Identifier
Created
Classification
Origin
09TOKYO1252
2009-06-04 07:15:00
UNCLASSIFIED
Embassy Tokyo
Cable title:  

DAILY SUMMARY OF JAPANESE PRESS 06/04/09

Tags:  OIIP KMDR KPAO PGOV PINR ECON ELAB JA 
pdf how-to read a cable
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UNCLAS SECTION 01 OF 11 TOKYO 001252 

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 06/04/09

INDEX:
(1) U.S. focusing on period following determination of Kim Jong Il's
successor; Plans to maintain pressure approach to prevent the
North's provocative acts (Nikkei)

(2) Dangers of advocating a capability to attack enemy bases, using
DPRK's outrageous behavior as excuse: Evil cycle of countering
military force with military force (Akahata)

(3) LDP Lower House member Taku Yamamoto: "Quite a number of
signatures collected" for campaign to advance presidential election
(Sankei)

(4) LDP's Nikai faction received 30 million yen when it was formed
from political organization made up of ocean construction firms
(Akahata)

(5) Debate on fiscal reconstruction starts between ruling,
opposition parties (Asahi)

(6) Amended Antimonopoly Law with broader fines enacted in response
to changes in industrial structure (Nikkei)

(7) Japanese companies rely on Asian markets for record 36 PERCENT
of fiscal 2008 operational profits (Nikkei)

ARTICLES:

(1) U.S. focusing on period following determination of Kim Jong Il's
successor; Plans to maintain pressure approach to prevent the
North's provocative acts

NIKKEI (Page 6) (Abridged slightly)
June 4, 2009

Masanori Yamaguchi, Seoul

The United States has begun making moves to work in close
cooperation with countries concerned, based on the view that North
Korea's saber-rattling, such as its nuclear tests and missile
launches, is designed to solidify the country's internal system that
is linked to accelerated developments in determining the successor
to General Secretary Kim Jong Il. The U.S. strategy is to focus its
attention on the North after it has obtained prospects for its
post-Kim Jong Il system without rushing to resume dialogue. At the
same time, the United States intends to apply pressure by using such
means as UN Security Council discussions on possible sanctions to
prevent the North from taking reckless actions.

Long-term strategy

"No matter what action North Korea takes, we will look for effective
means to have that country abandon its nuclear programs in close
cooperation with countries concerned."

U.S. Deputy Secretary of State James Steinberg, now on an Asian
tour, held talks in Seoul on June 3 with Foreign Affairs and Trade
Minister Yu Myung Hwan and other South Korean leaders. While playing
up the United States' plan to work closely with Japan, China, and
South Korea, Steinberg explained, "In talks this time around, we are
focused on a long-term strategy."


TOKYO 00001252 002 OF 011


North Korea's series of reckless actions, such as the missile
launches and nuclear tests, had been regarded as intended to push
Washington to engage in direct dialogue with Pyongyang, but the
situation has taken a new turn recently. Rekindled rumors of the
deterioration of Kim Jong Il's health condition and reports on the
North Korean leadership rushing to build a post-Kim Jong Il system
have resulted in a widespread view that the recent acts reflect the
North's own circumstances. Pyongyang's intention is to flaunt its
nuclear and missile technologies to avoid a decline in Kim Jong Il's
grip on power and to tighten the reins on the inner circle.

Making hasty compromises not an option

A senior U.S. official said on June 2, "Once a system for the
succession (of General Secretary Kim) is established, North Korea
will return to the negotiating table," indicating that the United
States has no intention of making hasty compromises just to engage
in dialogue with the North. The judgment is that the North will
return to the dialogue once it has concluded that it would be able
to control the turmoil with an eye on the succession structure.
Conveying to its Asian partners the U.S. administration's stance of
not seeking an early resumption of dialogue is the objective of
Steinberg's Asian tour, according to a source connected with the
Six-Party Talks.

At the same time, the United States is urging the UN Security
Council to adopt a strong resolution, including cargo inspections
and financial sanctions. Washington is set to continue applying
pressure on any move running counter to the denuclearization goal.
Steinberg has in fact confirmed a policy course with Japan and other
countries to increase pressure on the North.

China shares U.S. view

China shares the U.S. view that North Korea's hard-line stance
originates from its own circumstances rather than from its
diplomatic strategy. China, which has close ties with North Korea,
is set to take harsh measures, as seen in its intention to
effectively call off a program of reciprocal visits by their
high-level officials this year as part of events to mark the 60th
anniversary of diplomatic ties.

Beijing, however, is cautious about the UNSC adopting additional
sanctions for fear that they might result in turmoil and more
provocative acts. Striking a balance is essential when applying
pressure. The United States understands China's standpoint. In their
telephone conversation on June 3, President Barack Obama and his
Chinese counterpart, Hu Jintao, are believed to have confirmed their
policy direction and future plans for cooperation.

