DAILY SUMMARY OF JAPANESE PRESS 01/26/06

UNCLAS SECTION 01 OF 09 TOKYO 000430 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: DAILY SUMMARY OF JAPANESE PRESS 01/26/06 INDEX: (1) Second ban on US beef imports (Part 1): How effective is Japan's quarantine inspection system at the border? Impossible to open all cartons for inspection; Only 10 officers on "around-the- clock" duty at Narita Airport; Another concern is avian flu; Standard inspection rate is 0.5 PERCENT ; 31 PERCENT inspection finds spinal columns (2) Second ban on US beef imports (Part 2): Inclusion of high- risk materials in shipment reflects tendency of US to make light of Japan; There could not have been a blunder like this if the shipment were EU-bound; US making humble apology, but may really think that Japan is over-reacting (3) Zoellick's "stakeholder" advocacy kicks off pros, cons in China (4) JDA intends to consolidate DFAA and include the consolidation cost in fiscal 2006 budget request; aims to upgrade itself to ministry (5) LDP presidential race in 2006: Truce in the "post-Koizumi" successor debate (6) Focus in ODA-reform debate on future options for implementing bodies, including fate of JBIC (7) LDP fiscal reform panel switches away from tax-hike policy ARTICLES: (1) Second ban on US beef imports (Part 1): How effective is Japan's quarantine inspection system at the border? Impossible to open all cartons for inspection; Only 10 officers on "around-the- clock" duty at Narita Airport; Another concern is avian flu; Standard inspection rate is 0.5 PERCENT ; 31 PERCENT inspection finds spinal columns TOKYO SHIMBUN (Page 26) (Slightly abridged) January 26, 2006 Thoroughgoing safety measures were supposed to have been adopted when the ban on US beef imports was removed last December. Tokyo and Washington pledged to carry out strict inspections to make sure high-risk mad-cow disease materials (specified risk materials = SRM) are removed from Japan-bound products. The recent finding of three pieces of meat with SRMs at Narita Airport has shocked related sources. The second ban was then placed on US beef imports. The inspection failure on the US side is making headlines, but what about the safety wall on the Japanese border? An executive of a certain well-established foreign trading house, an importer of the US beef products that contained the spinal columns found this time, yesterday said in bewilderment, "The incident was a bolt out of the blue." The company had never imported US beef before the ban was placed on imports. He said the company had imported US beef for the first time on a trial basis. He stressed: "We have never imported US beef before. This is the first time we have imported it. Then, meat with SRM was found in our shipments. We have reported the matter to the Ministry of Agriculture, Forestry and Fisheries (MAFF). MAFF has TOKYO 00000430 002 OF 009 judged that there is no fault on our part." MAFF's Animal Quarantine Narita Office at Narita Airport found the backbones in question. An official in charge there explained: "There are about 70 officials here, of whom only 10 are in charge of carrying out quarantine inspections on imported stock farm products, such as meat and bones. These officials have to handle cargoes arriving at the airport one after another on an around- the-clock basis." To a question about commonly adopted quarantine procedures for imported meat, the same official noted: "We are not carrying out inspections at random. We pick one carton from a set of cartons containing the same products, such as, for instance, one from a set of ham cartons or one from a set of loin roll cartons. We cannot reveal details for security reasons." Regarding Japan's quarantine system, this source revealed his complex feelings, noting: "We found that material through a routine inspection. But when it comes to a question of whether the system we adopt here is sufficient or not, it is hard to say yes or no." The animal products inspection guidelines issued by the animal quarantine office lay down that inspection on imported goods should be carried out, by drawing a sample equivalent to 0.5 PERCENT of the entire shipment at random. The MAFF Animal Health Division explained that the figure 0.5 was set, based on the ministry's long-standing experience in inspecting animal products." MAFF has, however, set inspection guidelines especially for US beef to be imported, following the removal of the import ban. Under the guidelines, one from a set of cartons containing the same product should be inspected. Regarding the cartons this time from which the materials in question were found, since 13 kinds of parts were packed in 41 cartons, quarantine officials intended to open 13 cartons. In this case, the inspection rate becomes 31 PERCENT . Eight hundred cartons at most in one container An official at the Animal Quarantine Yokohama Head Office (Yokohama) observed: "Few importers purchase a single part in bulk as was case before the import ban. Most traders import various parts in small quantities. They appear to be trying to find out which part sells best in Japan. I am sure we open cartons at a ratio of more than 0.5 PERCENT ." US beef that passed quarantine inspections by the animal quarantine office then undergoes inspections at various quarantine points of the Ministry of Health, Labor and Welfare (MHLW). The inspection rate at this stage is 12 out of less than 50 and 32 out of more than 51. Even so, since