DAILY SUMMARY OF JAPANESE PRESS 09/25/07

UNCLAS SECTION 01 OF 10 TOKYO 004436

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SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 09/25/07


Index:

(1) New LDP leadership launched; Structural reform course might be
modified; Finance Ministry pins hopes on Tanigaki, Nukaga

(2) Market response to election of Fukuda as LDP president:
"Stabilize the government first"; No real substance in economic
policy; Concern about structural reform backsliding

(3) DPJ Secretary General Hatoyama hopes for quick response from US
Embassy

(4) Prime Minister Abe offers apology for announcing resignation at
worst timing; He has not regained 5 kg he lost

(5) Editorial: Ozawa's logic getting into a scrape with UNSC
resolution

(6) Editorial: Japan might be labeled as force of resistance to
preventing global warming

(7) TOP HEADLINES

(8) EDITORIALS

ARTICLES:

(1) New LDP leadership launched; Structural reform course might be
modified; Finance Ministry pins hopes on Tanigaki, Nukaga

MAINICHI (Page 11) (Abridged)
September 25, 2007

New LDP President Yasuo Fukuda launched yesterday the new LDP
leadership including Secretary General Bunmei Ibuki, Policy Research
Council Chairman Sadakazu Tanigaki in the run-up to the prime
ministerial election today, in which Fukuda is certain to be named
the nation's 91st prime minister. Whether the new administration
will continue the structural reforms laid down by former Prime
Ministers Junichiro Koizumi and Shinzo Abe remains to be seen. In
his campaign pledges, Fukuda promised to study such options as
freezing the planned increase in elderly people's share of medical
payments and a tax system allowing greater local autonomy in
consideration of the socially weak and local districts, while
declaring that he would continue some basic policies, such as fiscal
reconstruction. Attention is focused on the extent to which Fukuda
can break away from the Abe administration's economic policies once
he becomes prime minister.

Senior Finance Ministry officials welcomed Tanigaki's appointment as
policy research council chairman and Fukushiro Nukaga's expected
reappointment as finance minister because they are receptive to
fiscal reconstruction. A Finance Ministry official also took this
view: "They also seem to exhibit excellent abilities to coordinate
views in dealing with opposition parties on tough issues, such as
hiking taxes."

In running the LDP presidential election last year, in which he was
defeated by Abe, Tanigaki contended that the consumption tax must be
raised to up to 10 PERCENT by around 2015 to finance social
security.


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Highly alarmed at the nation's long-term debt equivalent to 150
PERCENT of GNP, Tanigaki is eager to attain a black-ink primary
balance by pursuing an approach combining the Koizumi- and Abe-style
policy course that deeply cut public works projects and tax grants
and tax hikes. Nukaga, on the other hand, shows an understanding of
the need for public works projects in order to redress disparities
between urban and rural areas. The appointments of Tanigaki and
Nukaga are likely to put a stop to one-sided spending cuts.

Fukuda's key policies also include freezing the government's plan to
increase elderly people's share of medical payments and taking bold
measures to eliminate the shortage of doctors.

Staring in next April, the government plans to increase the portion
of medical expenses borne by people between ages of 70 and 74 from
the current 10 PERCENT to 20 PERCENT . Fukuda's plan would
necessitate the central and local governments to come up with
additional financial resources totaling 120 billion yen. With his
another pledge of eliminating the lack of doctors also remaining
unclear, Fukuda's medical reform plan is likely to be pressed for a
fundamental review.

Following the ruling bloc's crushing defeat in the July House of
Councillors election, the New Komeito is calling for tax reforms,
such as reallocating the corporate enterprise tax and the corporate
inhabitant tax among prefectures as a means of reducing disparities
between urban and local areas. In the upcoming year-end tax reform,
Fukuda is likely to be pressed for new responses to the New
Komeito's call along with his campaign pledge of a tax system and
tax grants allowing local independence.

A working-level study is underway between the Finance Ministry and
the Internal Affairs and Communications Ministry on disparities in
tax revenues. Like the New Komeito, the Finance Ministry is studying
the plan to distribute the two local corporate taxes in terms of
prefectural population and the number of business establishments.
The Internal Affairs Ministry is also advocating a plan to
generously provide local areas with consumption tax revenues that
are essentially unaffected by cyclical changes, as well as the
so-called hometown tax scheme, under which taxpayers can allocate a
certain amount of their residential tax payment to their hometown.
Attention is focused on the future course of coordination between
the two ministries.