U.S. fine-tuned its North Korea policy

Hiroshi Maruya

During a Japan-U.S.-ROK defense ministerial held earlier in
Singapore, U.S. Secretary of Defense Robert Gates underlined the
need to employ both pressure and dialogue. His speech was viewed as
reflecting the Obama administration's basic stance toward North
Korea. "The secretary's speech was carefully worked out by the White
House, the Pentagon, and the State Department," a senior U.S.
official noted.


TOKYO 00001252 003 OF 011


The U.S. government, which thinks Pyongyang might launch more
missiles to raise tensions to solidify its internal system, believes
talks are the only option available for the North.

The United States, which puts top priority on nuclear
nonproliferation, firmly believes that the Six-Party Talks are the
best framework. The U.S. also believes there will be a chance to
make progress with the North Korean nuclear issue after a
cooling-off period.

(2) Dangers of advocating a capability to attack enemy bases, using
DPRK's outrageous behavior as excuse: Evil cycle of countering
military force with military force

AKAHATA (Page 3) (Full)
June 4, 2009

Takeshi Takeshita

Using North Korea's repeated nuclear tests and missile launches as
an excuse, the National Defense Division of the Liberal Democratic
Party (LDP) drew up a final draft of its recommendation on
"possessing the capability to attack enemy bases" on June 3.
Meanwhile, there have also been statements from the Democratic Party
of Japan (DPJ) regarding the possession of such a capability as a
matter of course.

Following the firing of a rocket in April and its nuclear test in
May, North Korea continues with its abnormal behavior of preparing
to even fire mid-range ballistic missiles.

The international community has criticized North Korea's actions
harshly, and the UN Security Council is discussing a sanctions
resolution. At the same time, the United States has sent a
delegation consisting of its deputy secretary of state and other
officials to Japan, China, the ROK, and Russia to roll out its
diplomatic efforts. It is important that the international community
makes a unified response.

A different government position

In response, the moves of the LDP and the DPJ have become highly
noticeable. Former Prime Minister Shinzo Abe has stated repeatedly:
"There is a discussion of whether we should possess the capability
to attack enemy bases. I think of course, we should" (speech in
Tokyo on May 15). DPJ member of the House of Councillors Keiichiro
Asao (defense minister in the "Next Cabinet") has also said: "If
North Korea comes to possess nuclear weapons or Nodong (mid-range
ballistic missiles),the argument will come out for Japan to also
possess the capability to attack enemy bases'" (May 27 issue of
Asahi Shimbun).

In its proposal on June 3, the LDP clearly calls for the "possession
of the capability to attack the operational base (enemy bases) under
the Japan-US cooperative arrangements." It is poised to demand the
inclusion of this in the new National Defense Program Guidelines
(NDPG) that the government will adopt in late 2009.

"Attack on enemy bases" refers to attacking with cruise missiles and
such other weapons the bases of another country that is about to
attack Japan with ballistic missiles and other weapons. The
government's position so far has been that such an attack is

TOKYO 00001252 004 OF 011


"legally possible" but the actual possession of the capability to
attack enemy bases "runs counter to the spirit of the
Constitution."

U.S. Forces as the "spear," SDF as the "shield"

At the same time, Japanese administrations over the years have
promoted Japan-U.S. military integration and the reinforcement of
U.S. military bases on the pretext that the U.S. Forces serve as the
"spear" (offensive capability) and the Self-Defense Forces (SDF)
serve as the "shield" (defensive capability) under the Japan-U.S.
security arrangements.

In this context, (then) Defense Agency Director General Shigeru
Ishiba (incumbent minister of agriculture, forestry and fisheries)
stated for the first time at the House of Representatives Committee
on Security on March 27, 2003 that "(the possession of enemy base
attack capability) should be discussed." This created a great stir.
At that time, former DPJ president Seiji Maehara questioned him
repeatedly about: "Will the possession of the capability to attack
(enemy bases) not undermine the relationship of trust with the
United States?" and "Tell us if this should be discussed in the
future."

Reservations even in the government

While the call for "attacking enemy bases" keeps surfacing every
time North Korea conducts a nuclear test or fires a missile,
actually, there are also strong reservations in the government.

At his news conference on April 10, Defense Minister Yasukazu Hamada
commented on the "capability to attack enemy bases": "I am very
doubtful about writing this into the NDPG or the Mid-Term Defense
Buildup Program."

A senior government official also said: "Attacking (North Korea's)
nuclear or missile experiment facilities does not make any sense.
This will only aggravate tension not only with North Korea but also
with China and South Korea, giving them an excuse to build up
arms."

Professor Satoshi Morimoto of Takushoku University also pointed out
during a NHK TV program on May 31: "If you give no thought to the
scenario after (attacking the enemy bases) and merely talk about
destroying the enemy's facilities, what will happen?" He expressed
doubts about such a line of thinking.

Moreover, a senior government official has said: "In the first
place, there is no way the U.S. will allow it." For those who regard
the Japan-U.S. alliance as sacred, this will mean a drastic review
of the division of labor between Japan and the U.S. as "spear and
shield," and they fear that this may create rifts in the alliance
under certain conditions.

