DAILY SUMMARY OF JAPANESE PRESS 03//08

UNCLAS SECTION 01 OF 11 TOKYO 000823

SIPDIS

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 03//08

INDEX:

(1) Poll on Fukuda cabinet, political parties (Yomiuri)

(2) Fukuda government to mark six months tomorrow since coming into
office; Prone to making mistakes and lacking cohesiveness, but ready
to take the offensive (Mainichi)

(3) Prime Minister Fukuda finds himself in fix over six months, with
DPJ refusing "grand coalition" proposal, nominations for BOJ top
posts (Asahi)

(4) Poll: 50 PERCENT want Ishiba to prevent recurrence of Aegis
accident instead of resigning (Nikkei)

(5) Government to discuss operation of SOFA to share information on
deserters (Asahi)

(6) Large blue coral colony found in planned relocation site for
U.S. Futenma base (Tokyo Shimbun)

(7) Concern about weakening capital investment: Leading companies'
business sentiment worsening; Some companies expect economy to pick
up in summer or later (Yomiuri)

ARTICLES:

(1) Poll on Fukuda cabinet, political parties

YOMIURI (Page 13) (Full)
March 24, 2008

Questions & Answers
(Some portions already reported)

Q: Do you support the Fukuda cabinet?

Yes 33.9
No 54.0
Other answers (O/A) 2.6
No answer (N/A) 9.5

Q: (Only for those who answered "yes" to the foregoing question)
Give up to two reasons for your approval of the Fukuda cabinet.

I can appreciate its political stance 25.6
It's stable 28.4
The prime minister is trustworthy 27.9
Something can be expected of its economic policy 4.8
Something can be expected of its foreign policy 5.8
Because it's a coalition of the Liberal Democratic Party and New
Komeito 12.4
Because the prime minister is from the LDP 30.5
It's better than its predecessors 12.2
O/A+N/A 5.9

Q: (Only for those who answered "no" to the foregoing question) Give
up to two reasons for your disapproval of the Fukuda cabinet.

I can't appreciate its political stance 47.8
It's unstable 26.8
The prime minister is untrustworthy 23.4

TOKYO 00000823 002 OF 011

SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 03//08

Nothing can be expected of its economic policy 37.9
Nothing can be expected of its foreign policy 8.6
Because it's a coalition of the Liberal Democratic Party and New
Komeito 8.8
Because the prime minister is from the LDP 4.9
It's worse than its predecessors 8.1
O/A+N/A 3.0

Q: What issues do you want the Fukuda cabinet to pursue on a
priority basis? Pick as many as you like from among those listed
below, if any.

Economic, employment measures 53.9
Fiscal reconstruction 24.5
Tax reform, consumption tax 32.1
Social security reform, including pension and healthcare systems
58.1
Low birthrate countermeasures, including childcare support 27.4
Education reform 18.6
Social divide, including income gaps 22.1
Administrative reform, including public service personnel cuts 19.7
Politics and money issues 30.2
Asia diplomacy, including China and South Korea 12.5
North Korea 17.9
Defense, security 11.6
Constitutional revision 4.8
Crisis management, including disaster prevention 8.4
Public security, crime prevention 16.9
Environmental protection 22.7
Food safety 37.1
O/A + nothing in particular + N/A 3.7

Q: Which political party do you support now? Pick only one.

Liberal Democratic Party (LDP) 33.1
Democratic Party of Japan (DPJ or Minshuto) 17.6
New Komeito (NK) 2.7
Japanese Communist Party (JCP) 2.5
Social Democratic Party (SDP or Shaminto) 1.1
People's New Party (PNP or Kokumin Shinto) 0.3
New Party Nippon (NPN or Shinto Nippon) 0.1
Other political parties ---
None 41.9
N/A 0.7

Q: When would you like the House of Representatives to be dissolved
for a general election? Pick only one from among those listed
below.

As early as possible 22.2
After this July's G-8 summit 22.5
Within this year 22.0
Sometime during the current term up until September 2009 24.7
N/A 8.6

Q: What kind of government would you like to see now? Pick only
one.

The current LDP-Komeito coalition government 22.1
A DPJ-led coalition government of opposition parties 16.1
The LDP's single-party government 7.2
The DPJ's single-party government 4.9

TOKYO 00000823 003 OF 011

SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 03//08

A coalition government centering on the LDP and the DPJ 20.7
A government under a new framework of political parties after
realigning the ruling and opposition parties 15.3
O/A 0.4
N/A 13.2

Q: Prime Minister Fukuda has now been in office for nearly a half
year. What do you think about Prime Minister Fukuda's own and his
cabinet's performance?

