DAILY SUMMARY OF JAPANESE PRESS 09/03/08

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SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 09/03/08

INDEX:

(1) Prime Minister Fukuda skips SDF conference, not even sending a
proxy; Unprecedented and unheard of omission (Mainichi)

(2) Three possible scenarios for Lower House dissolution and general
election (Mainichi)

(3) Poll on new Fukuda cabinet, political parties (Nikkei)

(4) Fiscal discipline on verge of collapse with government inundated
with requests for pork-barrel spending (Asahi)

(5) With Fukuda's resignation announcement, uncertainty looming over
basis for economic growth (Nikkei)

(6) (Corrected copy) Essay by Asahi columnist Yoshibumi Wakamiya on
the Hiroshima Summit: Next time the U.S. President should come
(Asahi)

ARTICLES:

(1) Prime Minister Fukuda skips SDF conference, not even sending a
proxy; Unprecedented and unheard of omission

MAINICHI (Page 2) (Abridged)
Eve., September 3, 2008

Prime Minister Yasuo Fukuda this morning was absent from the annual
meeting of senior level officers of the Self-Defense Forces (SDF)
that was held at the Ministry of Defense. It is customary for the
prime minister to instruct senior SDF officers from all over the
country on current course of defense policy, but because of Fukuda's
absence, no policy briefing was given. It appears that this was in
accord with the Prime Minister's intention to "avoid appearing in
public after having announced his resignation," according to a
government source.

There have only been two cases of the prime minister being absent
from the meeting in the last two years, 2001 and 2002, due to
foreign travel. At the time, then Chief Cabinet Secretary Fukuda
attended as a proxy. But for a substitute speaker not to be sent
from the Prime Minister's Official Residence is "unheard of," said a
Defense Ministry senior official.

(2) Three possible scenarios for Lower House dissolution and general
election

MAINICHI (Page 3) (Abridged slightly)
September 3, 2008

For the Liberal Democratic Partly, the selection of the successor to
Prime Minister Yasuo Fukuda is closely associated with the ability
to manage Diet affairs and the party's strategy for dissolving the
Lower House and holding a snap general election. At present, there
are three main possibilities. One is to dissolve the Lower House at
the beginning of the next extraordinary Diet session after the new
prime minister is elected. The other is to do so after the
supplementary budget clears the Diet in the next session. The
decision would depend on whether to put high priority on the
momentum of the LDP presidential race or on the government's
achievements. The third would be to wait until early next year.

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Possibility one -- Lower House dissolution at beginning of
extraordinary Diet session

The government and ruling coalition have decided to submit to next
year's ordinary Diet session a bill on a flat-sum tax cut, a matter
incorporated in the economic stimulus package adopted by them on
Aug. 29. With Fukuda's resignation announcement, the option of
dissolving the Lower House by the end of the year has again become a
real possibility. The lower chamber could be dissolved at the outset
of the extra Diet session that would be convened later this month.

Under this scenario, the LDP would draw national interest through
policy debates by several presidential candidates and then dissolve
the Lower House for a general election while the momentum is high.
Former Prime Minister Junichiro Koizumi reportedly told former LDP
Vice President Taku Yamasaki on the phone on the night of Sept. 1:
"The Lower House should be dissolved at the beginning of the extra
Diet session after the LDP presidential race is over." Secretary
General Taro Aso has already thrown his hat into the ring. Former
Secretary General Hidenao Nakagawa and others, who are at odds with
Aso over economic and fiscal policy, are looking for a candidate to
run against Aso.

If former Defense Minister Yuriko Koike becomes the first female
candidate, the LDP presidential race would attract much attention.

But no one expects the "boom" of interest in the race to equal that
of 2001 when Koizumi overwhelmingly defeated then Prime Minister
Ryutaro Hashimoto, who seemed to be enjoying a comfortable lead. A
former cabinet minister expressed concern over possible ill effects
resulting from the two consecutive prime ministers having walked off
the job, saying, "No matter who becomes the prime minister, support
ratings for the LDP would drop." Dissolving the Lower House at the
outset of the next Diet session would also end up leaving in limbo
the FY2008 supplementary budget and the fixed-rate tax breaks on
income and resident taxes that are necessary for boosting the
economy. Deliberations on a bill amending the new Antiterrorism
Special Measures Law for continuing the refueling mission in the
Indian Ocean would also be put off.

