JAPANESE MORNING PRESS HIGHLIGHTS 08/27/07

UNCLAS SECTION 01 OF 12 TOKYO 003948 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: JAPANESE MORNING PRESS HIGHLIGHTS 08/27/07 Index: 1) Top headlines 2) Editorials 3) Prime Minister's weekend schedule Cabinet and LDP executive shuffle today: 4) Foreign Minister Aso accepts LDP secretary general's post; ABE critic in the LDP, Upper House member Masuzoe to be appointed to a cabinet post 5) Nikai to be chairman of the LDP General Council 6) Defense Minister Koike opts out of the next cabinet: Will now serve as an ordinary foot soldier in the Diet Scandals: 7) Internal Affairs and Communications Minister Suga's political group had free office space but claimed in political funds report 20 million yen in office expenses 8) Justice Minister Nagase's support organization took 3 million yen fee from organization bringing in foreign trainees to Japan Defense and security issues: 9) LDP to shelve constitutional reinterpretation option for allowing Japan the use of right of collective self-defense 10) Prime Minister ABE says he will seek understanding of Democratic Party of Japan (DPJ) for bill extending Anti-Terrorist Special Measures Law 11) Embargoed Japanese goods being shipped to North Korea via Taiwan 12) After 4-year hiatus, Japanese, Chinese defense ministers to meet in Tokyo on Aug. 29, with Japan to press issue of China's increased defense spending 13) Defense Ministry to deploy F-15s to Okinawa to prepare for possible future Chinese aggression against Senkakus or other islands 14) Alarmed by Chinese moves, Defense Ministry putting in full efforts to draft space and marine strategies 15) Defense Ministry to introduce new formula for equipment procurement in order to constrain budget expenditures 16) Government requesting 312.5 billion yen in allocations for Okinawa development projects in fiscal 2008 budget Japan-ASEAN relations: 17) Japan, ASEAN reach general agreement on EPA under which Japan would scrap almost all tariffs on ASEAN imports 18) Japan hoping that its new EPA with ASEAN will add momentum to its free-trade strategy Articles: 1) TOP HEADLINES Asahi: Another eight high schools found to have given university examination fees to their students to achieve high scores for college examination pass rates Mainichi: Tokyo Shimbun: Aso accepts to serve as LDP secretary general: Reshuffled ABE cabinet to be launched this evening TOKYO 00003948 002 OF 012 Yomiuri: Reshuffled ABE cabinet to be launched today: Masuzoe most likely to join cabinet for first time Nikkei: Tokyo Stock Exchange to list exchange-traded fund with underlying assets of gold starting next spring: Arguments calling for reorganization of bourses could rekindle flare up again Sankei: Cabinet reshuffling, changing of LDP leadership lineup today: Nikai likely to be appointed as Executive Council chairman; Aso as secretary general; Former Iwate Governor Masuda also likely to join SIPDIS Akahata: Welfare Benefits Problem Countermeasures Council holds meeting to promote anti-poverty campaign 2) EDITORIALS Asahi: (1) German Chancellor to visit Japan: good opportunity to learn measures to prevent global warming (2) Drinking and driving: Root out addiction to alcohol Mainichi: (1) Chancellor Merkel to visit Japan: Learn Germany's achievement in CO2 reduction (2) Economic partnership agreement: Concern about fate of agricultural policy Yomiuri: (1) ODA: Cutting ODA budget is questionable (2) Fisheries industry: How can major fishing country be revived? Nikkei: (1) Make most of financial functions to prevent global warming Sankei: (1) Nuclear reactor: Regain reason that existed 50 years ago (2) Reorganization of department stores: First thing to do is to compete with new business models Tokyo Shimbun: (1) Global warming preventive measures: No preparedness felt from Interim report (2) Whistle-blowing: Do not let someone's good conscience go to waste Akahata: (1) Death from starvation case in Kitakyushu City: Crime committed by civil servants deprives citizen of his right of existence 3) Prime Minister's Official Residence (Kantei) Prime Minister's schedule, August 24 NIKKEI (Page 2) (Full) August 25, 2007 Morning Attended a welcome ceremony at the prime minister's official TOKYO 00003948 003 OF 012 residence in Putrajaya, Malaysia. Held a meeting with Prime Minister Abdullah. Attended a ceremony to sign a joint statement. Met with economic mission members. Afternoon Host a reception at the Mandarin Oriental Hotel in Kuala Lumpur. Attended a Japan-Malaysia business forum. Met King Mizan at his palace. Held a press conference at the Hotel Nikko Kuala Lumpur. Held informal talks with accompanying reporters. Night Attended a dinner party hosted by Prime Minister Abdulla at the Mandarin Oriental Hotel. Stayed at the Hotel Nikko Kuala Lumpur. Prime Minister's schedule, August 25 NIKKEI (Page 2) (Full) August 26, 2007 Morning Met former Japanese students who were studying in Malaysia at the Hotel Nikko Kuala Lumpur. Left Kuala Lumpur International Airport by a government plane. 