DAILY SUMMARY OF JAPANESE PRESS 02/15/06

UNCLAS SECTION 01 OF 11 TOKYO 000820 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 02/15/06 INDEX: (1) Poll on Koizumi cabinet, political parties, post-Koizumi race, Yasukuni Shrine (2) Will major US dailies' criticism become impediment to Foreign Minister Aso's candidacy for LDP presidential race? (3) Both Abe, Aso say Class-A war criminals "not criminals under domestic law" in response to questions from Minshuto (Democratic Party of Japan) (4) Abe: No one was judged guilty for crimes against humanity (5) Confusion reigns over administrative reform promotion legislation; Efforts to upgrade Defense Agency to ministry status, revise Imperial Household Law have failed; Moves to oppose specifics of bill seen at Kasumigaseki; Koizumi administration losing power base (6) Fate of ongoing talks on USFJ realignment unpredictable; Lack of progress and local coordination deadlocked (7) Japan caught in the crossfire between US and Iran over Iran's resumption of uranium enrichment (8) Energy diplomacy: Government facing policy dilemma due to nuclear development, history and territory issues ARTICLES: (1) Poll on Koizumi cabinet, political parties, post-Koizumi race, Yasukuni Shrine YOMIURI (Page 2) (Full) February 14, 2006 Questions & Answers (Figures shown in percentage. Parentheses denote the results of a survey conducted in January.) Q: Do you support the Koizumi cabinet? Yes 53.5 (56.1) No 36.2 (35.8) Other answers (O/A) 2.9 (2.4) No answer (N/A) 7.5 (5.8) Q: Which political party do you support? Liberal Democratic Party (LDP) 39.3 (40.9) Democratic Party of Japan (DPJ or Minshuto) 13.3 (12.6) New Komeito (NK) 3.1 (3.5) Japanese Communist Party (JCP) 1.4 (2.3) Social Democratic Party (SDP or Shaminto) 1.5 (1.6) People's New Party (PNP or Kokumin Shinto) 0.1 (0.2) New Party Nippon (NPN or Shinto Nippon) 0.1 (---) Other political parties --- (0.1) None 40.2 (38.1) N/A 0.9 (0.9) Q: Prime Minister Koizumi has clarified that he would step down when his term as LDP president expires in September this year. TOKYO 00000820 002 OF 011 Pick only one from among the following nine persons if there is anyone who you think is appropriate as the next prime minister. Taro Aso 5.6 Shinzo ABE 42.9 Koichi Kato 2.9 Yuriko Koike 1.9 Heizo Takenaka 2.2 Sadakazu Tanigaki 2.1 Fukushiro Nukaga --- Yasuo Fukuda 9.6 Taku Yamasaki 0.4 Others, none, N/A 32.4 Q: Prime Minister Koizumi has annually visited Yasukuni Shrine. Would you like the next prime minister to visit the shrine? Yes 28.3 Yes to a certain degree 21.9 No to a certain degree 19.2 No 24.0 N/A 6.6 Q: Prime Minister Koizumi has pushed for his market-oriented restructuring initiatives for a small government in order to minimize the government's public protection and services while lessening the public burden. Do you think the next prime minister should take over this policy course as is, or do you think the next prime minister should revise and take it over, or do you otherwise think there is no need to take it over? Take it over as is 25.6 Revise and take it over 48.8 No need to take it over 18.2 N/A 7.5 Polling methodology Date of survey: Feb. 11-12. Subjects of survey: 3,000 persons chosen from among all eligible voters throughout the country (at 250 locations on a stratified two-stage random sampling basis). Method of implementation: Door-to-door visits for face-to-face interviews. Number of valid respondents: 1,784 persons (59.5%). Breakdown of respondents: Male-48%, female-52%. (2) Will major US dailies' criticism become impediment to Foreign Minister Aso's candidacy for LDP presidential race? TOKYO SHIMBUN (Page 2) (Full) February 15, 2006 The New York Times and other US dailies have blasted Foreign Minister Taro Aso for his remarks about China. If he loses his reputation as a politician in the United States, it might have an adverse impact on his candidacy to become the next Liberal Democratic Party (LDP) president in the upcoming election to choose a successor to Prime Minister Junichiro Koizumi. The New York Times carried on Feb. 13 an editorial headlined "Aggressive Japanese foreign minister," in which the daily wrote: "Mr. Aso's sense of diplomacy is as odd as his sense of history. He has been neither honest nor wise in his remarks." The Boston TOKYO 00000820 003 OF 011 Globe criticized Aso in an article on Feb. 8, "Right-wingers like Mr. Aso have been indulging in undiplomatic words and actions." Aso, who is known as a straight-talker, has been criticized often by China since assuming his current post for his remarks on visits to Yasukuni Shrine by Prime Minister Junichiro Koizumi. In order to win the LDP presidential race, which will pick a successor to Koizumi, Aso, belonging to a small faction in the LDP, has no choice but to wait for Koizumi to resign. To that end, he has made it clear he would take over Koizumi's foreign policy of being unyielding to China's pressure. He has kept a tough stance against China, paying no attention to its