involvement in kidnapping of Kim Dae
Jung by KCIA; Reports to be made public soon

Mainichi and Tokyo Shimbun:
Nihon Keizai employee arrested over insider trading

Yomiuri:
Amazon to join Internet shopping mall market before year's end

Nihon Keizai:
Major steelmakers to increase production capabilities by 10 PERCENT
-20 PERCENT to increase profitability in anticipation of
realignment

Sankei:
Judicial reform: Speedy trial system to be implemented in October

Akahata:
Akita right-to-life group demands improved welfare administration,
claiming 37-year-old man killed himself in protest

2) EDITORIALS

Asahi:
(1)Make every effort to resume WTO talks
(2)Nihon Keizai employee arrested over insider trading

Mainichi:
(1)WTO trade talks frozen
(2)Postal administration plan must adhere to reform line

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Yomiuri:
(1)WTO talks: future bleak
(2)Nikkei Shimbun lax with privileged data

Nihon Keizai:
(1)Company will return to starting point to recover public trust
(2)Is free trade dead?

Sankei:
(1)Nihon Keizai loses public trust due to employee's insider
trading
(2)Find alternatives to live organ transplants

Tokyo Shimbun:
(1)Free trade must go on despite failed Doha Round
(2)30 years after Lockheed scandal: Public's participation in
politics essential

Akahata:
(1)Structural reform expanded social inequality

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, July 25

NIHON KEIZAI (Page 2) (Full)
July 26, 2006

09:32:
Attended LDP executive meeting at party headquarters.
10:01:
Attended cabinet meeting at Kantei. Met with Defense Agency Director
General Nukaga.
11:10:
Interviewed by elementary and junior high school students from
Okinawa and Hakodate.
11:32:
Met with Kobe University Prof. Makoto Iokibe, who has been named
president of National Defense Academy, and Nukaga.
14:10:
Met with Lower House member Tateo Kawamura and Japan-Brazil 21st
Century members. Had commemorative photograph taken.
15:00:
Met with Internal Affairs and Communications Minister Takenaka.
18:00:
Met at his official residence with AU Chairman Konare.
19:02:
Held joint press conference with Konare regarding the establishment
of Hideo Noguchi Africa Award worth 100 million yen. Attended dinner
party together with Konare and former Prime Minister Mori. Met later
with Mori.

4) Abe to leave Mori faction before LDP presidential race to obtain
wide-ranging support

YOMIURI (Page 1) (Full)
July 26, 2006


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Chief Cabinet Secretary Shinzo Abe has decided to leave the Mori
faction in the Liberal Democratic Party (LDP) before the Sept. 20
LDP presidential election and not to return to the faction after the
presidential race. He intends to declare his decision to leave the
faction when he announces his candidacy for the party leadership
race in late August and to submit a letter of his withdrawal from
the membership to the Mori faction in early September at the time
when the LDP announces the official campaign for its presidential
election on Sept. 20. The purpose of his decision is to obtain
support from a broad range of forces, while weakening the impression
of his being a Mori faction member.

Since former Chief Cabinet Secretary Yasuo Fukuda has decided not to
run in the election, the Mori faction is expected to field Abe alone
in the race.

According to an aide, Abe has judged that the LDP will lose support
from the public unless it conducts a leadership-focused election in
which debate on policy issues would be carried out, eschewing a
numbers tallying game.

Some aides to Abe are concerned that if the Mori faction takes the
lead in supporting Abe in the election, other factions will be
unhappy, and as a result, Abe would not boost support from other
forces. A mid-level Mori faction member said yesterday, "We will
establish a multi-tiered, cross-factional campaign setup for Mr.
Abe."

The expectation is that the Parliamentary League to Support a Second
Chance, which is made up of junior and mid-level lawmakers
supporting Abe, will become the core of groups supporting Abe's
presidential campaign.

