DAILY SUMMARY OF JAPANESE PRESS 12/29/06

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SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 12/29/06


INDEX:

(1) Close-up 2006 column -- Will mutual understanding be promoted
between Japan, China through joint history study?

(2) With six-party talks adjourned without progress, breakthrough
proposal floated for a summit meeting among US, China, and Japan

(3) Futenma alternate facility: Governor one day before inauguration
proposed having one runway and moving it seaward

(4) New Komeito Ota meets prime minister for three days in row

(5) M&As by Japanese companies reach 15 trillion yen, up 30 % this
year; Record high in terms of number; Overseas investment getting
bigger

(6) Japan-US alliance heading toward new stage, going beyond
security sphere

ARTICLES:

(1) Close-up 2006 column -- Will mutual understanding be promoted
between Japan, China through joint history study?

MAINICHI (Page 3) (Almost full)
December 27, 2006

Kazuo Iida, Tomoko Onuki, Beijing

The joint history study project consisting of experts from Japan and
China was finally launched on Dec. 26 as part of an effort to
improve mutual understanding. The project will involve discussions
among academics in order to avoid the history issue evolving into a
political issue. The two countries aim to release the results of the
joint study in 2008, the year that will mark the 30th anniversary of
the signing of the Japan-China Peace and Friendship Treaty. However,
a gap in views exists between the two countries, with Japan wanting
to focus on the 60 years after the end of the war, during which the
two countries have had peaceful and friendly relations and China
wanting to focus on the history of wartime aggression. Whether the
project will lead to improving the current relationship and changing
it into a future-oriented one remains an open question.

Perception gaps exist over "Nanking Massacre or Rape of Nanking" and
"military sex slaves"

"In Japan, speeches and activities not admitting the responsibility
for the war of aggression and denying the historical facts of the
war have existed until now. Those irresponsible words and actions
going against the common interests of the two countries have
constantly hurt the public sentiment of a war victim nation."

Bu Ping, chair of the Chinese research team and head of the
Institute of Modern History of the Chinese Academy of Social
Sciences made that remark in a speech delivered at the opening of
the first round of the joint study meeting on Dec. 26. "The first
matter for us is to overcome the barriers caused by those words and
actions," Bu continued, stressing that the history issue relating to
the past war should be taken up first.

The themes of the joint study for discussions are: (1) the more than
2,000 year history of exchanges between Japan and China; (2) the

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unhappy history during the modern age; and (3) the 60 years of
progress in Japan-China relations since the war.

Of the three, Japan is focusing on the 60 years of postwar history
and aims to obtain a favorable evaluation about Japan from China,
motivated by a desire to avoid the case where spotlight will be
directed solely on the unhappy period in the entire history of
bilateral relations. Japan intends to bring up such specific events
as what Japan's official development assistance to China has
achieved and how Japan helped China to come back to the
international community when that country was isolated from the
international community because of the 1989 Tiananmen Square
Incident.

On the other hand, China, as expected, focuses on the unhappy
history. Indeed, Bu's opening speech revealed that there were the
differences in ulterior motives between the two countries, implying
a rocky path for both sides to follow in the months ahead.

Japan appears not to argue during this round of the joint study
meeting about historical facts relating to the war of aggression on
China. But there are broader perception gaps over individual
historical facts, especially so over the Rape of Nanking. China
insisted that the former Imperial Japanese Army killed 300,000 -
400,000 Chinese, while in Japan, a number of arguments exists over
the number of the victims from several thousands to 200,000 exist.
Some in Japan even assert that the massacre itself was a
fabrication.

The two countries are also wide apart over the issue of military
comfort women. In Asian nations, such as China and South Korea, many
have pointed out that the former Imperial Japanese Army was involved
in military comfort women, for instance, in the way to construct
brothels. The Japanese government admitted to the former Imperial
Japanese Army's involvement and offered an apology and a remorse in
a statement released in 1993 in the name of then Chief Cabinet
Secretary Yohei Kono. Nonetheless, many in Japan still argue that

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those women were not necessarily forced to become military comfort
women.

