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 TOKYO 00004151 002 OF 006 �0A; 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 TOKYO 00004151 003 OF 006 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. TOKYO 00004151 004 OF 006 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 TOKYO 00004151 005 OF 006 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." TOKYO 00004151 006 OF 006 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