FUKUDA-OZAWA MEETINGS INCITE LATEST POLITICAL

C O N F I D E N T I A L SECTION 01 OF 03 TOKYO 005114

SIPDIS

SIPDIS

E.O. 12958: DECL: 11/04/2017
TAGS: PGOV PREL JA
SUBJECT: FUKUDA-OZAWA MEETINGS INCITE LATEST POLITICAL
CRISIS

REF: A. TOKYO 5059


B. TOKYO 4966

Classified By: Ambassador J. Thomas Schieffer, reasons 1.4(b),(d).


1. (C) Summary. Opposition leader Ichiro Ozawa's November 4
offer to resign, and the private meetings with the Prime
Minister that precipitated it, have further unsettled Japan's
political scene. While much of the press reporting is
focused on what sort of deal was proposed by whom in the
Fukuda-Ozawa talks, for now Embassy contacts are at a loss to
assess the impact of this latest crisis in terms of the
future of Ozawa's DPJ, the ongoing Diet proceedings, and the
scheduling of the next general election. At first glance,
the DPJ appears to have taken the bigger hit, but both
parties are likely to suffer a loss of confidence as further
details emerge. At this point, it is simply too early to
predict which party will come out on top. End Summary.

Fukuda and Ozawa Strike a Deal
--------------


2. (C) The latest political crisis to hit Japan erupted on
November 2, after a second round of talks between Prime
Minister and President of the ruling Liberal Democratic Party
(LDP) Yasuo Fukuda and main opposition Democratic Party of
Japan (DPJ) leader Ichiro Ozawa. The two party heads had met
for the first time on October 30 (Ref A) and agreed to
postpone a scheduled October 31 Diet debate in favor of
meeting again. Initial media reporting claimed that Fukuda
had initiated the meetings, but conflicting stories have so
far emerged labeling Ozawa the instigator. In fact, in a
conversation with Embassy Tokyo, one highly placed ruling
party insider echoed some media claims that Yomiuri Shimbun
president Tsuneo Watanabe acted as the go-between for Fukuda
and Ozawa at Ozawa's request.


3. (C) While their first meeting ended with no apparent
agreement, the two leaders apparently upped the stakes on
November 2. According to press reports, Prime Minister
Fukuda agreed to back down on seeking passage for a new
special measures law to authorize refueling support for
Operation Enduring Freedom (OEF),in exchange for Ozawa's
commitment to compromise on a permanent dispatch law. Fukuda
was said to have conceded to Ozawa's demand that Self-Defense
Force (SDF) dispatches be authorized in some undefined manner
by a UN Security Council Resolution. The new law would
obviate the need to pass a special measures law for each SDF
deployment.


4. (C) The two leaders are also reported to have discussed
the idea of a "Grand Coalition" of the LDP, DPJ, and Komeito.
This news landed like a bombshell, catching Embassy contacts
in both parties by surprise and leading to widespread
condemnation that they had failed to first lay the proper
groundwork within their own parties. Fukuda is also alleged
to have agreed to make Ozawa a Deputy Prime Minister, should
he join in coalition with the LDP and Komeito, and to give
the DPJ six of 17 cabinet posts (with the Komeito retaining
its current one post).

Making a Bad Situation Worse for Both
--------------


5. (C) Both the DPJ leadership and rank-and-file reacted
poorly to what many perceived as Ozawa's unilateral action
and rejected the deal he presented to them late November 2.
Subsequently, on November 4, he told the press he felt
obliged to submit his resignation as party leader "to take
responsibility for the political confusion." He referred to
the decision of the DPJ leadership not to back him up in his
dealings with Fukuda as tantamount to a "no-confidence"
motion. He continued to maintain, however, that the
coalition idea was Fukuda's, despite assertions to the
contrary by Chief Cabinet Secretary Nobutaka Machimura and
LDP Secretary General Bunmei Ibuki. For his part, Prime

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Minister Fukuda told the press November 5 that the "Grand
Coalition" idea was one shared by both leaders. (Note: The
PM described this in Japanese using an expression that means
"the mental and physical harmony of two individuals.")


