DAILY SUMMARY OF JAPANESE PRESS 03/29/07

UNCLAS SECTION 01 OF 08 TOKYO 001379 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 03/29/07 INDEX: (1) Futenma relocation: US consul general shows understanding on offshore shift (2) US consul general shows understanding on offshore installation; A step to break deadlock; Okinawa Prefecture, Nago City appreciate; Defense Ministry coolheaded (3) Regulatory reform panel determines seven-item agenda, keeping Abe's policy imprint in mind (4) Deregulation generates 140,000 yen in economic effect per capita over 15 years (5) Japanese economy on smooth track: Belated recovery of personal consumption seen with baby-boomers gradually loosening their purse strings ARTICLES: (1) Futenma relocation: US consul general shows understanding on offshore shift OKINAWA TIMES (Page 1) (Full) March 29, 2007 Kevin Maher, US consul general in Okinawa, expressed his views yesterday on the issue of building an alternative facility in a coastal area of Camp Schwab in Nago City for the US Marine Corps' Futenma Air Station. Okinawa Prefecture and Nago City have been seeking to install the planned facility at a site in waters southwest of the camp. "We will fully consider local views and will determine the relocation plan while understanding that we need to place it toward the ocean as much as possible (dekiru dake okiai ni yoseru)," Maher told reporters at the US Consulate General in Urasoe City, Okinawa Prefecture. Nago's municipal government and Okinawa's prefectural government welcome Maher's remarks on the issue. If the Japanese government shows a similar view officially, its talks with Okinawa and its local communities over Futenma relocation will likely be accelerated. Maher clarified that the United States, when working out a masterplan to build the Futenma alternative facility, would consider Nago City's request to install it in waters southwest of the currently planned relocation site. However, Maher stressed that it does not mean revising the Futenma relocation plan. It is unclear whether the construction site will be actually changed to an offshore site. "A US government official in charge made remarks that shows understanding on our request, so I think our proposal can get the government's understanding in our talks with the government from now on," Nago Mayor Yoshikazu Shimabukuro said. "This is a big step forward," the mayor added. Gov. Hirokazu Nakaima took the position that he would have to nail down whether Maher stated his personal views or not. However, Nakaima gave high marks to Maher's remarks, saying, "That's what Okinawa Prefecture and local communities want." Concerning the alternative facility, Maher noted that Japan and the United States released an interim report in 2005, incorporating an TOKYO 00001379 002 OF 008 intergovernmental agreement on the planned realignment of US forces in Japan. In this regard, Maher said the Japanese and US governments agreed at that time to minimize noise and other impacts on local residents. He stressed that his views clarified this time do not mean to change the United States' stance. Meanwhile, the governor has been calling for Futenma airfield to be turned into a state of closure within three years. "It's difficult to close down Futenma airfield in three years," Maher said. He went on: "It would be better to speed up the Futenma relocation as much as possible. We're ready to make efforts to dissolve the concerns of local residents living near the airfield as early as possible." In addition, Maher also referred to the fact that Japan and the United States have now finalized a report on the US military's realignment, incorporating an agreement to return bases located south of Kadena Air Base. "We don't have to wait until the Futenma alternative is completed in 2014 and Marine relocation is completed." With this, Maher clarified that the United States would consider returning some of those bases earlier than scheduled. (2) US consul general shows understanding on offshore installation; A step to break deadlock; Okinawa Prefecture, Nago City appreciate; Defense Ministry coolheaded OKINAWA TIMES (Page 3) (Full) March 29, 2007 On the issue of relocating the US Marine Corps' Futenma Air Station in Okinawa Prefecture, US Consul General in Okinawa Kevin Maher has indicated that the United States would consider the request of local communities to install an offshore alternative facility. Behind the scenes, Okinawa Prefecture and Nago City have been seeking to break the deadlock in their consultations with the Japanese government over Futenma relocation. Okinawa Prefecture appreciates Maher's remarks. "It's very wonderful if the Defense Ministry and the Japanese government also think that way," one of Okinawa's prefectural government officials said. Okinawa Prefecture, which frowns on the Japanese government's plan to send in an environmental assessment paper at this point of time, is also showing a positive posture to accept it. Meanwhile, the Defense Ministry remains cool-headed, with one of its officials taking the position that Maher did not clearly say the United States agreed to install an offshore facility. Maher's remarks came after certain developments. Defense Ministry: "The US side will not consent (to shift the planned coastal location of a new airfield)." Okinawa Prefecture: "The US side has only to consent?" On Feb. 16, the Okinawa prefectural government and the Defense Ministry held a meeting of senior officials at the prefectural government office. In that meeting, Okinawa Prefecture endorsed Nago City's request to shift a V-shaped pair of airstrips to an