criticism. However, support of the United States, Japan's ally, is indispensable for a successor to Koizumi. Having communication channels to key US government officials is a selling point of Aso. If he gains a bad reputation in the US and there is questioning of his qualifications to assume the prime minister post, it might be detrimental to him, forcing him to drop out of the presidential race. At a press conference yesterday, Aso stated, "Since it is free to criticize someone, I do not make any comment." Aso's aides are desperate to put the matter to rest, with one aide saying, "He has no intention of stirring up controversy with Chinese matters." However, the adverse effects of his "inflammatory remarks" remain unknown. Post-Koizumi contenders state Yasukuni issue will affect foreign policy At a House of Representatives Budget Committee session yesterday, candidate for the post of prime minister after Koizumi Chief Cabinet Secretary SHINZO Abe, Foreign Minister Taro Aso, and Finance Minister Sadakazu Tanigaki strongly reacted to a question about whether Koizumi's visits to Yasukuni Shrine have derailed Japan's Asia diplomacy. Katsuya Okada, a former president of the main opposition party Minshuto (Democratic Party of Japan),posed a question: "If the next prime minister visits Yasukuni Shrine, chances are that the present situation will continue. How would you conduct Asia diplomacy?" Abe responded: "India has created a boom in business circles because Prime Minister Koizumi visited the country last year. Paying attention to China alone is meaningless from a strategic point of view." Aso categorically said: "Summit meetings between the prime minister and the Chinese leader and between the prime minister and the South Korean president have been suspended, but many good collaborations have been carried out in the economic and music industry areas." Okada grilled ABE and Aso on their views of history, ABE avoided making a clear answer, responding, "(Evaluation) should be left to historians." At the ongoing Diet session, all eyes are now being focused on post-Koizumi contenders' replies. But there have no scenes yet in which the possible successors were able to display their individual characteristics. TOKYO 00000820 004 OF 011 (3) Both Abe, Aso say Class-A war criminals "not criminals under domestic law" in response to questions from Minshuto (Democratic Party of Japan) SANKEI (Page 5) (Full) February 15, 2006 Was the war one of self-defense? Who were responsible for the war? These questions were raised in the Lower House Budget Committee meeting yesterday. The questioner was Katsuya Okada, former president of Minshuto and the answerers were Chief Cabinet Secretary SHINZO ABE and Foreign Minister Taro Aso, both viewed SIPDIS as post-Koizumi candidates. Taking the floor, Okada posed a question about the validity of the International Military Tribunal for the Far East (Tokyo War Crimes Trials) that found the so-called "Class-A war criminals" to be "war criminals." But Aso and ABE took the same position that Class-A war criminals under Japanese domestic law were not identified as "criminals." Okada queried Aso about WWII: "There is an argument that the war was unavoidable for survival and self-defense, but what do you think?" Referring to the so-called Murayama statement released in 1995 and Prime Minister Junichiro Koizumi's speech in April 2005, Aso rejected that argument, saying: "I've never stated it was a war for self-defense." But once the validity of Tokyo Trials and Class-A war criminals were questioned,, debate heated up. ABE and Aso remarked, "Class- A war-criminals were not necessarily brought to justice." Okada argued against them: "Tokyo Trials' verdict was put above domestic law or is a higher concept." The difference in the basic perception of history was thus revealed as ABE and Aso cast doubts on the validity of Tokyo Trials in light of international law. On Class-A war criminals, Aso pointed out that former Foreign Minister Mamoru Shigemitsu had been a Class-A war criminal but after the war he was awarded the first class medal. ABE as well explained that Class-A war criminals and other criminals had been released in line with a Diet resolution after negotiations with the Allies and receiving overwhelming public support. But he failed to convince Okada. Okada also insisted, "Japan accepted the decisions by the Tokyo Trials. So, it is only natural that Japan is bound by them." Giving a sign in responding to Okada, ABE said: "Judging from your way of speaking, Mr. Okada, you appear to be siding with GHQ or something like that." (4) Abe: No one was judged guilty for crimes against humanity SANKEI (Page 5) (Full) February 15, 2006 At a Lower House Budget Committee session yesterday, Chief Cabinet Secretary SHINZO Abe, Foreign Minister Taro Aso and Finance Minister Sadakazu Tanigaki, who are all viewed as post- Koizumi candidates, faced "a litmus test" given by Katsuya Okada, former president of the main opposition Minshuto (Democratic