Prime Minister Shinzo Abe had cast doubts on the Kono statement at a
subcommittee meeting of the Lower House Committee on Audit in 1997,
but in this past October, soon after assuming office as prime
minister, Abe indicated during a question-and-answer session at the
Lower House that he would follow the previous government's
statement. This attitude came perhaps out of consideration for China
and South Korea before his first visits to the two countries as
prime minister, but it provoked complains from among some of his
highly nationalistic supporters.

On the number of Chinese killed by the former Imperial Japanese
forces, a person involved in the joint study commented: "When the
war ended, the Chinese side declared that the number was 'three
million,' but last year, (when the anti-Japanese movement occurred
in China),China said 'the number was 35 million.'" The Japanese
side intends to advance the joint study in an objective manner by
using data from third countries, such as the US and Russia.

(2) With six-party talks adjourned without progress, breakthrough
proposal floated for a summit meeting among US, China, and Japan

NIHON KEIZAI (Page 2) (Excerpts)
Eve., December 28, 2006

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Commentary by Editorial Writer Tsuyoshi Sunohara

Six-party talks on the North Korea nuclear issue recessed on Dec. 22
without achieving any progress. North Korea refused to respond to
discussions on its nuclear programs, insisting first that the US'
financial sanctions be removed. Its attitude not only perplexed
Japan and the US, it affected China, the chair of the talks, as
well. A view has emerged questioning the meaning itself of having
six-party talks.

"Perhaps there should be talks on the future of North Korea at a
trilateral summit meeting of the heads of the United States, China,
and Japan?" One former US government official has proposed such an
idea to President Bush in his office at the White House. That person
is former Department of State counselor Philip Zelikow. He is a
close friend of Secretary of State Rice, and is known for having
co-authoring with her an essay on German unification.

At first, the Bush administration maintained an unwritten policy
goal of "regime change" in North Korea, but when it come down to it,
it seemed to be nothing but "political rhetoric," as former
Secretary of State Powell put it. However, in foreign-policy circles

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of the Republican Party, the dominant view in consideration of such
issues as North Korea's nuclear and missile programs and the
abductions of Japanese citizens, was: "As long as the Kim Jong Il
regime is in power, there can be no complete resolution of the
issues," as a former senior official of the State Department
indicated.

Based on such analysis, the idea floated was to hold a summit
meeting of the leaders of the United States, China, and Japan, which
might be called an Asia-style Yalta Conference, similar to that held
by the US, Britain, and the Soviet Union to discuss resolving the
post-World War II situation. The leaders of Japan, the US, and China
would directly negotiate not only on the missile and nuclear issues
but also from the perspective of such mid to long-range topics as
post-Kim Jong Il arrangements and the unification of the two Koreas.
The aim would be to set a future direction for North Korea.

According to a source in the US government, this was a "concept" and
nothing more, and never went to the actual policy level. However,
when former State Department counselor Zelikow proposed it, even
though President Bush did not give any specific reaction, Secretary
Rice had an expression on her face that it was not a bad idea,
according to a US government-connected source.

(3) Futenma alternate facility: Governor one day before inauguration
proposed having one runway and moving it seaward

RYUKYU SHIMPO (Top play) (Excerpts)
December 29, 2006

In connection with the construction of an alternate facility for the
US forces' Futenma Air Station, it was learned as of yesterday that
Okinawa Governor Hirokazu Nakaima, who has been opposed to the
government's relocation plan that features a V-shaped runway, on
Dec. 9, the day before his inauguration, attended a meeting of the
Itsutsunohinokai (Fifth day committee, chaired by House of
Representatives lawmaker Masaji Nakamura),made up of Liberal
Democratic Party Diet members elected from or born in Okinawa. He
there transmitted his view on the alternate facility, saying, "It
would be desirable to make it into one runway and move it seaward."

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This was confirmed by several informed sources. The Defense Agency
(JDA),too, has informally told the prefecture that it was prepared
to revise the plan, but with no prospect of the governor's call for
having the runway closed within three years being in sight, it may
not be impossible to realize at a stroke talks to revise the plan
relocating the facility in the prefecture.

According to an informed source, the revised plan that Governor
Nakaima hoped to see reportedly was close to Nago Light Plan
(shallow waters plan) that the US and the Foreign Ministry had
advocated just prior to the interim agreement on USFJ realignment
reached last October. Nago City also accepted this plan.