offshore site in waters southwest of the currently planned relocation site. However, the Defense Ministry side rejected the Nago-proposed idea of installing an offshore facility, saying, "The current plan is best." On March 19, Consul General Maher, Okinawa Gov. Hirokazu Nakaima, and Nago Mayor Yoshikazu Shimabukuro met at a hotel in the city of Naha. In that meeting, an official from the Okinawa prefectural TOKYO 00001379 003 OF 008 government stressed that the danger of Futenma airfield to local residents in its vicinity and the noise problem must not be carried over to the relocation site in the city of Nago. This official added, "Relocating Futenma airfield without destroying the daily lives of local communities in Nago will lead to ensuring the feasibility of Futenma relocation and securing the new facility's stable operation." With this, Okinawa Prefecture pressed Maher to have Nago's request reflected in determining the newly planned airfield's detailed location. On March 11, Maher also met in Okinawa Prefecture with Defense Minister Fumio Kyuma, who has shown a flexible posture to Nago on the issue of Futenma relocation. Okinawa Prefecture has expectations for Maher, with one of its officials saying the consul general was one of the working-level officials when the bilateral agreement was reached on Futenma relocation. The Defense Ministry remains coolheaded about Maher's remarks. One of its officials said, "The consul general said the US government would consider local residents, but he didn't clearly say it's okay to install the Futenma alternative out at sea." The official added: "His understanding is the same as ours, and he only said what's a matter of course. The focus is now on whether or not to reposition the newly planned airfield. The foregoing Defense Ministry official said the Defense Ministry, with an eye to modifying the construction plan, would create a preparatory document based on the governor's statement in the process of going through procedures for an environmental assessment. "Right now," the official added, "I can't say anything with my prediction (about whether to reposition the relocation site)." The relocation site's offshore shift will destroy the environment, such as the seaweed beds. An environmental assessment survey, if implemented for data, is therefore likely to result in finding a negative impact on the natural environment. Maher recounted that his remarks did not mean a revision of the Futenma relocation plan. An Okinawa prefectural government official remains calm, saying, "We're not asking them to revise the plan." Nago City is calling for the relocation site to be positioned within the framework of the bilateral agreement. If the Japanese government and Nago City coincide with each other in their respective interpretations, Okinawa Prefecture may soften its attitude even though the relocation plan is not revised. Gist of US Consul General Maher's remarks The following is a gist of US Consul General Kevin Maher's remarks regarding the planned construction of an alternative facility for the US military's Futenma airfield. -- What about the Futenma alternative facility? Maher: When the Japanese and US governments decided on where to locate the runways in the so-called interim report that was released in October 2005, the two governments agreed to minimize its impact on the environment and to ensure operational capability, considering and analyzing factors that will not cause any negative impact on the daily lives of local residents. We fully considered the local request to install the Futenma alternative at a site that is as far away from populated areas as possible and to place it toward the TOKYO 00001379 004 OF 008 ocean as much as possible, and we're thinking of determining the relocation plan while understanding that we need to do place it toward the ocean as much as possible. It would be better to carry out the intergovernmental decision. -- Will the US government consider the relocation site's offshore shift before the environmental assessment? Maher: In my view, this is not the question of whether to revise the plan as the media says. I think the two governments are fully in consideration of local views. I think it would be better to carry out the legally required environmental assessment early so that we can carry out this plan as early as possible. We still can't say anything about what will come out of the environmental assessment. What I want to stress is that we are going to determine the plan while understanding that we need to place it toward the ocean as much as possible. -- When do you expect the masterplan? Maher: We still have to coordinate details. The plan is almost complete. I don't know when it will be made public. However, we need to coordinate with the Japanese government. -- Is your view this time shared by Japan and the United States? Maher: It's my interpretation. It's the US government's view. I don't know what has become of the Japanese government's view. That's up to the Japanese government. However, the two governments showed their ideas in the agreed interim report. (3) Regulatory reform panel determines seven-item agenda, keeping Abe's policy imprint in mind NIHON KEIZAI (Page 3) (Slightly abridged) March 29, 2007 The government's Regulatory Reform Council (RRC) (chaired by Nippon Yusen K.K. Chairman Takao Kusakari) yesterday started working out a first package of recommendations due out in May. It first decided seven agenda items, including regional revitalization and assistance for a second-chance program, and then began mapping out specific measures. The panel, selecting