Economic and Fiscal Policy Minister Kaou Yosano in a press
conference yesterday discouraged the early dissolution theory,
saying: "In the political world, the plan that seems the most
convenient always falls through."

Possibility two -- Lower House dissolution after supplementary
budget clears Diet

Under the second scenario, the prime minister would dissolve the
lower chamber in November after the FY2008 supplementary budget
clears the Diet. This would allow the ruling bloc to impress the
voters and support organizations with the new economic stimulus
package in the election that would follow.

Finance Minister Bunmei Ibuki and Chief Cabinet Secretary Machimura
indicated in a press conference yesterday that the new
administration should give priority to the supplementary budget,
saying: "Under the new prime minister, there will be no change to
what was decided by the government and ruling coalition." Aso is
close to the New Komeito, which has been calling for Diet
dissolution between the end of the year and the beginning of the new

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year. If Aso becomes the prime minister, this scenario might
unfold.

This scenario is also bound to affect the study to raise the
government's contribution to the basic pension scheme to half and to
free up road-related revenues for general spending starting in
FY2009, in addition to the bill amending the new antiterrorism law.
This might be criticized as pork-barrel spending at the cost of
reform.

Possibility three -- Lower House dissolution in early January or
later

Chances are slim that the lower chamber will be dissolved in early
January or in the spring after the FY2009 budget clears the Diet.
Given the severe economic conditions, there are strong calls for the
enactment of the budget in FY2008. At the same time, the New Komeito
is opposed to dissolving the Lower House anytime close to next
summer's Tokyo Metropolitan Assembly election.

Former LDP Upper House Caucus Chairman Mikio Aoki said to his aide
yesterday: "There is no longer a chance to enact the budget bill in
the next regular Diet session after the extraordinary session."

Lower House dissolution might occur in early January or later in the
event the next administration suffers from low support ratings and
passes up the opportunity to dissolve the chamber.

DPJ deprived of opportunity to play up its presence

The major opposition Democratic Party of Japan was planning to
intensify its offensive against the LDP-New Komeito administration
in order to force it into early Lower House dissolution for a snap
general election. With party president Ichiro Ozawa having
effectively sealed his third term without a vote and the next
extraordinary Diet session postponed until after the LDP
presidential election, the major opposition party will now just have
to look on the LDP presidential race. With no opportunity in sight
to make a public appeal, the party will have to busy itself with the
hunt for its candidates for the next general election.

Secretary General Yukio Hatoyama on a radio program yesterday
expressed a fear of his party sinking into insignificance, saying,
"Prime Minister Fukuda announced his resignation to eclipse our
party."

Hatoyama also urged his party to brace for a possible Lower House
dissolution in September, while sounding an alarm against the
establishment of a popular Aso administration that would result in a
tough Lower House race for the DPJ.

Public Relations Committee Chair Yoshihiko Noda and others have been
forced to give up their candidacies because of the leadership's
logic of putting the Lower House election ahead of the DPJ
presidential race. "We, too, should have decided to hold a
presidential election," a young DPJ lawmaker lamented.

The party held an executive meeting yesterday in which four possible
Lower House dissolution dates were presented: (1) at the beginning
of the extra Diet, (2) after the question-and-answer session, (3)
after the supplementary budget clears the Diet, and (4) after the
supplementary budget-related bills are enacted. It was simply

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impossible to predict when the chamber will be dissolved for a
general election, the matter even the ruling bloc does not know.

(3) Poll on new Fukuda cabinet, political parties

NIKKEI (Page 2) (Full)
September 1, 2008

Questions & Answers
(Figures shown in percentage. Parentheses denote findings from the
last survey conducted in early August.)

Q: Do you support the new Fukuda cabinet?