Markets players cool toward caretaker government

With many market players having already factored in the inauguration
of Prime Minister Fukuda, the establishment of a Fukuda
administration is likely to have a limited impact on the stock
markets. A leading securities firm source indicated, however, that
the appointment of Tanigaki, who has been skeptical about the
structural reform course since the Koizumi administration, as LDP
policy chief might dampen foreign investors' desire to buy, thereby
resulting in sluggish stock prices depending on the new
administration's policy. At the same time, expectations are strong
among market players, with Nomura Securities Co. market analyst
Masahiko Sato saying, "Mr. Fukuda has a stronger sense of stability
and balance than Mr. Abe."

From mid- to long-term perspectives, a Fukuda administration is
bound to face rough going in the opposition-controlled Upper House.
Credit Suisse Chief Economist Hiromichi Shirakawa said: "The Fukuda

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cabinet will be a caretaker cabinet until the next general election.
Reform will not advance under such a cabinet." Daiwa Securities SMBC
Co. Equity Marketing Department chief Kazuhiro Takahashi's
observation was equally chilly: "Chances are slim for the new
administration to put vital economic policies boosting stock prices
into action, such as a consumption tax hike."

Japanese stocks have been in an adjustment phase due to America's
subprime loan crisis. The predominant view is that Japanese stocks
depend on reduced global credit uncertainty and the trends of the US
economy. The trends of foreign investors, who account for 70 PERCENT
of trading in the domestic markets, are also vital. Norihiro Fujito
of Mitsubishi UFJ Securities said: "If a Fukuda cabinet immensely
increases government spending in the name of redressing
socioeconomic disparities, it would turn off foreign investors,
taking it as a setback from fiscal reconstruction."

(2) Market response to election of Fukuda as LDP president:
"Stabilize the government first"; No real substance in economic
policy; Concern about structural reform backsliding

ASAHI (Page 9) (Slightly abridged)
September 25, 2007

The prevalent view among market players is that the new president of
the Liberal Democratic Party of Japan (LDP) should first manage his
administration in a stable manner. That is because although the
election of the LDP president has put a halt to the political vacuum
for the time being, the opposition camp's dominance in the Upper
House remains unchanged. Some are concerned that the LDP might step
back to its former self, which attached importance to the interests
of party factions. If the reform policy, including fiscal
reconstruction, backslides, new disturbing factors might appear in
the market, which is now being rocked by the subprime housing loan
issue in the US.

The Nikkei average on the Tokyo Stock Exchange has surged about 500
yen over a week or so since Prime Minister Abe's announcement of his
resignation. A view that a shift to a new administration as well as
an interest rate cut in the US would stabilize the political
situation appears to have contributed to the rise.

The prevalent view is that since the market had already taken into
consideration the assumption of power by Fukuda, there would be no
major impact on the Tokyo market at the beginning of the week. Even
so, voices placing expectations on the Fukuda administration are
growing, because a stable administration inspires the market with
confidence, as Hidehiko Fujii of the Japan Research Center put it.

Among past administrations since around 1995, under the Hashimoto
and Mori cabinets stock prices dropped when they resigned, compared
with the level posted when they took office. In contrast, stock
prices were higher when Obuchi, Koizumi and Abe stepped down,
compared with the level marked when they took office. During the
Koizumi cabinet, the Nikkei average temporarily dropped to the 7,600
yen level, but it went up to the 15,500 yen level when he resigned.
The trend indicates that the Koizumi reform drive, including
deregulation, obtained a certain amount of praise from the market.

The key is the movements of foreign investors, who hold a majority
in terms of the amount of stock trading on the TSE. Koichiro Nishio
of Nikko Cordial Securities has believes that foreigners tend to

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give high marks to an administration like the Koizumi cabinet, which
send clear-cut messages.

In this regard, some take a cool view, with Shinya Ueno of Mizuho
Securities saying, "Whoever becomes the president of the LDP, he
would not be able to display political leadership under the present
market environment."