Appreciate very much 4.9
Appreciate somewhat 28.6
Don't appreciate very much 41.7
Don't appreciate at all 21.8
N/A 3.0


Q: Is there anything you can appreciate about Prime Minister Fukuda
or his cabinet? If any, pick as many as you like from among those
listed below.

Resumption of the Maritime Self-Defense Force's refueling mission in
the Indian Ocean 11.8
Blanket relief for all hepatitis C virus victims 49.9
Setting up of social security panel 3.5
Response to pension record-keeping flaws 17.5
Appointment of state minister for consumer affairs and setting up of
consumer administration panel 3.3
Response to Chinese-made frozen gyoza dumpling incidents 8.6
Response to stock market, other economic conditions 1.6
Response to Aegis accident 5.3
Diplomacy toward U.S. 3.9
Diplomacy toward China, South Korea 10.4
Global warming 11.5
O/A 0.2
Nothing 27.1
N/A 4.5

Q: Do you know well about Prime Minister Fukuda's political
approach?

Yes 8.8
No 88.7
N/A 2.5

Q: Do you think Prime Minister Fukuda is steady in his job
performance?

Yes 43.2
No 47.8
N/A 9.0


Q: If there is anyone you appreciate in the Fukuda cabinet for that
person's job performance? If any, pick as many as you like from
among those listed below.

Internal Affairs & Communications Minister Masuda 3.6
Justice Minister Hatoyama 4.3
Foreign Minister Koumura 6.0
Finance Minister Nukaga 1.6
Education, Culture, Sports, Science & Technology Minister TOKAI 1.2

TOKYO 00000823 004 OF 011

SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 03//08

Health, Labor & Welfare Minister Masuzoe 51.4
Agriculture, Forestry & Fisheries Minister Wakabayashi 0.7
Economy, Trade & Industry Minister Amari 1.2
Land, Infrastructure & Transport Minister Fuyushiba 4.1
Environment Minister Kamoshita 2.1
Defense Minister Ishiba 13.5
Chief Cabinet Secretary Machimura 8.6
National Public Safety Commission Chairman Izumi 0.4
Okinawa Affairs Minister Kishida 0.8
Financial Services Minister Watanabe 11.5
Economic & Fiscal Policy Minister Ota 3.6
Declining Birthrate Minister Kamikawa 1.6
None + N/A 35.8

Q: How long would you like the Fukuda cabinet to continue? Pick only
one from among those listed.

As long as possible 12.8
2 or 3 years 14.4
1 year or so 22.7
About a half year 18.6
Quit as early as possible 25.3
O/A 0.3
N/A 5.9

Q: What do you think about DPJ President Ozawa's job performance as
his party's representative?

Appreciate very much 4.3
Appreciate somewhat 25.1
Don't appreciate very much 42.0
Don't appreciate at all 23.0
N/A 5.7

Q: Who do you think is most appropriate in the Diet for prime
minister? Pick only one from among those listed below.

Taro Aso 21.2
Shinzo Abe 1.2
Nobuteru Ishihara 1.8
Akihiro Ota 0.5
Katsuya Okada 2.1
Ichiro Ozawa 5.3
Naoto Kan 3.4
Yuriko Koike 1.3
Junichiro Koizumi 16.1
Sadakazu Tanigaki 1.7
Shoichi Nakagawa 0.3
Fukushiro Nukaga 0.2
Yukio Hatoyama 0.9
Yasuo Fukuda 4.0
Seiji Maehara 0.8
Yoichi Masuzoe 3.2
Nobutaka Machimura 0.9
Kaoru Yosano 0.3
Others 0.5
None 24.9
N/A 9.5

Polling methodology
Date of survey: Mar. 15-16.
Subjects of survey: 3,000 persons chosen from among all eligible

TOKYO 00000823 005 OF 011

SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 03//08

voters throughout the country (at 250 locations on a stratified
two-stage random-sampling basis).
Method of implementation: Door-to-door visits for face-to-face
interviews.
Number of valid respondents: 1,786 persons (59.5 PERCENT )
Breakdown of respondents: Male-46 PERCENT , female-54 PERCENT ;
persons in their 20s-9 PERCENT , 30s-14 PERCENT , 40s-15 PERCENT ,
50s-21 PERCENT , 60s-23 PERCENT , 70 and over-18 PERCENT ; big
cities (Tokyo's 23 wards and government-designated cities)-22
PERCENT , major cities (with a population of more than 300,000)-19
PERCENT , medium-size cities (with a population of more than
100,000)-24 PERCENT , small cities (with a population of less than
100,000)-24 PERCENT , towns and villages-11 PERCENT .