the quarantine system at the airport adopts a spot- checking system, there is the possibility of inspections overlooking products including SRM. In order to make sure that imported beef is completely safe, all cartons containing US beef have to be checked. Vice MAFF Minister Mamoru Ishihara told reporters that it was impossible to carry out blanket inspection. However, he noted: TOKYO 00000430 003 OF 009 "We must see whether there is any way to improve the current inspection system." The same official of the Animal Health Division noted: "For instance, one vessel carries hundreds of containers, and one container can hold about 800 cartons at the most. There is no space to open all cartons. Think calmly, a blanket inspection is impossible." He continued: "Inspecting US beef is not the only job we carry out. There are many other key duties, such as quarantine inspections to prevent avian flu infection. We are already tremendously busy." (2) Second ban on US beef imports (Part 2): Inclusion of high- risk materials in shipment reflects tendency of US to make light of Japan; There could not have been a blunder like this if the shipment were EU-bound; US making humble apology, but may really think that Japan is over-reacting TOKYO SHIMBUN (Page 27) (Slightly abridged) January 26, 2006 Both the US government and meat industry association have humbly apologized for the inclusion of specified risk material (SRM) in a Japan-bound US beef shipment. The US Department of Agriculture (USDA) yesterday held a meeting of about 40 meatpackers throughout the nation and discussed ways to prevent a recurrence. The meat industry then offered a complete apology: "This incident was a serious blunder committed by the entire industry. There is no excuse for it." Agriculture Secretary Mike Johanns pointed out that the meatpacker and SIPDIS inspector who overlooked the inclusion of the materials in question did not have much time to learn export conditions for Japan-bound shipment. He repeatedly urged them to comply with those conditions. The Tokyo office of the US Meat Export Federation consisting of beef producers and exporters stressed that the case this time was special, saying: "The industry has made efforts to resume beef trade with Japan for the past two years. It was an unusually elementary mistake that the persons involved were not aware of conditions for Japan-bound exports. We never imagined an incident like this could happen." In an effort to prevent a recurrence, Washington has released a set of emergency measures, including the dispatch of a team of inspectors to Japan and carrying out surprise inspections. It is frantic about reinstating imports to Japan at an early date. However, some concerned sources voiced their true feeling that Japan is "over-reacting to the incident." Asked to deliver a message to Japanese housewives, Agriculture Under Secretary J.B. Penn, who visited Japan for a bilateral working-level meeting to discuss this issue, told reporters during a press conference on Jan. 24: "The chance of being hit by a car when driving to a supermarket (to buy beef) is greater than being harmed by eating beef." The spinal columns discovered this time were identifiable with the naked eye. Akira Miyazaki, director (for livestock science) of the University of the Air Kyoto Study Center, an expert on TOKYO 00000430 004 OF 009 beef production in the US, pointed out: "The inspection on the US side was sloppy, probably because they was the underlying perception among persons involved that consumers in the US all eat American beef, and so, there should be no problem." Miyazaki took a harsh view: "The hygienic level of US meatpackers is pretty high. If the EU had asked similar export conditions, they would not have made such a blunder. They may be making light of the Japanese and Asian markets. As long as US companies insist that it was a minor mistake made by a tiny company, then we cannot hope for improvement in the situation. It is necessary to have the US side fully understand the wishes of Japanese consumers." "Dispatch inspectors to all US meatpackers" Miyazaki then urged the Japanese government to make efforts to urge the US side to reform its consciousness: "MAFF and MHLW should dispatch inspectors to all of 40 American meatpackers that are authorized to export beef to Japan in order to provide a guidance on export conditions. Otherwise, it would be impossible to have people at the low end of the industry understand export conditions. Shinichi Fukuoka, professor of chemical biology at Aoyama Gakuin University, is concerned: "Unless the government again refers the matter to the Food Safety Commission and take a second look at the overall system, similar cases might occur." He underscored: "In reality, it is difficult to remove all SRM. Since Japan is actually continuing a blanket cattle inspection, it would be logical to seek a similar measure from the US." Commenting on Japan's quarantine system, he said: "It would be difficult to improve the situation with ad hoc measures, such as an increase in the number of inspectors. If the US refuses to implement drastic measures, such as a blanket inspection, Japan should open all cartons containing US beef and inspect them." A responsible officer at Yoshinoya D&C, a beef bowl restaurant chain, which is again suffering a heavy blow from the second ban on US beef imports only a month after the resumption, lamented: "We are so disappointed, as