DAILY SUMMARY OF JAPANESE PRESS 01/30/06

UNCLAS SECTION 01 OF 14 TOKYO 000501

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 01/30/06


INDEX:

(1) Poll on Koizumi cabinet, Livedoor scandal, economic disparity

(2) Poll: Half the public urge Koizumi cabinet to review
structural reforms; 75% actually feel disparity

(3) New China News Agency criticizes Aso's argument on Yasukuni
issue as "representing extreme right-wingers' position"

(4) SDP head Fukushima: Aso's argument on Yasukuni issue is
extremely controversial

(5) Minshuto head Maehara calls for Agriculture Minister Nakagawa
to resign

(6) No inspection before making decision on second resumption of
US beef imports, agriculture minister says, revealing discrepancy
in previous written government reply

(7) Muroran announces 2 US warships' visit; Mayor can't refuse
port call under current regime

(8) Personnel changes in Defense Agency: Defense policy bureau
deputy chief replaced due to dispute with vice minister on
realignment of US forces in Japan

(9) Nago mayoral election: Okinawa should stop depending on
central government over bases issues

(10) Bill revising Downtown Revitalization Law gives special
treatment to lots vacated by large stores

(11) Wavering Japan-US-China relationships (Par 1): US watching
Yushukan closely; Distrust growing of Emperor's State perspective
and Yasukuni Shrine; China actively lobbying US; US-China
"diplomatic honeymoon" progressing

(12) Livedoor shock: Arrest of President Horie; No change in
reform drive

ARTICLES:

(1) Poll on Koizumi cabinet, Livedoor scandal, economic disparity

TOKYO SHIMBUN (Page 3) (Full)
January 28, 2006

Questions & Answers
(Figures shown in percentage. Parentheses denote the results of
the last survey conducted Dec. 3-4 last year.)

Q: Do you support the Koizumi cabinet?

Yes 52.9 (57.1)
No 34.3 (33.2)
Don't know (D/K) + no answer (N/A) 12.8 9.7

Q: Livedoor Co. President Takafumi Horie and other executives
were arrested on suspicion of violating the Securities Exchange
Law. Horie ran in last year's election for the House of
Representatives as an independent and was defeated. However, the
ruling Liberal Democratic Party's Secretary General Tsutomu

TOKYO 00000501 002 OF 014


Takebe and Internal Affairs and Communications Minister Heizo
Takenaka backed Horie in his election campaign. The opposition
parties are therefore criticizing Prime Minister Junichiro
Koizumi and the LDP as having moral responsibility. Do you think
they have moral responsibility?

Yes 31.7
No 33.5
Can't say which 33.9
D/K+N/A 0.9


Q: What do you think about the Koizumi cabinet's structural
reform drive, such as pushing for market mechanisms and
deregulations? Pick only one from among those listed below.

Push further 29.7
Go on at present pace 15.1
Review 50.6
D/K+N/A 4.6

Q: There is also another scandal in which an architect has been
accused of falsifying earthquake-resistance data for a number of
buildings. In addition, the government, which recently called off
Japan's ban on US beef, has reimposed the ban on US beef due to
the discovery of specified risk materials in air shipments from
the United States. These issues, as well as the Livedoor scandal,
are referred to as negative factors that show the "shadow" of the
Koizumi cabinet's structural reforms. There is an argument
pursuing the Koizumi cabinet's responsibility for these problems.
Do you think the Koizumi cabinet is responsible? Pick only one
from among those listed below.

Yes 28.2
No 31.4
Can't say which 39.2
D/K+N/A 1.2

Q: Livedoor is accused of foul trading and other irregular
practices on the stock market. What do you think is most
important for appropriate trading on the stock and financial
markets? Pick only one from among those listed below.

Strengthen market rules, oversight 27.3
Change the current money game trend 27.5
Improve business, corporate morals 29.6
No change needed in particular 5.7
Other answers (O/A) 0.5
D/K+N/A 9.4

Q: What do you think is the most important role for business
corporations? Pick only one from among those listed below.

Make profits for growth 4.2
Pay enough, protect the livelihood of employees 29.6
Raise stock prices, dividends for stockholders 3.2
Develop new useful technologies, products 31.2
Contribute to local communities
for cultural development, etc. 28.0
O/A 0.3
D/K+N/A 3.5

Q: There are the so-called groups of winners and losers with

TOKYO 00000501 003 OF 014


their income and other disparities expanding according to their
ability or job. Do you think such disparities have expanded? Pick
only one from among those listed below.