For this reason, the LDP proposal also includes a passage on "the
need to build an even stronger Japan-U.S. cooperation system in
conjunction with the U.S. Forces' intelligence and offensive
capabilities."

Strictly banned under UN Charter

In any case, at a time when the international community needs to

TOKYO 00001252 005 OF 011


cooperate in responding to the North Korea issue, being taken in by
North Korea's provocation and prioritizing a military response is
the worst possible course of action, since this may start a
dangerous evil cycle of "countering military force with military
force." Above all, "This is an attempt to embark on using North
Korea's nuclear test to advocate a preemptive attack, which is
strictly prohibited by the UN Charter and is, needless to say, a
violation of the Constitution" (Japanese Communist Party Chairman
Kazuo Shii).

(3) LDP Lower House member Taku Yamamoto: "Quite a number of
signatures collected" for campaign to advance presidential election

SANKEI ONLINE (Full)
13:19, June 4, 2009

House of Representatives member Taku Yamamoto, who has initiated a
signature campaign in the Liberal Democratic Party (LDP) to demand
that the party's presidential election - currently scheduled for
September -- be held before the next Lower House election, told
reporters at a hotel in Tokyo at midday on June 4 that, "Quite a
number of signatures have been collected." However, he would not
reveal how many people are supporting his campaign, saying: "If
something like this is reported, this will cause problems for the
cabinet."

The group "association for advancing the presidential election" led
by Yamamoto sent a fax on June 2 to all LDP Diet members, including
Prime Minister Taro Aso, to ask for their signature in support of
the proposal. Since Yamamoto belongs to the Machimura faction, which
supports the Aso administration, senior faction officials were
furious and have moved to apply pressure on faction members not to
sign the document. A senior faction official strongly suspects that
"former secretary general Hidenao Nakagawa and others are behind
Yamamoto," but Nakagawa denies the allegation.

LDP Secretary General Hiroyuki Hosoda has stated at a meeting with
senior ruling party officials on the morning of June 3 that "he
(Yamamoto) seems to be acting alone," indicating that he thinks the
signature campaign will not go very far.

(4) LDP's Nikai faction received 30 million yen when it was formed
from political organization made up of ocean construction firms

AKAHATA (Page
UNCLAS SECTION 01 OF 11 TOKYO 001252

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 06/04/09

INDEX:
(1) U.S. focusing on period following determination of Kim Jong Il's
successor; Plans to maintain pressure approach to prevent the
North's provocative acts (Nikkei)

(2) Dangers of advocating a capability to attack enemy bases, using
DPRK's outrageous behavior as excuse: Evil cycle of countering
military force with military force (Akahata)

(3) LDP Lower House member Taku Yamamoto: "Quite a number of
signatures collected" for campaign to advance presidential election
(Sankei)

(4) LDP's Nikai faction received 30 million yen when it was formed
from political organization made up of ocean construction firms
(Akahata)

(5) Debate on fiscal reconstruction starts between ruling,
opposition parties (Asahi)

(6) Amended Antimonopoly Law with broader fines enacted in response
to changes in industrial structure (Nikkei)

(7) Japanese companies rely on Asian markets for record 36 PERCENT
of fiscal 2008 operational profits (Nikkei)

ARTICLES:

(1) U.S. focusing on period following determination of Kim Jong Il's
successor; Plans to maintain pressure approach to prevent the
North's provocative acts

NIKKEI (Page 6) (Abridged slightly)
June 4, 2009

Masanori Yamaguchi, Seoul

The United States has begun making moves to work in close
cooperation with countries concerned, based on the view that North
Korea's saber-rattling, such as its nuclear tests and missile
launches, is designed to solidify the country's internal system that
is linked to accelerated developments in determining the successor
to General Secretary Kim Jong Il. The U.S. strategy is to focus its
attention on the North after it has obtained prospects for its
post-Kim Jong Il system without rushing to resume dialogue. At the

same time, the United States intends to apply pressure by using such
means as UN Security Council discussions on possible sanctions to
prevent the North from taking reckless actions.

Long-term strategy

"No matter what action North Korea takes, we will look for effective
means to have that country abandon its nuclear programs in close
cooperation with countries concerned."

U.S. Deputy Secretary of State James Steinberg, now on an Asian
tour, held talks in Seoul on June 3 with Foreign Affairs and Trade
Minister Yu Myung Hwan and other South Korean leaders. While playing
up the United States' plan to work closely with Japan, China, and
South Korea, Steinberg explained, "In talks this time around, we are
focused on a long-term strategy."