the moment we have taken a step forward, imports have been halted. We want the government to tell us what actually happened and what the problem is." (3) Zoellick's "stakeholder" advocacy kicks off pros, cons in China SANKEI (Page 3) (Full) January 26, 2006 Beijing, Tadashi Ito US Deputy Secretary of State Zoellick yesterday ended his three- day visit to China. Zoellick talked with Chinese leaders not only on trade and other bilateral issues but also on international issues ranging from the nuclear programs of North Korea and Iran to Japan-China relations. Zoellick seems to have asked for China's responsible action with his advocacy of "stakeholder" as a keyword. (TN: The Sankei Shimbun translates this word into "?????" or "rigai kyoyusha" or "one who shares interests.) In China, there is a mood for welcoming his overtures or the United States' strategy toward China connoted in that keyword. However, there is also a deep-seated wariness of his advocacy. Arguments TOKYO 00000430 005 OF 009 will likely continue. On Sept. 21 last year, Zoellick used the word "stakeholder" for the first time in his speech delivered in New York. He reiterated this word seven times in that speech. The US Department of State rendered the word into "????????" ("rieki sokanteki sanyosha" in Japanese, which can be literally reversed into "reciprocal participant in benefits"). In China, however, it was translated in various ways, such as "????" in the meaning of "joint stockholder." In the end, "?????" or "reciprocal beneficiary" came to stay. China has been growing rapidly and is becoming more influential. Zoellick admitted China as a partner and called on China to become a "responsible stakeholder." This was noted in China because it was apparently different from US Defense Secretary Rumsfeld's earlier speech in Singapore and the Defense Department's recent report that regarded China as a threat. In early August last year, prior to that speech, Zoellick visited China and attended the first round of US-China strategic dialogues held in Beijing. In his press remarks there after the talks, he underscored the necessity of partnership with China. In the speech, however, he emphasized that the United States and China would have to work together against various challenges, such as terrorism, Islamic radicals, WMD proliferation, poverty, and diseases. In December last year, the US and Chinese governments held their second round of strategic dialogues in Washington. On that occasion, officials from the two governments held discussions over Zoellick's stakeholder advocacy. According to a diplomatic source, one of those representing China at the talks, Vice Foreign Minister Dai Bing Guo, developed his argument about China's theory of peace and development. The Chinese vice minister also took the position that China basically would agree to build a constructive relationship with the United States but was not coincident with the United States on everything, the source said. That argument is seen as reflecting a threat among some people in China. In other words, that is affected by the standpoint of conservatives asserting that Zoellick's theory is a rehash of the United States' engagement policy toward China in the 1990s that was intended to have China comply with the United States under their different political structures and values. There are also deep-seated hardline arguments, particularly in the Chinese military, against the backdrop of strategic divisive factors between the United States and China, such as Taiwan, Japanese and US security strategies, energies, and the nuclear programs of North Korea and Iran. Some note inconsistency between Zoellick's policy course and hardline arguments against China. According to a diplomatic source, however, the Chinese government's mainstream welcomes Zoellick's policy course and its officials concerned are now studying it. Prior to Zoellick's China trip this time, the US State Department clarified that his stakeholder advocacy represents the US government. Washington needs to talk with Beijing over a number of immediate challenges such as North Korea and Iran. Moreover, observers presume that Washington aims to establish a long-term bilateral cooperative structure between the United States and TOKYO 00000430 006 OF 009 China on the occasion of Chinese President Hu Jintao's US visit this April. That is why, a diplomatic source notes, Zoellick urged Beijing to improve its soured relations with Tokyo when he met with his Chinese counterparts, including Premier Wen Jiabao, on Jan. 24. The United States' relationship with Japan is vital for its Asia strategy, and the present state of Japan-China relations could become an obstacle when the United States tries to push for close ties with China. In connection with Zoellick's policy course, some in China are insisting that China should not only fulfill its international responsibility but also push ahead with political reforms and democratization. In China, however, there are also antireformers. Sources deem it difficult for Hu and his government to turn China into a stakeholder with the United States, judging from the way things are going between Japan and China, for instance. (4) JDA intends to consolidate DFAA and include the consolidation cost in fiscal 2006 budget request; aims to upgrade itself to ministry MAINICHI (Page 1) (Full) Evening, January 26, 2006 By Yozai Furumoto The Defense Agency (JDA) today decided to consolidate