Yes 29 (38)
No 63 (49)
Can't say (C/S) + don't know (D/K) 8 (13)

Q: Which political party do you support or like now?

Liberal Democratic Party (LDP) 37 (37)
Democratic Party of Japan (DPJ or Minshuto) 30 (33)
New Komeito (NK) 3 (4)
Japanese Communist Party (JCP) 4 (4)
Social Democratic Party (SDP or Shaminto) 2 (2)
People's New Party (PNP or Kokumin Shinto) 0 (0)
New Party Nippon (NPN or Shinto Nippon) 0 (0)
Other political parties 1 (1)
None 16 (15)
C/S+D/K 6 (5)

(Note) The total percentage does not become 100 PERCENT in some
cases due to rounding

Polling methodology: The survey was taken Aug. 29-31 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 1,549 households with one or
more eligible voters were sampled, and answers were obtained from
866 persons (55.9 PERCENT ).

(4) Fiscal discipline on verge of collapse with government inundated
with requests for pork-barrel spending

ASAHI (Page 6) (Abridged slightly)
September 3, 2008

The fate of many policy issues has become unclear in the wake of
Prime Minister Fukuda's abrupt announcement of his intention to step
down. Economic stimulus measures, reconstruction of the social
security system and fiscal reconstruction are all supposed to be
urgent issues under normal circumstances. However, they will likely
be put on the back burner for a while, leaving it up to the next
administration, which might take a totally different approach. What
will become of the national welfare and economy? The Asahi Shimbun
probes into the real situation those policy issues will face.

The office of the Yosano Team is located on the 5th floor of the
Cabinet Office in Kakumigaseki, Tokyo, where State Minister for
Economic and Fiscal Policy Yosano is situated. Ten officials from
the Cabinet Office, the Finance Ministry and the Ministry of
Economy, Trade and Industry engaged in the compilation of the

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government's economic stimulus package for about a month there.

However, the prime minister announced his decision to quit right
after the package was compiled in late August. Those officials who
were involved in the compilation of the package said the future
course of the package has now been derailed.

Those officials who compiled the economic stimulus package this time
tried to achieve a good balance under a difficult situation.

Though they decided on a package with 11.7 trillion yen worth of
projects, only 1.8 trillion yen in fiscal spending will be funded in
real money from the fiscal 2008 supplementary budget. The government
constrained expenditures, because it did not want to lower the
banner of fiscal reconstruction. The prime minister rejected a call
for issuing additional deficit-covering government bonds in the
supplementary budget. In the meantime, he decided to implement in
this fiscal year fixed-rate tax cuts, which the New Komeito had
demanded, with no particular funding resources behind them.

The prime minister has now abandoned his administration just when it
had reached a crucial juncture of tilting in the direction of
abiding by fiscal discipline or of adopting a pork-barrel spending
policy.

The Koizumi administration, which started the process of structural
reform, tried to achieve fiscal soundness by advancing spending
cuts. The Abe and Fukuda administrations have followed through on
the Koizumi policy line.

However, facing the current economic downturn, LDP Secretary General
Taro Aso, one of the potential candidates to succeed Fukuda, is
willing to actively increase public spending. In early August, right
after assuming his post, he referred to a possible postponement of
the government goal of moving the primary balance into the black by
fiscal 2011.

Yosano, who attaches importance to fiscal reconstruction, said,
"There is no way any sensible LDP official would seek increased
spending in order to win an election." However, many ruling party
members are already calling for more public spending.

One senior Finance Ministry official said, "We are now at a crucial
juncture of whether to keep intact the policy of restoring fiscal
soundness, which has narrowly survived. If pork-barrel spending
revives, it would become impossible to spend money for necessary
policies due to a heavy debt-payment burden. There is even a
side-effect of a rise in long-term interest rates further worsening
the economy.

Path for economic growth not in sight

Zenichi Kanda (65),who runs a cardboard processing factory in Ota
Ward, Tokyo, breathed a sigh, when he was watching TV news reporting
the prime minister's announcement of his intention to step down. He
lamented, "Whatever we seek from politics, nothing will change. The
reality is nothing like politicians think."