TOKYO 00001252 002 OF 011


North Korea's series of reckless actions, such as the missile
launches and nuclear tests, had been regarded as intended to push
Washington to engage in direct dialogue with Pyongyang, but the
situation has taken a new turn recently. Rekindled rumors of the
deterioration of Kim Jong Il's health condition and reports on the
North Korean leadership rushing to build a post-Kim Jong Il system
have resulted in a widespread view that the recent acts reflect the
North's own circumstances. Pyongyang's intention is to flaunt its
nuclear and missile technologies to avoid a decline in Kim Jong Il's
grip on power and to tighten the reins on the inner circle.

Making hasty compromises not an option

A senior U.S. official said on June 2, "Once a system for the
succession (of General Secretary Kim) is established, North Korea
will return to the negotiating table," indicating that the United
States has no intention of making hasty compromises just to engage
in dialogue with the North. The judgment is that the North will
return to the dialogue once it has concluded that it would be able
to control the turmoil with an eye on the succession structure.
Conveying to its Asian partners the U.S. administration's stance of
not seeking an early resumption of dialogue is the objective of
Steinberg's Asian tour, according to a source connected with the
Six-Party Talks.

At the same time, the United States is urging the UN Security
Council to adopt a strong resolution, including cargo inspections
and financial sanctions. Washington is set to continue applying
pressure on any move running counter to the denuclearization goal.
Steinberg has in fact confirmed a policy course with Japan and other
countries to increase pressure on the North.

China shares U.S. view

China shares the U.S. view that North Korea's hard-line stance
originates from its own circumstances rather than from its
diplomatic strategy. China, which has close ties with North Korea,
is set to take harsh measures, as seen in its intention to
effectively call off a program of reciprocal visits by their
high-level officials this year as part of events to mark the 60th
anniversary of diplomatic ties.

Beijing, however, is cautious about the UNSC adopting additional
sanctions for fear that they might result in turmoil and more
provocative acts. Striking a balance is essential when applying
pressure. The United States understands China's standpoint. In their
telephone conversation on June 3, President Barack Obama and his
Chinese counterpart, Hu Jintao, are believed to have confirmed their
policy direction and future plans for cooperation.

U.S. fine-tuned its North Korea policy

Hiroshi Maruya

During a Japan-U.S.-ROK defense ministerial held earlier in
Singapore, U.S. Secretary of Defense Robert Gates underlined the
need to employ both pressure and dialogue. His speech was viewed as
reflecting the Obama administration's basic stance toward North
Korea. "The secretary's speech was carefully worked out by the White
House, the Pentagon, and the State Department," a senior U.S.
official noted.


TOKYO 00001252 003 OF 011


The U.S. government, which thinks Pyongyang might launch more
missiles to raise tensions to solidify its internal system, believes
talks are the only option available for the North.

The United States, which puts top priority on nuclear
nonproliferation, firmly believes that the Six-Party Talks are the
best framework. The U.S. also believes there will be a chance to
make progress with the North Korean nuclear issue after a
cooling-off period.

(2) Dangers of advocating a capability to attack enemy bases, using
DPRK's outrageous behavior as excuse: Evil cycle of countering
military force with military force

AKAHATA (Page 3) (Full)
June 4, 2009

Takeshi Takeshita

Using North Korea's repeated nuclear tests and missile launches as
an excuse, the National Defense Division of the Liberal Democratic
Party (LDP) drew up a final draft of its recommendation on
"possessing the capability to attack enemy bases" on June 3.
Meanwhile, there have also been statements from the Democratic Party
of Japan (DPJ) regarding the possession of such a capability as a
matter of course.

Following the firing of a rocket in April and its nuclear test in
May, North Korea continues with its abnormal behavior of preparing
to even fire mid-range ballistic missiles.

The international community has criticized North Korea's actions
harshly, and the UN Security Council is discussing a sanctions
resolution. At the same time, the United States has sent a
delegation consisting of its deputy secretary of state and other
officials to Japan, China, the ROK, and Russia to roll out its
diplomatic efforts. It is important that the international community
makes a unified response.

A different government position

In response, the moves of the LDP and the DPJ have become highly
noticeable. Former Prime Minister Shinzo Abe has stated repeatedly:
"There is a discussion of whether we should possess the capability
to attack enemy bases. I think of course, we should" (speech in
Tokyo on May 15). DPJ member of the House of Councillors Keiichiro
Asao (defense minister in the "Next Cabinet") has also said: "If
North Korea comes to possess nuclear weapons or Nodong (mid-range
ballistic missiles),the argument will come out for Japan to also
possess the capability to attack enemy bases'" (May 27 issue of
Asahi Shimbun).

In its proposal on June 3, the LDP clearly calls for the "possession
of the capability to attack the operational base (enemy bases) under
the Japan-US cooperative arrangements." It is poised to demand the
inclusion of this in the new National Defense Program Guidelines
(NDPG) that the government will adopt in late 2009.

"Attack on enemy bases" refers to attacking with cruise missiles and
such other weapons the bases of another country that is about to
attack Japan with ballistic missiles and other weapons. The
government's position so far has been that such an attack is

TOKYO 00001252 004 OF 011


"legally possible" but the actual possession of the capability to
attack enemy bases "runs counter to the spirit of the
Constitution."