(2) Fukuda government to mark six months tomorrow since coming into
office; Prone to making mistakes and lacking cohesiveness, but ready
to take the offensive

MAINICHI (Page 5) (Full)
March 25, 2008

The government of Prime Minister Yasuo Fukuda will mark six months
tomorrow since it came into office. It has found managing the
divided Diet fraught with many difficulties, and it has been forced
to waver back and forth in selecting its nominee for a new governor
of the Bank of Japan. Meanwhile, the cabinet support rate has
continued to slide. Legislation amending the Special Taxation
Measures Law, aimed at retaining the current provisional tax for
gasoline and road-related taxes, has been left pending in the Diet.

Failure in formation of grand alliance

Fukuda assumed the prime minister's post on Sept. 26 last year
following the sudden resignation of then Prime Minister Shinzo Abe.
The Fukuda government was launched, facing a House of Councillors
that was controlled by the opposition camp. This was the reason why
Fukuda named his government the "back to the wall" cabinet. At that
time, Fukuda showed determination by saying: "If the cabinet makes
even a small mistake (in its judgment),the Liberal Democratic Party
will lose the reins of government." Even before assuming the prime
minister's post, Fukuda looked into the possibility of forming a
grand alliance between the LDP and the Democratic Party of Japan,
the largest opposition force. After taking office, through two
face-to-face meetings, Fukuda built a relationship of trust with DPJ
President Ichiro Ozawa, who was then positive about such discussion
with the government and ruling coalition. However, meeting with
strong opposition from many DPJ lawmakers, Ozawa had to give up on
the grand alliance idea.

Criticizes DPJ's response

Using the Constitution's provision that states if the Upper House
rejects a bill, it still can be passed by a two-thirds Lower House
overriding vote, Fukuda enacted the new anti-terrorism measures law
to continue the Maritime Self-Defense Force's refueling operation in
the Indian Ocean. However, the DPJ was able to threaten to undermine
the Fukuda government by using such issues as missing pension
payment records and the collision between an MSDF Aegis destroyer
and a fishing boat.

When his nominee for Bank of Japan governor, then Deputy Gov.
Toshiro Muto, was rejected by the DPJ, Fukuda picked as a next

TOKYO 00000823 006 OF 011

SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 03//08

choice Koji Tanami, a former vice finance minister. But his
nomination, too, was rejected by the opposition camp. As it stands,
the top post at the central bank has been left vacant for the first
time in the postwar period. As a result, Fukuda's hold over the
party is beginning to unravel.

Despite this, the Prime Minister's Official Residence (Kantei) has
taken the offensive. A source in the government asserted: "The prime
minister has not made any significant mistakes." Fukuda indeed
believes that he did not err in his choice of candidates for the new
BOJ governor. His stubborn disposition has reappeared, and he told
aides: "The DPJ's rejection of the government's plan has damaged
Japan's interests." A senior Machimura faction member spoke for
Fukuda: "I have lost my trust in Mr. Ozawa."

(3) Prime Minister Fukuda finds himself in fix over six months, with
DPJ refusing "grand coalition" proposal, nominations for BOJ top
posts

ASAHI (Page 4) (Full)
March 25, 2008

During the past six months since Yasuo Fukuda assumed office, the
prime minister has devoted himself to trying to build a relationship
with the Democratic Party of Japan (DPJ) led by President Ozawa
under conditions in which the opposition bloc has control over the
House of Councillors. For Fukuda, it was a continuing trial and
error process. He even kept alive a kind of "hotline" to Ozawa even
after a "grand alliance" scheme between the two misfired. But the
hotline did not work when Fukuda nominated a candidate to head the
Bank of Japan (BOJ). And on the issue of the legislation to continue
the provisional gasoline tax rate, as well, the prime minister has
yet to find a way to start talks with the DPJ in order to maintain
the rate the end of March, when current legislation ends. With
public support for the cabinet plummeting, the Fukuda government now
finds it difficult to take a hard-line stance or to be ready to
dissolve the House of Representatives if need be. The government
remains unable to move effectively.