Consumption tax a subject of high interest

As a matter of fact, many economists are unhappy with Fukuda's
economic policy, with one noting, "His economic policy is unclear."
Fukuda's statement on economic policy made during the LDP
presidential campaign lacked specifics out of consideration to
various factions that supported him.

How the new administration will deal with spending cuts and a
consumption tax hike is a subject of high interest in the market. It
is said that a consumption tax hike, which could take the steam out
of the domestic economy, putting a dent in consumption, could
trigger yen-selling.

Taro Aso, another contender in the presidential election, fought
well. Hiromichi Shirakawa of Credit Swiss, noted, "Mr. Aso brought
to the forefront a policy of giving priority to local economies. He
gained an unexpectedly large number of votes. The result shows that
LDP members are concerned they cannot fight the next election unless
they attach importance to regional areas."

Fukuda's so-called balanced approach is the cause of barring market
players from placing expectations of reform, with Kenichi Kawasaki
of Lehman Brothers noting that that the LDP has returned to its
former self, as can be seen in Mr. Fukuda's attaching importance to
coordination with government offices, and Nishio saying, "Giving
excessive consideration to income disparities and regional economies
would backslide fiscal and political structural reforms."

Impact on interest hike

The inauguration of the new administration and the selection of a
cabinet line-up will likely affect the future monetary policy of the
Bank of Japan, which is searching for the best time for an interest
rate hike. Shirakawa pointed out, "Chances are that if the Fukuda
administration clarifies its vision for fiscal reconstruction,
political checks will heighten against an interest rate hike by the
BOJ, as it could lead to an increased fiscal burden." However, the
general view is that whether to raise interest rates will be
determined by the movements of the global monetary market triggered
by the subprime loans, according to Hideo Kumano of Dai-Ichi Life
Insurance Economic Research Center.

Another focus of attention is the impact on the selection of a
successor to BOJ Governor Toshihiko Fukui, who finishes his term
next March. The cabinet appoints a BOJ governor with the consent of
the Lower and Upper Houses. However, if the Upper House, where the
opposition holds a majority, opposes the selection of a person
proposed by the cabinet, then the proposal will be scrapped.

The BOJ is holding out hope that Vice Governor Toshiro Muto, a
former Finance Ministry official, will be promoted. When the Koizumi
administration picked Muto as vice governor in 2003, Fukuda was the
chief cabinet secretary. Expectations of the selection of Muto will

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likely heighten. However, the DPJ opposed the selection of Muto as
vice governor, because he is a former bureaucrat.

Nishio views that since Mr. Fukuda must obtain cooperation from the
DPJ in managing the government, he probably does not want a fight
over the selection of a BOJ governor. On the other hand, there is
also a strong view that since if the DPJ opposes anything proposed
by the ruling camp it would not be able to gain support from the
public, it would try to find a common settlement line with the new
administration, as Fujii put it.

(3) DPJ Secretary General Hatoyama hopes for quick response from US
Embassy

SANKEI (Page 5) (Full)
September 22, 2007

Yukio Hatoyama, secretary general of the main opposition Democratic
Party of Japan (DPJ),stated in a press conference on Sept. 21 on
his party's request for the US Embassy in Tokyo to provide
information about the activities of US warships that have received
fuel from the Maritime Self-Defense Force in the Indian Ocean: "The
Embassy is trying to respond in a careful manner. We hope the
Embassy will swiftly provide the information so that we will be able
to use it at questioning sessions and Budget Committee sessions in
the upcoming Diet." Hatoyama explained how his party made the
request to the US Embassy: "The party's International Affairs Bureau
chief Tetsundo Iwakuni verbally conveyed it."

(4) Prime Minister Abe offers apology for announcing resignation at
worst timing; He has not regained 5 kg he lost

YOMIURI (Page 1) (Full)
September 25, 2007

Prime Minister Shinzo Abe, appearing publicly for the first time
since his hospitalization, explained yesterday his health condition
and the real reason for the sudden announcement on Sept. 12 of his
intention to step down. He reiterated words of apology, saying, "I
want to apologize to the public." He did not mention the major
reason for his decision to resign, however. He held the press
conference a day before his cabinet is to resign en masse. Although
he expressed his eagerness for cooperating with the new LDP
president as a Diet member, questions about Abe's accountability
were raised from some experts.

