JAPANESE MORNING PRESS HIGHLIGHTS 08/04/08

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SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 08/04/08

Index:

1) Hiroshima peace groups protest remark made by Ambassador
Schieffer about the dropping of atom bombs saved many more lives by
ending the war (Nikkei)

New Fukuda Cabinet:
2) Cabinet shuffle by Prime Minister Fukuda a shift in gears to face
a Lower House election, but it also symbolizes a change away from
reform line (Akahata)
3) Average age of the new Fukuda Cabinet is 62, older than the first
cabinet (Yomiuri)
4) Prime Minister Fukuda in press conference denies the possibility
of an early Diet dissolution, as rumored in the media (Asahi)
5) LDP Election Chairman Koga, kept on in his post, retracts earlier
statement about an early Diet dissolution (Asahi)
6) Minister for Economic and Fiscal Policy Yosano to be the control
tower for Fukuda administration's economic policy (Nikkei)

Opinion polls:
7) Cabinet support rate leaps 14.7 points to 41.3 PERCENT in
Yomiuri poll, boosted by LDP Secretary General Aso's 66 PERCENT
popularity (Yomiuri)
8) Nikkei poll: Cabinet support rate soars 12 points to 38 PERCENT ,
with LDP support rate outpacing DPJ's, 37 PERCENT to 33 PERCENT
(Nikkei)
9) Mainichi poll shows little change in cabinet support rate, rising
3 points to 25 PERCENT , with 56 PERCENT of public not appreciating
the new lineup (Mainichi)
10) Asahi poll after the cabinet shuffle has the support rate at 24
PERCENT , the same as before, but 51 PERCENT of the public are
positive about the Aso appointment (Asahi)

11) Kyodo poll shows 4.7 point rise in cabinet support rate to 31.5
PERCENT , but voters would prefer a DPJ-centered government over an
LDP one, 48.2 PERCENT to 34.8 PERCENT (Tokyo Shimbun)
12) Nikkei poll found Taro Aso the most popular future candidate for
prime minister, favored by 20 PERCENT of the voters (Nikkei)

Diplomatic issues:
13) Nikkei poll finds 48 PERCENT of the public favoring a
withdrawal of the MSDF from its refueling mission in the Indian
Ocean (Nikkei)
14) Fukuda in press conference after cabinet shuffle skirts the
issue of whether his government would present bill extending MSDF
refueling in the Indian Ocean (Tokyo Shimbun)
15) LDP General Council Chairman Sasagawa cautious about extending
MSDF's mission in the Indian Ocean (Tokyo Shimbun)
16) Fukuda Cabinet to face difficult foreign policy issues with
U.S., starting with the extension of the MSDF's mission in the
Indian Ocean (Nikkei)

Sasebo incident:
17) Small leak of radiation from U.S. Navy submarine at Sasebo
occurred in March but went unreported (Asahi)
18) Foreign Minister Koumura annoyed, said he saw news of the Sasebo
sub leak on CNN (Tokyo Shimbun)
19) Prime Minister's Official Residence not contacted by the Foreign
Ministry about the U.S. Navy sub leaking radiation (Sankei)
20) Local government officials in Sasebo query Tokyo for reason why
they were not informed about the U.S. Navy sub leaking radiation in
their waters (Nikkei)

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Economic agenda:
21) Fukuda orders comprehensive economic policy measures drawn up
(Yomiuri)
22) Government and ruling camp mulling submission of supplemental
budget during extra Diet to deal with soaring fuel and food prices
(Nikkei)
23) Chief Cabinet Secretary Machimura, also retained in the cabinet,
rules out tax hike next fiscal year (Sankei)
24) Major cabinet figures starting to call for need to stimulate the
now sagging economy (Yomiuri)

Articles:

1) Sit in at Hiroshima of atomic-bomb victims, foreign
representatives of peace groups protest remark by U.S. Ambassador to
Japan justifying the dropping of atomic bombs on Japan

AKAHATA (Page 1) (Full)
August 4, 2008

(Photo shows a peace groups staging sit in at the Peace Park in
Hiroshima City with banner reading: "We protest the remark by U.S.
Ambassador to Japan Schieffer, "Dropping of atomic bombs saved many
more lives.")

The peace groups, Hiroshima Prefecture Gensuikyou (headed by
Masanobu Omori) and the Hiroshima Prefecture Hidankyou (headed by
Kazushi Kaneko),staged a sit in yesterday in front of the memorial
to atomic bomb victims in the Peace Park in Hiroshima City to
protest a remark by U.S. Ambassador to Japan Schieffer the dropping
of atomic bombs on Japan "were necessary to hasten the end of the
war." The sit in was joined by foreign representatives who had come
to Hiroshima to attend the 2008 international rally and convention
to ban nuclear weapons. The sit in was staged in 35 degree heat,
displaying a banner protesting the statement, "Dropping atomic bombs
saved many more lives." A protest letter was sent to Ambassador
Schieffer that went: "The dropping of atomic bombs was in inhuman
act that violated international law. They cannot be justified for
any reason whatsoever."