U.S. Forces as the "spear," SDF as the "shield"

At the same time, Japanese administrations over the years have
promoted Japan-U.S. military integration and the reinforcement of
U.S. military bases on the pretext that the U.S. Forces serve as the
"spear" (offensive capability) and the Self-Defense Forces (SDF)
serve as the "shield" (defensive capability) under the Japan-U.S.
security arrangements.

In this context, (then) Defense Agency Director General Shigeru
Ishiba (incumbent minister of agriculture, forestry and fisheries)
stated for the first time at the House of Representatives Committee
on Security on March 27, 2003 that "(the possession of enemy base
attack capability) should be discussed." This created a great stir.
At that time, former DPJ president Seiji Maehara questioned him
repeatedly about: "Will the possession of the capability to attack
(enemy bases) not undermine the relationship of trust with the
United States?" and "Tell us if this should be discussed in the
future."

Reservations even in the government

While the call for "attacking enemy bases" keeps surfacing every
time North Korea conducts a nuclear test or fires a missile,
actually, there are also strong reservations in the government.

At his news conference on April 10, Defense Minister Yasukazu Hamada
commented on the "capability to attack enemy bases": "I am very
doubtful about writing this into the NDPG or the Mid-Term Defense
Buildup Program."

A senior government official also said: "Attacking (North Korea's)
nuclear or missile experiment facilities does not make any sense.
This will only aggravate tension not only with North Korea but also
with China and South Korea, giving them an excuse to build up
arms."

Professor Satoshi Morimoto of Takushoku University also pointed out
during a NHK TV program on May 31: "If you give no thought to the
scenario after (attacking the enemy bases) and merely talk about
destroying the enemy's facilities, what will happen?" He expressed
doubts about such a line of thinking.

Moreover, a senior government official has said: "In the first
place, there is no way the U.S. will allow it." For those who regard
the Japan-U.S. alliance as sacred, this will mean a drastic review
of the division of labor between Japan and the U.S. as "spear and
shield," and they fear that this may create rifts in the alliance
under certain conditions.

For this reason, the LDP proposal also includes a passage on "the
need to build an even stronger Japan-U.S. cooperation system in
conjunction with the U.S. Forces' intelligence and offensive
capabilities."

Strictly banned under UN Charter

In any case, at a time when the international community needs to

TOKYO 00001252 005 OF 011


cooperate in responding to the North Korea issue, being taken in by
North Korea's provocation and prioritizing a military response is
the worst possible course of action, since this may start a
dangerous evil cycle of "countering military force with military
force." Above all, "This is an attempt to embark on using North
Korea's nuclear test to advocate a preemptive attack, which is
strictly prohibited by the UN Charter and is, needless to say, a
violation of the Constitution" (Japanese Communist Party Chairman
Kazuo Shii).

(3) LDP Lower House member Taku Yamamoto: "Quite a number of
signatures collected" for campaign to advance presidential election

SANKEI ONLINE (Full)
13:19, June 4, 2009

House of Representatives member Taku Yamamoto, who has initiated a
signature campaign in the Liberal Democratic Party (LDP) to demand
that the party's presidential election - currently scheduled for
September -- be held before the next Lower House election, told
reporters at a hotel in Tokyo at midday on June 4 that, "Quite a
number of signatures have been collected." However, he would not
reveal how many people are supporting his campaign, saying: "If
something like this is reported, this will cause problems for the
cabinet."

The group "association for advancing the presidential election" led
by Yamamoto sent a fax on June 2 to all LDP Diet members, including
Prime Minister Taro Aso, to ask for their signature in support of
the proposal. Since Yamamoto belongs to the Machimura faction, which
supports the Aso administration, senior faction officials were
furious and have moved to apply pressure on faction members not to
sign the document. A senior faction official strongly suspects that
"former secretary general Hidenao Nakagawa and others are behind
Yamamoto," but Nakagawa denies the allegation.

LDP Secretary General Hiroyuki Hosoda has stated at a meeting with
senior ruling party officials on the morning of June 3 that "he
(Yamamoto) seems to be acting alone," indicating that he thinks the
signature campaign will not go very far.

(4) LDP's Nikai faction received 30 million yen when it was formed
from political organization made up of ocean construction firms

AKAHATA (Page 1) (Full)
June 4, 2009

Akahata learned on June 3 that Atarashii Nami (New Wave),a fund
management organization headed by Economy, Trade, and Industry
Minister Toshihiro Nikai, had received 30 million yen in donations
from a political organization, which was a dummy entity set up by
those who were related to ocean construction companies. This
occurred when Nikai's fund-raising organization was established in

2003. Sources related to the dummy entity have admitted that the
Nikai faction demanded donations. Suspicion has now surfaced that
the money from the dummy political organization was used for the
formation of the Nikai faction.