It was after 5:00 p.m. when Abe showed up at the press conference
room in Keio University Hospital in Shinanomachi, Tokyo. He entered
the room slowly and sat on a chair. He was looking down at notes
while his doctors were being introduced. He apparently grew utterly
emaciated. "I was unable to have a chance to explain since my
condition did not make any recovery as I expected," rasped Abe, who
has been hospitalized since Sept. 13.

The prime minister said feebly:

"I wanted to apologize to the people before stepping down as prime
minister. I announced my resignation at the worst timing soon after
delivering a policy speech. I was unable to respond adequately to
the expectations of the public."

At the press conference on Sept. 12 when he announced his intention

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to quit, he cited Democratic Party of Japan (DPJ) President Ichiro
Ozawa's refusal of his request for a meeting as a reason for his
intention to resign. Abe, however, essentially retracted it
yesterday. He stated: "I apologize for not referring to the main
cause of my decision and for failing to convey my real intention to
the public." He added: "I should have mentioned it at that time."
Abe, who had suffered from such factors as his party's setback in
the July Upper House election, and the resignation of the
agriculture minister even after he reshuffled his cabinet, said
yesterday: "I felt like I'd reached the limit of my strength." One
of his doctors also explained his condition: "The prime minister
suffered from lack of appetite due to acute gastroenteritis during
his overseas trip. He then grew weak." The doctor revealed that Abe
has been unable to regain his weigh since he lost 5 kg.

Watching Abe's press briefing, many in his hometown, Shimonoseki
City in Yamaguchi Prefecture, expressed their hopes for Abe to
recover as quickly as possible. Akio Ito, 71, chairman of Abe's
support group, worried about Abe, saying: "I'm concerned about his
lifeless voice. I want him to think first of recovering his health
as early as possible." He expressed his determination to continue to
his political career. Regarding this, Abe's support group secretary
general Okamoto, 60, commented: "Since he said that he wanted to
continue his political career, I'm determined to support him."

Keio University Prof. Yasunori Sone made this comment:

"I understand that he reached the limits of his strength physically
and psychologically. He should have explained his health condition
as the reason for his resignation when he announced his intention.
He as prime minister of the country missed the right timing to
fulfill his accountability. The fact that he did not appoint an
acting prime minister during his hospitalization exposed a lack of
the Prime Minister's Official Residence's crisis management. His
responsibility for abandoning the prime minister's job in this way
is grave. I think his political career will be difficult in the
future."

Nobuko Hiwasa, external board member of Snow Brand Milk Products
Co., who used to serve as chief of secretariat of the National
Liaison Committee of Consumers' Organizations, commented:

"It never should occur that the top leader of a company does not
explain the real reason for trouble when the trouble affects
consumers. He should have said at that time if he was really sick.
Since he failed to do so, the public was confused and speculation
was rampant. Honesty is required in any circle. I think that Abe
made that decision because he did not look toward the public."

(5) Editorial: Ozawa's logic getting into a scrape with UNSC
resolution

NIKKEI (Page 2) (Full)
September 21, 2007

The United Nations Security Council adopted Resolution 1776, which
extends the International Security Assistance Force's mission in
Afghanistan for one year and which expresses "appreciation" to
multinational naval forces for their maritime interdiction
operations conducted in the Indian Ocean with Japan's participation.
The leading opposition Democratic Party of Japan (Minshuto) remains
committed to standing against continuing the Maritime Self-Defense

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Force's refueling activities in the Indian Ocean. However, the UNSC
resolution adopted this time works to the disadvantage of DPJ
President Ichiro Ozawa, who has been asserting that the MSDF's
refueling mission is not based on any UN resolution.

The resolution was adopted with a concurring vote of 14 countries
excluding Russia, which abstained from voting. It is not a unanimous
resolution, so some people seem to take it that this would work to
the DPJ's advantage. When the Gulf War broke out, Ozawa, basing his
standpoint on UNSC Resolution 678, asserted that Japan should send
the Self-Defense Forces to participate in the multinational forces.
However, China abstained from voting on that resolution. Ozawa will
lose consistency if he makes light of Resolution 1776 on the grounds
that it is not a unanimous resolution.