Party of Japan). But the questions fired at Tanigaki were scarce. The following are main points of the replies given by Foreign TOKYO 00000820 005 OF 011 Minister Aso and Chief Cabinet Secretary Abe: Was the war one of self-defense? Aso: "Even if we decide today that the war was one of self- defense, it's quite difficult to prove that. It's an undeniable fact that the war in part was a war of aggression. This will be judged by history down the road." Abe: "History is found in the sequence of events. What parts of the war do we deal with and how? The government should not play the role of judge over history." Tokyo Trials Aso: "The defendants were found guilty for committing crimes against peace. Article 11 of the San Francisco Peace Treaty accepted the decisions by the Tokyo Tribunal. That's all that I can say." Abe: "The Nazis were found guilty for crimes against humanity, but in the Tokyo War Crimes Trials, no one was decided guilty (for similar crimes). I'm not in a position to raise objections (on behalf of the government) to the trials, but the trials were no more and no less than that." Were Class-A criminals "war criminals"? Aso: "The international military tribunal used the phrase 'war criminals' to identify those Japanese who were tried. Those Japanese would not be subject to criminal prosecution at least by Japan's domestic law." Abe: "The Tokyo War Crimes Trials were conducted by the Allies. Seven defendants were sentenced to death. Our country never tried those individuals on its own. If you ask they were criminals in Japan? I would say no, they were not." (5) Confusion reigns over administrative reform promotion legislation; Efforts to upgrade Defense Agency to ministry status, revise Imperial Household Law have failed; Moves to oppose specifics of bill seen at Kasumigaseki; Koizumi administration losing power base ASAHI (Page 4) (Excerpts) February 15, 2006 One target of an administrative reform promotion bill is to achieve a net reduction in the fixed number of national government employees by more than 5% by fiscal 2010. Liberal Democratic Party (LDP) Policy Research Council Chairman Hidenao Nakagawa and Chief Cabinet Secretary ABE have taken the lead for the submission of the legislation, calling it a bill that will bring about a small government advocated by Prime Minister Koizumi. However, there seems to be something wrong about the fate of the bill. At an informal cabinet meeting on Feb. 10, Justice Minister Sugiura objected to a proposal for a cutback in the number of prison officers, noting, "It is impossible to reduce such personnel." It was shortly after Prime Minister Koizumi cautioned all cabinet ministers to act in unity in dealing with the issue TOKYO 00000820 006 OF 011 in order to address a call from the public to continue reform efforts. In the end, it was decided that prison officers would not be included in the list of public servants subject to reductions to be incorporated in the bill. There are 15 key areas subject to reductions of the total personnel cost. The prison administration facility-related area is one of those 15 areas. A large portion of public servants in this field are involved in duties of prison officers. The fixed number of officials for this area is approximately 17,000. Some have pointed out that if those involved in prison officers' duties are exempt from the cutback policy, only about 2,000 officials will become subject to the proposed reduction, as a senior official at the Secretariat of the Cabinet Office noted. Principles will be gradually chipped away, if opposition to even one proposal is accepted "Principles will be gradually chipped away, if opposition to even one proposal is accepted" has been the cardinal rule since the administrative reform policy of Prime Minister Nakasone (early 1980s). But now this rule has been broken so easily. It had never been the case up until last year. Looking back on the cabinet meeting last year, one senior Cabinet Secretariat official noted, "We were crestfallen since there was unexpectedly no major resistance from government agencies at the stage of the cabinet decision." The Council on Economic and Fiscal Policy (CEFP) last November adopted basic guidelines, and key guidelines for administrative reform were adopted at a cabinet meeting late last December, based on the basic guidelines. No major opposition came from Kasumigaseki, Japan's bureaucratic center, either. Prime Minister Koizumi won a landslide victory in last year's general election, which asked voters whether or not they supported postal privatization. Koizumi followed through on the trinity of reforms and the integration or abolition of public financial institutions. What is the background of contained objection being unleashed? A senior official at the administrative reform promotion office said, "Amid the Koizumi administration losing steam, the lack of coordination of views since last year has now been exposed." Government offices had been discontent with the Koizumi