The dummy entity called "Koeikai" changed the name to "Sansoukai" in

2006. Sansoukai has been headed by executives of Toa Corporation
(Chiyoda Ward, Tokyo) and Penta-Ocean Construction (Bunkyo Ward,
Tokyo) and by advisers to the two construction companies.

TOKYO 00001252 006 OF 011



According to Nikai's fund management organization's political funds
report for fiscal 2003, the New Wave received 30 million yen on Aug.
29 from Koeikai.

The address of Koeikai at that time was its treasurer's home address
in Chiba City. Koeikai was headed by a Penta-Ocean Construction
executive. Nikai rejoined the ruling Liberal Democratic Party (LDP)
in 2003 from the now defunct New Conservative Party (NCP). Nikai
changed the NCP's fund management organization's name from the NCP
Association to the New Wave in November 2003 and he became its
chairman. This means that he started operations of the New Wave as
an LDP faction after receiving the money from Koeikai.

A person connected with Sansoukai admitted that the Nikai side had
requested the donations. The person said: "We contributed the money
because we were asked. It is hardly possible that we told them to
take the money because we had a lot of money." The person said:

"The (30 million yen) was actually contributed by several ocean
construction companies and we made the donation with the hope of the
money leading to harbor constructions. Donations from one company
cannot be competed with those from a major general construction
firm."

The Political Funds Control Law allows only the political parties'
headquarters and their regional chapters to receive corporate
donations. The law prohibits such political organizations as the New
Wave from taking corporate donations.

However, Sansoukai has made a large amount of contributions to the
fund management organizations of LDP lawmakers with close ties to
land, infrastructure and transport affairs, under the pretext of a
real political organization. There is a possibility that if Nikai's
fund management organization received the money with the knowledge
that it came from ocean construction firms, it means that the Nikai
side violated the Political Funds Control Law.

The New Wave's told Akahata: "We do not answer to questions by the
political party's organ newspaper."

(5) Debate on fiscal reconstruction starts between ruling,
opposition parties

ASAHI (Page 2) (Excerpts)
June 4, 2009

A discussion on how to put the nation's public finances on a sound
footing has started in the Diet. The Liberal Democratic Party (LDP)
and the New Komeito are willing to reflect a consumption tax-hike
scenario in their policy manifestos as "responsible parties." They
set economic upturn as the precondition for the scenario. Meanwhile,
the Democratic Party of Japan (DPJ) has already sealed off a
discussion on tax increases. The main opposition party instead has
insisted on the need for eliminating the waste of taxpayers' money.
The two parties might stop short of presenting any specific roadmap
on fiscal reconstruction in their policy manifestos for the next
general election, although the voters will select in the election
one of these parties as the next political party in power.

LDP wants to demonstrate "responsibility" by presenting consumption
tax-hike scenario, but unlikely to specify timing in 2009

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guidelines

In a meeting yesterday of the Council on Economic and Fiscal Policy
to work out the government's annual economic and fiscal policy
guidelines for 2009, Prime Minister Taro Aso said: "Putting up a new
goal (for fiscal reconstruction),the government needs to show its
willingness to make fiscal reconstruction efforts."

The government set forth the policy goal of achieving a primary
balance surplus in fiscal 2011 in its annual economic and fiscal
policy guidelines for 2006 under the Koizumi administration. In the
meeting yesterday, the panel decided to shift this goal into a
target of curbing the ratio of public debt in the 2009 guidelines.
With this, the targeted year for achieving fiscal rehabilitation has
become ambiguous.

Reallocation of fiscal revenues is vital in achieving fiscal
soundness. In the meeting yesterday, a private-sector member
presented a report including expressions that indicated a hike of
the consumption tax, such as: "the stable securing of fiscal
resources in the social security sector." Aso also emphasized in the
meeting: "Premised that we make utmost efforts to put the economy
back on its feet, we will steadily implement drastic reform of the
tax system, including a hike of the consumption tax."

With an eye on the next general election, Aso wants to build the
image that the LDP does not side step tax increases as a responsible
political party and wants to underscore a difference from the DPJ's
stance of sealing off a discussion on the consumption tax. The prime
minister apparently is aiming at placing the LDP to an advantage
with this approach.

In the debate between Aso and DPJ President Hatoyama on May 27, Aso
apparently focused his attention on the ability to hold the reins of
government, as shown in this remark: "We are facing a
once-in-a-century economic crisis. The most important task for the
government in these days is to map out measures in accordance with
actual circumstances." In line with Aso's view, LDP members are
eager to underline that the DPJ has no vision, as Deputy Secretary
General Nobutaka Ishihara said: "(The DPJ's stance) is to avoid
replying to a question about where the financial resources to fund
the nursing, medical and pension programs will come from."

In a discussion that is to start on the 10th, the LDP intends to
reflect the measures in the 2009 guidelines in its policy manifesto
and promise to raise the consumption tax in the future.

