JAPANESE MORNING PRESS HIGHLIGHTS 12/31/08

UNCLAS SECTION 01 OF 06 TOKYO 003538 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: JAPANESE MORNING PRESS HIGHLIGHTS 12/31/08 Index: 1) Prime Minister Aso's packed diplomatic schedule for 2009 may be sideswiped by Diet turmoil (Nikkei) 2) Japanese government frustrated by lack of progress in negotiations with China over joint development of gas fields in the ¶E. China Sea (Mainichi) 3) Government to create new panel of experts next month to revise the National Defense Program Outline (Nikkei) 4) Yen in 2008 rose from 109 to 87 yen to the dollar: How far will yen appreciation go in 2009? (Yomiuri) Politics as usual: 5) Nishimatsu Construction Co. provided 478 million yen in illegal political donations through shady political organizations to key figures in LDP, DPJ (Yomiuri) 6) Liberal Democratic Party (LDP) works out new arrangement to back New Komeito election candidates running in certain Tokyo wards (Sankei) 7) LDP's Taku Yamasaki denies he will form a new party prior to the next general election (Sankei) 8) Democratic Party of Japan (DPJ) cutting costs on party convention, commercials in order to devote all resources to preparing for next election (Yomiuri) Articles: 1) Prime Minister Aso walking a tight rope in setting his diplomatic schedule for 2009, with pressure to place priority on Diet affairs NIKKEI (Page 2) (Abridged) December 31, 2008 The diplomatic schedule of Prime Minister Taro Aso for 2009 is developing into a balancing act in which the maneuvers of the opposition camp in the regular session of the Diet have to be factored. The prime minister at the beginning of the year will make a hurried trip to South Korea to actively carry out summit diplomacy, the hope being to use this visit to boost the cabinet's sagging popularity at home. However, the ruling camp has taken a stance of all-out confrontation during budget deliberations and other Diet encounters. For the time being, the reality is that the prime minister has no choice but to give precedent to the Diet over diplomacy. Unclear outlook until April The prime minister around Jan. 10 is planning to meet with South Korean President Lee Myung-bak. This is to be the chance to restart a shuttle diplomacy that had been cut short by the territorial issue centering on claims to Takeshima (Dokdo in Korean). However, with the exception of this visit, the rest of the schedule for bilateral meetings has yet to be clearly set. The opposition camp has taken the position of seeking thorough deliberations on such bills as the national budget, having in mind the forcing of an early Lower House dissolution. As a result, the outlook for fixing Aso's diplomatic schedule until April remains difficult to predict. TOKYO 00003538 002 OF 006 The prime minister has indicated his strong desire to attend the Davos Conference in Switzerland, an annual international economic forum that will be held in late January. However, this timeframe overlaps with the start of full-scale deliberations on the next fiscal year's budget in the Diet. Already, there have been complaints heard in the ruling Liberal Democratic Party, with a senior member of the Diet Affairs Committee saying, "The level of priority (the prime minister is giving to the Diet) is too low." The schedule has been set for February 24-26 for the ASEAN-plus-3 summit conference -- postponed due to unrest in Thailand -- and the East Asian Summit Conference. However, this timeframe, too, it is feared, will overlap with the lower-house passage of the budget bill. The Japanese side is seeking an adjustment of the schedule. On the other hand, what the prime minister's aides are calling the top-priority agenda item now is the prime minister's attendance at the second G-20 financial summit meeting that will be held in England April 2. The prime minister by attending hopes to explain to the G-20 leaders and others that Japan has been tackling the issues proactively, and by this, demonstrate his presence in the group. However, there is a high probability at this point that the bills connected to next fiscal year's budget bill that will back up Aso's economic stimulus plan will not be passed without the cooperation of the opposition camp. Effect of the twisted Diet The schedule for Aso's first meeting with the new U.S. president, Barack Obama, has still not been coordinated. Aides are considering an Aso visit to the U.S. as soon as possible after the new administration is launched on Jan. 20. At the latest, a meeting could be set up in the spring. However, there is strong feeling that the meeting "will be at Washington's convenience," according to a senior Foreign Ministry official, since the U.S. president's post-inauguration schedule is already packed. 