Abe intends reveal his administrative vision when he announces his
candidacy, which includes: not accepting recommendations from the
factions in picking new cabinet members and LDP executives; a stance
of succeeding Prime Minister Junichiro Koizumi's policy line of
eliminating factional influence; and choosing cabinet members and
party executives from among veteran, mid-level and junior members in
view of forming a unanimous party arrangement.

5) 2006 LDP presidential race: Uniting anti-Abe forces difficult;
Faction split over fielding Nukaga

MAINICHI (Page 2) (Abridged)
July 26, 2006

With former Chief Cabinet Secretary Yasuo Fukuda's announcement that
he will not run in the Liberal Democratic Party presidential race,
the focus has now shifted whether the forces that have kept their
distances from Chief Cabinet Secretary Shinzo Abe, the front-runner,
can field a single candidate in place of Fukuda. Although the
activities of Defense Agency Director-General Fukushiro Nukaga of
the Tsushima faction, the second largest in the party, are drawing
attention, there are arguments pro and con in the faction about
fielding the defense chief. Other factions with no prospective
candidates are increasingly leaning toward supporting Abe.
Difficulty in uniting anti-Abe forces is now evident.


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Nukaga discussed measures yesterday with Mikio Aoki and Toranosuke
Katayama, who are chairman and secretary general of the LDP's Upper
House caucus, respectively, of the Tsushima faction. Former Science
and Technology Minister Toshimitsu Motegi and others are eager to
field Nukaga, fearing that unless the faction produces its own
candidate, the faction would turn into a hunting ground. The aim is
to secure the second place in the election and win major posts under
the new prime minister for the sake of the race after the next.

In contrast, General Council Chairman Fumio Kyuma of the Tsushima
faction expressed a negative view about fielding Nukaga by saying to
Senior Vice Cabinet Minister Taimei Yamaguchi: "Victory is
everything in an election." The faction's mid-level members,
including Yamaguchi and Yoshitaka Sakurada, are increasingly eager
to back Abe. Nukaga met last night with Motegi, Yamaguchi, and
Sakurada. But they simply agreed to take concerted action. Aoki's
decision holds the key.

Winning "Fukuda votes" is equally critical for Foreign Minister Taro
Aso and Finance Minister Sadakazu Tanigaki, who have expressed their
intentions to run. But the view is prevalent that because Tanigaki
and Aso are incumbent cabinet ministers and not anti-Koizumi, their
abilities to absorb Fukuda votes are limited. Financial Affairs,
Economic, and Fiscal Policy Minister Kaoru Yosano, another possible
candidate, remains cautious about joining the race.

Many in the factions with no prospective candidates, such as the
Niwa-Koga faction and the Ibuki faction, are visibly pro-Abe
regardless of the wishes of the factional leaders. Given the
situation, former Secretary General Makoto Koga, who has been
searching for ways to form an anti-Koizumi and anti-Abe framework
for fielding Fukuda, commented: "Having many candidates is not
always good." Ibuki also noted: "The Ibuki faction has generally
decided to support Mr. Abe."

6) Mori explains Koizumi reasons why Fukuda decides not to run in
LDP presidential race

TOKYO SHIMBUN (Page 2) (Full)
July 26, 2006

Former Prime Minister Yoshiro Mori, who heads the Mori faction in
the Liberal Democratic Party (LDP),met last night with Prime
Minister Junichiro Koizumi at the Prime Minister's Official
Residence. He explained to Koizumi the reason why former Chief
Cabinet Secretary Yasuo Fukuda, a Mori faction member, had decided
not to run for the LDP presidential election. The two then agreed to
watch calmly the situation until the lineup of candidates are put
forward.

7) Nukaga cautious about joining LDP presidential race

YOMIURI (Page 4) (Full)
July 26, 2006

Defense Agency Director-General Nukaga and Liberal Democratic Party
(LDP) caucus head Aoki in the House of Councillors, both members of
the Tsushima faction, and House of Councillors Secretary General
Katayama met in Tokyo for about one hour yesterday to discuss their

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approach to the LDP presidential race.