19:03 Arrived at Haneda Airport. 19:36 Called at Imperial Palace to report his return. 19:52 Returned to his official residence. Prime Minister's schedule, August 26 NIKKEI (Page 2) (Full) August 27, 2007 10:57 Had his hair cut at a barber shop in the Hilton Hotel. 13:27 Met Secretary General Nakagawa at his official residence. 4) Aso to become LDP secretary general, Masuzoe likely be appointed minister in cabinet shuffle ASAHI (Page 1) (Full) August 27, 2007 Prime Minister SHINZO ABE will today shuffle his cabinet and the three top executives of the Liberal Democratic Party and launch the new cabinet tonight. The prime minister yesterday asked Foreign Minister Taro Aso to serve as secretary general of the LDP and Aso accepted. It has been decided that LDP Upper House Diet Affairs Committee Chairman Tetsuro Yano will serve in his first cabinet post and Land, Infrastructure and Transport Minister Tetsuzo Fuyushiba, a member of the New Komeito, will be retained in his current post. Yoichi Masuzoe, policy chief of the LDP caucus in the House of Councillors, is rumored to be picked for a cabinet post. ABE has decided to reduce from five to three the number of special advisors to the prime minister, posts which were set up to strengthen the TOKYO 00003948 004 OF 012 function of the Prime Minister's Official Residence (Kantei). Yesterday afternoon at his official residence, ABE carried out final coordination with LDP Secretary General Hidenao Nakagawa on the new cabinet and LDP lineups. Aso served as chairman of the LDP Policy Research Council, minister of internal affairs and communications, and foreign minister in the government of Prime Minister Junichiro Koizumi, and he is currently serving as foreign minister in the ABE administration. He enjoys Abe's strong confidence. His foreign policy is similar to that of Abe. The focus is on how much Aso will be able to manage the party since he hails from a small faction which has only 16 members. Abe will not accept recommendations from the factions, but he is expected to give priority to factional balance in the party. The dominant view is that the prime minister will pick former Foreign Minister Nobutaka Machimura, who heads a faction to which ABE used to belong, as chief cabinet secretary. ABE apparently wants to appoint Masuzoe to the cabinet to win support from the forces opposing him. In the wake of the LDP's crushing defeat in the July 29 Upper House election, ABE has said that he wants to make efforts to revitalize regional economies. He, therefore, is considering naming former Iwate Gov. Hiroya Masuda to the cabinet. Meanwhile, ABE reportedly told Upper House Caucus Chairman Hidehisa Otsuji, who had called on the prime minister to appoint Yano, on the phone on the night of Aug. 25: "I understand the (Upper House side's intention)." It has now decided that Deputy Chief Cabinet Secretary Seiji Suzuki will succeed Yano as chairman of the Diet Affairs Committee. Abe will pick the three new LDP executives this morning and hold a cabinet meeting to accept the resignations from the cabinet ministers. After meeting with New Komeito Chief Representative Akihiro Ota, he will name the new cabinet ministers, setting up reorganization headquarters in the Kantei. He plans to hold press conference after completing an attestation ceremony of the cabinet ministers tonight. Taro Aso: Age 66; head of the Aso faction; served as foreign minister, internal affairs and communications minister, and chairman of the LDP Policy Research Council; graduated from Gakushuin University; elected nine times to the Lower House from the Fukuoka No. 8 constituency. 5) ABE to appoint Nikai as minister of internal affairs and communications, Aso as LDP secretary general SANKEI (Top Play) (Lead paragraph) August 27, 2007 Prime Minister SHINZO ABE will today shuffle the cabinet and the top executives of the Liberal Democratic Party (LDP). After going through an attestation ceremony of the cabinet ministers at the Imperial Palace, he will launch the new cabinet. It has been decided so far that Foreign Minister Taro Aso will serve as LDP secretary general. It will also likely that Diet Affairs Committee Chairman Toshihiro Nikai will be picked as minister of internal affairs and communications, and former Agriculture Minister Tadamori Oshima as Nikai's replacement. It has been also decided that Tetsuro Yano, TOKYO 00003948 005 OF 012 chairman of the Upper House caucus, will join the cabinet, and that Land, Infrastructure and Transport Minister Tetsuzo Fuyushiba, Economic and Fiscal Policy Minister Hiroko Ota, and Special Advisor (on Abduction Issue ) Kyoko Nakayama will be retained in their posts. In response to public criticism of the economic gaps between the urban and regional areas, ABE is carrying out coordination on a plan to name former Iwate Gov. Hiroya Masuda to the cabinet. 