DAILY SUMMARY OF JAPANESE PRESS 12/19/06

UNCLAS SECTION 01 OF 05 TOKYO 007051

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 12/19/06


INDEX:

(1) Takeovers of Japanese companies by foreign companies: Types of
business subject to notification to be increased; METI plans measure
to prevent conversion of civilian goods into military usage

(2) Abductions by North Korea violate human rights: Government urged
to hammer out strategy to deal with North in cooperation with other
countries

(3) North Korea's kidnapping constitutes violation of human rights:
First International conference on abduction issue held in Tokyo

(4) Kasumigaseki confidential: Kantei (Prime Minister's Official
Residence) vs. Finance Ministry

ARTICLES:

(1) Takeovers of Japanese companies by foreign companies: Types of
business subject to notification to be increased; METI plans measure
to prevent conversion of civilian goods into military usage

NIHON KEIZAI (Top Play) (Almost Full)
December 19, 2006

Regarding takeovers of Japanese companies by foreign companies, the
Ministry of Economy, Trade and Industry (METI) has started looking
into the possibility of expanding types of business subject to the
system requiring notification to the government. The envisaged
measure is based on the Foreign Exchange and Foreign Trade Control
Law intended to prevent the outflow of key technologies that could
be used for military purposes or terrorist attacks. METI intends to
expand the coverage of the system from the current weapons and
aircraft industries to related fields, such as high-tech materials
and machine tools, which are convertible into military use. It wants
to strengthen a monitoring system in preparation for an increase in
international M&As, while maintaining a stance of encouraging
investment by foreign countries with a regulation that is more
moderate than that of the US, which targets all industrial sectors.

High-tech materials, machine tools

METI will shortly set up a study group consisting of persons
representing industrial circles and academia. It wants to compile a
report around next June and revise ordinances of related ministries
as early as next year, along with the Finance Ministry, with which
it has jurisdiction over related laws.

The Foreign Exchange and Foreign Trade Control Law obligates that in
the event of a foreign company trying to obtain shares of a Japanese
company, it notify in advance that the envisaged takeover of the
target company could damage Japan's national security, provided that
the target company is a listed company, and its stake in it exceeds
10% . If it is determined that the technologies of the target
Japanese company could flow into foreign countries, endangering
Japan, the METI minister and the Finance Minister can recommend or
order the alteration or suspension of the takeover bid.

European and US governments also regulate direct investment by
foreign countries. Moves to strengthen such regulations are also
spreading, following the terrorist attacks on the US in 2001. The
Japanese regulation is less strict compared with European countries
and the US. METI views that it is essential for Japan to strengthen

TOKYO 00007051 002 OF 005


its monitoring system in order to fulfill its international
responsibility, such as prevention of terrorist attacks.

In the revision, METI will first expand the types of business
subject to notification. It will consider the possibility of adding
such categories of industry as special steel and high-tech carbon
materials, and machine tools used to process those high-tech
materials to the list of business types subject to the regulation.
Those materials are all convertible for the manufacturing of
missiles.

At present, takeovers of operating companies by foreign companies
are subject to the notification system, but after the revision,
takeovers of holding companies will also become subject to
notification. Purchases of shares Japanese companies issue abroad
will also be subject to the regulation. The aim is to prevent
foreign companies from using loopholes with the diversification of
corporate forms and the development of the capital market on a
global scale in mind.

METI is also considering strengthening the penalty system. The
existing law stipulates that prison terms of no longer than three
years or fines of no more than 1 million yen be imposed on companies
that fail to observe the notification obligation or violated an
order to suspend investment. A plan to extend prison terms to no
more than five years has been floated with the aim of boosting the
efficacy of the law.

A triangular merger system that allows a foreign company to wholly
own a Japanese company using its own stock as the merger
consideration will come into effect next May. The growing view is
that M&As by foreign companies will increase in Japan. METI will
therefore adopt a system that will enable it to carry out detailed
checks on security matters.