Yoshio Hachiro, foreign minister in the DPJ's shadow cabinet,
stresses the DPJ's posture against continuing the MSDF's refueling
mission, taking the position that the UNSC resolution this time does
not directly provide for Japan's SDF activities at all. This kind of
assertion is understandable from the context of domestic politics.
The question is how far it will be convincing in the international
community and in Japan now that the UNSC has adopted a new
resolution.

As noted by Hachiro, UNSC Resolution 1776 does not directly touch on
the SDF's activities. However, the international community has no
powerful law enforcers. International law is not the same as
domestic laws. Unlike a treaty between one country and another, UNSC
resolutions go no further than to politically bind UN members in
many cases. If a UNSC resolution is vague in substance, it is
important to interpret what it means on the whole.

UNSC Resolution 1776 expressed appreciation for the multinational
naval forces' maritime interdiction operations. What does this mean?
The UNSC has approved their activities. In commonsense terms, that
is why the UNSC expressed its appreciation. The UNSC, if it is
against their activities, is unlikely to adopt a resolution that
expresses its appreciation for such activities.

Accordingly, the DPJ's logic, which takes the position that the
SDF's refueling mission is groundless because it is not based on a
UN resolution, cannot but fall into a jurist argument that makes no
sense to the general public if the DPJ tries to carry it through,
although it has yet to collapse completely.

The Diet will elect Japan's new prime minister next week. The DPJ
would find it even more difficult than ever to uphold its logic in
parliamentary inter-party talks.

The DPJ has stood against the SDF's refueling mission, so the DPJ
should carry through its standpoint against it to the last. That is
a sincere response to its supporters. One may think in this way.
There can be such a way of thinking in Japan, indeed. At the same
time, however, the DPJ should also listen in a sincere manner to the
international community's expectations shown in the UNSC resolution.
The DPJ should take it for granted as a political party responsible
for state affairs in Japan living in the international community. To
that end, the ruling and opposition parties should rack their
brains.

(6) Editorial: Japan might be labeled as force of resistance to
preventing global warming

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NIKKEI (Page 2) (Full)
September 25, 2007

Soon after the Fukuda administration is launched today, it will find
itself facing difficult international talks in which both national
and global interests are complexly interrelated. These will be
political negotiations aiming at the period after the Kyoto Protocol
expires in 2012 by creating a new regime that would include the US,
China and other major gas emitters. For Japan, the question is how
it should combat global warming while keeping the economy growing.

The United Nations kicked off its meeting on climate change in New
York on Sept. 24. The Japanese prime minister did not attended the
meeting this year, although the prime minister initially should
express Japan's views on the international stage and discuss ways to
prevent global crisis with other countries' leaders.

From dialogue to negotiations

The conference brings together leaders from 80 countries, including
United States President Bush and French President Sarkozy. Former
Prime Minister Yoshiro Mori represents the Japanese government.
Prime Minister Shinzo Abe set forth the initiative, "Invitation to
Cool Earth 50," in the Heiligendamm Summit in June calling for
halving global greenhouse gas emissions by 2050 and earned a certain
level of international praise for it. Set off by Abe's sudden
resignation, Japan's presence on the international stage has begun
to decline.

The high-level UN conference is indisputably aimed to shift such
tasks as halving global gas emissions by 2050 and of creating a
post-Kyoto framework from "the current dialogue stage to the
negotiating stage," in which rules and goals will be worked out.

China still insists that industrialized countries alone should be
required to cut greenhouse gas emissions. The US government also
remains opposed to setting any goals for gas-emission cuts. In the
declaration issued at the Asia-Pacific Economic Cooperation (APEC)
forum and on other occasions, only goals to strive for were worked
out, in a sense, as products of dialogue.

United Nations Secretary General Ban Ki-moon aims to start
full-scale negotiations at the 13th session of the Conference of the
Parties (COP) to the UN Framework Convention on Climate Change
(UNFCCC) in Bali, Indonesia, in December, reflecting countries'
political stances clarified by their leaders in the high-level
conference. Following the high-level meeting, a meeting of major
greenhouse gas emitters will be held in Washington starting on Sept.

