DAILY SUMMARY OF JAPANESE PRESS 10/08/08

UNCLAS SECTION 01 OF 07 TOKYO 002810 SIPDIS DEPT FOR E, P, EB, EAP/J, EAP/P, EAP/PD, PA; WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST DIVISION; TREASURY/OASIA/IMI/JAPAN; DEPT PASS USTR/PUBLIC AFFAIRS OFFICE; SECDEF FOR JCS-J-5/JAPAN, DASD/ISA/EAPR/JAPAN; DEPT PASS ELECTRONICALLY TO USDA FAS/ITP FOR SCHROETER; PACOM HONOLULU FOR PUBLIC DIPLOMACY ADVISOR; CINCPAC FLT/PA/ COMNAVFORJAPAN/PA. E.O. 12958: N/A TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 10/08/08 INDEX: (1) DPJ goes along with having new antiterrorism revision bill adopted by Lower House this week (Mainichi) (2) Ruling parties eye election in November (Asahi) (3) DPJ, PNP set to grill New Komeito on separation of politics and religion (Asahi) (4) Japan to seek at G-7 U.S. commitment to inject public funds into ailing banks (Sankei) (5) Inpex to build offshore LNG terminal in Indonesia: Over 1 trillion yen to be invested; Exports likely to begin in 2015 (Nikkei) (6) Prime Minister's schedule, October 7 ARTICLES: (1) DPJ goes along with having new antiterrorism revision bill adopted by Lower House this week MAINICHI ONLINE (Full) 1:48 pm, October 8, 2008 In a directors meeting this morning of the Lower House Steering Committee, the main opposition Democratic Party (DPJ) took a stance of going along with having the House of Representatives approve before the end of the week a bill amending the new Antiterrorism Special Measures Law that allows the Maritime Self-Defense Force to continue its refueling mission in the Indian Ocean. The DPJ demanded that a Lower House plenary session tomorrow be skipped and that the government explain the purpose of the legislation and a question-and-answer session be held at the Lower House Special Committee on Antiterrorism and Iraq Assistance. The DPJ's demand seems to be aimed at an early Lower House dissolution. The ruling camp, however, proposed launching deliberations on the bill after government explains the purpose of the legislation. Therefore, the ruling coalition and the DPJ in the end failed to reach agreement on the procedures. (2) Ruling parties eye election in November ASAHI (Page 4) (Abridged slightly) October 8, 2008 By Tsuyoshi Yamashita and Hiroshi Samejima The ruling coalition is hoping to carry out the next general election in November, despite the turbulence in financial markets and low support rates for the Aso Cabinet. An election at the end of the year might expose the growing rift between the Liberal Democratic Party and the New Komeito over how to finance basic pensions and the flat-sum tax cut expected to be implemented in fiscal 2008, thereby taking a toll on campaign cooperation. Prime Minister Taro Aso's grip on power is likely to weaken if he delays a decision to carry out the election in November. The flat-sum tax cut, which is supposed to be implemented in the TOKYO 00002810 002 OF 007 current fiscal year in compliance with the New Komeito's request, is the toughest challenge for the government as the end of the year approaches. The government and the ruling coalition agreed in August to decide on the scale of the tax cut and fiscal resources for it when discussing tax reform in December. The New Komeito defines the flat-sum tax cut as its greatest achievement, and its powerful supporter, Soka Gakkai, also pins hopes on it. New Komeito Representative Akihiro Ota indicated that the tax must be reduced by a minimum of 65,000 yen (for a family of four),as is the case with the special tax cuts 10 years ago. But a former LDP cabinet minister predicted that the amount would be no more than 10,000 yen per household under the tight fiscal situation. Aware of the large gap between the two ruling parties, Liberal Democratic Party of Japan Deputy President Naoto Kan applied pressure on Environment Minister Tetsuo Saito of the New Komeito in yesterday's Lower House Budget Committee meeting. Kan: "The scale of and fiscal resources for the flat-sum tax cut will be unknown until late December. The New Komeito is calling for the general election in November. Isn't your party going to include (the tax cut) in the manifesto?" Saito: "The timing of the election will be determined by the prime minister. I cannot say for certain that we will incorporate (the tax cut) in our manifesto." Is the government going to increase the size of the tax cut in