6) Defense Minister Koike indicates intention to support ABE from outside the cabinet MAINICHI (Page 1) (Full) Eve., August 25, 2007 Ryuko Tadokoro Defense Minister Yuriko Koike returned from India this morning. Meeting with the press corps at Narita Airport, she spoke of her earlier remarks denying she would stay on in the current post and noted: "I've conveyed to Prime Minister (Shinzo) ABE my intention to work hard as an ordinary foot soldier to support the prime minister." Koike thus revealed that she conveyed her intention to leave the cabinet to the prime minister. She also commented, "Because the prime minister is the person who appoints the cabinet members, I'll follow the prime minister's decision." When asked when she conveyed her intention to the prime minister, Koike said, "I've previously conveyed my intention to the prime minister." When asked how the prime minister responded to her, Koike said, "I can't say anything about that," avoiding specific comments. Denying again that the trouble over the selection of a new administrative vice defense minister was the reason for her not to stay on, Koike commented: "I think it is better to replace the defense minister in order to have Diet deliberations go more smoothly." 7) Two organizations affiliated with Internal Affairs and Communications Minister Suga found to have reported 20 million yen as office expenses, despite their offices located in Suga's own building YOMIURI (Page 1) (Excerpts) August 25, 2007 The Yomiuri Shimbun learned that the ruling Liberal Democratic Party's (LDP) Kanagawa Chapter's Second Constituency Branch Office of which Internal Affairs and Communications Minister Suga served as representative and his political organization had reported a total of 19.56 million yen in their reports on political funds for 2005, although their main offices are located in a building possessed by Suga himself. Cases where lawmakers located their main offices in the Diet Members' Building or their parents' houses so that they did not pay the rent but reported office expenses in their political fund reports are becoming a big problem, as evidenced by the cases of former Agriculture Ministers Toshikatsu Matsuoka and Norihiko Akagi. The two organizations -- the branch office and the supporters' organization -- associated with Suga had their main offices in a three-story building in Tori Town, Minami Ward, Yokohama. The two organizations initially were tenants of the building, but in December 2004, Suga purchased the building and the lot from a TOKYO 00003948 006 OF 012 construction material company located in Yokohama's Naka Ward. The two organizations reported a total of 21.03 million yen and a total of 16.2 million yen in their 2003 and 2004 political fund reports, respectively, but even in 2005, when they did not have to pay rent, they reported a total of 19.56 million yen as office expenses in their political funds reports, with 16.7 million yen reported by the branch office and 2.86 million yen by the supporters' organization. 8) 3 million yen paid to NPO associated with Justice Minister Nagase by leading organization accepting foreign trainees ASAHI (Top play) (Excerpts) August 25, 2007 The Asahi Shimbun learned that two organizations affiliated with the Industrial Foundation for International Personnel Management (IPM located in Tokyo's Shinjuku Ward) had paid a total of 3,000,000 yen during a period from 2006-2007 to the nonprofit organization "Yuyukoronjuku" (located in Tokyo's Minato Ward) of which Justice Minister Jinen Nagase had served as honorary principal chairman. The NPO serves as a political-support organization of Nagase. The IPM's director, as well, had donated a total of 360,000 yen to Nagase's political organization. Suspicions are arising that the justice minister, who is in a position to supervise and give guidance to organizations accepting foreign trainees, had received money in various forms from some of those organizations under his oversight. The IPM was established in 1993. It has until now accepted some 2,800 Chinese trainees and introduced them to domestic firms. Nagase reportedly had served as