administration, pressed to transfer various services under their jurisdiction to the private sector or cut the volume of services for which they were responsible. However, they had stayed on the sidelines because of the overwhelming victory in the general election by Koizumi, as a senior official of the administrative office put it. However, since the beginning of this year, the Koizumi administration have been frequently on the offensive due to the Livedoor incident and the US beef import issue. Unity of cabinet ministers holds the key The government will compile a plan to allocate targets for a new reduction in the fixed number of national government employees. This process will take place concurrently with deliberations on the administrative reform promotion bill. A senior Cabinet Secretariat official said, "To what extent cabinet ministers can SIPDIS fall in step by the submission of the bill will hold the key." Objections have also been raised on other key areas as well. A TOKYO 00000820 007 OF 011 New Komeito source is concerned: "An effort to upgrade the Defense Agency to a ministry status has failed; a move to revise the Imperial Household Law has been dampened; an effort to present a national referendum bill to revise the Constitution has also fallen through. If this situation continues, (the Koizumi administration) will find itself up in the air after passage of the budget bill." An aide to the prime minister also said, "The Diet session will become calm with no controversial issues on the table. Once the budget bill secures Diet approval, an LDP presidential race mode will prevail." Asked about the possibility of the administrative reform promotion bill being watered down, Prime Minister Koizumi yesterday at the Prime Minister's Office reacted in a bad mood, "People always criticize that bills are watered down, so if this bill is watered-down, resistance will suddenly drop. You will see from the result." (6) Fate of ongoing talks on USFJ realignment unpredictable; Lack of progress and local coordination deadlocked ASAHI (Page 4) (Excerpts) February 14, 2006 By Masahiro Tsuruoka The Japanese and US governments have engaged in talks on the realignment of US forces in Japan (USFJ),aiming to reach a final agreement before the end of March. But the fate of the talks is becoming increasingly unpredictable. One reason is a lack of progress in the recent senior-working level talks that continued until Feb. 11. Another is slow coordination with base-hosting municipalities, such as Nago City in Okinawa Prefecture. US Deputy Under Secretary of Defense Lawless: "We have more issues than expected left to be resolved. Speed is important." Defense Agency (JDA) Director-General Nukaga: "It is widely known that both of us will reach an agreement on the realignment plans by the end of March. If we fail, that would have an adverse effect on Japan-US relations. We need to resolve various issues within February." Shared by Lawless and Nukaga in their meeting on Feb. 10 was a sense of crisis that it was becoming increasingly difficult to meet the end-of-March deadline for a final agreement. A sense of disappointment at the results of the recent senior working-level talks on the USFJ realignment prevails in the government. "We had thought that the talks would produce a certain degree of results, which would give a boost to local coordination. But given that the Japan-US talks themselves have stalled, it seems impossible a final report in March can be readied," a responsible official pointed out. Many in the government predict that after ironing out differences, Japan and the US will reach agreement but that it would not come before the end of March. The reason is that it is not an easy task to bridge the gap between Japan, which seeks burden reduction, and the US, which emphasizes the maintenance of deterrent capabilities. In addition to these factors, the fate of new legislation that is TOKYO 00000820 008 OF 011 necessary for Japan to pay a portion of the costs of transferring some 6,000 Marines from Okinawa to Guam is unpredictable, too. The JDA sees a growing call for enactment during the current Diet session while Prime Minister is in office as president of the Liberal Democratic Party, but coordination with base-hosting municipalities has been stalled. In the recent mayoral election in Nago City - the planned relocation site for the US Futenma Air Station - in Okinawa Prefecture, Yoshikazu Shimabukuro, backed by the ruling parties, was elected as mayor. Nukaga was quick to indicate his intention to establish a consultative council for liaison between the central and local governments. But Shimabukuro has taken the stand of not meeting with central government officials unless revision is first made to the Henoko Cape plan the Japanese and US governments agreed on. In Iwakuni City housing the US Marine Corps' Iwakuni Air Station in Yamaguchi Prefecture, a referendum on the planned transfer of a carrier-borne aircraft unit from the Atsugi Naval