Gensuikyou head Omori said: "The Schieffer remark can be said to be
an official statement of the U.S. government. It is a major setback
for the move to ban nuclear weapons." From the foreign visitors, one
representative said: "With the dropping of the bombs, the Cold War
started. What Schieffer should do is to seriously study and learn
that. He should come here and apologize."

The statement by Ambassador Schieffer occurred in a city in Fukuoka
Prefecture in answer to a question after his lecture to high-school
students.

2) Fukuda shuffles cabinet, apparently keeping in mind Lower House
election, picks Aso as secretary general, expecting him to lead LDP

ASAHI (Top Play) (Lead paragraph)
August 2, 2008

Prime Minister Fukuda launched his new cabinet last night. In
picking new cabinet members and Liberal Democratic Party executives,
Fukuda apparently kept in mind the next general election, as seen
from the selection of Taro Aso as "the poster-boy" for the LDP. In

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terms of policies, as well, he gave priority to such challenges as
dealing with soaring commodity prices and buoying up the economy,
shifting his policy priority away from structural reform. Even so,
unless such a change in his policy course contributes to boost his
government, he may promptly lose his grip on power and become unable
to exercise his right to dissolve the House of Representatives.

Fukuda shifts away from reform line

The new lineup shows that the government has turned away from the
structural policy line that was promoted by the Koizumi and Abe
administrations. Given skyrocketing gasoline and food prices,
uncertainty is now looming large over an economic recession. Under
such a circumstance, the new lineup reflects the government's desire
to shift to policies that will be favorably taken by the voters,
with an eye on the next general election.

Finance Minister Ibuki and Economy, Trade and Industry Minister
Yosano, those responsible for the government's economic and fiscal
policies, are regarded as advocates of fiscal reconstruction. They
insist that since expenditure cuts have their limits, discussion of
a consumption tax hike must be proactively conducted in order to
strengthen social security and other services for the people.

For the posts related to economic and fiscal policies, Fukuda tapped
lawmakers who draw a line with market-oriented structural reform
line, including Land, Infrastructure, and Transport Minister
Tanigaki. At the outset of a press conference yesterday, Fukuda also
categorically said: "I would like to come up with a lineup that is
capable of implementing policies whereby the people can feel the
improved quality of their lives."

Fukuda also appointed Kosuke Hori as Policy Research Council
chairman and Seiko Noda as consumer policy minister, both of who
opposed the privatization of postal services and once bolted the LDP
but returned to the party under the Abe administration. Among those
who left the party over the postal issue but returned to it, Hori
and Noda are the first members who assumed one of the four key party
posts or joined the cabinet.

Meanwhile, no key post has been given to former Secretary General
Hidenao Nakagawa, who supported the Koizumi and Abe administration
and insisted on the need to give priority to economic growth and
spending cuts. Former Administrative Reform Minister Yoshimi
Watanabe and former Economic and Fiscal Policy Minister Hiroko Ota
are said to have views close to Nakagawa's, but both have also left
the cabinet.

Attributing the ruling camp's crushing defeat in the House of
Councillors election in July of last year to the structural reform
policy line, many ruling members were calling on Fukuda to change
his policy course. Even while giving consideration to the
side-effect of reform, the prime minister has continued to raise the
slogan of reform out of fear about a further drop in public support
for his cabinet. But in the run-up to a general election, he seems
to have taken one step toward a policy change in term of lineup,
first.

3) Average age of ministers 62: Five first-time ministers

YOMIURI (Page 4) (Excerpts)
August 2, 2008

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Average age higher than that of previous cabinet

The average age of newly appointed ministers, including Prime
Minister Fukuda, is 62, which is higher than the previous cabinet's
60.2. This is because priority has been given to the appointments of
experienced veterans. The oldest minister is the prime minister at
72, followed by Finance Minister Ibuki, 70. The youngest are State
Minister in charge of Consumer Affairs Noda and Defense Minister
Hayashi. Both are 47 years old.

One from private sector

There are five first-time ministers, compared with one in the
previous cabinet. The number of ministers from the private sector
decreased from two to one.

Distribution of cabinet posts

Abe cabinet Shuffled Abe cabinet Fukuda cabinet Shuffled Fukuda
cabinet
Machimura faction 4 1 2 2
Tsushima faction 2 3 4 1
Koga faction 4 2 2 3
Yamasaki faction 1 2 2 2
Ibuki faction 2 1 1
Aso faction 1 1
Nikai faction 1 1 1
Koumura faction 1 1 1 1
Independent 3 2 3
New Komeito 1 1 1 1
Private sector 1 2 2 1

4) Fukuda denies early Lower House dissolution, playing up plan to
implement policies

ASAHI (Page 4) (Lead paragraph)
August 2, 2008

After shuffling the LDP executive lineup and his cabinet, Prime
Minister Yasuo Fukuda held a press conference at the Prime
Minister's Official Residence (Kantei) on the night of August 1.
Asked whether he would dissolve the Lower House for a snap general
election under the new cabinet lineup, Fukuda ruled out an early
Diet dissolution, revealing a plan to give top priority to
implementing policies. He said: "The socioeconomic situation is such
that policies must be implemented rather than talking about Lower
House dissolution. The situation does not allow me to consider
dissolving the Lower House immediately."