honorary chair of the IPM since its foundation and stepped down around September 2005, immediately before he assumed the post of deputy chief cabinet secretary. According to the IPM director, the two IPM-affiliated companies that had donated money to the NPO "Yuyukoronjuku" were "Neo Plan" represented by the IPM director and "Yen Plan" led by the director's wife. These two groups had each paid 100,000 yen monthly as supporting members to that NPO from May 2006 through July 2007. The money they had paid to the NPO totaled 3,000,000 yen. Reportedly, they were asked by Nagase's secretary to join the NPO as members. As the reasons why the two companies donated money to the NPO, the IPM director explained: "I donated in part because I hoped to see Mr. Nagase succeed in the political world." The director also said he took it into consideration that it appeared difficult to track this sort of donation. Given this, the NPO might have been used as a shield for political donations. The two companies declared losses in two fiscal years, 2005 and 2006. 9) LDP to shelve reinterpreting right to collective defense NIKKEI (Page 2) (Abridged slightly) August 26, 2007 The Liberal Democratic Party has decided to shelve its plan to produce this fall a set of proposals on altering the interpretation of Constitution with regard to the right to collective self-defense. The New Komeito has expressed its opposition to changing the constitutional interpretation to allow the country to exercise the right. The reason is that now that the House of Councillors is controlled by the opposition following the July election in which the ruling bloc suffered a crushing defeat, improving relevant TOKYO 00003948 007 OF 012 legislation, including the Self-Defense Forces Law, has become difficult. The LDP launched in late April a special committee on the right of collective self-defense chaired by LDP policy chief Shoichi Nakagawa following the government's Council for Rebuilding the Legal Foundation of National Defense. The LDP committee was planning to produce a set of proposals ahead of the government's experts panel. However, given the ABE administration's declining momentum, the LDP panel is not in a mood to discuss the matter calmly, according to a committee member. Although the party plans to put together views in the party on the current situation and challenges regarding the right of collective self-defense, it plans to abstain from showing any direction in its proposals. 10) Prime Minister ABE to seek DPJ understanding for extension of Antiterrorism Law NIKKEI (Page 2) (Excerpts) August 25, 2007 Yushi Kihara, Kuala Lumpur Visiting Prime Minister SHINZO ABE held a press conference on Aug. 24 at a hotel in Kuala Lumpur, in which he stated on the issue of extending the Antiterrorism Special Measures Law: "I will discuss foreign policy with the opposition camp, as well. I want the Democratic Party of Japan to understand how much Japan's activities are appreciated and expected by the international community." He indicated in his remarks that with an eye on passage of the law in the fall extraordinary session of the Diet, he would seek understanding from the DPJ, which has opposed an extension of the Antiterrorism Law. He, however, refrained from mentioning any specific response, including corrections to a bill to extend the antiterrorism law. 11) North Korea is believed to have obtained Japanese products via Taiwan SANKEI (Page 2) (Excerpts) August 25, 2007 Against the backdrop of Japan's tight export control against North Korea following the country's nuclear and missile tests, North Korea is strongly suspected of shifting to "diversionary trade" of importing high-tech Japanese equipment via Taiwan. Pyongyang is believed to have begun taking advantage of the system allowing Japan to export supplies to Taiwan, whose direct exports to North Korea are prohibited. Some corporations run by Koreans in Japan have offices in Taiwan. Public security authorities are highly alarmed, believing that they are trying to make Taiwan, which actively trades with North Korea, into a new base for procuring Japanese products. In early August, Taiwan's Justice Department arrested Hua Yue Enterprise (Taipei) executives for allegedly having illegally exported Japanese computer components that could be converted for military use to North Korea. The company is believed to have exported computer numerical control components to North Korea on 14 occasions from last August through this past July by falsely TOKYO 00003948 008 OF 012 claiming the cargo to be bound for China. Japanese computers and stainless pipes were also included in the cargo. According to security authorities, what has