Air Station to the Iwakuni base is slated for March 12. Other base-hosting municipalities are keeping a close watch on Nago City. Prime Minister Koizumi pointed out at a Lower House Budget Committee meeting on Feb. 8 that the situation was severe, saying: "(Local residents) are unwilling to give approval." Delay in DFAA's coordination due to recent revelation of its involved-bid-rigging scandal The Defense Facilities Administration Agency (DFAA)-involved bid- rigging scandal has also clouded the talks on the USFG realignment. The government and the ruling coalition once aimed to submit to the current Diet session a bill to upgrade the JDA to ministry status and enact it into law but this plan is likely to be postponed due to the scandal. "The bid-rigging scandal and the upgrading of the JDA are two different matters, but there seems to be some impact of the scandal on the upgrading issue," Koizumi told reporters yesterday, admitting that the scandal is adversely affecting the plan for the submission of the bill. Last December, Koizumi indicated his positive attitude about upgrading the JDA to a ministry, noting: "It's strange to keep it in the status of being an agency." But the government's position is that "the submission of the bill to upgrade the JDA to ministry status would be discussed if the ruling parties concurred on upgrading the agency to ministry status," according to Chief Cabinet Secretary Abe. The submission of the bill is premised on accord between the LDP and the New Komeito. But this premise is being eroded due to the recent bid-rigging scandal. New Komeito Secretary General Tetsuzo Fuyushiba remarked on Feb. 12: "It's difficult to discuss the issue in a cool-headed manner amid the raging flames of criticism due to the scandal." Foreign Minister Aso expressed concern that the bid-rigging scandal "would further delay DFAA's response (to the USFJ realignment plans)." Administrative Vice Defense Minister Takemasa Moriya as well was forced to mention the USFJ realignment talks and an investigation into the bid-rigging scandal as his agency's immediate tasks to address. (7) Japan caught in the crossfire between US and Iran over Iran's TOKYO 00000820 009 OF 011 resumption of uranium enrichment SANKEI (Page 5) (Slightly abridged) February 15, 2006 Following the revelation of Iran's resumption uranium enrichment, the Japanese government decided yesterday to urge Tehran to suspend its nuclear program. Crude oil from Iran has played a key role in Japan's energy strategy. Given this, Japan cannot easily echo calls from the US and other countries for slapping economic sanctions on the nation. But Japan will unavoidably be pressed to make a clear-cut response in the face of North Korea's nuclear threat. The government now finds itself caught in the crossfire between Iran as an important oil supplier and the US as its ally. In reference to Iran's enrichment resumption, Chief Cabinet Secretary SHINZO ABE indicated a willingness to play a mediating SIPDIS role between the US and Iran, saying in a press briefing yesterday: "Because Japan has maintained friendly ties with Iran, we will try to persuade its government to respond to our call so that it will not find itself isolated in the international community. It is only Japan that can address Western countries' concerns to Iran." The Foreign Ministry plans to invite Iranian Foreign Minister Motaki to Japan beginning Feb. 27, and Foreign Minister Taro Aso and other officials will call on Iran to dismantle its nuclear development program. However, Motaki told Aso in a telephone conversation on Jan. 18: "Our program is not intended to develop nuclear fuel but is for research and development." As seen from this, the possibility is slim that Iran will positively respond to Japan's request. The International Atomic Energy Agency (IAEA) decided early this month to refer Iran to the United Nations Security Council (UNSC). It is certain that in UNSC deliberations, the US and other countries will become more vocal in their call for economic sanctions against Iran. The US is nervous about the Iranian nuclear issue, reflecting its stance of placing emphasis on ensuring the security of Israel, a country with which Iran is hostile. But Japan has to be cautious about imposing economic sanctions on Iran. Japan imports 15% of its crude oil from Iran. Japan once held 75% of all concession rights for the Azadegan oil field -- the largest field in the Middle East in terms of estimated reserves. Given this, the following view is dominant in the government, according to a senior official of the Ministry of Economy, Trade, and Industry: "Should the international community impose economic sanctions, Iran will certainly launch an oil embargo in retaliation." A senior official of the Foreign Ministry said: "Such a measure will deal an unfathomably serious blow to Japan, although European countries will not be significantly affected." Some observers predict that if Japan works with the US, Iran may pull Japan's