5) Koga retracts statement on early Lower House dissolution

ASAHI (Page 2) (Full)
August 4, 2008

In a speech in Omuta City, Fukuoka Prefecture yesterday, Makoto
Koga, the Liberal Democratic Party's Election Committee chairman,
said: "If the Lower House is dissolved for a snap election under the
current situation, the outcome may be disastrous. In order for the
ruling coalition to win the election, the sole way is to make
efforts to get the people to realize that the cabinet will put them
at ease."

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On the timing for dissolving the House of Representatives, Koga had
echoed the New Komeito's insistence on late this year or early next
year, but he said in the speech: "I had said until recently sometime
between late this year or early next year, but I have to change the
remark into one suggesting sometime very close to the expiration of
the members' term." He indicated that time is needed to work out
economy-boosting measures following the shuffle of the cabinet.

6) Yosano to serve as control tower for economic policy: Distancing
himself from those who attach importance to economic growth;
Appointment of former postal rebels likely to dim Koizumi reform
policy

NIKKEI (Page 3) (Excerpts)
April 2, 2008

Former Chief Cabinet Secretary Kaoru Yosano, who is well-versed in
policy matters, has assumed the post of state minister in charge of
economic and fiscal policy. He will once again play the role of the
central command of economic policy as the fixer of the Council on
Economic and Fiscal Policy, whose presence has been declining as the
ruling parties and government agencies increase pressure.

He is expected to play a leading role in the management of the
economy in cooperation with Secretary General Taro Aso, with whom he
has a deep relationship of trust.

Since he is a prominent advocate of fiscal reconstruction, he will
likely firmly maintain the government goal of putting the primary
balance back into the black.

Regarding the tax code, he has called for concrete discussions of a
hike in the consumption tax. Bunmei Ibuki, who took office as
finance minister and has previously served as the chairman of the
subcommittee of the Liberal Democratic Party Tax System Research
Commission, is also known as an advocate of fiscal reconstruction.
This could affect discussions of reforming the tax code starting in
the fall.

Kosuke Hori, who took office as Policy Research Council, is an
influential figure among education and agriculture policy experts in
the Diet, who are calling for a positive increase in expenditures.

Aso during a press conference said, "Economic stimulus measures are
a key policy that would lead to buoying up the administration."

Among those who attach importance to economic growth and are in
confrontation with Yosano over the restoring of fiscal health is
Toshihiro Motegi, who holds the post of state minister for
administrative reform. However, former Secretary General Hidenao
Nakagawa, leader of those calling for economic growth, has again not
been given a cabinet post.

Yosano is negative toward the idea of increasing tax revenues
through higher economic growth, as called for by Nakagawa. He is
also cautious about implementing more thorough administrative
reform. Some take the view that the stand of those who want to
maintain the Koizumi reform policy line will now become difficult to
promote.

7) Spot poll: Cabinet support rebounds to 41 PERCENT

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YOMIURI (Top play) (Abridged)
August 3, 2008

The Yomiuri Shimbun conducted a telephone-based nationwide public
opinion survey from the evening of Aug. 1 through Aug. 2, in which
the rate of public support for the new cabinet of Prime Minister
Fukuda was 41.3 PERCENT and the nonsupport rate was 47.0 PERCENT .
The figures cannot be compared simply with those in the past surveys
but changed for the better from the 26.6 PERCENT approval rating
and the 61.3 PERCENT disapproval rating in this July's face-to-face
survey taken July 12-13. Fukuda appointed Taro Aso to the post of
secretary general for his ruling Liberal Democratic Party. In the
survey, respondents were asked if they supported this appointment.
To this question, "yes" totaled 66 PERCENT . The figure shows that
public expectations for improving the ability to carry out policy
measures with the appointment of a heavyweight pushed up public
support for the Fukuda government.

In the breakdown of public support for political parties, the LDP
stood at 35.1 PERCENT , with the leading opposition Democratic Party
of Japan (Minshuto) at 24.6 PERCENT . The figures showed no marked
changes from this July's face-to-face survey (27.2 PERCENT for the
LDP, 18.8 PERCENT for the DPJ).

8) Poll: Cabinet support rises to 38 PERCENT

NIKKEI (Page 1) (Abridged)
August 4, 2008

The Nihon Keizai Shimbun and TV Tokyo conducted a joint spot poll on
Aug. 2-3 in the wake of Prime Minister Yasuo Fukuda's shuffling of
his cabinet. In the poll, the rate of public support for the new
Fukuda cabinet was 38 PERCENT , up 12 percentage points from the
last poll taken in late June. The nonsupport rate was 49 PERCENT .
It still remains high but was down 14 points from the last survey.
The public saw the new Fukuda cabinet as an ability-oriented one.
This apparently had a favorable impact on the support rate. The
ruling Liberal Democratic Party stood at 37 PERCENT in public
support, up 1 point. The leading opposition Democratic Party of
Japan (Minshuto) was at 33 PERCENT , down 2 points.

The LDP outstripped the DPJ for the second time in a row. The gap
between the two parties was 1 point in the last survey but increased
to 4 points in the latest poll.