fallen in the hands of North Korea is software used for missile control. In addition, highly acid-resistant stainless pipes are extremely tightly controlled in Japan for exports as a material indispensable for producing nuclear substances and rocket engine components. In March this year in Taiwan, trading company executives were arrested for illicitly exporting to North Korea a precision metal processing machine tool that could be used in processing ammunition. Arrests of company executives for illegal exports to the North are on the rise. Components in the machine tool that was illicitly exported were imported from Japan and assembled in Taiwan. Such components are not allowed to be exported to North Korea. Last year, Japanese police arrested executives of two companies run by Koreans in Japan who were involved in the illegal export via Taiwan of a freeze dryer that can be used in developing bio weapons on suspicion of violating the Foreign Exchange and Foreign Trade Control Law. 12) Japan concerned about China's defense buildup TOKYO (Page 2) (Full) August 27, 2007 China's National Defense Minister Cao Gangchuan will visit Japan on a five-day schedule from Aug. 29 and will meet his Japanese counterpart. China's defense chief will visit Japan for the first time in nine and a half years since Chi Haotian visited in February 1998. Japan and China will now hold a defense summit for the first time in four years since Shigeru Ishiba visited China and met with Cao in September 2003 when Ishiba was director general of the Defense Agency, now the Defense Ministry. Japan and China, which have suspended defense exchanges since former Prime Minister Junichiro Koizumi paid homage at Yasukuni Shrine, will now resume them. However, there is a deep gulf between the two countries over the rapid increase in China's defense spending. There are many challenges in store for the two countries. Prime Minister ABE visited China in October 2006. ABE then met with Chinese President Hu Jintao and other Chinese leaders. At that time, Japan and China agreed on mutual confidence-building measures (CBMs). In the defense summit this time, Japan and China are expected to discuss carrying out mutual fleet visits at an early date and setting up a hotline between their defense officials. However, Japan remains distrustful of China over its nontransparent defense spending, taking the position that China has boosted its defense spending with a double-digit increase for 19 years in a row and that there are questions about the transparency of the budget. Meanwhile, Japan has been strengthening its alliance with Japan. In addition, Prime Minister ABE has advocated building a framework of Japan, the United States, India, and Australia. China is increasingly becoming wary of that move, taking it as a coalition against China. As it stands, Japan and China have not built an environment to facilitate cooperation. TOKYO 00003948 009 OF 012 On Aug. 24, Defense Minister Yuriko said she would not be involved. "We've been troubled since the appointment of a successor to the vice defense minister, so I wonder if she can talk with her Chinese counterpart in an appropriate manner." With this, one of the Defense Minister's officials voiced concern. 13) F-15 deployment to Okinawa eyed SANKEI (Page 5) (Abridged) August 27, 2007 The Air Self-Defense Force will deploy F-15 fighter jets to its Naha base in Japan's southernmost island prefecture of Okinawa, Defense Ministry officials said yesterday. The F-15 deployment to Okinawa is intended to secure mastery of the air and strengthen readiness for a possible violation of Japan's territorial airspace while in preparation for a possible invasion of the Senkaku islets and other islands. In this F-15 deployment, the Defense Ministry plans to replace F-4 mainstay fighters currently deployed to the Naha base with F-15 fighters deployed to the ASDF's Hyakuri base in Ibaraki Prefecture. The F-15 is superior to the F-4 in mobility and dogfight capability. The ASDF will deploy F-15s to Okinawa and step up interoperability with F-15s deployed to the US Air Force's Kadena base on the island prefecture in an aim to increase deterrence on China. The ASDF's Naha base currently deploys the 302nd Fighter Squadron with about 20 F-4s and will replace them with about 20 F-15s from the 204th Fighter Squadron. The ASDF is expected to complete its F-15 deployment to Okinawa in fiscal 2008. The Hyakuri base, according to an ASDF staff officer, had been positioned as "the last line of metropolitan air defense" in Japan's northern-oriented strategy against the now-defunct Soviet Union's possible invasion during the Cold War. Replacing the Naha-based