Yes 75.0
No 18.9
D/K+N/A 6.1

Q: What do you think about income gaps resulting from ability and
job? Pick only one from among those listed below.

Very acceptable 9.3
Somewhat acceptable 70.2
Not very acceptable 16.6
Not acceptable at all 1.7
D/K+N/A 2.2

Polling methodology: The survey was conducted (by Kyodo News
Service) over a period of two days, Jan. 26-27, on a random digit
dialing (RDD) basis. The computer-aided RDD methodology, which
makes and puts out telephone numbers at random for polling, can
survey those who do not have their telephone numbers listed in
telephone directories. Among those randomly generated telephone
numbers, those actually for household use with one or more
eligible voters totaled 1,457. Answers were obtained from 1,007
persons.

(2) Poll: Half the public urge Koizumi cabinet to review
structural reforms; 75% actually feel disparity

TOKYO SHIMBUN (Page 1) (Abridged)
January 28, 2006

According to findings from a telephone-based spot nationwide
public opinion survey conducted by Kyodo News on Jan. 26-27 in
the wake of the arrest of Takafumi Horie, former president of
Livedoor Co., Ltd., 50.6% of respondents insisted that the
Koizumi cabinet should review its structural reform drive, such
as pushing for market mechanisms and deregulations. In addition,
75.0% answered that the nation's economic disparity-typified by
the so-called groups of winners and losers-was expanding. The
poll showed that Japan was becoming a society of disparity.

The approval rating for the cabinet of Prime Minister Junichiro
Koizumi was 52.9%, down 4.2 percentage points from the last
survey taken in December last year. The disapproval rating was
34.3%, up 1.1 points. There were also negative factors to the
Koizumi cabinet. In last year's election for the House of
Representatives, the ruling Liberal Democratic Party's Secretary
General Tsutomu Takebe and a minister of the Koizumi cabinet
backed Horie, who was recently arrested in the Livedoor scandal.
There is also another scandal in which an architect has been
accused of falsifying earthquake-resistance data for a number of
buildings. In addition, the government, which recently called off
its ban on US beef, has reimposed the ban on US beef due to the
discovery of risk materials in air shipments from the United
States. In the survey, those in support of the Koizumi cabinet
were asked why. In the breakdown of their reasons for support,
the proportion of those picking "that is because something can be
expected of political reforms" decreased 5.2 points. Among those
not supporting the Koizumi cabinet, the proportion of those
saying "that is because nothing can be expected of political
forms" was up 6.6 points.

TOKYO 00000501 004 OF 014



In the survey, respondents were asked if they thought Takebe and
others who backed Horie in his election campaign have moral
responsibility. In response to this question, "yes" accounted for
31.7% and "no" at 33.5%, with 33.9% saying they can't say which.
The Livedoor scandal is referred to as a "shadow" or negative
factor of the Koizumi cabinet's reform initiative. When it comes
to whether the Koizumi cabinet is responsible for it, public
opinion was split, with "yes" accounting for 28.2%, "no" at
31.4%, and "can't say which" at 39.2%.

(3) New China News Agency criticizes Aso's argument on Yasukuni
issue as "representing extreme right-wingers' position"

TOKYO SHIMBUN (Page 3) (Full)
January 30, 2006

Toru Shiraishi, Beijing

Foreign Minister Taro Aso expressed his expectations in his
statement yesterday for the Emperor to visit Yasukuni Shrine. In
reaction, the New China News Agency criticized Aso's argument as
"representing the position of Japanese extreme right-wingers."

The Chinese government-run news agency reported on the details of
the speech delivered by Aso in Nagoya. It noted as follows under
the headline: "The Japanese foreign minister inappropriately
encourages a visit to Yasukuni Shrine by the Emperor:"

"The prime minister's visits to Yasukuni Shrine reflect his
inability to squarely face his country's past military aggression
as a major political issue. The foreign minister has added his
sophistry."

(4) SDP head Fukushima: Aso's argument on Yasukuni issue is
extremely controversial

TOKYO SHIMBUN (Page 3) (Full)
January 30, 2006

In a press conference delivered yesterday in the village of Kusu
in Oita Prefecture, Social Democratic Party (SDP) head Mizuho
Fukushima criticized Foreign Minister Taro Aso for recently
saying that a visit to Yasukuni Shrine by the Emperor was
desirable. She said:

"He does not understand at all the problems caused by Prime
Minister Koizumi's visits to Yasukuni Shrine, as well as the
issue of separation of politics from region. His remark is
extremely controversial."