2) Tokyo frustrated by stagnation in gas talks with Beijing MAINICHI (Page 2) (Abridged) December 31, 2008 Japan and China agreed in June to jointly develop gas fields in the East China Sea. However, the Japanese and Chinese governments will likely see the old year out, while remaining unable to make a treaty that will present in concrete terms, for example, the shared interests (of the two countries). The joint development project is positioned as a symbol of better relations and strategic reciprocal relations between the two countries, but bilateral talks have been stagnant. The Japanese government says that is because China has changed its attitude toward a negative stance. The two governments have been unable to find out a way out of the impasse. As it stands, the Japanese government is growing irritated. "It's not good for both countries to put off negotiations," a senior Foreign Ministry official complained. Prime Minister Taro Aso: "We want to hold talks at an early stage to translate our political agreement into action." Chinese Prime Minister Wen Jiabao: "We want to continue our TOKYO 00003538 003 OF 006 communications at the working level." In the Dec. 13 Japan-China summit meeting, Aso urged Wen to enter into talks for a treaty based on the bilateral agreement on gas field development. However, Wen was brusque. Tokyo and Beijing saw no progress in their prior working-level coordination. The Japanese government hoped to see something in the two leaders' meeting but got the cold shoulder. In 2003, China went ahead with its gas development near the 'equidistance line' that Japan maintains as the boundary line. The development of gas fields has since been a bilateral issue. China insisted on a boundary line that enters Japan's boundary from the equidistance line. This boundary issue has become a major point at issue over a conflict of interests for natural resources. Under such circumstances, Japan and China reached the June agreement. That is because both Tokyo and Beijing wanted to make an appeal on their cooperation, with Japan scheduled to host the Group of Eight (G-8) summit at Lake Toya in Hokkaido and with the Beijing Olympics also scheduled ahead for China. The boundary issue was shelved in that agreement. However, the Japanese government took it as a settlement along with Japan's claim to set the equidistance line. "It was not too bad," a senior Foreign Ministry official said. In China, however, the agreement was criticized as a "unilateral concession." Anti-Japanese activists made demonstrations in front of the Japanese embassy in Beijing. The Chinese government is apparently concerned that entering into talks for a treaty may arouse anti-Japanese nationalism. 3) New panel eyed for defense plan revision NIKKEI (Page 2) (Abridged) December 31, 2008 The government will set up a new advisory panel at the prime minister's office in January next year ahead of revising the National Defense Program Guidelines, which sets a basic course of action for Japan's defense policy. The government will appoint Tokyo Electric Power Co. Chairman Tsunehisa Katsumata as panel chair. The panel is to discuss such issues as: 1) coping with Chinese and Russian military expansion; 2) reviewing the Ground, Maritime, and Air Self-Defense Forces' setup; 3) screening for the follow-on fighter jet model (FX) and other hardware selections; 4) using outer space for defense; and 5) the advisability of Japan's three principles on weapons exports. The government is going to make a cabinet decision late next year to adopt a new version of the NDPG. 4) Yen grew stronger against dollar in 2008 YOMIURI (Page 3) (Full) December 31, 2008 The yen grew stronger against the dollar in Tokyo in 2008 as markets lost confidence in the dollar due to the U.S.-triggered financial crisis. The U.S. dollar briefly fell to 87 yen, the lowest level in 13 years. The yen's effective exchange rate also marked a record high in November since 1973, when Japan adopted the floating exchange rate system. The sharp gain in the yen's exchange value TOKYO 00003538 004 OF 006 seriously aggravated the business performance mainly of export-oriented companies, dealing a serious blow to the Japanese economy. The dollar was traded at 109 yen early this year, but the rate began to fall in mid-March. The financial difficulty of the leading securities company Bear Stearns seriously impaired U.S. financial institutions' credit, bringing down the dollar to the 95 yen level. Further, in the aftermaths of the downfall of Lehman Brothers, the financial crisis became more serious in mid-October. Since then, the dollar has been under strong selling pressure against the yen. The dollar dropped to 87.19 yen, the lowest level this year, on Dec. ¶18. While the Japanese economy was sinking deeper into recession, a yen-buying frenzy was evident. Behind this trend is the view that the Japanese financial market is considerably more stable, compared with U.S. and European markets. The euro has also fallen by 38 yen annually. An executive of a leading trust bank commented: "It is feared that the financial crisis will be protracted, and the future of the yen remains unpredictable." Many in the market take such a view. Maki Fukui of Mizuho Corporate Bank takes a severe view: "If markets are disappointed at the incoming U.S. Obama administration's economic policy, the dollar could sink to the 79.75 yen level." 5) Nishimatsu Construction allegedly donates 478 million yen to Ozawa, Mori and other politicians through shady political groups YOMIURI (Top Play) (Excerpts) December 31, 2008 Nishimatsu Construction Co., based in Tokyo, made illegal donations to ruling and opposition politicians through shady political organizations headed by former company executives. The company listed its employees as members of the political organizations and had them pay membership fees to the groups. Donations were paid to the politicians through the groups. The company covered the employees' membership fees by making special payments to them as bonuses. The amount of donations exceeds 400 million yen, and the company designated the destinations of donations. Of the total amount of about 478 million yen in donations, 26 million yen went to the fund management groups of six politicians from 2004 through 2006. The six include Democratic Party of Japan President Ozawa (who received 14 million yen),former Finance Minister Koji Omi of the Liberal Democratic Party (4 million yen), and former Prime Minister Yoshio Mori (3 million yen). 