According to an informed source, Nukaga "took a neutral attitude" on
whether he would run in the LDP presidential election, and Aoki and
Katayama also suggested he should make a decision while watching the
situation within the party. The three shared the view that if they
allowed Chief Cabinet Secretary Abe to continue to hold a big lead,
people might lose interest in the election.

Meanwhile, Yoshitaka Sakurada and Senior Vice Minister Taimei
Yamaguchi, who are members of the Tsushima faction and support Abe,
met with Nukaga in Tokyo last night and tacitly attempted to
dissuade Nukaga from entering the race, remarking: "Of the 300 party
member votes, 200 are certain to go to Mr. Abe."

8) Tanigaki to include consumption tax hike in LDP presidential
election campaign pledges

YOMIURI (Page 4) (Full)
July 26, 2006

A gist of the pledges Finance Minister Tanigaki will bring forth in
his campaign for the September Liberal Democratic Party (LDP)
presidential election was unveiled yesterday. He will set forth as
tasks to tackle on a priority basis (1) a consumption tax hike; (2)
a review of Asia diplomacy; and (3) reform of local tax resources.
Tanigaki will release the pledges when he announces his candidacy
tomorrow.

Regarding a consumption tax hike, Tanigaki will give a specific
margin. He aims to underscore the stance of squarely facing
difficult challenges by stressing the need for painful policy
measures. Arrangements are now being made to set the margin at
around 5 percent.

9) Minshuto readies for an Abe administration

SANKEI (Page 5) (Excerpts)
July 26, 2006

In the wake of former Chief Cabinet Secretary Yasuo Fukuda's
decision not to run in the Liberal Democratic Party (DP)
presidential election in September, the main opposition party
Minshuto (Democratic Party of Japan) has started making policy
measures with an eye on the birth of a government led by Shinzo Abe.
The largest opposition party thinks that it will be able to clearly
show differences in Asia policy between it and Chief Cabinet
Secretary Shinzo Abe, who has supported Prime Minister Junichiro

SIPDIS
Koizumi's foreign policy. The opposition party is, however,
concerned about Abe's high public support. Thinking that attacks on
him would backfire, the party intends to refrain from criticizing
him for the time being. It will then accelerate a policy course of
making a clear distinction between its position and Abe.

Party head Ichiro Ozawa stressed in a press conference yesterday:
"We don't care who (becomes LDP president). What our party is
concerned about is whether the public will entrust us with the reins
of government. The first thing to do is to show the public clear and
simple basic policies."

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In a meeting yesterday of senior party officials, the LDP
presidential election was the hot topic of discussion. Ozawa, Acting
President Naoto Kan, and Secretary General Yukio Hatoyama shared the
view that Abe would be elected LDP president and prime minister.

Some Minshuto members have presumed that the more experienced Ozawa
would have an easier time dealing with Abe. One party executive
member, however, pointed out: "Abe's high level of support cannot be
discounted." Ozawa, Kan, and Hatoyama reportedly confirmed that they
would maintain a troika setup to face off against a government led
by Abe.

10) Prime Minister Koizumi: I must in Japan on Aug. 15

TOKYO SHIMBUN (Page 2) (Full)
July 26, 2006

Referring to his planned visit to Mongolia around August 10, Prime
Minister Junichiro Koizumi said in a meeting yesterday of the
Liberal Democratic Party (LDP) executives, "I have to be in Japan on
August 15 (anniversary of the end of World War II)." Since Koizumi
attends every year a memorial ceremony for all the war dead, which
takes place in Nippon Budokan Hall, he apparently meant this."

However, Mikio Aoki, who heads the LDP caucus in the Upper House,
scolded Koizumi, because all eyes are now focused on whether the
prime minister will visit Yasukuni Shrine on Aug. 15, saying, "When
you say you have to be in Japan on Aug. 15, voters may think you
will be here to pay homage at the shrine."

SCHIEFFER