But the mid-term program adopted late last year to show a roadmap
for drastic tax reform cited fiscal 2011 as the targeted year for
raising the consumption tax, with economic recovery as the major
precondition. Although many members of the New Komeito and the LDP,
eyeing the next general election, were negative about tax hikes,
they stopped opposing the plan, because consensus was formed in the
ruling coalition on the view that "the consumption tax will be
raised if business perks up," as said by former Chief Cabinet
Secretary Nobutaka Machimura, as a result of giving priority to
measures to recover the economy for the time being.

State Minister for Economic and Fiscal Policy Kaoru Yosano has
announced a plan to change the mid-term program in the process of
drawing up the 2009 guidelines, but the dominant view in the ruling
camp is that a specific timing for a consumption tax hike should not

TOKYO 00001252 008 OF 011


be mentioned.

If the ruling parties, while stressing the need for a consumption
tax hike, give no specific roadmap for fiscal reconstruction,
leaving the timing and an increased rate vague, the catchphrase
"responsible parties" might fizzle out.

DPJ defers discussion on tax hikes to election after next, instead
puts forth need to eliminate waste, but without presenting total
sum

The DPJ, which defines the Aso administration's economic stimulus
measures as "pork-barrel," has yet to prepare its own policy
vision.

In the first meeting yesterday of the party's committee to study a
manifesto for the next Lower House election, Policy Research council
Chairman Masayuki Naoshima said: "We are calling for an early Lower
House dissolution for a general election. There is no much time
left. We might have to work hard up until late at night every day,
but we would like to produce a fine manifesto and grab political
power."

The manifesto includes a number of costly policy measures, such as
programs to offer 26,000 yen as a monthly allowance for child and
family support and subsidies to individual farmers. But the party is
unlikely to discuss a consumption tax hike. That is because
President Yukio Hatoyama has taken over former president Ichiro
Ozawa's policy of sealing off tax-hike debate.

Hatoyama said: "(If the LDP and the New Komeito continue to take the
helm of the nation,) the consumption tax will be surely raised in
two years." Secretary General Katsuya Okada, who promised to boost
the consumption tax by 3 percent to secure financial sources for the
pension program when he was assuming the presidency, also said: "We
will not take the option of raising the consumption tax in the next
four years."

The drastic tax reform action program, compiled by the party's tax
system research commission late last year, specified that the party
will take up tax increases in general election campaigning. Given
this, the party has decided to seek the voters' judgment for tax
hikes in the general election after the next.

How is the DPJ going to implement policies and restore fiscal
soundness simultaneously without depending on tax hikes? In
exchanging views with senior members of the Japan Business
Federation on June 1, Hatoyama said: "We are having difficulty
securing financial sources without relying on debt as much as
possible."

The main opposition party has called for eliminating the waste of
taxpayers' money. As specific measures to that end, the party has
started checking about 3,000 projects in the fiscal 2009 initial
budget to judge which projects should be abolished and which should
be entrusted to the private sector.

In a meeting of the Fiscal and Financial Department yesterday,
participants criticized expenses for housing for civil servants. The
party has presented which projects are considered to be waste but
has not given specific amounts. It seems difficult for the party to
clarify how to secure funds for measures it has pledged to implement

TOKYO 00001252 009 OF 011


if it takes over political power.

The DPJ has also advocated the goal of a primary balance surplus by
fiscal 2011, but Hatoyama recently indicated an intention to put the
goal on hold, saying: "Under the current economic situation, it is
considerably difficult to include the goal (in the manifesto)." The
party has not promoted discussion on an alternative target, either.

(6) Amended Antimonopoly Law with broader fines enacted in response
to changes in industrial structure

NIKKEI (Page 4) (Full)
June 4, 2009

The amended Antimonopoly Law with a broader scope of fines was
enacted on June 3. It will now be easier to apply the law widely to
rampant price cutting competition in the retail industry. In light
of the increasing weight of the service industry in the industrial
structure, the antimonopoly authorities have made clear their
intention to demand transparency in business practices not only in
the major manufacturing and construction industries, but also in all
businesses, regardless of size and line of business. Some people are
concerned about the growing powers of the antimonopoly authorities.

The amended law widens the scope for imposing fines, which have so
far been virtually limited to cases of bid-rigging and cartels.
Behind this are changes in the industrial structure, which have
resulted in drastic changes in the types of illegal practices and
the players involved. Unfair price cutting competition banking on
the capacity of a business to endure unprofitability has recently
been rampant due to the decline in personal consumption.

The number of cases of price cutting aimed at the elimination of
rivals - which could potentially lead to unfair price cutting -
watched by the Fair Trade Commission (FTC) in FY08 rose rapidly to
about six times that in FY05. Such cases became common in the sale
of electric home appliances, alcoholic beverages, and gasoline.
Local businesses demanded stiffer penalties in order to restrain
such practices.

The amended law imposes a fine on "unfair price cutting" equivalent
to 3 PERCENT of the sales volume. The Zensekiren (National
Federation of Oil Workers Unions) made up of gasoline retailers
(chaired by Masao Seki) says: "This is expected to deter businesses
from practicing unfair pricing."