the Defense Facilities Administration Agency (DFAA). It intends to include the reorganization cost in its fiscal 2007 budget request. A prevailing plan is to set up a defense facilities headquarters or a defense facilities bureau in JDA. DFAA is an external agency of JDA that is tasked with the construction of facilities for the Self-Defense Forces and the US forces in Japan, as well as facilities management. But the DFAA personnel are hired in principle separately from the JDA; as a result, they have been criticized as lacking the awareness of implementing defense policy, a JDA senior official said. In the talks on the realignment of the US forces in Japan, while the JDA has aimed at reviewing security policy, DFAA has given priority to the wishes of base-hosting local governments, exposing a difference of views. At the plenary session yesterday of the House of Councilors, Shozo Kusakawa of the New Komeito referred to the issue of whether to upgrade the status of JDA to a ministry and pointed out: "I would say one idea is that it is necessary to undergo a big change like JDA absorbing DFAA." Some in JDA also want to gain the momentum for upgrading it by emphasizing that efficiency would improve with consolidation. The number of personnel working at DFAA headquarters totals 600 or so. Including personnel working at eight branch offices, the total number reaches some 3,100. (5) LDP presidential race in 2006: Truce in the "post-Koizumi" successor debate ASAHI (Page 4) (Slightly abridged) January 26, 2006 TOKYO 00000430 007 OF 009 The Liberal Democratic Party (LDP) is moving toward calling a truce in the fierce debate over who should succeed Junichiro Koizumi as president of the party. With the opposition camp stepping up its attack on the LDP in Diet debate on the Livedoor scandal, the LDP appears to have judged that elements that would lead to internal discord must be avoided. For the presidential hopefuls -- except for Chief Cabinet Secretary SHINZO ABE -- and their factions the main aim has been to stop the trend favoring Abe as Koizumi's successor. Prime Minister Koizumi dined with senior ruling coalition members at his official residence on the evening of Jan. 24. Mikio Aoki, chairman of the House of Councillors LDP caucus, told him: "It's better for the prime minister not to talk about the presidential race. If you and (former Prime Minister Yoshiro) Mori make a decision, the general direction for the presidency will be set." Koizumi reportedly responded: "Well, I haven't said anything, but everyone is saying all sorts of things connecting to the presidential election." Aoki, who heads the LDP caucus in the Upper House, thinks that candidates should be chosen after the ongoing regular Diet session is over, after gauging the circumstances in the party. Aoki, therefore, seems to have urged Koizumi to take a calm response. Koizumi has been in keen competition with Mori over the requirements for his successor. In a speech last December, Mori suggested that ABE should refrain from running in the next presidential race. In response to those remarks, Koizumi stated, "(Abe) should not flee from trouble and stay in the race." He then stated that an LDP president who is capable of winning elections would be one condition for his successor. Mori then rebutted, "A president capable of winning elections is meaningless." Mori heads the LDP's largest faction, to which Koizumi used to belong. Koizumi has influence on the 82 new LDP Lower House members, who are called "Koizumi children." If a rift becomes obvious in the Koizumi government, the opposition might have a chance to hurt the LDP by attacking it on the Livedoor scandal. Mori stated in a general meeting on Jan. 19 of his faction, "I may ask you to leave the faction if you announce your support for someone on your own decision." The Mori faction has two possible presidential candidates: ABE and former Chief Cabinet Secretary Yasuo Fukuda. Such a split in the Mori faction is just what other factions in the LDP need. The Shimazu faction has refrained from overt action, with one former cabinet member saying, "We will judge a response to the presidential race while closing watching the trend of the Diet." A senior Nikai faction member commented, "The moves are too rapid compared with past races." Health, Labor and Welfare Minister Jiro Kawasaki, a senior Tanigaki faction member, said, "(Other factions) proposed an armistice until around April (when the Diet approves a budget for fiscal 2006)." As it stands, a mood for a temporary cease fire is growing in the party. TOKYO 00000430 008 OF 009 (6) Focus in ODA-reform debate on future options for implementing bodies, including fate of JBIC NIHON KEIZAI (Page 2) (Full) January 26, 2006 The government's Study Group on Overseas Economic Cooperation (chaired by former Attorney General Akio Harada) decided in its meeting yesterday to set up a cabinet-level committee tasked with mapping out an official development assistance (ODA) strategy and then started discussing future options for implementing agencies, such as the Japan Bank for International Cooperation (JBIC). Many lawmakers from the Liberal Democratic Party (LDP) are calling for splitting the JBIC into a section responsible for yen loans and another for international financing, but the Finance Ministry and business leaders insist that the bank should be kept in place. The panel is scheduled to finalize a report of recommendations in late