Fukushima added:

"Why has the emperor refrained from visiting Yasukuni Shrine
since 1975? I think that the emperor might be judging that a
visit by himself to the shrine might be seen as support for
Japan's aggressive war and glorifying the war. It would send the
wrong political message, so I think the emperor should not go."

(5) Minshuto head Maehara calls for Agriculture Minister Nakagawa
to resign

NIHON KEIZAI (Page 1) (Full)

TOKYO 00000501 005 OF 014


Evening, January 30, 2006

This morning, Agriculture Minister Shoichi Nakagawa stated that
the ministry had not inspected local sites prior to the
resumption of US beef imports, adding that the ministry's
response was "not carried out as the Cabinet had decided; I take
responsibility." On hearing the reply, Minshuto (Democratic Party
of Japan) President Seiji Maehara called for Nakagawa to resign,
saying: "It is only natural that he resign. We won't stop there,
but will pursue the responsibility of the entire cabinet." He
was speaking to the press corps in the Diet.

(6) No inspection before making decision on second resumption of
US beef imports, agriculture minister says, revealing discrepancy
in previous written government reply

MAINICHI (Page 1) (Full)
Evening, January 30, 2006

By Takashi Sudo

At a meeting this morning of the Lower House Budget Committee,
Agriculture Minister Shoichi Nakagawa referred to the US beef
shipment to Japan containing specified risk materials, revealing
that the government in its written reply approved by a cabinet
meeting had stated that a fact-finding inspection would be
conducted before beef imports restart, but that in fact, such an
inspection was actually to be conducted after beef imports
resumed. Nakagawa offered an apology. In the same committee
meeting that reopened in the afternoon, Nakagawa explained:

"Before resuming beef imports, we cannot judge whether US plants
are appropriate or not. This does not depart from the written
government reply's spirit of defending food safety. We do not
make it a condition for the resumption of imports to conduct a
fact-finding inspection."

In reaction to Nakagawa, the largest opposition party Minshuto's
(Democratic Party of Japan) President Seiji Maehara has demanded
the removal of Nakagawa from the post. The government's stance
might turn into a political issue.

According to the agriculture minister's reply, the government in
its cabinet meeting in last November approved a written reply
saying that it is necessary to send Japanese inspectors to the
United States before resuming US beef imports in order to conduct
a fact-finding inspection of US slaughterhouses that will ship
beef to Japan." But it was Dec. 13, the day after the decision
was made on Dec. 12 to resume US beef imports, when the Ministry
of Agriculture, Forestry and Fisheries (MAFF) and the Ministry of
Health, Labor and Welfare actually sent inspectors to the US.

Nakagawa in his morning replies apologized: "No fact-finding
inspection was carried out before the resumption of beef imports.
I apologize for the discrepancy between the written reply and the
facts. I will consider ways to take responsibility." In his
afternoon replies, however, he slightly modified his remarks made
earlier, by saying: "After the written reply was approved, the
situation changed. I am sorry for not informing the Diet of (a
policy change)."

While some in Japan point out that under US pressure, the
government made a hasty decision on the resumption of US beef

TOKYO 00000501 006 OF 014


imports, the agriculture minister has now exposed the clumsiness
of the government response. Maehara told reporters: "The Koizumi
cabinet has insisted that the US is responsible for the
(inclusion of specified risk materials in beef shipments to
Japan). Given this, the Koizumi cabinet bears a great
responsibility. I will pursue its responsibility exhaustively.

(7) Muroran announces 2 US warships' visit; Mayor can't refuse
port call under current regime

MURORAN MIMPO (Page 1) (Full)
January 27, 2006

Two US naval vessels belonging to the US Navy's 7th Fleet will
enter the port of Muroran in early February, the municipal
government of Muroran City said yesterday. Their port call is for
a goodwill and friendship visit. The municipal government refused
their proposed use of berths in Muroran port against the backdrop
of incidents such as the arrest of a US serviceman for his
alleged murder of a Japanese woman in Yokosuka. However, the
Foreign Ministry, citing the Japan-US Status of Forces Agreement,
told the city government that their proposed use of facilities
could not be restricted for emotional reasons. The city and the
Hokkaido government will request the US consulate general in
Sapporo early next week to consider the safety of citizens.