"Hotline with Ozawa" cut off

Speaking before reporters at his official residence yesterday,
Fukuda complained of the DPJ's stance, saying "Honestly speaking, I
cannot see why it has taken such a stance. It rejected our
nominations for the BOJ governor post. The party has also refused
talks on budget-related bills. It is difficult to even get to talk
with it."

The prime minister has long stressed a willingness to pursue a
dialogue with the DPJ and had refrained from openly criticizing it.
But recently he has not been able to hide his irritation at the
DPJ.

Fukuda also lashed out at the DPJ's response to the issue of the
provisional highway-related tax rates. National Governors'
Association Chairman Wataru Aso and other representatives from local
groups called on the prime minister at his official residence
yesterday to ask the government to do its best to maintain the
current tax rates. Fukuda told them: "Time is running out. With only
this week to go, the other side has still refused talks. It is quite
deplorable."


TOKYO 00000823 007 OF 011

SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 03//08

According to his close aide, the prime minister intentionally
refrained from criticizing the DPJ, based on the judgment that
matters would not move forward smoothly without the understanding of
the DPJ, as long as it controls the Upper House.

With this situation in mind, the prime minister has continued
efforts since coming into office to grope for ways to join hands
with DPJ President Ozawa, with an eye on a "grand alliance." Fukuda
held three rounds of meetings with Ozawa late last October and in
November, using former Prime Minister Mori and Yomiuri Shimbun Group
President Tsuneo Watanabe as intermediary, but the grand coalition
initiative fell through as a result of Ozawa encountering opposition
from the DPJ executive.

Afterward, Ozawa disclosed the process that led to the realization
of the party head talks, but the prime minister remained silent,
just saying: "There is the need to keep faith with President Ozawa.
It is impermissible for me to talk everything."

A senior government official explained how the prime minister was
feeling at that time: "Mr. Ozawa lost his grip on the party and was
unable to unify views in the party. But the prime minister, instead
of resorting to a tough stance, patiently tried to maintain the
relationship with Mr. Ozawa."

Difficult to dissolve Lower House, given low public support

The hotline with Ozawa seemed to work effectively to push ahead with
the government's nomination for the BOJ governorship.

According to several ruling party members, Fukuda and Ozawa began to
secretly meet last December. There was even a scene in which when

SIPDIS
Fukuda unofficially proposed nominating Deputy BOJ Governor Toshiro
Muto for the governorship, he got a positive impression that Ozawa
would accept.

But DPJ members were beset with doubts and fears about
behind-the-scenes negotiations between Ozawa and Fukuda in the
aftermath of the row in the party over Fukuda's grand coalition
proposal. In late February, the ruling camp forcibly passed the
budget bill through the House of Representatives. Set off by this
event, the hotline between Fukuda and Ozawa was cut off.

When he dined with LDP Research Council Chairman Sadakazu Tanigaki
and others on the night of March 19, Prime Minister Fukuda quoted a
leading figure in the DPJ as saying: "The nomination of Mr. Muto is
acceptable. I will take responsibility and persuade the four party
executives to accept the plan." Although Fukuda did not mention who
the leading figure was, he disclosed what was going on in backstage
negotiations with the DPJ."

Following his grand coalition proposal having been rejected and the
hotline with Ozawa having been cut off, the DPJ formally refused
talks on revising the government's bill on the highway-related tax
rates yesterday. The prime minister's relations with the DPJ are now
in the worst state since he assumed office. Under the prime
minister's envisioned strategy, he would manage to survive until the
July Lake Toya Summit in Hokkaido while keeping a low profile by
enacting the budget-related bills by the end of the fiscal year and
putting forth the policy of protecting the environment and
consumers, as well as foreign policy. But the DPJ's clarification of
its intention to press the government to dissolve the Lower House

TOKYO 00000823 008 OF 011

SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 03//08

prior to the end of the fiscal year has begun to upset that
strategy.

The prime minister has "put the seal" on the possibility of
dissolving the Lower House until after the G-8 Summit, but he does
not have enough power to turn around the political situation on his
own. Particularly, public support for his cabinet remains too low
for him to do so. In addition, since the nation's economy is
sluggish, the Fukuda administration cannot choose an option that
might lead to depriving the ruling coalition of its two-thirds lower
chamber overriding vote.