deference to the New Komeito or curb it by placing high priority on fiscal discipline? The prime minister will be pressed for a decision toward the end of the year. The popular view in the LDP is that the general election should be held before the contents of the tax cut are nailed down, with one lawmaker saying: "Discussion of tax reform is scheduled for year's end. If the election is postponed until then, it would create too much trouble for us." The handling of the bill extending the special measures law authorizing the Maritime Self-Defense Force's refueling mission is also a thorny issue. The New Komeito gave a nod to the Lower House's re-adoption of the legislation in January, but this time around, the party is cautious about using the same method. If the LDP attempts to readopt it before the general election, the New Komeito might exert heavy pressure on the administration, just as it did in the closing days of the former Fukuda administration. The prime minister wants to begin Diet deliberations on the refueling legislation and make it a point at issue in the next election, while the New Komeito wants to avoid readopting the legislation before the election. To save the faces of the two sides, the prevailing view in the LDP is that the Lower House should be dissolved soon after the Diet begins deliberating on the legislation. In compiling the fiscal 2009 budget, the government must secure funds for an increase in the government's contribution to the basic pension scheme and take steps to free up road-related revenues for general spending. About the prime minister's strong desire to compile a second supplementary budget, an LDP executive said: "Specifics in the budget might fall short of expectations. The Lower House should be dissolved soon after an overall picture is TOKYO 00002810 003 OF 007 presented." There is concern in the ruling bloc that the more the election is put off, the more the support ratings will drop. "I think the election is near, very near," LDP Secretary General Hiroyuki Hosoda said at a fund-raising party held yesterday by an LDP Lower House member. (3) DPJ, PNP set to grill New Komeito on separation of politics and religion ASAHI (Page 4) (Full) October 8, 2008 Naoto Kan, deputy president of the Democratic Party of Japan (DPJ), and Shizuka Kamei, deputy head of the People's New Party (PNP),took up the issue of separation of politics and religion at a Budget Committee session yesterday of the House of Representatives. The two opposition parties have a plan that if Lower House dissolution is pushed back, they will shake up the New Komeito by demanding that Junya Yano, former chairman of the New Komeito, be called to testify as a Diet witness. Yano has said that the facilities of the religious sect Soka Gakkai, which is the support body of the New Komeito, are the bases for the party's election activities. At yesterday's committee session, Kan posed a question: "The Aum Shinrikyo cult headed by Shoko Asahara (death-row inmate whose real name is Chizuo Matsumoto) was formed in 1990. Twenty-five Aum members ran for seats in a national election. The Aum cult tried to spread its beliefs by taking advantage of political power. Does this activity violate the principle of the separation of politics and religion?" Kan succeeded in eliciting an answer from the Cabinet Legislation Bureau director general that such activity was "unconstitutional." Prime Minister Taro Aso also said: "I think so, too." Moreover, Kamei questioned: "The largest supporter of the Liberal Democratic Party (LDP) is Soka Gakkai. Is it permissible for religious facilities that receive tax benefits to be used in such a way?" There was a tense atmosphere. Aso evaded the question, saying: "You must have read too many tabloid weeklies." Environment Minister Saito, former New Komeito policy chief, refuted him by saying: "You are trying to make it a political issue." The questions by Kan and Kamei appear to be strategic moves in an effort to realize Diet testimony by Yano. When the House of Councillors called then Soka Gakkai Chairman Einosuke Akiya to testify in 1995, Kamei was one of the senior LDP members, who demanded testimony. After the end of the Lower House Budget Committee session, Kamei told reporters: "It is not good to for Yano to testify alone. It is necessary to do it fairly by hearing from Soka Gakkai, too." He indicated