The survey was taken by Nikkei Research Inc. by telephone on a
random digit dialing (RDD) basis. For the survey, samples were
chosen from among men and women aged 20 and over across the nation.
A total of 1,402 households with one or more eligible voters were
sampled, and answers were obtained from 856 persons (63.8 PERCENT
).

9) Poll: Cabinet support up 3 points to 25 PERCENT

MAINICHI (Top play) (Abridged)
August 3, 2008

In the wake of Prime Minister Yasuo Fukuda's shuffling of his
cabinet and his ruling Liberal Democratic Party's executive lineup,
the Mainichi Shimbun conducted a telephone-based spot nationwide
public opinion survey on Aug. 1-2. The rate of public support for

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the new Fukuda cabinet, which was formally launched yesterday, was
25 PERCENT , up 3 percentage points from the last survey conducted
in July. In the survey, respondents were asked if they would
positively evaluate the Fukuda cabinet's new lineup and the LDP's.
To this question, 56 PERCENT answered "no." Respondents were also
asked if they thought that the cabinet shuffle clearly showed
Fukuda's political philosophy, and 72 PERCENT answered "no." The
figures show that the cabinet and LDP shuffles did not necessarily
lead to boosting the Fukuda government.

The nonsupport rate for the new Fukuda cabinet was 52 PERCENT , a
decrease of 2 points from the last survey. The proportion of those
"not interested" was 21 PERCENT , remaining the same as in the last
survey.

In the breakdown of public support for political parties, the LDP
stood at 24 PERCENT , up 2 points. The leading opposition Democratic
Party of Japan (Minshuto) was also at 24 PERCENT , down 1 point.
However, 46 PERCENT chose the DPJ, with 31 PERCENT picking the
LDP, when asked which political party between the LDP and the DPJ
they would like to see win in the next election for the House of
Representatives. The gap between the LDP and the DPJ has narrowed
from 27 points in a survey taken in May when the government's newly
introduced healthcare system for the elderly came under attack. It
also narrowed from 21 points in the last survey.

10) Poll: Cabinet support levels off at 24 PERCENT

ASAHI (Top play) (Abridged)
August 3, 2008

In the wake of Prime Minister Fukuda's shuffling of his cabinet, the
Asahi Shimbun conducted a telephone-based spot nationwide public
opinion survey on Aug. 1-2. The approval rating for the new Fukuda
cabinet was 24 PERCENT , remaining unchanged from the 24 PERCENT
rating in the last survey taken July 12-13. The disapproval rating
was 55 PERCENT (58 PERCENT in the last survey). Fukuda appointed
Taro Aso to the post of secretary general for his ruling Liberal
Democratic Party. In the survey, 51 PERCENT supported this
appointment, with 29 PERCENT saying they do not.

Respondents were also asked which political party they would vote
for in their proportional representation blocs if they were to vote
now in an election for the House of Representatives. To this
question, 25 PERCENT chose the LDP, with 32 PERCENT preferring the
leading opposition Democratic Party of Japan (Minshuto). In this
June's survey, the LDP was at 23 PERCENT , with the DPJ scoring 36
PERCENT . The gap between the two parties has narrowed. However, the
DPJ is still above the LDP.

In the breakdown of public support for political parties, the LDP
stood at 23 PERCENT (26 PERCENT in the last survey),with the DPJ
at 22 PERCENT (24 PERCENT in the last survey).

11) Kyodo News opinion poll finds 31 PERCENT support for shuffled
Fukuda cabinet. But 48 PERCENT of public prefer a DPJ-centered
administration

TOKYO SHIMBUN (Top play) (Full)
August 3, 2008

With Prime Minister Yasuo Fukuda's shuffle of his cabinet and the

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Liberal Democratic Party (LDP) executive posts, Kyodo News carried
out a telephone-based nationwide spot public opinion survey from the
evening of Aug. 1 through Aug. 2. The poll showed the support rate
of the new cabinet to be 31.5 PERCENT , a 4.7 PERCENT rise from the
previous poll in July. The non-support rate for the cabinet dropped
5.4 points to 48.1 PERCENT . On the other hand, regarding the
framework of the administration preferred by the public, close to
half or 48.2 PERCENT said they favored a Democratic Party of Japan-
(DPJ) centered one, an increase of 2.9 points from July, while only
34.8 PERCENT supported an LDP-centered administration, a drop of
3.6 points.

Although the appointment of Taro Aso as LDP secretary general and a
strong cabinet made up of veteran lawmakers received a certain level
of appreciation, the poll still showed that the public is
increasingly seeking a change in administration. Prime Minister
Fukuda is likely to continue to be forced to run his government
under severe circumstances.

Asked about the lineup in the new cabinet, 37.9 PERCENT of the
public picked the answer, "They do not project anything different."
Only 3.7 PERCENT chose, "It is a fresh cabinet, not fettered by
factions." A small percentage, 7.7 PERCENT , chose, "I sense there
is an eagerness to carry out reforms."

As for party-support rates, the LDP and DPJ in the last survey were
dead even at 28.6 PERCENT , but this time, the DPJ increased to 30.2
PERCENT , while the LDP remained the same at 28.7 PERCENT .