The two incoming US warships are the USS Chancellorsville, a
10,000-ton guided missile cruiser, and the USS Blue Ridge, a
19,200-ton flagship. The two vessels have a total crew of 1,100-
1,200 on board. The Foreign Ministry says the two vessels are
loaded with no nuclear weapons. A total of 38 foreign naval
vessels have entered port since October last year.

The municipal government was notified of the two US warships'
planned port call on Jan. 19 through the Japan Coast Guard. The
city reported available berths before the Jan. 25 time limit to
respond.

The Blue Ridge's captain plans to host a deck reception. However,
the municipal government decided not to attend the reception. The
municipal government will not greet the two vessels upon their
arrival and will not be a scenesetter for their crew and
citizens.

"There was such an incident, so this is not an appropriate time,"
Muroran Mayor Masashi Shingu commented. "I requested that the
visit should be called off. However, we cannot refuse their port
entry under the current institution, so I have arranged berths,"
the mayor said, adding: "I will request them to consider the
safety of citizen."

Both the Chancellorsville and the Blue Ridge are homeported at
Yokosuka. The Chancellorsville, which will visit Muroran for the
first time, will come from Yokosuka and arrive in Muroran port at
9 a.m., on Feb. 3. The cruiser will anchor at Berth 5 on Sakimori
Dock and will leave port at 9 a.m., on Feb. 3. It is of 10.3
meters draft with an overall length of 172.8 meters and a width
of 16.8 meters. Its crew total about 850 (sic).

The Blue Ridge, coming around from Nagoya, will enter port at 10
a.m., on Feb. 6. The flagship will arrive at Berth 6 on the same
dock and will leave port at 10 a.m., on Feb. 10. It will visit
Muroran for the third time. It is 193.6 meters long from stem to

TOKYO 00000501 007 OF 014


stern and 32.9 meters wide, drawing 8.8 meters, with a total crew
of about 300 on board (sic).

(TN: the crew numbers for the two ships have been reversed by the
reporter. The Chancellorsville has 300; the Blue Ridge has about
850 crewmembers.)

(8) Personnel changes in Defense Agency: Defense policy bureau
deputy chief replaced due to dispute with vice minister on
realignment of US forces in Japan

SANKEI (Page 5) (Excerpts)
January 30, 2006

Chisato Yamauchi, deputy director general of the Defense Policy
Bureau, has been dismissed in effect and named vice president of
the National Defense Medical College as of today. Yamauchi has
been the official in charge of negotiations with the US
government on the realignment of US forces in Japan. The rumor
was that he had been criticized for his propensity toward secrecy
and that he was at odds with top defense officials. The director
general of the Naha Regional Defense Facilities Administration
was also replaced. The Defense Agency has conducted senior
personnel changes with an eye on a final report on the
realignment of US forces in Japan.

The Defense Policy Bureau deputy director general post was set up
in May 2003. Yamauchi assumed the post in August 2003. About
three months later, the governments of Japan and the United
States began talks on the realignment issue. Yamauchi engaged in
negotiations with Deputy Assistant Secretary of Defense Lawless
and formulated an interim report.

In addition to a dispute between Yamauchi and Vice Minister
Takemasa Moriya and other mainstream defense officials,
Yamauchi's way of handling the talks came under criticism. A
senior uniformed officer commented: "Since he worked for many
years in the intelligence field, he was too cautious about
leaking information. So he did not disclose the contents of the
talks to other officials."

When Japan and the US locked horns over a plan to relocate the US
Marine Corps' Futenma Air Station to a landsite or to an offshore
airfield. Yamauchi reported to a high Defense Agency official:
"The US side will accept Japan's land air-station plan." However
the US did not do so. When the high official had another senior
official sound out the US side, the senior official made a
completely different report from Yamauchi's. A Defense Agency
official said, "The top official judged that Mr. Yamauchi had
betrayed him."

The removal of Yamauchi from the post was put off even though
such an idea had cropped up soon after the interim report was
issued last October.

(9) Nago mayoral election: Okinawa should stop depending on
central government over bases issues

ASAHI (Page 15) (Full)
January 28, 2006

By Manabu Sato, professor of US politics and local administration
at Okinawa International University

TOKYO 00000501 008 OF 014



Yoshikazu Shimabukuro, an independent candidate backed by the
Liberal Democratic Party and the New Komeito, won the Jan. 22
mayoral election in Nago, Okinawa Prefecture. The main issue of
the election was the question of asking voters to accept a plan
to relocate the US Marine Corps' Futenma Air Station to the coast
of Nago City. What should we think about the result of the
mayoral race in which Shimabukuro -- who took a stance of asking
the central government to revise the plan and then looking into
the revised plan, while opposing the present relocation plan --
defeated the two other candidates, who clearly opposed the
relocation plan?