that if Yano's testimony was realized, the opposition would call Soka Gakkai representatives to testify as Diet witnesses. (4) Japan to seek at G-7 U.S. commitment to inject public funds into ailing banks TOKYO 00002810 004.2 OF 007 SANKEI (Page 7) (Full) October 8, 2008 In a meeting of finance ministers and central bank governors from the Group of Seven (G-7) countries in Washington on Oct. 10, Finance Minister and State Minister in Charge of Financial Services Shoichi Nakagawa will propose that the U.S. government decide to use public funds to shore up the capital base of ailing financial institutions. The U.S. enacted a bailout bill into law designed for the government to purchase nonperforming loans with public funds on Oct. 3, but since the legislation was regarded as just a stopgap measure, global stock markets have continued to tumble. The focus of attention in the coming G-7 meeting is on how the U.S., which triggered the global financial crisis, will respond to Japan's request based on its experience. Good opportunity for Japan to play up presence Prime Minister Taro Aso urgently called in Finance Minister Nakagawa, Bank of Japan Governor Masaaki Shirakawa, and other responsible officers last night to discuss what approach Japan should take in the G-7 meeting. They agreed that Japan should propose that the U.S. inject public funds into ailing banks. Nakagawa told reporters: "It will provide a change for Japan to let the other G-7 members know that Japan had suffered a bitter experience for several years," indicating that he would explain about the government's injection of approximately 13 trillion yen in public funds into ailing financial institutions following a credit crunch in 1997. The U.S. bailout legislation has had no immediate effect, as admitted by President Bush saying: "It will be some time before the effect becomes apparent." The round-the-world panic sell-offs that started in Tokyo on Oct. 6 returned to New York on the 7th. Market players will pay close attention to the upcoming the G-7 meeting. Depending on the outcome the meeting, the economy might fall into a global depression. It is uncertain, however, whether the monetary authorities from Japan, the U.S., and Europe would be able to jointly come up with effective measures. U.S. authorities also do not think the measures to purchase nonperforming bank loans under the bailout legislation are sufficient. A senior Federal Reserve Board member said: "The Department of the Treasury recognizes that it is unavoidable to increase funds to cover the losses accrued from the sales." Some have begun to think injecting funds would be possible under the framework of the bailout legislation. A provision notes that it is possible to purchase any kind of financial instrument. It means that "it is possible to buy shares issued by financial institutions to increase capital," according to an international finance source. But there are no moves to send a message to the markets regarding capital injection at the present stage. European financial authorities are divided over whether taxpayers' money should be used. The European Central Bank (ECB) supervises monetary policies in Europe, but there are administrative TOKYO 00002810 005 OF 007 authorities in countries who oversee their individual financial institutions. "The administrative office of the European Union (EU) does not have enough funds to set up a joint fund for that purpose," according to an ECB official. For Japan, which has been suffering only slightly from the ongoing financial crisis, it is a good opportunity to demonstrate its presence by explaining its experience in handling its own post-economic bubble financial crisis. Japan's injection of public funds came too late, and the people's burden eventually increased. To what extent will Western countries listen to Japan's advice? Seeing global stock markets reeling, World Bank President Zoellick said: "(The G-7) is not working." The significance of the G-7 will now be severely tested. (5) Inpex to build offshore LNG terminal in Indonesia: Over 1 trillion yen to be invested; Exports likely to begin in 2015 NIKKEI (Top Play) (Full) October 5, 2008 The Inpex Corp. will likely construct a liquefied natural gas terminal off the coast of Indonesia -- the first such terminal in the world. It will invest over 1 trillion yen in hopes of LNG delivery to