On the extension of the Maritime Self-Defense Force's (MSDF)
refueling mission in the Indian Ocean, a hot issue in the upcoming
extra Diet session, a majority or 52.4 PERCENT said they opposed
such a bill, while another 34 PERCENT said they approved it. When
asked when they expected the Lower House election to be held, 37.6
PERCENT thought it would be later this year.

As for reasons for supporting the Prime Minister the most favored
answer with 45.7 PERCENT was, "There is no other appropriate person
around." The most favored reason for not supporting the Prime
Minister, with 32.6 PERCENT , was the answer, "I have no
expectations of his economic policies." As for the agenda of the new
cabinet, the most picked choice (29 PERCENT ) was "economy and
jobs," followed by "social security, including pensions" (28.6
PERCENT ),and then by "income disparity issue" (11.5 PERCENT ).

Support rates for parties other than the LDP and DPJ: the New
Komeito had 3.4 PERCENT ; the Japanese Communist Party had 2.9
PERCENT ; the Social Democratic Party, 1.7 PERCENT ; Peoples New
Party, 0.5 PERCENT , and New Party Japan, 0.7 PERCENT .

12) Aso ranks first at 20 PERCENT in popularity ranking for
post-Fukuda premiership

NIKKEI (Page 2) (Full)
August 4, 2008

In a recent spot poll conducted by the Nihon Keizai Shimbun and TV
Tokyo, respondents were asked who they thought would be appropriate
for prime minister in the future. To this question, Taro Aso, the
new secretary general of the ruling Liberal Democratic Party, ranked
first at 20 PERCENT . The same question was asked in a survey taken
in May, and Aso topped all others at 21 PERCENT in that survey. He

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has now become LDP secretary general. Its effects did not show in
the survey this time, but he is still above all others.

Former Prime Minister Junichiro Koizumi ranked second at 13 PERCENT
, followed by Ichiro Ozawa, president of the leading opposition
Democratic Party of Japan (Minshuto),at 10 PERCENT . Koizumi and
Ozawa stood at the same rankings and popularity ratings as in the
May survey. Prime Minister Yasuo Fukuda rose from 4 PERCENT in May
to 8 PERCENT in the latest survey.

DPJ Vice President Naoto Kan was at 8 PERCENT . Land, Infrastructure
and Transport Minister Sadakazu Tanigaki and former DPJ President
Katsuya Okada were at 5 PERCENT , followed by former Defense
Minister Yuriko Koike at 4 PERCENT .

13) Poll: 48 PERCENT opposed to continue MSDF mission in Indian
Ocean

NIKKEI (Page 2) (Full)
August 4, 2008

The Nihon Keizai Shimbun conducted a joint spot poll with TV Tokyo
in the wake of Prime Minister Yasuo Fukuda's shuffling of his
cabinet. In the survey, respondents were asked if Japan should
continue the Maritime Self-Defense Force's current refueling mission
in the Indian Ocean after the Antiterrorism Special Measures Law
expires in January next year. To this question, 48 PERCENT answered
that the MSDF mission there should be discontinued then, with only
36 PERCENT saying it should be continued. The government plans to
revise the law at the next extraordinary Diet session to extend the
MSDF mission. However, the opposition parties are opposed to the
legislation. There are also cautious views in New Komeito, the
ruling Liberal Democratic Party's coalition partner.

In a previous poll taken in December 2007 after the MSDF was
temporarily recalled from the Indian Ocean, 44 PERCENT said Japan
should not resume the MSDF's Indian Ocean refueling mission, with 39
PERCENT saying Japan should resume it.

14) Prime Minister Fukuda in press conference did not mention
whether bill extending MSDF refueling mission would be presented to
the Diet or not

TOKYO SHIMBUN (Page 2) (Excerpt)
August 2, 2008

Prime Minister Yasuo Fukuda in his press conference at the official
residence following his shuffling of his cabinet, stated his view
that it was necessary to extend the refueling mission of the
Maritime Self-Defense Force (MSDF) in the Indian Ocean: "We cannot
ignore a problem which has cause great losses for concerned
countries." On the other hand, on the question of whether he would
be presenting a bill to the extraordinary session of the Diet this
fall extending the anti-terrorism special measures law, he avoided
mentioning anything specific, only saying, "We are considering the
specific handling of this, so we are not at the stage of my
announcing anything."

15) Sasagawa cautious about refueling operation in Indian Ocean

TOKYO SHIMBUN (Page 2) (Full)
August 4, 2008

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The New Antiterrorism Special Measures Law, the law that serves as
the basis for the Maritime Self-Defense Force's (MSDF) refueling
operation in the India Ocean, expires in January next year. Takashi
Sasagawa, General Council chairman of the Liberal Democratic Party
(LDP),during a Fuji TV talk show on August 3 indicated a cautious
stance toward an extension of the law, noting, "The Democratic Party
of Japan (DPJ or Minshuto) is not opposing Japan taking measures to
ensure the safety of oil coming from Arab countries, and it is
necessary for MSDF vessels to do that job. There may be a gap
between this job and refueling operations."