Shimabukuro's triumph is an extremely heavy judgment against the
anti-base movement. The anti-base relocation group failed to
unify around one candidate and so lost. The number of votes
obtained by the two candidates opposing the government's
relocation plan was less than that Shimabukuro secured. With an
eye on the upcoming mayoral race of Okinawa City in April and the
fall gubernatorial election of Okinawa, the anti-relocation group
needs to review its campaign strategy.

The Nago mayoral race also presented voters tough choices.

Incumbent Okinawa Gov. Kenichi Inamine, who is also backed by the
LDP-New Komeito coalition, has been opposing the relocation plan
agreed by the governments of Japan and the United States last
October. He backed Shimabukuro in the campaign. Local business
circles and the LDP insisted that the acceptance of the
relocation plan would bring about economic promotion measures.
The convoluted arrangement perplexed the voters.

As a result, the result of the election sent the wrong message to
the central government. After the mayoral race, the view heard in
the city that if the government offers a package of promotional
measures, the mayor-designate would shift his position to a
stance of accepting the relocation plan. Many government
officials probably have the same view.

I think the victory of Shimabukuro means that Naha voters
expressed "No" to the government's plan, although they still
hoped for economic development measures. Shimabukuro clearly
expressed during the campaign his opposition to the relocation
plan. This fact should not be overlooked.

The relocation plan was formulated in the form of totally
ignoring the residents of Nago City following the US military
transformation plan. As the US military has stated, elimination
of danger of the Futenma Air Station and reducing Okinawa's
burden of US military bases are not the main purposes of the
relocation plan. Relocating the air station to the coast of Camp
Schwab is a plan to build a place to station Marine Corps troops,
complete with an air station and a military port -- the nature of
which is completely different from that of the Futenma base. The
relocation plan also states that 7,000 marines would be cut from
Okinawa, but most of the 7,000 are rear-echelon support troops.
The functions of operational units will be reinforced. The
outcome of the election means that Nago citizens opposed to the
plan face a strengthening of the base functions.

Okinawa has been forced to accept the burden of US military bases
in return for economic measures. However, Okinawa's industrial
infrastructure is still weak and per capital income of Okinawa

TOKYO 00000501 009 OF 014


people remains the lowest in the country. Okinawa's habitual
reliance on the central government and private companies have
grown due to the routine transfer of finances from the central
government on the grounds that it shoulders the US military
burden. Okinawa should be aware that a package of promotional
measures would not bring about a bright future to it.

The US military realignment plan has made it clear that the
central government regards Okinawa as a convenient position amid
the realignment of Japanese and US forces pushing forward with.
In order to create its own future, Okinawa has no choice but to
build an equal relationship with the central government, putting
an end to the subservient relationship.

The "regional bloc" system or 'doshusei' system aimed at
integrating prefectures into broader regional entities would give
the prefecture such an opportunity. If Okinawa becomes an
independent province as a plan the government is considering, it
will have no choice but to be independent. Okinawa should end its
dependency by aiming at forming a "self-ruled province" that
would be designed to realize an advanced government exceeding the
scope of "regional bloc" system that the government is
considering.

Okinawa's road to independency appears rocky, but putting an end
to its dependency would be more desirable than ruining itself by
accepting pocket money from the country. Okinawa must gain its
psychological independence.

(10) Bill revising Downtown Revitalization Law gives special
treatment to lots vacated by large stores

TOKYO SHIMBUN (Page 3) (Full)
January 30, 2006

The Ministry of Land, Infrastructure and Transport (MLIT) and the
Ministry of Economy, Trade and Industry (METI) have decided to
submit a bill amending the Downtown Revitalization Law to the
current Diet session. The bill - outlined yesterday - gives
prefectural governments the authority to designate areas
including districts or shops vacated by large retail stores, like
department stores and supermarkets, as "special zones" for being
exempted from the complicated store-opening procedures stipulated
in the Large-Scale Retail Store Location Law. This is a measure
to revitalize downtown districts by drawing in potential store
openers.