Investment by foreign companies will be approved if it is determined
after screening that there is no concern about the outflow of
technology. However, the abuse of the system could hamper free
investment. How to secure transparent standards for government
recommendations or orders to suspend investment will likely be a
future agenda item.

(2) Abductions by North Korea violate human rights: Government urged
to hammer out strategy to deal with North in cooperation with other
countries

SANKEI (Page 30) (Full)
December 19, 2006

"North Korea hates to see the abduction issue becoming an
international issue," a Foreign Ministry official told the relatives
of abduction victims after the talks held between Japan and North
Korea in February.

Video testimony by Choi Un-hee, a South Korean actress abducted by
North Korea, and Charles Jenkins, the husband of Japanese abductee
Hitomi Soga, were shown in an international conference on North
Korea's abductions held in Tokyo recently. Their revelations turned
the abduction issue into an international problem.

Jenkins said that the wife of another US Army deserter was a Thai
citizen abducted by North Korea named Anocha Panjoy. He claimed that
she had told him she was grabbed in the summer 1978 in Macau, where

TOKYO 00007051 003 OF 005


she was working, and taken by boat (to North Korea). Thai newspapers
prominently reported on this verified case, prompting the Thai
government to launch an investigation to find out the truth.

Immediately after Jenkins' testimony, an English newspaper in Hong
Kong also filed this report: "Two ethnic Chinese women also
disappeared in Macao on the same day Anocha was kidnapped." Jenkins
said that Anocha had told him, "There were other Asian women" beside
her in the ship.

Choi in custody talked with one of the two missing Chinese women,
Ms. Hong, in Pyongyang many times. Choi quoted Hong as saying, "I
was taken by boat to offshore and then by large ship to North
Korea." Her relatives met with Hong in Seoul in March and confirmed
that she had been abducted by North Korea.

Jenkins also spoke about a Rumanian abductee. Choi also gave
information about victims abducted from Jordan, France, and
Malaysia.

In the past, a Lebanese abduction victim who escaped from North
Korea referred to victims abducted from France, Holland, and Italy.
North Korea is now suspected to have kidnapped citizens from at
least 12 countries.

Representatives from the National Association for the Rescuing of
Japanese Kidnapped by North Korea and the Association of the
Families of Victims Kidnapped by North Korea visited New York last
month and provided information about abductions to the Office of the
UN. Now that North Korea has continued to decline Japan's proposal
for talks on the abduction issue, it is necessary for the Japanese
government to learn about the results of investigations conducted by
various countries based on such information from Japan and hammer
out a strategy to deal with North Korea in cooperation with these
countries.

(3) North Korea's kidnapping constitutes violation of human rights:
First International conference on abduction issue held in Tokyo

SANKEI (Page 30) (Full)
December 14, 2006

Such groups as the Association of the Families of Victims Kidnapped
by North Korea and the National Association for the Rescuing of
Japanese Kidnapped by North Korea held a first international
conference on the abduction issue at a Tokyo hotel yesterday.
Families of abduction victims and government officials from
countries involved, as well responsible UN officials reported on
their abduction cases in detail. The participants affirmed the need
for the countries concerned to work together in settling the
abduction issue.

In a speech at the outset of the conference, Kyoko Nakayama, special
advisor to the prime minister (for the Abduction Issue),claimed in
a strong tone, "The kidnapping of citizens from a number of
countries, including Japan, constitutes a violation of human
rights."

In a session to explore ways to resolve the abduction issue, North
Korea Freedom Coalition Vice Chairman Suzanne Scholte said, "It
probably will be impossible to resolve the abduction issue while the
Kim regime remains in power," adding, "We must not yield on to the
North until all abduction victims return to their home countries. We

TOKYO 00007051 004 OF 005


should call on the US government to take sanctions against the North
in order to pursue the responsibility of Kim Jong Il."