the seven items, gave priority to the viewpoint of market functions and coordination with the priority policies put forth by Prime Minister SHINZO Abe. But the package, in a sense, lacks showcase measures. The prime minister's backup will be imperative for the panel to accelerate its regulatory reform drive again. Key lies in prime minister's support Acting Chairman Tatsuo Hatta, professor at International Christian University, said in a press conference held after an RRC meeting yesterday: "Deregulation may result in expanding the existing social disparity, but its major purpose is to bring in those who remain unable to join new businesses." He thus stressed that deregulation would contribute to creating new markets and job opportunities. Keeping in mind the criticism of the existing social discrepancy from opposition parties and others, the deregulatory panel has come up with measures in wider-ranging areas, such as employment, welfare, and child-rearing. TOKYO 00001379 005 OF 008 In reviewing the employment conditions in the public sector, the panel plans to study raising the age of eligibility to take civil servant examinations. Hatta said in the press conference: "We keep in mind the age of women who have finished child-bearing so that they find it easier to get a new job." The deregulation drive has apparently lost steam since the ABE administration was launched in September of last year. The prime minister has distanced himself from the stance of only giving priority to market-based principles, remarking, "There are regulations that should be retained in light of keeping the people's livelihood stabilized." In education reform, which the cabinet positions as its top priority challenge, too, the report represents a willingness to have the central government involved more in boards of education. Concerned about its shrinking profile, the RRC keeps in mind the need to have its measures linked to the priority policies set forth by the prime minister, focusing on Abe's policy identity. The RRC has decided to finalize the first package of recommendations in mid-May and to have such recommendations reflected in the government's three-year regulatory reform promotion plan covering the period FY2007-FY2009 due out in mid-May. Afterward, the panel plans to come up with a final report, possibly by the end of this year. In the course of discussion, contradictions might appear between measures to promote thorough competition without restrictions and such pending issues as correcting social disparities. Chairman Kusakari indicated his confidence in a press conference, remarking, "The report includes many showcase measures." The report, however, covers the agriculture and medical areas, on which negotiations often stood at a standstill due to opposition from the Liberal Democratic Party and for other reasons. With an eye to the House of Councillors election in July, the ruling parties are now sensitive to the intentions of industrial groups and relevant government agencies. Many RRC members take the view that it might be difficult to produce results without the prime minister's backup. (4) Deregulation generates 140,000 yen in economic effect per capita over 15 years NIHON KEIZAI (Page 3) (Full) March 29, 2007 The Cabinet Office yesterday released its survey that concluded that the regulatory reform measures taken during the FY1991 - FY2005 period boosted the economy by approximately 18.3 trillion yen. The report underscores the benefits of deregulation also reach consumers through price drops and market expansion. The economic effect per capita is calculated to be 144,000 yen. An official of the Cabinet Office commented, "By promoting reform further, more benefits will be generated for consumers." The Cabinet Office calculated how many economic benefits were generated through regulatory reforms in 14 areas, including electricity and city gas. Upon working out the added value of "price cuts owing to expedited competition" and "expanded demand for goods and services (market expansion)," the survey compared the total figure with that worked out on the assumption that no deregulatory measures were taken. The total figure of economic effect increased TOKYO 00001379 006 OF 008 by 3.8 trillion yen over that in the previous survey in FY2002. In value terms, the electricity industry showed the largest economic effect. This result is attributed to the measure taken in 2004 to expand the scope of liberalization of retail sales, as well as the improvement in the wholesale exchange market for surplus electricity. Compared with FY1994, electric prices dropped 39.1% on average, and the market expanded by 18.6%. The trucking industry followed the electricity industry, generating the economic impact of approximately 3.43 trillion yen. In 2003, the government eased rate-setting regulations to enable entities to change transport charges on their own judgment. Market-entry regulations were also relaxed. Transport rates dropped 27.5% in FY2004 from FY1990 levels. In regulatory reform in the financing area, the government took measures to completely liberalize commissions and fees in stock brokerage and non-life insurance rates. In particular, the first measure contributed to increasing individual investors, helped by the spread of the electronic securities market. In the cellular phone business, the price of a unit in FY2005 was down 60% below in FY1993. The market expanded 20 times larger. The deregulation measures taken so far generated 2.78 trillion yen worth of economic effect. However, since major reforms have already been carried out, a significant effect has