6) LDP to launch campaign headquarters to support New Komeito Ota SANKEI (Page 4) (Excerpts) December 31, 2008 Liberal Democratic Party Headquarters and the Tokyo Metropolitan Federation of Chapters decided yesterday to launch the party's campaign headquarters to support New Komeito President Akihiro Ota in Tokyo No.12 constituency. This decision is based on an agreement among Election Strategy Committee Chairman Makoto Koga and senior members of the federation. It is unprecedented for one political party to set up a campaign headquarters for another party's TOKYO 00003538 005 OF 006 candidate, although the LDP initially decided to support Ota in the No.12 district. Meanwhile, LDP Koga and New Komeito Secretary General Kazuo Kitagawa agreed in September on the view that the LDP would not call the voters to vote for the New Komeito in the representational portion of the election. In early December, Koga indicated that the party would review the conventional way of cooperation in the representational portion, saying: "Is it all right to give 180 proportional-representation seats to the New Komeito?" The LDP's move reflects its concern about an expected severe outcome of the next election for the LDP. As one LDP lawmaker said, "The New Komeito also used in local elections the list of supporters that the LDP gave to its coalition partner for the previous Lower House election," there is discontent toward the New Komeito in the Tokyo federation. Even so, since the LDP cannot dissolve the LDP-New Komeito cooperative line, the party has decided to totally support Ota in the No.12 district, in which no LDP candidate will run, in an apparent aim of demonstrating election cooperation between the two ruling parties. 7) Yamasaki emphasizes no intention of forming new party before Lower House election SANKEI (Page 4) (Excerpts) December 31, 2008 It has been reported that Taku Yamasaki, former vice president of the Liberal Democratic Party, would launch a new study group with former Secretary General Koichi Kato as early as January, keeping in mind the possibility of forming a new political party prior to the next House of Representatives election. Yamasaki denied this conjecture yesterday. In reply to a question by a reporter in Fukuoka, Yamasaki said: "I am not thinking about a new party for now. I am determined to do my best to bring about a victory to the LDP and make it the leading party in realigning the political world." According to informed sources, Kato proposed to Yamasaki forming a study group in the LPD, and they have begun looking into the possibility, but its members have yet to be decided. 8) DPJ economizing first YOMIURI (Page4) (Abridged) December 31, 2008 The leading opposition Democratic Party of Japan (Minshuto) is now trying to cut expenses in preparation for the next general election for the House of Representatives. There is no foreseeing when the election will take place. As it stands, the DPJ is holding down its party convention and commercial publicity spending for the election battle. The DPJ will hold a party convention on Jan. 18 at Mielparque Tokyo in Shiba Koen, Tokyo. Meanwhile, the ruling Liberal Democratic Party's convention is also slated for that day. However, the DPJ has decided not to do anything showy like a music band's performance. TOKYO 00003538 006 OF 006 The agenda for the DPJ's party convention will be minimized to the party's budget and its settlement of accounts. The DPJ will have its lawmakers attend the convention. However, the DPJ will not seek participation from its prospective new-face candidates and former lawmakers who are going to run in the next election for the House of Representatives, as the party leadership thinks they should prepare themselves for the election. The venue for the DPJ's party convention used to be Yubin Chokin Kaikan or Postal Savings Hall. The cost there is about one-fourth to one-fifth of the cost at a famous hotel, according to the DPJ. One party executive explains, "We held a party convention when DPJ President Ozawa was elected this fall, so we don't have to make it big." The DPJ will have its TV commercials aired across the nation around the turn of the year but will make them plain and simple with some cuts from Ozawa's stumping tour photos and some catchphrases for "people's safe living" and "political tasks." Most of the photos were used for TV commercials aired in September. The DPJ says the party used almost no money to produce the commercials. The DPJ is trying to economize on its spending because the party has no major revenue sources but political party subsidies unlike the LDP that will collect big money for its political funds with corporate donations and fundraising parties. Many of the DPJ's lawmakers have been elected a few times, so their individual fundraising power is not so strong. Prime Minister Aso has now forgone the general election for the House of Representatives. One LDP lawmaker says, "If the election is long away, the DPJ will run out of the money." In other words, the DPJ needs to economize on its usual party activities in order to save money for election campaigning. ZUMWALT