Many relatives of abductees from overseas called for Japan's
cooperation and stressed the need for cooperation among all the
countries concerned. Chairman Choi of the South Korean Association
of the Families of Victims Kidnapped by North Korea said: "(In South
Korea,) the problem of North Korea's nuclear programs has come into
focus, with the abduction issue put on the backburner and about to
be forgotten. We hope the issue of South Korean abduction victims
will also be discussed in the six-party talks (starting on Dec.
18)." A nephew of Anocha Panjoy, a Thai abduction victim,
emphatically said, "We want to know how (their relatives) are living
in North Korea," asking for assistance to be offered to the families
of abductees in Japan and South Korea.

Sakie Yokota, 70, the mother of Megumi, who was abducted at the age
of 13, said: "We want to appeal that there are persons who need help
across the world. All parents of the abductees are getting older.
Unless a settlement is reached at an early date, reunion will become
impossible."

(4) Kasumigaseki confidential: Kantei (Prime Minister's Official
Residence) vs. Finance Ministry

BUNGEI SHUNJU (Page 235 &236)
January 2007

The Finance Ministry has finally taken action after watching
carefully moves of the Abe cabinet, which has strong tinge of being
antagonistic toward it.

The ministry was surprised at Prime Minister Abe's appointment of
Junzo Matoba as deputy chief cabinet secretary, the highest post in
the bureaucracy. Matoba is a former Finance Ministry official, who
joined the ministry in 1957. Matoba still has hard feelings toward
the ministry because he was unable to become administrative vice
minister, even though he considered himself as the best candidate
among those who had joined the ministry when he did. The rumor is
that Matoba has no intention to work with the Finance Ministry as
one of their own.

Osaka University Prof. Masaaki Honma, who buried the idea of a sales
tax, was appointed as chairman of the government's Tax Commission
under the prodding of Chief Cabinet Secretary Yasuhisa Shiozaki. The
appointment of Honma shocked the ministry. With his appointment, the
ministry was forced to go on the defensive soon after the Abe
cabinet was formed. In an attempt to recover the government's
confidence in it, the ministry decided to cut new government bond
issues in a supplementary budget for fiscal 2006 because of an
expected increase in tax revenues (in fiscal 2007).

The method of slashing government bond issuances for a supplementary
budget has been used from long ago. The reasons for cutting new
government bonds -- to rebuild government finance, to reduce annual
expenditures, or to use surplus funds for an additional fiscal
stimulus -- are deeply related to the image a government wants to
project at the time. In short, the Finance Ministry suddenly
presented such a policy that could determine the fate of the Abe
government. The ministry this time around had its collective eye on
both a cut in expenditures and a policy emphasis on economic
growth.


TOKYO 00007051 005 OF 005


Assistant Deputy Chief Cabinet Secretary Atsuro Saka, who joined the
ministry in 1970, and Kazuho Tanaka, secretary to the prime
minister, entered the ministry in 1979, took the initiative in
compiling the supplementary budget. It was easy for them to predict
that tax revenues would top 50 trillion yen. Saka earlier took the
lead in coming up with measures for the "second chance" policy under
then Chief Cabinet Secretary Abe. Tanaka served in such posts as
budget examiner in charge of the Ministry of Health, Labor and
Welfare, as well as Secretariat Division director, and he has his
own channels of communication to the ministry's mainstream.

As a result, they compiled a typical Finance Ministry-style
supplementary budget. Expecting a further increase in tax revenues,
they plan to bring the policy slogan, "emphasis on economic growth,"
to the fore in compiling the budget for fiscal 2007.

Over the past decade, when the Finance Ministry drafted budgets
under the Hashimoto, Obuchi and Koizumi governments, respectively,
it placed emphasis on fiscal reconstruction, cuts in expenditures,
or fiscal stimulus by combining tax revenues, expenditures, and
government bond issuances. Whenever Finance Ministry officials
presented the indices for government bond issuances, politicians who
don't know about the system never failed to fall into ministry
officials' trap. The question is whether the Abe government, which
plans to stand up against the Finance Ministry, will follow in
former governments' steps or whether it will be able to block the
ministry's offensive, seeing through the bond issuance mechanism.

SCHIEFFER