F-4 fighters with F-15s can be called an instance that typifies a shift to southwestern-oriented strategy with China in mind. The Defense Ministry will also earmark 112.3 billion in its budget estimate for fiscal 2008 to renovate 32 F-15s in order to enhance their combat capability. The F-22A Raptor, a state-of-the-art stealth fighter developed by the United States, was a likely candidate for Japan's follow-on mainstay fighter (FX). However, the United States will not provide Japan with any data about the F-22A. The Defense Ministry therefore deems it difficult to select a fighter model by the summer of next year as planned. The ministry, which has so far had plans to renovate only eight F-15s, will now substantially increase the number of F-15s for modernization with upgraded radar performance and missile efficiency. 14) Japan putting in serious efforts to ready space, sea strategies SANKEI (Page 1) (Abridged) August 27, 2007 The Defense Ministry will set up a new division, tentatively called the "Office of Space and Ocean Policy" or "OSOP" for shirt, which is in charge of planning space and sea strategies, officials said yesterday. China has been projecting its space and ocean activities. With an eye to this move, the Defense Ministry will launch the office in the summer of next year. TOKYO 00003948 010 OF 012 OSOP will be installed in the Defense Policy Division and will be staffed with five persons or so. In July, Japan's own law of the sea came into effect. OSOP will plan space and ocean policies. In addition, the new office will also engage in interdepartmental coordination with other government ministries and agencies as well as international coordination with foreign defense ministries and international organizations. The Defense Ministry's budget estimate for fiscal 2008 totals 4.8172 trillion yen, an increase of 0.7% or 35.7 billion yen over the ministry's initial budget for the current fiscal year. The ministry will also earmark costs for establishing OSOP. 15) Equipment contracts: New system to curb procurement expenses; Defense Ministry to encourage companies to reduce prices NIKKEI (Top Play) (Excerpts) August 25, 2007 The Defense Ministry will launch a drive to reform its system of procuring defense equipment, including fighter planes and spare parts for repairs, starting in fiscal 2009. Judging that it is difficult to urge companies to make rationalization efforts under the present system of adding a 5% profit to cost prices after the completion of ordered products, the ministry will instead adopt a system under which companies can receive portions of costs saved during a production process as their profits, thereby curbing procurement prices. Another aim of the introduction of a new system is to boost the competitiveness of the defense industry on the equipment market. Defense equipment generically indicates weapons, protective equipment, systems used mainly by the Ground, Maritime and Air Self-Defense Forces. Such equipment used by the GSDF includes tanks, all-wheel-drive armored trucks, carrier helicopters, rifles and so on. The MSDF uses Aegis ships, submarines. The ASDF uses fighter planes, missiles and transport planes. These products are often procured, based on discretionary contracts. Companies that received orders for such products usually work out prices by adding profits the costs needed immediately before the delivery. It takes several years for companies to deliver ordered equipment. Since low cost prices mean low profits, the present system does not encourage manufacturers to make cost-cutting efforts so much. The envisaged system is aimed at encouraging manufacturers to cut cost prices, while maintaining a general framework of the current system of adding a 5% profit to cost prices. To be precise, prices are set when the Defense Ministry allocates contracts to start the manufacturing of ordered products to companies. Companies will be entitled to receive portions of costs saved by their own efforts made by immediately before the delivery. 16) Cabinet Office requests 312.5 billion yen in Okinawa package SANKEI (Page 5) (Full) August 25, 2007 The Cabinet Office on August 24 produced an Okinawa-related budgetary request for FY2008 totaling 312.51 billion yen (up 18.3% from this year's initial budget) including 15.597 billion yen in a TOKYO 00003948 011 OF 012 preparatory fund for the Okinawa Institute of Science and Technology. In new businesses, the budget places priority on developing human resources in tourism and other areas. Specifically, 39 million yen was appropriated for a project to foster highly skilled human resources with the aim of producing international tourist resorts, and 224 million yen for the House of Asian Youths project to promote exchanges with other Asian nations. In addition, a total of 10 billion yen -- the same as last year -- was earmarked for an aid package for development of the northern area, which is based on the planned relocation of Futenma Air Station. However, whether or not the government can actually secure the funds for the northern area depends on developments in the year-end budget compilation. 