6. (C) In spite of his own party's opposition, Ozawa defended
his decision to consider the proposed political realignment,
noting that Fukuda had agreed to back down on the OEF bill
and support DPJ-sponsored bills aimed at reforming the
pension system and providing additional supports to
child-rearing families and farmers. Ozawa insisted that some
sort of compromise with the ruling coalition was necessary
for the DPJ to meet the expectations of the voters who gave
the party control of the Upper House in July 29 elections.
More importantly, he said, he had come to the realization
that the DPJ could not make substantial gains in the next
general election without gaining passage of at least some of
its proposed livelihood measures. His goal, he told the
reporters, had been to create a policy consultation framework
with the ruling coalition. He blasted the media for trying
to "eliminate" him politically and bring down the DPJ's image
by running "groundless" reports on his role in initiating the
discussions.


7. (C) DPJ President Naoto Kan and Secretary General Yukio
Hatoyama tried to convince Ozawa to stay -- assuming he would
back down from his support for forming a coalition with the
ruling parties -- during an emergency executive meeting on
November 5, but it was already clear that Ozawa had made up
his mind. Kan is widely expected to be a front-runner as
Ozawa's replacement, along with former DPJ leader Katsuya
Okada. Kan might appeal more to Ozawa's core supporters in
the party, but Okada is more likely to gain the support of
the mostly younger members who have chafed under Ozawa's
leadership and disdained his dictatorial style. Furthermore,
among DPJ leadership, Ozawa is thought of as the only former
party leader to have resigned "honorably" (to take
responsibility for the DPJ's Lower House election loss in
2005).


8. (C) Fukuda has also been damaged by his attempt to craft a
deal with Ozawa, Embassy contacts say. On substance, he will
undoubtedly be faulted for giving up too easily on the OEF
bill and rushing to gain agreement on a permanent dispatch
law instead. On style, his negotiations with Ozawa only
bolster the impression of many critics that his election as
LDP President has fostered a return to the "back room"
decision-making style of the old LDP. His aggressive moves
on the permanent dispatch law -- and willingness to partner
so quickly with the opposition -- are certain to weaken the
already strained ties between the LDP and junior coalition
partner Komeito. Results of an Asahi poll conducted November
3-4 show only 36 percent of respondents in favor of expanding
the ruling coalition, with 48 percent opposed.

Improved Prospects for Passage of New OEF Bill?
-------------- --


9. (C) Speaking on a popular weekend talk show, former LDP
heavyweight Shizuka Kamei said that Fukuda had gained the
upper hand after the inter-party talks, and would now be able
to gain passage of the new OEF bill (Ref B) and other key
legislation without incurring a censure motion from the
opposition-controlled Upper House or having to dissolve the
Lower House. On the other hand, allegations that Fukuda was
willing to sacrifice the new OEF bill in exchange for DPJ
support for a permanent dispatch law could now weaken the
ruling coalition's case for suddenly choosing to use its
two-thirds override power in the Lower House to ram the
measure through in an extended Diet session.


10. (C) The departure of Ozawa could also complicate passage
during this Diet session, assuming the new opposition leader
can hold the party together and maintain a confrontational
stance. At this point, the government is saying publicly
that it hopes to pass the new OEF bill through the Lower

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House prior to Fukuda's November 16 visit to the United
States. The rest would depend on whether the opposition
votes the measure down quickly in the Upper House, or opts to
exercise its right to hold the legislation for up to 60 days.
The ruling parties have already entered into discussions
with the opposition on extending the extraordinary session
for three to four weeks beyond its scheduled closing date of
November 10.

Possible Damper on Early Elections
--------------


11. (C) With a combined 105 seats in the Upper House after
their disastrous loss in July, the LDP-Komeito coalition
needs to lure just 17 DPJ members or independents into their
corner to regain control of the 242-seat chamber and break
through the political deadlock that threatens to choke the
system until at least the next Upper House elections in 2010.
The "confusion" resulting from the Fukuda-Ozawa meetings
will likely put to rest opposition calls for an early Lower
House election, which would have to be considered a major win
for Fukuda and the LDP.
SCHIEFFER