The amount of work his factory performed has dropped to one-third of
the amount 10 years ago, when his business was booming. The cost of
purchasing raw materials, such as cardboard sheets, has increased 50
PERCENT over the past year. There would be a further rise in the

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cost of purchasing raw materials in the fall. There used to be about
60 companies in the same trade operating in a suburb. However, the
number has now dropped to 16 to 17.

The package incorporated funds worth 9 trillion yen to help small-
and medium-size companies that are experiencing funding difficulties
due to the steep rise in crude oil and raw material prices. Kanda,
however, said: "If I borrow such money, my debts would simply
increase. I want the government to tell us how to cope with the
changing business environment."

Foreign factors are a main contributor to the current economic
slowdown as can be seen in the steep rise in resources and food
prices and slowing exports. Prices are expected to continue to hover
at a high level. As such, it will become important to change the
economic structure to such that can endure environmental changes and
to boost domestic demand.

However, finance assistance for the introduction of energy-saving
conserving technologies appears to be the only measure in the
package that could spur structural changes. Only stop-gap pain
relief measures for sagging industries, such as subsidies to cover
the increased fuel costs, are visible.

The Ministry of Land, Infrastructure and Transport once again
strengthened a rule restricting new entries into the taxi business
this year for the reason of overheated competition. The economic
growth strategy, which the government compiled in June, did not
include such measures as to boost foreign investment in Japan.

The next prime minister will face the test of showing a path for
economic growth, while containing the strain of the economic
downturn amid such setbacks as the worldwide economic slowdown and
rise in prices.

(5) With Fukuda's resignation announcement, uncertainty looming over
basis for economic growth

NIKKEI (Page 5) (Full)
September 3, 2008

Uncertainty is now looming over the fate of medium to long-term
economic agenda items due to political turmoil in the aftermath of
Prime Minister Yasuo Fukuda's abrupt announcement of his intent to
step down. The global environment issue, on which Fukuda placed
emphasis, has now lost its control tower, so the issue may begin to
float away. Trade, agriculture, and social security are important
policies for Japan to create a foundation for sustainable economic
growth despite its shrinking and aging population. But debate on
their drastic reforms may also be left behind.

Environment: Focus on how to lead post-Kyoto negotiations

The issue of global warming is one of a few areas in which Prime
Minister Fukuda demonstrated leadership. In the World Economic Forum
Annual Meeting (Davos Conference) in January, Fukuda announced
Japan's plan to provide developing countries with aid worth 10
billion dollars. In June, he came up with the "Fukuda Vision,"
Japan's new guideline on countermeasures to climate change. In the
July Hokkaido Toyako Summit, in which global warming was focused on
as a major theme, Fukuda took the initiative in discussion.


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These measures are included in "the action plan to form a low-carbon
society" adopted at a cabinet meeting in July, so the dominant view
is that "the government's policy will remain unchanged, though the
implementation of the measures may temporarily be delayed," as said
by a senior official of the Ministry of Economy, Trade and
Industry.

Meanwhile, negotiations will soon start on a full scale to hammer
out a new international framework following the 2012 expiration of
the Kyoto Protocol. Fukuda promised to announce midterm emissions
reduction goals for 2020 or 2030 at a proper time next year.

The deadline for negotiations on a post-Kyoto regime is set at the
end of next year. After the change of government in the U.S., the
new administration is expected to be more positive about tackling
global warming. Accordingly, heated haggling is likely to occur in
negotiations. A senior Foreign Ministry official said: "The top
leader's zeal and leadership will be put to the test.

The realization of a low-carbon society will contribute to
revitalizing the Japanese economy. An emission trading system will
be introduced on a trial basis in October, but whether Japan should
introduce the system on a full scale will be left to a political
judgment by the new prime minister.

Trade: Focus on EPA negotiations

In order to strengthen the Japanese economy's growth potential when
domestic demand is stagnant due to population decrease, it is
imperative to draw in overseas demand for goods and services. In the
trade sector, the focus of attention is on how to make progress in
negotiations on concluding economic partnership agreements (EPA)
with countries in East Asia.