Japan as early as 2015. Amid growing economic nationalism focusing on natural resources, it has been of urgent concern for Japan to secure an LNG supplier, because Japan is the largest importer of the product. The construction of a huge terminal will secure up to 7 PERCENT of Japan's annual LNG imports. The company will likely reach an agreement with the Indonesian government before year's end. Inpex owns a 100 PERCENT stake in the Marcela gas field, a major gas field in the Timor Sea. It is now pressing ahead with a plan to produce 4.5 million tons starting in 2015 and exports the total amount to Japan. The gas field is now being developed. A plan to build an LNG terminal to ship liquefied gas has remained undecided. The company had two construction options for the terminal. One option was to build on solid ground in Australia, transporting the gas from Indonesia through undersea pipelines. The other was to build an offshore terminal inside Indonesian territorial waters, an option which would be significantly more expensive, because it requires measures against welters caused by waves. However, President Kuroda told Nihon Keizai Shimbun, "We are now making our final consideration with the possibility of opting for an offshore terminal." He added, "We will reach a decision within a couple of months. Inpex will build the offshore terminal, meeting the Indonesian government's request, giving priority to the launching of production at an early date. The estimated construction cost will reach more than 1 trillion yen. However, the company believes that the project will be worthwhile, because of prospects for growing LNG demand and high LNG prices. Construction will be financed by bank loans and Inpex cash reserves. The company will also consider selling part of its stake in the Timor Sea gas field to foreign energy companies. Inpex is also developing the Ixis gas field in Australia. The plan TOKYO 00002810 006 OF 007 is to start producing 8 million tons from around 2014-2015 and export the total amount to Japan. The output of the "Hinomaru (Rising Sun)" gas fields in Indonesia and Australia will total 12.5 million tons, approximately 20 PERCENT of annual imports by Japan. The company has already decided to construct a terminal on solid ground in Australia. It now has paved the way for a system allowing the supply of large quantities of LNG to Japan. Demand for LNG is growing throughout the world, indicating signs of a scrambling for the material occurring. Against a backdrop of rising prices of natural resources, energy nationalism is rising. Indonesia plans to cut the exports of LNG to Japan from the current 12 million tons a year to 2-3 million tons a year in 10 year's time. It is believed that the gas field will be exempt from Indonesia's export reduction policy. It is expected that shipments from the two gas fields will make up for portions of exports slashed by Indonesia. (6) Prime Minister's schedule, October 7 NIKKEI (Page 2) (Full) October 8, 2008 07:09 Met at Kantei with Deputy Chief Cabinet Secretary Matsumoto. 08:31 Attended cabinet meeting in the Diet building. 09:00 Attended Lower House Budget Committee session. 12:08 Arrived at Kantei. 13:00 Attended Lower House Budget Committee session. 17:15 Signed in at the Imperial Palace to express appreciation for dinner party. 17:55 Met Brazil-Japan immigration 100th anniversary association chairman Uehara at Kantei and others 18:30 Met with Finance Minister Nakagawa, Economic and Fiscal Policy Minister Yosano, BOJ Gov. Shirakawa, Financial Services Agency Director General Sato, Vice Finance Minister Sugimoto, Budget Bureau chief Tango, Vice Finance Minister for International Affairs Shinohara, and Deputy Vice Minister Katsu. Nakagawa and Sugimoto remained. 20:08 Telephoned Makoto Kobayashi and Toshihide Masukawa, awarded the 2008 Nobel Prize in Physics. TOKYO 00002810 007 OF 007 20:39 Dined with LDP Diet Affairs Committee Chairman Oshima, New Komeito Diet Affairs Committee Chairman Urushibara and ruling coalition Diet affairs members, at Chinese restaurant in Kiyoi-cho, joined by Chief Cabinet Secretary Kawamura and Deputy Chief Cabinet Secretary Matsumoto. 21:00 Met with Matsumoto at a Japanese restaurant in New Otani Hotel. Met afterwards with secretaries at Kato's Dinning and Bar at the hotel. 23:04 Returned to his private residence in Kamiyama-cho. SCHIEFFER