An increasing number of large-scale stores located in front of
stations have been closed down across the nation, but many of the
vacated stores have been left undestroyed. By exempting store-
opening applicants from the obligation of taking the procedures
and facilitating large-store openings, the ministries aims to
stop the further drying up of downtown shopping districts across
the nation. They hope to enforce the law by the end of this year.

The Large-Scale Retail Store Location Law requires applicants for
opening stores with a floor space of 1,000 square meters or
larger and local governments concerned to take such procedures as
(1) notifying of equipment guidelines and store hours; (2)
holding briefings to local communities; and (3) listening to
views by prefectural governments concerned from the municipal
governments that will be involved in the plans. The law also
stipulates that retailers are allowed to open new stores eight

TOKYO 00000501 010 OF 014


months after submitting applications for the first time

Under the bill revising the Downtown Revitalization Law, however,
these procedures will be exempted in the case of store openings
in areas designated as "special zones" by prefectural
governments. Upon obtaining agreement on certain conditions from
the former retailers, applicants will be allowed to open new
stores. But in order to protect the living conditions, they will
be required to continue to take environment-protection measures,
such as securing a parking lot and a graveyard.

If a municipal government housing a deteriorated downtown
district wants the district to be designated as a "special zone,'
the government will have to draw up a basic central city-
invigoration plan including commercial revitalization measures
and submit it to the central government. Once the central city-
invigoration headquarters, which will be soon set up in the
Cabinet Office, endorses the plan, the prefectural government
concerned will designate it as a "special zone."

(11) Wavering Japan-US-China relationships (Par 1): US watching
Yushukan closely; Distrust growing of Emperor's State perspective
and Yasukuni Shrine; China actively lobbying US; US-China
"diplomatic honeymoon" progressing

MAINICHI (Pages 1 and 2) (Abridged slightly)
January 30, 2006

Asked about his visits to Yasukuni Shrine, Prime Minister
Junichiro Koizumi told the House of Councillors last week, "In
the world, China and South Korea are the only countries that
criticize my visits to the shrine." Koizumi's answer is correct
as far as official statements are concerned. But his view is not
true in essence. Subtle changes are seen in the inner workings of
the United States, which is Japan's ally today but was its enemy
during World War II. The US is not happy with the exhibits and
films critical of the Roosevelt administration's Japan policy and
the US-led Tokyo War Crimes Tribunal, shown at the war museum,
Yushukan, at Yasukuni Shrine.

Prior to his departure from post in February 2005, US Ambassador
to Japan Howard Baker called on influential Liberal Democratic
Party members, and exchanged views on relations between Japan and
China. In the session, Baker, broaching the topic of Yushukan
Museum, complained with a wry smile, "The exhibits on display
suggest that Japan had won the war."

The renovation of the Yushukan Museum, which started as part of
the 130th anniversary of the foundation of Yasukuni Shrine, ended
In July 2002. After the renovation, the imperial historical
perspective was stressed even further. The museum also openly
presented the view that the US embargo against Japan had forced
the latter to go to war with the former and that Japan had simply
stood up in defense of itself and for putting an end to the
supremacy of the white race. The museum shop carries scores of
books critical of China for pursuing Japan's wartime
responsibility. Baker, who was nearly 80 at the time, visited the
museum in person to confirm what was on display.

On Dec. 7, 2005 (Dec. 8, Japan time),on the 64th anniversary of
Japan's bombing of Pearl Harbor, a group of US experts on Asia in
Washington invited visiting Minshuto (Democratic Party of Japan)
President Seiji Maehara to their breakfast meeting.

TOKYO 00000501 011 OF 014



In the meeting, James Kelly, who had served as assistant
secretary for East Asian and Pacific affairs until January 2005,

SIPDIS
expressed concern, saying, "The prime minister's visits to
Yasukuni Shrine might be taken to mean that he is subscribing to
Yushukan's views."

There is no pro-Japan diplomat who does not know the Yushukan
Museum. A senior diplomat long served in Tokyo commented to a
Mainichi Shimbun reporter in Washington on condition of
anonymity:

"The US can wink at a gap in views on history between Japan and
China, but Yushukan is something we cannot ignore. We don't think
the museum is trying to tell the truth. It is good for the prime
minister to pay respects to the war dead. The problem is the
relationship with Yushukan."

Former Pentagon Japan desk director Paul Giarra also unloaded his
discontent with Yushukan on the Mainichi reporter, saying, "The
exhibits are arrogant enough to give the impression that Japan
was correct to wage war and they blame other countries for World
War II."