EPA negotiations with India and Vietnam have entered their final
stage. India is aiming to strike a deal by the time when Prime
Minister Manmohan Singh visits Japan this fall.

Vietnam is also eager to reach an agreement by the end of this year,
which marks the 35th anniversary of the establishment of diplomatic
relations between Japan and Vietnam.

Japan held working-level talks with South Korea in June in an effort
to resume EPA negotiations, but no progress has been made since
then. Negotiations with Australia have also reached a deadlock over
how to treat farm products. To move the negotiations forward, many
are now calling for political leadership.

The ministerial meeting in July of the new round of World Trade
Organization (WTO) global trade talks (Doha Round) ended in rupture.
WTO Director General Pascal Lamy and others are stepping up efforts
to resume high working-level negotiations, but if the political
confusion in Japan is prolonged, Japan might not be able to speedily
take response measures.

Agriculture: Uncertainty over farmland reform

In the agriculture area, the Ministry of Agriculture, Forestry and
Fisheries (MAFF) has decided to compile a package of measures on
farmland reform. But the fate of farmland reform is now uncertain.

The ministry has studied the possibility of carrying out drastic

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reform, specifically working out measures to enhance productivity by
consolidating small patches of paddy fields and farming land into
larger units and to expand agricultural businesses by utilizing idle
farmland. Depending on the political situation, however, it might
become difficult for the government to submit and enact related
bills in the regular Diet session next year as scheduled. Given the
rising age of the rural population and difficulty in finding
successors, a senior MAFF official said: "If reform is delayed,
matters related to land rights may become more complicated and
consolidating land may become more difficult." As part of efforts to
increase the nation's self-sufficiency rate, the ministry has also
come up with measures to effectively use paddy fields, but whether
Japan can make the agricultural sector stronger from the medium- to
long-term perspective is likely to hinge on the outcome of farmland
reform.

Social security: Nursing care insurance measures may be delayed

On health, labor and welfare administration, there is a crowded
agenda. Prime Minister Fukuda presented the Five-Point Reassurance
Plan in the social security area in July, including emergency
measures to cope with the lack of doctors.

But the order of policy priority might change under a new prime
minister and a new health, labor and welfare minister. A senior
ministry official grumbled: "I am concerned that the ministry may
not be able to secure enough budget allocations."

Next fiscal year, the government is scheduled to revise the
nursing-care-reward system. Minister Yoichi Masuzoe is looking into
the possibility of boosting nursing-care benefits to be paid to care
insurance businesses. He planned to compile a package of proposals
later this year on reviewing the nursing-care insurance system at an
expert panel. The effort to that end will inevitably slow down.

Dark clouds are also hanging over the reform of the ministry itself,
in which the public have a sense of mistrust.

The government's council on future options for health, labor and
welfare administration, chaired by Toyota Motor Corp Advisor Hiroshi
Okuda, has decided to come up with a policy direction later this
year, but no decision has been made on when it will meet next.

(6) (Corrected copy) Essay by Asahi columnist Yoshibumi Wakamiya on
the Hiroshima Summit: Next time the U.S. President should come

ASAHI (Page 11) (Slightly abridged)
September 1, 2008

On that fateful morning, then Illinois assembly member Barack Obama
was driving his car in downtown Chicago when he heard on the radio
about the first airplane crashing (into the World Trade Center). By
the time he reached his meeting, two more planes had crashed into
buildings. He immediately got out of the car, looked to the heavens,
and thinking about his country and family, was overcome by grief for
the victims.

It will soon be seven years since the tragedy of 9/11, when
terrorists attacked the World Trade Center and the Pentagon. "With
those incidents, everything changed," Obama later said. Three years
later, he became a U.S. senator, and now, he himself has completely
changed, having become a presidential candidate.

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That Barack Obama, recalling the fear that 9/11 generated, came out
with a statement of his thinking this July 16 that went: "I will
place at the center of nuclear policy the goal of complete abolition
of nuclear weapons." In a campaign speech in Indiana, he heatedly
stated, "It is time for America to send a clear message that we will
aim for a world where there are no nuclear weapons."