17) Japan, ASEAN agree to sign EPA; Japan to repeal more than 90% of tariffs soon YOMIURI (Page 1) (Full) Evening, August 25, 2007 Manila Japan and the Association of Southeast Asian Nations (ASEAN) held an economic ministerial meeting in Manila on Aug. 25 and agreed in principle to reach an economic partnership agreement (EPA), centering on free trade agreements (FTA). Both sides will ink the accord in November when their leaders meet in Singapore. The pact is expected to take effect next year. Japan will scrap tariffs on more than 90% of imports from the region immediately after the pact comes into effect. The items subject to tariff removal will be increased to more than 93% of all imports within 10 years. But rice will not be covered by the agreement. The six original ASEAN countries, including Indonesia, will repeal tariffs on more than 90% of imports from Japan in terms of both value and items. Of the later members, Vietnam will abolish more than 90% of tariffs within 15 years, and three countries, including Cambodia, will scrap over 85% of tariffs within 18 years. The EPA will be Japan's first multinational accord. Under the pact, tariffs will not be imposed or will be reduced even if components or fully assembled products are moved within the ASEAN region, for instance, in a case in which Japan exports a liquid crystal panel to Malaysia and again exports a TV set assembled there to Thailand. The business community has welcomed the accord, based on the view that it will become easier for Japanese firms to construct plants in various countries in the region and to divide work. ASEAN has already concluded free trade agreements (FTA) with China and South Korea. The FTAs with China and South Korea came into effect in July 2005 and in June 2007, respectively. Given this, Japan was being pressed to quickly conclude a pact. Minister of Economy, Trade and Industry Amari told reporters after the ministerial meeting: "We were able to mark a great step forward toward integrating the economies of East Asia," stressing the significance of the agreement. 18) Agreement between Japan, ASEAN to sign EPA likely to add TOKYO 00003948 012 OF 012 momentum to free trade strategy NIKKEI (Page 3) (Full) August 26, 2007 Japan and the Association of Southeast Asian Nations (ASEAN composed of 10 countries) yesterday came to a general agreement to conclude an economic partnership agreement (EPA). Japan has no regional trade bloc, like the European Union (EU),so it is an important challenge for the nation to form a free trade zone with ASEAN and countries in the Asia-Pacific countries, such as China, South Korea, Australia, and India. The progress in negotiations on concluding an EPA with ASEAN is likely to give momentum to Japan's free trade strategy. Minister of Economy, Trade and Industry Akira Mari told reporters yesterday: "This marks a great step forward to realize the concept of an East Asia Community," indicating his eagerness for an expansion of EPAs. Trade in the Asia-Pacific region grew more than 10 fold over the past 20 years in value terms. The Japanese government estimates that if 16 countries in the Asia-Pacific region reach an EPA, it will bring about an economic effect worth approximately 5 trillion yen. The government also aims to sign EPAs with the United States and the European Union (EU). Japan proposed in earlier EPA talks with ASEAN that it would promptly remove tariffs on about 90% of imports from the region. South Korea, which has already inked a deal with ASEAN, has agreed to immediately abolish about 60% of tariffs. China will phase out tariffs on all imported products. If Japan is able to present bold liberalization plans, like the one with ASEAN, the East Asia-Community concept must take on a realistic touch. In the EPA talks with ASEAN, though, Japan placed such high-tariff agricultural products as rice, dairy products, and beef outside the reach of the agreement. China and Australia are expected to call on Japan to open up its agricultural market wider. Unless Japan encourages Japanese farmers to bolster their competitiveness and liberalize the market, it might be difficult for a free trade system to be established in the Asia-Pacific region, as Japan desires. MESERVE