27. This is a valuable occasion for industrialized countries and
emerging countries such as China and India to sit at the same table,
but many countries have decided not to send cabinet ministers, for
the reason that the meeting is unlikely to produce specific results
because it will be held under the lead of the Bush administration.

Negotiations on global warming will held at various levels,
including the COP13 and the Lake Toya Summit in Hokkaido next July.
Besides the serious damage from Abe's resignation, Japan has another
weak point that might cause questions about Japan's ability as the
chair of the Lake Toya Summit. That is the fact that Japan remains
unable to clearly speak of its own reduction goals.


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In Japan, the business world and the government agencies responsible
for economic policies are absolutely opposed to the idea of adopting
an emissions trading system based on a cap-and-trade program that
would set limits on companies' gas emissions. They are also against
an introduction of nation-specific reduction targets. Looking at
Japan's negative stance, other countries might define Japan as a
force of resistance.

It was said that since the Japanese industry has achieved energy
saving most conspicuously in the world, it will be impossible to
hammer out more energy-conservation measures. But this myth might
have already shattered. Japan has already been overtaken by Germany
and Britain in terms of energy efficiency and emission consumption
rate in many of its industries.

Nippon Keidanren (Japan Business Federation) and the Ministry of
Economy, Trade and Industry (METI) have yet to present any reasons
for their opposition to emissions trading and total volume targets.
In the US, a law that would set numerical targets for cutting its
greenhouse gas emissions will surely be enacted under a post-Bush
administration. Many of the bills now put on the agenda set
numerical targets that are not significantly different from those of
the European Union (EU). Naturally, they are numerical figures
worked out on the premise of introducing the emissions trading
system. Australia has also come up with similar figures.

Flexible goals for emerging nations

Among the industrialized countries, only Japan has still allowed
companies to draw up their own voluntary action programs based on
the conventional convoy system, without setting any total volume
targets. Japan has yet to allow emissions trading, either. Even so,
Japan will inevitably be requested to transfer technology and offer
financial aid in the future. How can a nation that cannot speak of
its future targets assume the initiative in cutting greenhouse gas
emissions?

Emerging nations will not be punished even if they fail to achieve
their targets. Furthermore, study is underway to set a
target-setting framework under which if they succeed in meeting
their targets, they will be allowed to sell that portion under the
emissions-trading system. By introducing sector-specific goals,
instead of nation-specific ones, emerging countries will find it
easier to join the framework.

Views are split over whether to push ahead with negotiations on a
regime for industrialized countries and those for emerging countries
separately. But the major principle in a treaty is "common but a
different level of responsibility."

It is as clear as daylight that it is impossible for Japan to cut
its emissions of greenhouse gases by 60 to 70 PERCENT from current
levels without emissions trading. It is believed that Nippon
Keidanren and METI are now aware of the need for a policy switch.
What is needed now in Japan is a political judgment. The government
must try to prevent the force incomprehensive of the scientific
evidence of global warming from undermining Japan's national
interests.

(7) TOP HEADLINES

Asahi, Mainichi, Yomiuri, Nikkei, Sankei & Tokyo Shimbun:

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Fukuda names faction leaders Ibuki, Tanigaki, Nikai, and Koga to
party executive posts, Machimura as chief cabinet secretary

Akahata:
All JCP members elected in Higashi Osaka assembly election

(8) EDITORIALS

Asahi:
(1) End of Abe cabinet: Results and setbacks of right-wing
government
(2) Increasing poverty: More countermeasures needed

Mainichi:
(1) Appointments of LDP executives: How will party policies,
management change?
(2) Record high oil prices: Speculative funds pouring in

Yomiuri:
(1) Will LDP return to faction-led politics?
(2) Sale of insurance policies at banks: Complete removal of ban
serves to expedite reform in industry


Nikkei:
(1) Japan might be labeled a "force of resistance" preventing global
warming

Sankei:
(1) New LDP executives expected to achieve results through
coordination and resolution
(2) Academic aptitude test: Fair competition leads to improving
scholastic ability

Tokyo Shimbun:
(1) LDP returns to old regime, with appointments of faction leaders
(2) Transparency required in selecting Chinese Communist Party
leader

Akahata:
(1) Lawsuit on drug-induced hepatitis C: Give top priority to
rescuing victims

SCHIEFFER