His statement could only come from a sense of alarm about how
fearful it would be if terrorist groups got their hands on nuclear
weapons. The Democratic Party that nominated him at its convention
at the end of last month included that in its election promises.

Having just played a role in that party convention, U.S. House of
Representatives Speaker Nancy Pelosi has come to Japan, and is now
in Hiroshima. She is attending the G-8 Summit of Lower House
Speakers that convenes on Sept. 2. This year, the seventh such
event, is being hosted by Lower House Speaker Yohei Kono.

At the Toyako Summit of world leaders that was held in July, the
main theme was global warming. If that is the case, I would like to
bring up here another global crisis. The proposal came from Mr. Kono
to choose Hiroshima as the sight to discuss "peace and disarmament."
In the past, the eight countries represented here divided themselves
into "Axis" countries of Germany, Japan, and Italy and "Allied"
countries centered on the U.S. and Britain and fought a war. Now,
their parliamentary speakers have assembled to lay wreathes at the
monument in Hiroshima dedicated to atomic bomb victims, and tour the
Peace Memorial Museum, where the bombings are vividly portrayed. The
most noteworthy participant is no doubt Speaker Pelosi, who has come
from the country that dropped the bombs.

Sixty three years ago, the feeling in Hiroshima, which had made the
atomic bombings its hell, was that the United States could not be
forgiven and the tragedy could not be wiped away. However, the
United States' thinking was that without using the bombs, Japan
could not have been subjugated, the expectation being that in ending
the war, there would be tragic resistance. There was also a feeling
of resistance from Japan, which stressed the catastrophe of the
bombings, tending to forget that it had been the aggressor in the
war. Even in 1996, when the Atomic Bomb Dome (Peace Memorial) was
recognized as a World Heritage, the U.S. was against the move.

Mr. Kono, who fully realizes the existence of such a situation, last
year broached the idea to Speaker Pelosi first of all with the
words, "If you were to come, it would be to Hiroshima." She replied
that it would be a "good idea." Perhaps the Speaker's decisiveness
was because she is a liberal, but Speaker Pelosi is the highest
level U.S. politician to visit Hiroshima in the 63 postwar years.

Even John McCain, the Republican Party candidate for president, in
May made a similar statement. He introduced former President
Reagan's words, "Our dream is a day when there will be no nuclear
weapons on this earth," and then stated, "This is my dream, too."

If such is the case, I would like to see the next president, whether
it is Mr. Obama or Mr. McCain, make a visit to Hiroshima. In the
message of aiming for a nuclear-weapon free world, there is no doubt
such a spirit.

In fact, this July 2, President Bush, then on the way to the Toyako
Summit, had this exchange with reporters: When asked, "There has

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been a proposal for the prime minister of Japan to visit Pearl
Harbor in Hawaii, and for the U.S. president to visit Hiroshima," he
answered, "I haven't given it any thought, but it is an interesting
idea."

It is difficult for him to make the trip, given his remaining short
stay in office, but Mr. Bush did make this significant remark: "Wipe
the slate of the past clean, and turn to look to the future." This
may have been lip-service, but if his friend (Koizumi) and he as a
combination had continued, would it have been out of the question?

That reminds me, there has never been a prime minister who has
visited Pearl Harbor. There seems to be a strong resistance to do so
within the Japanese government. In 1994, such a visit was considered
when the Emperor visited the United States, but it never came
about.

If the prime minister visits Pearl Harbor, the U.S. president, too,
would find it easier to pay visits to Hiroshima and Nagasaki. If
both leaders bowed their heads in reflection and then laid down
memorial wreathes, it would take the form of a real reconciliation
and friendship. The atomic bomb victims, too, would perhaps be
somewhat buoyed up by the gesture.

What words would be used at Hiroshima by Mr. Obama, who captured
peoples' hearts with his speeches that called for change and unity?
What kind of emotions would be evoked by Mr. McCain, who suffered as
a prisoner of war?

It may be said to be premature, but my interest in this has
continued to climb.

ZUMWALT