Using the word "outrageous," Giarra criticized the prime
minister's shrine visits, adding, "Shrine visits might end up
isolating not only Japan but also the United States, its ally, in
Asia."

President Bush has not criticized Koizumi's Yasukuni visits, but
discontent is spreading among US government officials and
lawmakers. Although the issue will not jolt the foundation of the
alliance with Japan, those who have abstained from commenting on
the issue as Japan's domestic matter have begun voicing their
irritation. Such a trend has been conspicuous since Koizumi's
visit to the shrine last year on its Oct. 17 autumn festival.

On Oct. 20, 2005, three days after Koizumi's fifth annual visit
to the shrine, House International Relations Committee Chairman
Henry Hyde sent a letter to Ambassador to the US Ryozo Kato,
expressing his regret over Koizumi's shrine visits. Hyde, now 81,
fought with the Imperial Japanese Army in the Philippines during
World War II.

Hyde obviously could not overlook Prime Minister Koizumi's visits
to Yasukuni Shrine, which honors the war dead, including Class-A
war criminals, although he has sent in the past a letter to
Koizumi expressing his gratitude for the Self-Defense Forces
mission in Iraq and threw his support behind Japan's efforts to
resolve the issue of Japanese abducted by North Korea. During the
Nov. 16 Koizumi-Bush summit meeting in Kyoto as well, the two
leaders spent the bulk of their talks on relations Japan-China
relations, following Bush's question on Koizumi's view on China.

Behind Bush's question lies Washington's view that regards Japan-
China relations as the most serious issue in Asia. Fearing that
deteriorating relations between the two countries would harm US
national interests, the US House plans to hold a public hearing
on Japan-China relations as early as March.

Asked about the background of the hearing, a House Secretariat
staffer familiar with East Asia affairs said:


TOKYO 00000501 012 OF 014


"The Korean Peninsula, Taiwan Strait, India, and Pakistan have
been politically and militarily unstable in Asia. But Japan-China
relations are a hot topic today. US bonds are now in the hands of
Beijing, Shanghai, and Tokyo, and disputes between Japan and
China could adversely affect the US as well."

The interests of US business circles obviously lie behind the
planned House hearing.

The US Congress' growing interest in Japan-China relations
triggered by Koizumi's shrine visits is mainly ascribable to
China's lobbying on the US.

Dan Blumenthal of the American Enterprise Institute, a think tank
close to the Bush administration, noted: "In the past, when
Chinese officials visited the US, they always talked about
Taiwan, but today, they lash out at Japan's nationalism, citing
the Yasukuni issue."

With business and nationalism entangled with each other, China
has been lobbying the US Congress actively.

Last July, the US House rejected legislation to slap sanctions on
China. The legislation was designed to enhance the President's
authority to allow him to impose sanctions on European firms that
have removed the arms embargo against China.

Larry Wortzel of the Heritage Foundation explained: "China is
well versed in the circumstances of each US Congressman. Beijing
exerts its influence by tactfully using pro-China lawmakers and
corporations."

Last June, shortly before the House took the vote, pro-China
Representatives launched a US-China working group. A group of
organizers, including Mark Kirk and Rick Larsen, visited China
early this year to hold talks with Wu Bangguo, chairman of the
Standing Committee of the National People's Congress, and others.

Kirk's constituency and its vicinity are a home to Boeing and
Motorola, which are eager to break into the Chinese market.

What about Japan's lobbying activities?

The aforementioned Senate staffer has this view:

"Taiwan deserves an A plus and China a B plus. Japan has been too
quiet to evaluate. With an increased interest in the US in the
Yasukuni issue, Japan has finally began calling Congressional
members to its Embassy to hold study sessions."

China's momentum both in the US Congress and administration has
been noticeable. During the first Bush administration, Deputy
Secretary of State Richard Armitage, the most prominent Japan

SIPDIS
expert in the administration, handled Asia policy. Armitage's
successor, Robert Zoellick, has created a high-level arrangement
for discussions with China, instead of going along with the
Armitage-style Japan-US strategic dialogue.

The second US-China high-level talks took place on Dec. 9, 2005,
in Washington. After the talks, Zoellick invited Chinese Vice
Foreign Minister Dai Bingguo to the Franklin D. Roosevelt
Presidential Library in Hyde Park, New York.