February. Prior to this, haggling between both sides is likely to heat up. In a meeting held by the LDP taskforce on overseas economic cooperation at party headquarters the same day, JBIC Governor Kyosuke Shinozawa, who was invited for a hearing of views, reiterated the need of preserving the JBIC, saying: "Should a solo body offer both yen loans and international financial services, their operational efficiency will be improved." Taskforce Chairman Tatsuya Ito, assistant to the Policy Research Council chairman, promptly refuted it: "We will conduct discussion on the premise of splitting off the JBIC." Many LDP officials are calling for disbanding the JBIC, based on the judgment that "the yen loan program, which is aimed at providing development aid for developing countries, and international financing, which is intended to help Japanese businesses promote economic activities overseas, are different in nature." Many believe that if the yen-loan section separated from the JBIC and the Japan International Cooperation Agency (JICA) are integrated, Japan will be able to carry out a more effective ODA program. Besides the JBIC, the Finance Ministry and business circles have insisted on preserving the JBIC. Japan Foreign Trade Council Chairman Mikio Sasaki said in a meeting of the government's study group: "It will be convenient for our trade partners to have a sole provider of ODA loans. We also want its internationally high profile to be preserved." Finance Minister Sadakazu Tanigaki and Nippon Keidanren (Japan Business Federation) Chairman Hiroshi Okuda shared a negative view about the plan to dissolve the JBCI when they held a meeting in Tokyo. The study group, set up under Chief Cabinet Secretary SHINZO Abe, will soon engage in last-minute talks on Feb. 13 on future options for ODA implementation organizations. In an effort to remove the adverse effect of the current system in which 13 government ministries and agencies have been involved in ODA policy planning, the government panel is now in accord on setting up a cabinet ministers' council. When it comes to ODA implementing organs, however, there are others who are even more interested. Abe's ability to coordinate views will be put to the test. (7) LDP fiscal reform panel switches away from tax-hike policy TOKYO 00000430 009 OF 009 MAINICHI (Page 2) (Full) January 26, 2006 The "Project Team to Overcome Deflation and Attain Economic Growth" set up by the Liberal Democratic Party's (LDP) Financial Reform Study Group held its first meeting at party headquarters yesterday. In its interim report released last October, the study group came up with the policy of hiking the consumption tax rate. At that time, its chairman was Kaoru Yosano, who advocates reconstructing the nation's financial system. Following the reshuffle of the Cabinet and party executive officers, however, State Minister in charge of Economic and Fiscal Policy Yosano was replaced with Policy Research Council Chairman Hidenao Nakagawa, who has cautioned against giving priority to tax hikes over other measures. In its final report due out in May, the study group is expected to turn around and to propose minimizing the margin of tax increase by achieving higher economic growth rates. In yesterday's meeting, Nakagawa stressed the need to break away from deflation at an early date in order to minimize the margin of consumption tax hike. He said: "Overcoming deflation has been a challenge since the Koizumi administration was inaugurated, but no settlement has been reached yet. The purpose (of the project team) is to minimize the scale of tax hike." The project team was set up at the proposal of Nakagawa. Nakagawa calls for giving priority to reforms, like spending cuts and putting an end to deflation, over tax increases. Based on this policy, he aims to curb the margin of tax hike by streamlining central government agencies and achieving higher economic growth rates. Under the lead of Nakagawa, the project team's policy direction has completely shifted from the Yosano line of designating the consumption tax as a welfare tax and raising the tax rate to a 10 PERCENT level. Prime Minister Junichiro Koizumi has clearly said: "I will not raise the tax rate while I am in office." But whether to hike the rate will undoubtedly be one of the most controversial issues in the upcoming LDP presidential election. Chief Cabinet Secretary, who is regarded as the most likely potential candidate to succeed Koizumi, insists that priority should be given to administrative and fiscal reform plans in echoing Nakagawa and Internal Affairs and Communications Minister Heizo Takenaka. Meanwhile, Finance Minister Sadakazu Tanigaki, who has also expressed a desire to run in the election, aims to submit a bill in 2007 to raise the consumption tax. Financial reconstruction will reach a crucial point in June, when the government presents a report containing policy options and a timetable for reforming expenditures and revenues in a package. The proposed package reforms have been discussed mainly at the Council on Economic and Fiscal Policy led by Yosano. This panel, in contrast to the Financial Reform Study Group, has become an arena for Yosano and Tanigaki to try to set the timing for tax hikes. In the spring and later, the issue of whether to hike the consumption tax is likely to take center stage in discussions in the government and the LDP, with an eye on the LDP presidential election. SCHIEFFER