Sasagawa stressed that it would be difficult to obtain the public's
understanding regarding continuing the refueling operation when
crude oil prices are surging. He said, "The domestic situation this
year is completely different from the situation last year."

16) Fukuda administration's foreign policy faces difficulty in
relations with U.S.; Takeshima, too, remains contentious issue

NIKKEI (Page 2) (Abridged)
August 2, 2008

The new Fukuda cabinet has been launched bearing a heavy workload on
the diplomatic front, as well. In particular, the administration
faces a number of difficult problems in relations with the United
States, such as extending the Maritime Self-Defense Force's (MSDF)
refueling mission in the Indian Ocean. The standoff with South Korea
over the Takeshima (Dokdo) isles, as well, shows no sign of abating.
With the appointment of Taro Aso as Liberal Democratic Party (LDP)
secretary general, who has a different foreign policy line than
Prime Minister Fukuda, some observers are worried whether the two
will be able to cooperate.

"Next January, we will likely face a big crisis in our Asia
diplomacy, centering on our relations with the United States," said
a senior Foreign Ministry official, echoing the views of others in
the ministry who see the Fukuda administration's relationship with
the U.S. as a spark ready to ignite. In addition to the refueling
services in the Indian Ocean which expire by law in January, there
is no prospect in sight for dispatching the Self-Defense Forces to
mainland Afghanistan, as the government had been considering.

The U.S. is in a political season culminating in November with the
presidential election and the inauguration of a new administration
next January. A government source spoke for many others by stating,
"If the refueling mission is withdrawn, and the contribution planned
for the Afghan mainland is not in train, Japan-U.S. relations by the
end of this year will likely to grow ugly."

The standoff between Japan and the Republic of Korea over the
Takeshima issue, too, is filled with the danger of undermining the
entirety of Fukuda's Asia diplomacy. This fall, there is supposed to
a summit meeting held in Tokyo between Japanese and South Korean
leaders, the first for the two in Japan. But according to a
diplomatic source connected to the bilateral relationship, there is
a possibility that "South Korean President Lee could possibly cancel
his trip to Japan." The confrontation between Japan and the ROK
could impact adversely on their policy cooperation toward North
Korea.

17) U.S. submarine leaked radiation since its port call at Sasebo in

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March; level not harmful

ASAHI (Page 1) (Abridged)
Evening, August 2, 2008

Washington

The U.S. Navy announced on August 1 that there was a possibility
that the USS Houston, a Los Angeles-class fast attack submarine,
leaked minute amounts of radiation for several months, including
during its port call at Sasebo, Nagasaki Prefecture, in March and
April and its navigation in waters around Japan.

U.S. CNN reported on the matter, and the U.S. Navy public relations
office confirmed the fact in the Asahi Shimbun's question about it.
The level of leakage is so low that there is no danger of causing
any damage but for the maintenance of transparency, the U.S. Navy
notified the Japanese government of the fact on July 31, U.S.
Eastern time, according to the U.S. Navy public relations office.
The U.S. Navy also notified the fact to Guan and Hawaii where the
submarine visited in May.

The radiation leak was found during the Houston's regular inspection
on July 17 in which about 1 gallon (about 3.8 liters) of water
splashed on the feet of one crewmember when it came through a valve
near the sub's engine room. The water was not in direct contact with
the nuclear reactor.

The U.S. Navy explained that the crewmember who was exposed to the
water, proved to be unaffected and that the amount of leaked
radiation was estimated at 0.5 micro-curie at the most -- the level
equivalent to being exposed to a 50 pounds (22 kilograms) of plant
fertilizer (in daily life).

18) Koumura learned of U.S. submarine radiation leak through CNN
report; Harshly raps administrative officers

TOKYO SHIMBUN (Page 1) (Full)
August 3, 2008

A Foreign Ministry department was notified on August 1 by the U.S.
side on the leak of radiation from the USS Houston, the
nuclear-powered submarine that had docked in Sasebo, Nagasaki
Prefecture. But the office did not report the matter to Prime
Minister Yasuo Fukuda, Foreign Minister Masahiko Koumura, Defense
Ministry, and other nerve centers of the government, it was learned
on August 2. Chief Cabinet Secretary Nobutaka Machimura in a press
conference expressed strong displeasure, saying: "It was pretty bad.
It was about radiation. The office should have announced it
immediately."

The Foreign Ministry was notified of the matters from the U.S.
government on the afternoon of August 2. A Foreign Ministry official
explained, "We judged the amount of radiation would not have any
impact on humans or the environment." When the Houston docked in
Japanese ports in March and April, no abnormal figures were detected
in radiation examinations. For this reason, the Foreign Ministry
kept the information to itself without reporting it to other
government offices and municipalities concerned, such as Sasebo.

Koumura learned of the matter through a CNN television report on the
morning of August 2. After seeing the report, Koumura reportedly

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immediately confirmed the fact with administrative officials.
Koumura harshly criticized the ministry's inappropriate handling of
the matter, saying: "I ordered the ministry to announce such
information immediately. It should have been made public much
earlier."