In a press conference yesterday, Chief Cabinet Secretary Machimura
replied in a strong tone to a question about what measures he has in
mind to break an impasse: "Besides talks, what measures are there?
Is there some meaning in creating a political vacuum as a result of
the Lower House being dissolved?"

(4) Poll: 50 PERCENT want Ishiba to prevent recurrence of Aegis
accident instead of resigning

NIKKEI (Page 2) (Full)
March 25, 2008

The Nihon Keizai Shimbun conducted a public opinion survey on Mar.
21-23, in which respondents were asked about Defense Minister
Shigeru Ishiba's responsibility over the recent fatal collision of a
Maritime Self-Defense Force Aegis destroyer with a fishing boat. To
this question, 50 PERCENT answered that Ishiba should hurry to work
out recurrence prevention measures without resigning as defense
minister, with 39 PERCENT saying he should resign after clearing up
the cause of the accident, and 5 PERCENT saying he should resign at
once.

Among those who support the ruling Liberal Democratic Party, 61
PERCENT urged Ishiba to work out recurrence prevention measures
without resigning, with 31 PERCENT saying he should resign after
clearing up the cause of the accident, and 3 PERCENT calling for
his immediate resignation. Among those who support the leading
opposition Democratic Party of Japan (Minshuto),46 PERCENT
answered that Ishiba should resign after clearing up the cause of
the accident, with 8 PERCENT insisting on his immediate
resignation, and 44 PERCENT saying he should work out recurrence
prevention measures without resigning.

(5) Government to discuss operation of SOFA to share information on
deserters

ASAHI (Page 4) (Full)
March 25, 2008

The government decided yesterday to hold talks with Washington to
improve the operation of the Japan-U.S. Status of Forces Agreement
(SOFA) in a way allowing the two countries to share information on
missing U.S. service members in Japan, including deserters. The
decision follows the discovery of a credit card belonging to a U.S.
sailor who went missing (in early March) in the taxi of a driver who
was slain in Yokosuka, Kanagawa Prefecture.

Foreign Minister Masahiko Koumura said before the House of
Councillors Budget Committee yesterday: "We would like to discuss
with the U.S. side and relevant government agencies how information

TOKYO 00000823 009 OF 011

SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 03//08

on missing U.S. service members should be shared."

Koumura was responding to a question from Keiichiro Asao of the
Democratic Party of Japan.

According to the Foreign Ministry, the United States under the SOFA
is not required to inform Japan of missing U.S. service members. The
sailor, now in the custody of the U.S. Navy, went missing on March

8. The U.S. side declared him a deserter on March 10. The United
States has not requested an investigation by Japan.

Under the SOFA, U.S. service members are exempt from
passport-checks, visas, and alien registration requirements when
entering Japan. The government has no information on U.S. service
members who are missing from their bases in Japan. Given the
situation, there has been an argument in the government that
information on missing U.S. service members must be shared between
Japan and the United States.

(6) Large blue coral colony found in planned relocation site for
U.S. Futenma base

TOKYO SHIMBUN (Page 1) (Full)
Eve., March 24, 2008

A joint survey by the World Wide Fund for Nature Japan (WWF Japan)
and the Nature Conservation Society of Japan (NACS-J) confirmed that
one of the largest blue coral colonies in the world exists in waters
off Okinawa's Nago City, where an alternative facility for the U.S.
military's Futenma Air Station is planned to be relocated.

EIA on the way

The two organizations assert that an urgent need at present is to
preserve the waters that have some of the world's richest
biodiversity, including dugongs, as the Ministry of Defense's (MOD)
Defense Policy Bureau has now launched an environmental impact
assessment (EIA) in the area.

The blue coral colony in the area was discovered some 400 meters off
Teima Fishing Port in Oura Bay, Nago City, in last September. The
colony lies on a slope extending from a depth of one meter to 20
meters.

Valuable assets should be conserved by political decision

Commentary by Toshiya Ura

The blue coral colony discovered off Nago City, Okinawa Prefecture,
is one of the largest in the world. Nanzan University Prof.
Shigekazu Mezaki, a councilor of the WWF Japan, notes: "I have never
heard of this size colony on a seabed slope. The maximum height of
the colony is 15 meters, five times as high as the colony found in
the Shiraho waters around Ishigaki Island, previously said to be the
world's largest. This colony is a valuable asset for the entire
world and can help foster understanding of the progress of coral,
which changes its form to adapt itself to the environment."