The Itsutsunohinokai took the view that it was essential to reflect
the desires of the local community of Nago City.

Although Nago City had agreed to the government's plan to construct
a V-shaped runway, with the V-shaped runway, aircraft would fly over
the homes of local residents. In order to avoid that, if the runway
were moved into the sea and only one runway built, it would be easy
to avoid aircraft flying over the village.

The governor will now negotiate with the government to have Futenma
in "closed situation in three years," and at the same time,
apparently will coordinate with the local governments about the
revision of the plan, indicating his intention to approve it against
the background of having local agreement.

(4) New Komeito Ota meets prime minister for three days in row

NIHON KEIZAI (Page 2) (Excerpts)
December 29, 2006

New Komeito President Akihiro Ota called on Prime Minister Shinzo
Abe at the Kantei yesterday, the last business day of the year, and
presented a package of proposals prepared by his party regarding the
government's Asia Gateway Initiative. Ota met the prime minister for
three days in a row, despite the Diet being out of session. Now that
the Abe administration is suffering a series of setbacks, including
the resignation of Administrative Reform and Regional Revitalization
Minister Genichiro Sata, Ota appears to have tried to encourage the
prime minister by visiting him for three continuous days.

In its package on the Asia Gateway Initiative, the New Komeito
proposed establishing an investment institute to foster Asian
companies and setting up air routes between Japan and Asian
countries on a priority basis. The New Komeito intends to cooperate
in translating the concept into action.

The meeting yesterday was suddenly arranged at the request of Ota on
the phone to prime minister's secretary Yoshiyuki Inoue late at
night of the previous day. On Dec. 26, Ota met the prime minister
for about 20 minutes to speak of his planned visit to China starting
on Jan. 7 and other matters. On the 27th, Ota accompanied the prime
minister on his tour to a shopping mall in Kita Ward, Tokyo, his
electoral district.

Ota was elected to the House of Representatives for the first time
in 1993, the same as the prime minister, but he is nine years older
than Abe. They had few opportunities to meet each other until then.
They have just started contacting each other as the leaders of the
coalition parties.


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In late September, Prime Minister Abe met with Honorable Chairman
Daisaku Ikeda of Soka Gakkai, the main support group for the New
Komeito. Ikeda was on close terms with former Prime Minister
Nobusuke Kishi, the prime minister's grandfather. Members of the New
Komeito and Soka Gakkai have begun to feel intimacy toward the prime
minister, but they also harbor a sense of alarm about his hawkish
policy stance, for instance, on revision of the Constitution.

The meeting yesterday lasted for about 10 minutes. In response to
the prime minister's remark, "Thank you for your visiting me the day
before yesterday and yesterday," Ota said, "I would like to
cooperate with you next year, too," underscoring his willingness to
support the prime minister, who is now in a quandary over dropping
public support rates.

(5) M&As by Japanese companies reach 15 trillion yen, up 30 % this
year; Record high in terms of number; Overseas investment getting
bigger

NIHON KEIZAI (Top Play) (Almost Full)
December 29, 2006

Japanese companies are stepping up their mergers and acquisitions
(M&A) activities both in Japan and abroad. The number of M&As in
2006 registered the highest since 1999, up approximately 30% from
the preceding year, reaching 15 trillion yen in value terms.
Companies advancing overseas are seen investing huge amounts of
money in foreign companies in order to strengthen competitiveness,
while mature industries are increasingly making efforts for
industrial reorganization in order to survive. Proposals for hostile
takeovers and management buyouts (MBO),spurred by exhortations by
M&A advisory companies, were also prominent.

The number of M&As reached a record high of 2,764 cases, up 1% ,
indicating that such transactions have taken root as a commonplace
corporate strategy. M&As for the reorganization of banks, such as
the Mizuho Financial Group, alone reached approximately 10 trillion
yen in 1999. However, M&As by operating companies were pronounced
this year. Recof, an M&A broker located in Chiyoda Ward, Tokyo,
tallied the data.