19) Foreign Ministry failed to report U.S. submarine's radiation
leak to Kantei

SANKEI (Page 1) (Full)
August 3, 2008

The Foreign Ministry failed to report to Foreign Minister Masahiko
Koumura and the Prime Minister's Official Residence (Kantei) the
information it had obtained that the U.S. Navy nuclear-powered
submarine USS Houston that had docked in Sasebo, Nagasaki
Prefecture, in late March leaked a small amount of radiation, it was
learned yesterday. Foreign Minister Koumura in a press conference
yesterday harshly criticized the Foreign Ministry's office that had
been responsible for the matter.

Koumura learned of the radiation leak through a CNN television
report yesterday morning. The Foreign Ministry department that
received the information on August 1 from the United States
reportedly did not make it public, judging that the amount of
radiation leaked was low that would not have any impact on humans.
Koumura expressed a strong sense of displeasure, saying: "The office
should have announced it much earlier. (Whether the amount was
minute or not) was not the rightful reason (not to make the
information public). It is simply unacceptable."

Chief Cabinet Secretary Nobutaka Machimura, too, in a news
conference yesterday, called for speedy reporting to the Kantei,
saying: "It is pretty bad. It's about radiation. Once the Foreign
Ministry is notified by the U.S. government, it should report the
matter immediately to the Kantei to make it public."

According to the U.S. Navy, the nuclear-powered submarine had been
leaking minute amounts of radiation for several months since March.
The leak was found in a regular inspection on July 16. The submarine
had docked in Sasebo for a week. It also visited Guam and Hawaii.

20-1) U.S. base-hosting municipalities becoming distrustful of
Japanese government that failed to report on U.S. submarine's
radiation leak

NIKKEI (Page 11) (Full)
Evening, August 2, 2008

A radiation leak by a U.S. Navy nuclear-powered submarine has come
to light through a CNN television report. Was the government's
communication system functioning properly? Residents of Sasebo,
Nagasaki Prefecture, are becoming distrustful of the government,
because it failed to announce the fact.

The Japanese government was notified on August 1 by the U.S. side
about the leak. But the information on the leak did not reach Sasebo
until a news program reported it. Masahide Haraguchi, the
59-year-old head of Sasebo city's bureau in charge of U.S. military
base programs, said: "I wonder why the Foreign Ministry didn't tell
local communities after it learned of the incident. I wish they had
handled the matter properly even if the leak was not problematic."

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Mayor Tsuneo Chinen of Uruma, Okinawa Prefecture, where the USS
Houston, the nuclear-powered submarine that leaked radiation, docked
for a short period of time, also expressed concern, saying: "The
matter is too serious to overlook. Radiation must not be leaked,
even a minute amount."

According to the Okinawa Prefecture base affairs department, the
Huston docked in the U.S. Navy base of White Beach for 24 minutes on
March 12 replenishing supplies. The level of radiation in an
inspection conducted at that time was reportedly normal.

The nuclear-powered aircraft carrier George Washington is scheduled
to be deployed at Yokosuka, Kanagawa Prefecture. Yokosuka base
affairs division director Masashi Suzuki said: "(As of August 2),
there has been no notice. I think there will be an explanation of
some sort, but we won't know anything until we hear an
explanation."

20-2) Japan, U.S. required to mutually report on radiation accidents
during port calls in Japan

NIKKEI (Page 11) (Full)
Evening, August 2, 2008

When U.S. nuclear-powered vessels enter Japanese ports, Japan and
the United States are required to sample air and seawater in order
to check the level of radiation and to report to each other swiftly
when an accident occurs.

When U.S. nuclear-powered vessels enter, leave, or are docked at
Japanese ports, such as Sasebo, the Japanese side also checks air
and seawater to detect possible radiation leaks by using radiation
measuring instruments set at bases and their vicinity. The
Education, Science and Technology Ministry collects seawater and
seabed mud by using Japan Coast Guard radiation research vessels to
find any anomalies. However, Japan is reportedly not allowed to
conduct onboard inspections from the perspective of protecting
military secrets.

After a U.S. nuclear-powered submarine left Yokosuka port in
September 2006, a minute amount of Cobalt 60, a radioactive
substance, was detected in seawater collected by the Japanese side.
But the U.S. Navy concluded that there was no problem aboard the
submarine.

21) Fukuda to instruct Yosano today to produce comprehensive
economic package this week

YOMIURI (Page 2) (Full)
August 4, 2008

Prime Minister Fukuda will call in Minister of Economy, Trade and
Industry Yosano to the Prime Minister's Office this morning to
instruct him to produce a package of comprehensive economic measures
this week to cope with skyrocketing oil and food prices and an
economic slowdown.

Fukuda will order Yosano to compile a policy package to quickly
erase public uneasiness and dissatisfaction about price hikes and
other problems, as well as to sweep away people's concern about the
economy. The package is likely to include measures to boost aid to

TOKYO 00002123 014 OF 016


small businesses and to industries related to agriculture, forestry
and fisheries, which are suffering from the recent steep rise of oil
prices. The package is also expected to include measures to promote
energy conservation and new energy.

As key points in drawing up measures, the following three points
will bepQQLQxQl or stopgap measures;
and (3) maintain the policy of keeping fiscal soundness, as well as
promote examining government disbursements and reviewing the special
accounts simultaneously.