TOKYO 00000501 013 OF 014


The memorial library of Roosevelt, who guided the Allies to the
victory in WWII and engineered the postwar system by the US,
Russia, Britain, France, and China, reflects a historical
perspective that conflicts with that of Yushukan at Yasukuni
Shrine. Dec. 9 happened to be just two days after the attack on
Pearl Harbor on Dec. 7. The two leaders played up the US-China
"diplomatic honeymoon" through their tour of the library titled
"Freedom From Fear."

(12) Livedoor shock: Arrest of President Horie; No change in
reform drive

NIHON KEIZAI (Page 1) (Excerpts)
January 28, 2006

Commentary by editorial writer Akio Fujii

Interpellation sessions in the regular Diet session started on
the day that Takafumi Horie was arrested. In the ruling camp,
there had been an atmosphere in which one found it difficult to
criticize the Koizumi reform drive, but now voices critical of
his reform initiative are beginning to be heard. The key word is
"shadow."

New Komeito head Takenori Kanzaki pointed out: "As the structural
reforms progress, distortions that can be called their shadow are
permeating in Japanese society." Mikio Aoki, head of the Liberal
Democratic Party caucus in the House of Councilors also
underscored: "Japan might be splitting into bright and dark
sides, and the division between the two sides may be widening."
Since the LDP supported Horie, when he ran in last year's Lower
House election, an increasing number of people have come to
regard Horiemon (Horie's nickname) as a product of the Koizumi
reform drive. Just then, the Livedoor incident occurred. It
appears that dissatisfaction with Koizumi's reform initiative has
erupted.

Genuine things will survive

Policy officials should delve in a cool-headed manner into how
they might learn lessons from the incident. To begin with, it was
not the structural reforms that caused this incident. The problem
lies in the delay in reform of the securities market.

While financial and securities administration has shifted
emphasis from prior regulations to ex post facto regulations, no
sufficient efforts have been made to strengthen the functions of
the watchdogs of the market, inducing efforts to secure
independence of the Securities and Exchange Surveillance
Commission. In strengthening governance by the private sector,
which defends the market, it is important to learn lessons from
the facts that the Tokyo Stock Exchange's computer order
processing system failed and that audit companies were unable to
catch on that there were window-dressed settlement accounts, as
economic commentator Naoki Tanaka has pointed out.

The words "entrepreneur" and "mergers and acquisitions" (M&A)
have become familiar through the battle to buy out Nippon
Broadcasting System waged by Livedoor. However, epideictic bogus
entrepreneurs are bound to be rooted out. Only genuine
entrepreneurs will survive. Young people who want to start up in
the real business will find it easier to do so without bogus
entrepreneurship.

TOKYO 00000501 014 OF 014



The setting up of businesses by individuals and their making
profits through originality and ingenuity, even by taking risks,
is the source of vitality to the market economy. The rate of
newly established companies to the Japanese companies as a whole
has increased due to the removal of a ban on the establishment of
companies with 1 yen in capital has risen but only to 3.5%, which
is only 25% of such a rate in the US (14%).

M&A contributing to industrial reorganization and economic
revitalization

Kazuhiko Toyama, managing director of the Industrial
Revitalization Corporation of Japan, said that M&As should not be
denied because of the Livedoor incident. He said: "It is
necessary to take measures, such as strengthening penalties
against securities-related crimes, instead of blaming M&As."

In the US, an AOL and Time Warner merger proposition, which made
headlines as the integration of media companies of the century,
failed, but Google, a leading search engine, is now trying to
forge a capital alliance with AOL. Though all M&A attempts do not
end successfully in the US, they are contributing to industrial
realignment and economic revitalization.

The 225-issue Nikkei Stock Average on Jan. 27 set a new high
since last year, canceling out the Livedoor shock.

The Japan-buying move, which came in shortly after the
dissolution of the Lower House last year, reflects expectations
from both domestic and foreign investors, who think that the
reform drive would further accelerate. What should be done now is
not turn a cold shoulder on the market but carry out reform that
will let the market function in a sound way. It is necessary to
carry out reform that will eliminate loopholes so as to prevent
violations and evasions of law.

The reform effort to move services from government to the private
sector, such as postal privatization, has just gotten under way.
There are a mountain of challenges ahead, such as social security
reform to cope with a low birthrate and aging society and
regulatory reforms designed to create a small government. It is
premature to halt the reform drive, saying there is reform
fatigue. Japan's reform efforts should not be allowed to end as a
fiasco.

SCHIEFFER