not appeared recently. In domestic air service and liquor sales, there is no significant effect observed. Compared with the prices when regulatory reform started to be carried out, the rate of decline stayed at only 8.8% and 11.6%, respectively. In domestic air service, due to an increase in demand for short-distance flights increased (less than 600 kilometers in distance),for which higher passenger fares are set, a negative economic effect in price terms has been produced. (5) Japanese economy on smooth track: Belated recovery of personal consumption seen with baby-boomers gradually loosening their purse strings NIHON KEIZAI (Page 1) (Slightly Abridged) March 28, 2008 The economy is on a mild but stable growth track. Consumption and capital spending are following a steady path, but there are potential risks about their future, including uncertainties about the US economy. The underlying strength of domestic demand holds the key to the sustainability of the longest economic boom in post-war decades. Shortage of boats in stock Baby-boomers have begun spending money for their post-retirement interests. Customers in their late fifties have visibly increased on the digital single-lens reflex camera sales floor at Yodobashi Camera Multimedia Akiba in Chiyoda Ward, Tokyo. A half of the customers who visit there on weekend are baby-boomers. Though many are beginners, cameras in the price range between 100,000 yen and 130,000 yen for intermediate users sell well. According to BCN, a research company based in the Bunkyo Ward, Tokyo, the sales of digital single-lens reflex cameras had remained on the same level as the preceding year up until last summer, but a 60% -70% increase over the previous year is continuing since last September. TOKYO 00001379 007 OF 008 President Koichi Hattori of Hattori Marine, a boat shop in Yasu City, which deals with used boats, expressed his surprise, "The shortage of boats to sell will likely continue. The number of baby-boomers who want to enjoy fishing when they retire is sharply increasing. Personal consumption is beginning to pick up. The Bank of Japan's indices of aggregated sales gauging consumption from an overall perspective took an upward turn in January. One factor for the rise is increased consumption among baby-boomers. A household economy survey carried out in January found that expenditures by households headed by those in the 55-59 age bracket increased for the first time in seven months. The baby-boomer population born from 1947 through 1949 is approximately 7 million. They have potential to have a major impact on the economy. Goldman Sachs estimated that the total amount of retirement allowances paid in the fiscal 2007-2009 period, when this generation hit retirement age, would reach 13.9 trillion yen per year, up 2.5 trillion yen over the average amount paid in the past 10 years. A large part of their retirement allowances will likely be put aside as savings to pay living expenses or as investment in investment trust funds, but the remaining portion will be spent. Aeon set its eyes on their changing wardrobe in preparation for post retirement life. It in mid-March carried out a campaign to take unwanted suits from customers in exchange for 10% discount tickets, which they can use when they buy casual clothes. 13,000 suits were brought in to Aeon stores during the three-day campaign period. The sales of jackets and pants jumped 70%, compared with the previous year. Wages hold key Young people's consumption has also begun moving, as their purses are getting fat due to the recruitment of many college graduates, raises in their initial salaries and wages for part-timers. Both Royal Host and Sky Lark, family restaurants with many young customers, saw an increase in per-customer spending in fiscal 2006. Will consumption continue to pick up smoothly? There remain some unclear elements. One is a sluggish increase in wages. Though the overall income of wage earners has increased at a pace of over 1% on average since 2005, per-capita income or cash earnings have not increased. Per-capita income in January suffered a drop for the second straight month, marking a 1.4% fall in comparison with the preceding year. Taro Saito at the Nissei Basic Research Center said that the rise in consumption thus far has been led not by wage increases but by an increase in the number of people who got into the workforce thanks to the upturn in the employment situation. However, there are signs of wages increasing. According to the first aggregation of wage negotiations in the spring of 2007, which the Japan Business Federation (Nippon Keidanren) compiled on Mar. 22, the rate of wage hikes reached 1.85%, up 0.16 points over the same period of the preceding year. An increase in the number of permanent employees will boost consumption due to heightened expectations on stable income. In one labor force survey, the average number of permanent employees in the October-December quarter last year increased by 590,000, compared with the same quarter the year before, topping an increase in the TOKYO 00001379 008 OF 008 number of part-timers. An increase in interest earnings from the payment of dividends and interest rate hikes are also boosting the household economy. The spillover effect of the current economic growth on the household economy has been very mild, unlike a boom in the corporate sector. However, the income level of the household economy is gradually increasing, even though the growth occasionally comes to a standstill. If this trend continues, it would become possible to declare that personal consumption has recovered. SCHIEFFER