22) Government, ruling parties now looking into submitting
supplementary budget to upcoming extraordinary Diet session as
measure to address soaring crude oil, food prices

NIKKEI (Page 1) (Full)
August 4, 2008

The government and the ruling camp yesterday started looking into
the possibility of submitting a supplementary budget for the current
fiscal year to the upcoming extraordinary Diet session. Their
judgment is that it will be necessary to make fiscal disbursements
in a flexible way in order to cope with soaring crude oil and food
prices and a slowing domestic economy. With the next Lower House
election in mind, some in the ruling parties are calling for
large-scale fiscal disbursements so as to demonstrate their stance
of attaching importance to the economy. This will likely generate
vigorous discussions about the scale and specifics of fiscal
disbursements.

Referring to the possible compilation of a supplementary budget,
Chief Cabinet Secretary Nobutaka Machimura during a TV program that
day noted, "Such a judgment must be made at the appropriate time. We
will do whatever necessary during the extraordinary session in a
flexible manner." Appearing on another TV talk show, he said, "We
are ready (to compile a supplementary budget),if necessary."

Finance Minister Bunmei Ibuki also noted, "The government will use
the budget ahead of schedule to implement measures to boost the
economy." He then indicated the government policy of looking into
compiling a supplementary budget, saying that it would make efforts
to implement the budget for the current fiscal year ahead of
schedule and consider what to do, when it is used up.

Concerning specifics to be incorporated in a supplementary budget,
the finance minister said that the focus will be on measures to
address soaring crude oil prices. He noted, "The first thing we
should do is to take emergency individual measures for businesses
that cannot pass higher costs along to consumers, such as farmers,
commercial fishermen, livestock farmers and the trucking industry."
Environment Minister Tetsuo Saito (New Komeito) pointed out, "All
policy measures, including fiscal disbursements, should be fully
mobilized."

Machimura said, "It is questionable whether the situation now
requires tax cuts and a substantial increase in spending. Measures
that greatly deviate from the government policy of bringing the
primary balance into the black by fiscal 2011 should not be taken."
He thus indicated a cautious stance toward large-scale fiscal
disbursements that could lead to a change in the fiscal
reconstruction policy line.

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23) Hiking consumption tax next fiscal year difficult, says Chief
Cabinet Secretary Machimura; Unavoidable over mid- to long-term

SANKEI (Page 1) (Full)
August 4, 2008

Chief Cabinet Secretary Nobutaka Machimura, appearing on NHK and TV
Asahi talk shows on August 3, indicated a negative view on a hike in
the consumption tax in fiscal 2009. He said, "The economy is showing
signs of losing steam. Given the current economic situation, it
would be rather difficult to decide to raise the consumption tax in
the tax code revision for next year."

Concerning the issue of raising the state contribution to the basic
pension to 50 PERCENT starting in fiscal 2009, Machimura pointed
out, "It must be implemented, because the increase is stipulated by
law." Regarding fiscal resources to finance the increase, he
indicated his perception that it would be possible to finance the
increase using reserves in the special account.

He also said, "The public expects improved social security and solid
measures to ensure that. It is necessary to indicate a mid-term
vision to the public." He thus indicated that it raising the
consumption tax over the medium term will be unavoidable.

Referring to measures to address rising prices in the wake of the
steep rise in crude oil prices and the economic slowdown, Finance
Minister Bunmei Ibuki on an NHK talk show of the same day said, "We
will implement the budget ahead of schedule in order to boost the
economy." He thus indicated that the government will deal with those
issues by implementing the fiscal 2008 budget ahead of schedule for
the time being. He at the same time indicated his stance of looking
into a possible compilation of a supplementary budget, saying, "We
must consider what do to when the budget is used up."

Machimura also stated, "We will take measurers in the extraordinary
Diet session in a flexible manner, if necessary."

24) Major cabinet ministers insist on need for economic stimulus
measures

YOMIURI (Page 2) (Full)
August 4, 2008

Appearing on NHK and commercial TV programs yesterday, major members
of the shuffled Fukuda cabinet reiterated the need for
economy-spurring measures to deal with soaring oil and food prices,
as well as economic slowdown.

Finance Minister Ibuki indicated a positive view about compiling a
supplementary budget in a NHK program, saying: "Upon working out
economic stimulus measures, the government will have to come up with
additional steps." Chief Cabinet Secretary Machimura also commented:
"We will flexibly take measures if necessary during the
extraordinary Diet session."

On the scale of fiscal disbursements, Land, Infrastructure, and
Transport Minister Tanigaki said: "There is room to come up with
something other than fiscal disbursements." But Environment Minister
Saito asserted: "Fiscal disbursements and measures that need no
money should be fully employed."

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Asked about a consumption tax hike, Machimura stated: "Since there
are signs of an economic slowdown, it might be difficult to decide
to raise the consumption tax in FY2009."

Regarding the proposed constraint of growth in spending on social
security to 220 billion yen in the budgetary request guidelines for
FY2009, Machimura indicated that the government would secure 330
billion yen under a separate account as money to finance measures to
implement key tasks and to cover the contained expenditures for
social security with the money.

SCHIEFFER