The discovered blue coral colony sits about 3 km northeast of the
planned relocation site. The MOD's Okinawa Policy Bureau began an
EIA on March 18 in preparation for the construction of an alternate
facility. Reportedly, the U.S. military also has sought to construct

TOKYO 00000823 010 OF 011

SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 03//08

a gun-loading ground and a 214-meter quay in addition to the
previous plan.

Because the area is a major feeding ground for dugongs, there is
concern that the dugongs may be driven to extinction with a change
in the sea current stemming from the possible contamination of
seawater because of a series of surveys and construction work.

Wilderness found on the east coast on the northern part of the main
Okinawa island has remained the same as it was before the war. This
area is indispensable for the future of Okinawa, a prefecture that
relies on tourism. That wilderness is a valuable natural asset.

Permits and license rights regarding reclamation under the Law for
Reclamation of Public Land lie with the governor. The ongoing EIA
has not offered any opportunity for the environment minister to say
anything about the EIA. But it is politicians who can take action to
preserve some of the world's richest biodiversity before all is
lost.

(7) Concern about weakening capital investment: Leading companies'
business sentiment worsening; Some companies expect economy to pick
up in summer or later

YOMIURI (Page 11) (Full)
March 25, 2008

It has become clear through the results of an economic forecast
survey conducted on companies, released yesterday by the Cabinet
Office and the Finance Ministry, that the business sentiment of
leading companies, which have led the economic recovery up until
now, has significantly deteriorated. This is because the sharp rise
in the prices of raw materials, such as crude oil and grain, and the
slowdown of the U.S. economy, are having an adverse effect on their
business confidence. There is concern that while the Japanese
economy is in a temporary slump, the deteriorated business
confidence will negatively affect the economy, such as by
constraining capital investment.

Business confidence index marks record low of minus 9.3: Eight
industries record positive figures

The business confidence index of leading companies (those
capitalized at over 1 billion yen) is determined by subtracting the
percentage of companies that say the economy is deteriorating from
the percentage that say the economy is improving. This figure was
minus 9.3 in a survey carried out in the January-March quarter, the
lowest level since the surveys were started in the April-June
quarter in 2004.

Among industries that showed a marked drop in business confidence
were food manufacturers, which are suffering from high grain prices
and a rise in transportation cost, down 29.2 percentage points,
followed by the financial and insurance sectors, which are being
buffeted by the U.S. subprime mortgage crisis, down 25.9 points, and
information and communications equipment manufactures, which are
suffering sluggish sales of cell-phone handsets, down 22.2 points.

Only 8 of 34 sectors, including the automobile, precision machinery,
and advertising industries, were in positive territory.

Moves to cut back on capital investment

TOKYO 00000823 011 OF 011

SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 03//08


In connection with the worsening business sentiment, companies have
begun showing signs of cutting back on capital investment intended
to increase production capacity.

Capital investment in fiscal 2007 is expected to show a slight
increase of 0.6 PERCENT from fiscal 2006. However, plans for
capital investment in fiscal 2008 are down 9.4 PERCENT from the
previous year.

Many companies expect a significant decrease in capital investment,
as can be seen in that food manufacturers expect a 30.9 PERCENT
drop, the wholesale industry, which is expected to suffer a drop in
U.S.-bound exports, projects a 38.9 PERCENT fall, and the
restaurant and hotel industry, which is prone to being directly
affected by sluggish consumption, expects a 50.8 PERCENT drop.

Further deterioration?

In the meantime, leading companies project that business sentiment
will improve to negative 2.3 in the April-July quarter and positive
6.6 in the July-September quarter. Japan Business Federation (Nippon
Keidanren) Chairman Fujio Mitarai told a news conference yesterday,
"Major economic stimulus measures to be taken by the U.S. in May
will produce results around early summer." He thus stressed his
perception that if the U.S. economy takes an upward turn due to
support from stimulus measures, the Japanese economy will return to
a healthy speed.

However, the commotion in global financial markets stemming from the
subprime mortgage crisis is still continuing. There are no
indications of the situation improving. The survey this time was
carried out on Feb. 25 and therefore does not include the impact of
the strengthening yen and weakening dollar, two trends that have
only progressed since then. Chances are that companies' business
confidence regarding the domestic economy has further deteriorated.

SCHIEFFER