M&As targeting foreign companies grows five-fold

An increase in M&As targeting foreign companies is attributable to
the increase in M&As in value terms. The takeover of Gallaher, a
leading British tobacco manufacturer, by JT was the largest overseas
investment by a Japanese company, with 2.2 trillion yen. The
top-five M&As, including the takeover of Japanese corporation of
Vodafone of Britain by Softbank, all involved foreign companies. As
moves to seek opportunities for growth abroad gathered steam, M&As
targeting foreign companies have expanded to 8.4 trillion yen, up
more than five times.

On the domestic front, an increasing number of companies in matured
markets, such as consumption and food, were seen making efforts to
boost their shares. Methods of M&As have also diversified with MBOs
growing 2.3-fold with 690 billion yen and takeover bids (TOBs)
expanding six-times with 3.6 trillion yen.

Active moves by advisor companies

In the financial advisory area, foreign banks have been visibly
active in giving advice to companies. According to Thomson

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Financial, a research company, European and US financial
institutions, starting with Goldman, gained the top-three spots in
terms of money gained by giving advice.

Goldman Sachs zoomed up to first place due the M&As involving JT and
Softbank, to which it acted as advisor. UBS, which came in second,
served as an advisor to Vodafone in its merger into Softbank. It
also played an active role in the MBO involving Skylark. Merrill
Lynch served as an advisor to JT.

Large-scale border-crossing M&As by Japanese companies have
continued, leading to advance of foreign financial institutions,
which have customers across the world in the M&A business.

Japan occupies 5% of M&As throughout world

M&As are growing in size throughout the world, topping 2.5 trillion
dollars as of September, up more than 30% from the previous year.
M&As exceeding 10 billion dollars have continued in December, a pace
faster than that of 2000, the year that recorded the fastest pace in
annual terms with 3.5 trillion yen. Since Japan's M&As occupy only
about 5% of all, some take the view that Japan is at last on the
threshold to the age of full-fledged M&As. A ban on a triangular
merger system, which allows a foreign company to purchase a Japanese
company using its own stock as merger consideration, will be removed
next May. Chances are that Japanese companies could be buffeted by
waves of global M&As.

(6) Japan-US alliance heading toward new stage, going beyond
security sphere
By Howard Baker, former US ambassador to Japan

Wedge (January) (Full)

It was a great honor for me to have been able to fulfill my duty as
United States ambassador to Japan for a four-years period. I am
warmly grateful to President Bush, who awarded me the position that
represents in Japan the United States and the US President. My wife
Nancy and I met wonderful persons, visited many beautiful places,
and enjoyed Japan's impressive culture and traditions.

I learned that the Japanese economy is vital and filled with
potential. What stands out in my memory is the warmness and
friendship of the Japanese people, in short, amicable relations
between Japan and the US. The friendly relationship established
between Japan and the US is noteworthy, when considering that the
two countries had engaged in warfare at a time not so far off in the
past.

For the future of Asia, it is imperative for the two countries to
continue to be on good terms and to perceive the need for the other
side's cooperation. Japan-US relations are the bedrock of the United
States' diplomatic and military policies in Asia, and I believe that
Japan also has the same view.

We are now facing a crisis. The crisis is spreading on the Korean
Peninsula. Japan and the US are strong, vital, well governed, and
democratic. The two countries have the capability to work out
policies that ensure their national security and prosperity. I hope
that Japan and the US will tighten their cooperative relations
further and work together not only on the economic front but also in
order to promote such values as democracy, individual freedom, and
the rule of law.

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In conclusion, I would like to say to the readers: Although there
are many things to which I pay respect in Japan, I particularly envy
its railway systems, as represented by the Shinkansen bullet train
system. I had a test ride on a superconducting linear motorcar
express. The bullet train system is a successful case in Japan's
technical area, but the development of superconducting liner
motorcar promises a brighter future for the transport sector.

-- What will the outcome of the midterm elections have on the future
political management of President Bush?