exploitation rights in the Azadegan field and transfer them to China, which has been eager to deepen ties with Iran in order to secure natural resources. When Iranian students and others took over the US Embassy in Teheran in 1979, the US called on Western countries to ban the import of oil from Iran. On that occasion, some Japanese firms TOKYO 00000820 010 OF 011 purchased large quantities of crude oil from Iran at high prices, evoking a fierce reaction from the US government and Congress. Regarding Iran's resumption of uranium enrichment, Prime Minister Junichiro Koizumi only said, "It is still unknown whether it is true or not, isn't it?" In the event that the US calls on Japan to join in economic sanctions against Iran, Tokyo will find it difficult to refuse. A government source was also overheard saying: "North Korea has been developing nuclear weapons and constitutes a threat to Japan's national security. Given this situation, a misstep by Japan could create uncertainty over relations with the US and the nation's security." In a House of Representatives Budget Committee meeting yesterday, Foreign Minister Aso indicated that the ministry would make its utmost efforts to bring a "soft landing" to the Iranian nuclear issue, but this scenario is still nowhere in sight. (8) Energy diplomacy: Government facing policy dilemma due to nuclear development, history and territory issues NIHON KEIZAI (Page 2) (Excerpts) February 14, 2006 The government is facing policy dilemma in pursuing energy diplomacy. Amid growing arguments calling for economic sanctions against Iran over its resumption of uranium enrichment activities, there has appeared concern over a possible setback to Japan's joint project with that nation to develop the Azadegan oil field, expected to be launched in 2008. Talks with China on the development of gas fields in the East China Sea and negotiations with Russia over the East Siberian oil pipeline plan are also encountering complications. Such issues as Iran's nuclear development program, differences in the view of wartime history and a territorial issue are apparently hampering Japan's energy diplomacy. Iranian foreign minister to visit Japan on Feb. 27 Iranian Foreign Minister Mottaki is scheduled to visit Japan for three days starting on Feb. 27. Foreign Minister Taro Aso intends to urge him to suspend that nation's nuclear development program, when he meets with him. The Azadegan oil field, an undeveloped oil field located in the southwestern part of Iran, has one of the largest oil reserves in the Middle East with the estimated amount of deposits at 5 to 26 billion barrels. The Iranian side is expected to shoulder 25% of the total project costs, and 75% by the Japanese side. For Japan, Iran was the third largest crude oil supplier, following Saudi Arabia and the United Arab Emirates, in 2005. Once the Azadegan oil field is developed on a full scale, imports of crude oil independently developed by Japan will likely to increase 50 % . However, in an effort to prevent Iran from becoming a nuclear state, the US is geared up to work on concerned countries to impose economic sanctions on it. In view of the relationship of alliance with the US, the possibility of Japan finding it difficult to positively press ahead with the project cannot be ruled out. Yasukuni issue affects development of gas fields In Japan-China comprehensive vice-ministerial dialogue held on Feb. 10 and 11, Chinese Vice Foreign Minister Dai Bingguo conveyed his government's proposal for mutual visits by the TOKYO 00000820 011 OF 011 leaders of the two countries to Vice Foreign Minister Yachi. Yachi reiterated the Japanese government's proposal for jointly developing gas fields in the East China Sea with each country developing its own side with the median line in between. Vice Minister Dai made a negative response to the proposal. Differences in the views of wartime history between the two countries are casting a dark shadow on the gas field development issue as well. Suffering setback in talks with Russia as well Japan is suffering a setback also in talks with Russia on the construction of an oil pipeline from East Siberia. The Japanese proposal for constructing a pipeline as far as the Pacific Ocean side all at once was rejected at the bilateral summit last November. The two-step formula was instead adopted, as Russia proposed. The prospect is now strong that a China-bound branch line will be built first to meet definite demand from China. The deadlocked Northern Territories issue is behind the pipeline building talks. Japan intends to pursue talks, based on the 1993 Tokyo Declaration, which noted: "A peace treaty is to be signed, after settling the attribution of the four Northern Territories." Russia constrained the Japanese proposal with President Putin noting, "Acknowledging the present state of each other's country, the two countries have begun to search for settlement measures that are acceptable for both sides." Bargaining continues. SCHIEFFER