The new law imposes a fine equivalent to 1 PERCENT of the
transaction volume between businesses for "abusing a position of
advantage." In June last year, Yamada Denki (a major electric home
appliance retail chain) was slapped with a cease-and-desist order
for violating the Antimonopoly Law (provision on abusing position of
advantage) for asking its suppliers to send employees to staff its
stores. Major electric home appliance retail chains, which have
often put pressure on their suppliers, are likely to be forced to
review their practices.

In the auto industry, parts makers dealing directly with car
manufacturers preside over a hierarchy of sub-suppliers. In
industries with a broad network of transactions, the major groups
will have to take responsive measures for the group as a whole to
prevent the bullying of subcontractors and other unfair practices.


TOKYO 00001252 010 OF 011


During the process of legal amendment, a review of the "arbitration
system" for companies to appeal the FTC's verdicts was also
confirmed.

With stricter penalties, there might be an increase in appeals by
companies being penalized, but the arbitration system is run by the
FTC. There has been a growing demand from businesses for
"independent arbitration procedures" (Nippon Keidanren (Japan
Business Federation))

How to deal with concerns about the growing powers of the FTC is
also likely to become a point of contention in the future.

(7) Japanese companies rely on Asian markets for record 36 PERCENT
of fiscal 2008 operational profits

NIKKEI (Top Play)
June 4, 2009

Japanese companies are increasingly relying on Asia for their
operating profits. Listed companies generated a record 36 PERCENT
of their operating profits in Asia in the term that ended in March

2009. While their operating profits in Japan, the U.S. and Europe in
the second half of fiscal 2008 (from October 2008 through March
2003) slipped into the red, those in Asia alone registered black ink
figures. Demand in Asia was stable even amid the ongoing global
recession. The profitability of operations in Asia has begun to
influence growth of the corporations over the mid- to long-term, as
well. Some companies are showing signs of intensively investing
management resources in Asia. Asia will likely shore up Japanese
companies in the second half of fiscal 2009, as well.

Among listed companies that closed their business books in March
(excluding the financial and three emerging markets),a Nikkei
survey covered 432 companies that disclose group sales and operating
profit figures for each region. Operating profits mean profits
generated from companies' mainstay business. Such data are being
watched with attention, because they can be used for comparison of
profit-earning capacity according to business field or region.

The companies reported 10 PERCENT -20 PERCENT declines in sales for
all regions in the second half of fiscal 2008. Operating profits
plunged 82 PERCENT to 2.31 trillion yen in Japan and to 135.2
billion yen in the Americas due to the financial crisis. They bled
red ink in Europe with an operating loss of 199.7 billion yen.

Meanwhile, operating profits in the Asia and Oceania region slipped
just 28 PERCENT to 1.72 trillion yen. Due to improved efficiency in
local production, the operating profit margin was 4.4 PERCENT for
this region, compared with 1.1 PERCENT for the domestic market.

The share of Japan in group operating profits dropped 48 PERCENT ,
down about 18 points, while that of Asia increased 24 points,
narrowing the difference.

Behind the increase in Asia's share is solid consumption. Suzuki
Motor Corporation's operating profit in Asia outside Japan marked
35.3 billion yen, down 37 PERCENT , for the first time surpassing
that in the domestic market -- 28.7 billion yen or a 66 PERCENT
drop. Unicharm Corp's operating profit in Asia outside Japan
increased 17 PERCENT on brisk sales of baby diapers and sanitary
goods.

TOKYO 00001252 011 OF 011



Economic stimulus measures appear to have contributed, too. Nippon
Yusen K.K.'s operating profit in Asia increased 43 PERCENT to 13.9
billion yen due to increased transportation of iron ore from
Australia to South Korea, reflecting the brisk Chinese market.

In the second half of fiscal 2008, Japanese companies were in the
red by 2.53 trillion yen in Japan, 62.9 billion yen in the Americas
and 273.2 billion yen in Europe. Asia outside Japan was the only
region in which they made profits, posting an operating profit of
470.4billion yen.

Many companies take the view that Asia will remain strong. Komatsu
Ltd. expects that global demand for its seven key construction
machinery products, such as hydraulic shovels, will dip 26 PERCENT
from the preceding term. China is expected to be the only market
where demand will grow. China's share of the sales of construction
machinery products by Komatsu will increase 15 PERCENT , up 5
points. The company plans to double the size of its plant in
Changzhou, China at the beginning of 2010. Shiseido Co. plans to
proactively increase personnel resources in China, projecting
yuan-based sales in that market will continue to log double-digit
gains.

According to the global economic outlook issued by the International
Monetary Fund (IMF),the global economy in real terms in 2009 will
mark negative growth of 1.3 PERCENT , while emerging Asian nations,
including China, will likely maintain 4.8 PERCENT growth. The
potential to earn money in Asia will likely hold the key to Japanese
companies regaining their operational profits.

ZUMWALT