Baker: The Republican Party, which the president belongs to,
traditionally has suffered defeats in past midterm elections, but in
the latest one, it ended up losing only a limited number of seats.
Even so, some effects will inevitably appear in the policymaking
process, because all committees are now under the Democratic Party's
control, and Democratic Party members are installed to the posts of
both Senate and House majority leaders. The key lies in whether the
Democratic Party will take a cooperative or confrontational stance
while President Bush is in office for the remaining two years. I
wish the Democrats would remain cooperative, but nobody knows which
course they will choose. If progress is made in both parties'
programs, the remaining two years will turn to be a very good term.
It is true, though, many members in the Democratic Party are seeking
an opportunity to criticize President Bush and his administration,
so optimism may not be warranted.

If the Democrats choose the option of countering the government's
management, no major changes would occur over the next two years.
But if they decide to offer cooperation to the government, it will
become highly possible for the two parties to approve the other
side's bills, resulting in bringing about benefits to the US.

Regarding whether the Democrats are cooperative or confrontational
toward the government, we won't know for a while until after the
Congress is convened in January 2007, for instance, for several
weeks or several months. Their stance hinges on what intents the new
leaders in the Senate and House may have and if they are capable of
controlling radical Democratic members. I believe that President
Bush is willing to offer a helping hand and join hands with new
Democratic Party members. We will be facing an interesting and
important period from now.

-- How will the Bush administration's Iraq policy be affected?

Baker: I think the policy will not so significantly change as
predicted by the media. The president has authority related to war.
But the Congress is responsible for budgetary allocations. On the
occasion of the Vietnamese War, the Congress enacted the so-called
Cooper Church Law, which called for ending the war. But it was not
the law but the Senate Budget Committee that terminated the Vietnam
War. The committee cut the funds necessary to continue the war. I do
not think a similar situation would occur this time. The Congress is
expected to issue various demands or suggestions regarding the Iraq
war, but in my view, it will cooperate with the president in the
end, and the Congress will not take a similar step to that on the
occasion of the Vietnam War.

The Iraq war might have more effect on Japan than on the US. The war
ushered Japan into a modern, powerful, and international nation. I
think it was a matter of time for Japan to move in that direction,
but the Iraq war accelerated the process.

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-- The Koizumi administration greatly contributed to strengthening
Japan-US relations. I believe that Prime Minister Abe also
understands the importance of Japan-US relations. What views do
Americans have about this?

Baker: I know Prime Minister Abe very well. While in Japan, I
frequently contacted him in the capacity of ambassador. I have great
confidence in him. I believe he will be a brave, prudent, and good
prime minister. I am looking forward to his future. Specifically, I
am interested to see the fate of a bill to upgrade the Defense
Agency to ministry status and if he is really eager to revise
Article 9 of the Constitution.

-- What tasks do you think are placed high on the agenda in Japan-US
relations?

Baker: The Japan-US alliance is vital for the sake of Japan's
security. In a similar way, it is also inevitable for the US policy
toward the Asia-Pacific region. Based on the Japan-US alliance, the
US will be able to promote such values as democracy, liberalism, and
the rule of law. All the more because there is the Japan-US
alliance, this region can be changeable. It is imperative for Japan
and the US to jointly address matters in a cautious manner for the
future. In Japan, some persons say that the Constitution should not
be revised, but I do not agree to the view. Japan already has the
second strongest Maritime Self-Defense Force, following the US
military, in the Pacific Ocean, as well as the Air Self-Defense
Force, which is modernized and has a dominating presence. A plan to
deploy the missile defense system is underway, and the system is
indispensable in light of the growing tensions on the Korean
Peninsula.

-- Japan-US relations were strengthened under the Bush and Koizumi
administrations. I think the close bilateral relations greatly
contributed to guaranteeing security in Japan, stabilizing politics,
and putting the economy on recovery track. I think it is also
necessary for the two countries to construct a closer, inseparable
relationship from now.

Baker: I agree. Japan and the US are coming closer in terms of
foreign policy. I think the two countries have enjoyed the best
partnership in the world. The US once regarded US-Britain relations
as a special one. Hearing this, my British friends might be unhappy,
but the Japan-US alliance is now a special relationship. This is
indisputably true.

Whenever I visit Tokyo, I find the city cleaner. Tokyo is now the
capital of East Asia in various senses. It probably was impossible
without rational, resolute foreign policies of Japan and the US.

-- Who do you think is a potential candidate for the next
presidency?

Baker: I have no idea until the last minute. My guesses have never
been right.

DONOVAN