JAPANESE MORNING PRESS HIGHLIGHTS 06/17/09

UNCLAS SECTION 01 OF 14 TOKYO 001361

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 06/17/09

Index:
1) Top headlines
2) Editorials
3) Prime Minister's daily schedule (Nikkei)

Defense and security affairs:
4) Signs that North Korea readying to fire another Taepodong-2
ballistic missile has Japan worried (Sankei)
5) Government reveals draft of special measures law that include
ship searches and supplying foreign vessels (Asahi)
6) Democratic Party of Japan (DPJ) cautious about having law that
allows ship searches (Asahi)
7) Former defense chief Koike quits Liberal Democratic Party (LDP)
committee on base affairs in protest of wording about no preemptive
strike capability (Tokyo Shimbun)
8) Koike concerned that removing possibility of preemptive strike
capability would weaken Japan's defense options (Sankei)
9) Government adopts additional set of sanctions against North Korea
(Yomiuri)
10) Lawsuit to require government to release document(s) with
"secret agreement" between Japan and U.S. on Okinawa reversion
(1972) finds a sympathetic judge (Asahi)

Political agenda:
11) His popularity plummeting in the poll, Prime Minister Aso seems
to have no way to fight back and recover earlier momentum (Tokyo
Shimbun)
12) Political parties are rapidly preparing for the next Lower House
election, with many hoping that it will be called sooner rather than
later (Nikkei)
13) LDP shaken by the erosion of Cabinet support in the polls, with
some saying Aso should step down if the party does badly in the July
Tokyo assembly election (Nikkei)
14) Senior LDP member suggest Prime Minister's litmus test will be
Tokyo election (Asahi)

15) JICA to restart financing overseas development projects this
fall (Asahi)

16) Japan to put efforts into mining undersea mineral resources in
nearby waters (Nikkei)

17) One year after Japan, China reached agreement on joint
development of gas fields in waters between the two countries, all
movement has stopped (Asahi)

18) Government reveals draft of "big-boned" economic policy
guidelines for 2009 (Mainichi)

Articles:

1) TOP HEADLINES

Asahi:
Iranian authorities refuse revote; Unrest spreading across country

Mainichi:
Iran ready for recount in face of massive protests

Yomiuri:
Local farm ministry branches hold 1,400 union meetings for 3 years
during office hours

TOKYO 00001361 002 OF 014



Nikkei:
Finance Ministry to preferentially allocate social security budget
in fiscal 2010

Sankei:
North Korea preparing to launch Taepodong-2 at Musudanri

Tokyo Shimbun:
U.S. to provide South Korea with nuclear umbrella against North
Korea; Lee, Obama confirm enhanced alliance

Akahata:
7,309 public elementary and junior high school building at risk of
collapsing in powerful earthquake

2) EDITORIALS

Asahi:
(1) Government urged to end municipal mergers and move on
(2) Sense of security requires a clear path

Mainichi:
(1) Secure society report insufficient
(2) Municipal mergers to end

Yomiuri:
(1) Aso must act to resolve Nishikawa issue
(2) Ship inspection special measures law must be enacted speedily

Nikkei:
(1) Iran in turmoil
(2) Municipal mergers must go hand in hand with decentralization

Sankei:
(1) Will ship inspection legislation function without SDF?
(2) Bloodshed in Iran must end

Tokyo Shimbun:
(1) International community must stop North Korea's reckless acts
(2) Hiroshima reformatory instructors arrested

Akahata:
(1) Specific steps must be spelled out for a secure society

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, June 16

NIKKEI (Page 2) (Full)
June 17, 2009

09:00 Attended cabinet meeting in the Diet building. Internal
Affairs and Communications Minister Sato remained.
09:16 Met with Chief Cabinet Secretary Kawamura and Environment
Minister Saito. Kawamura remained.
10:00 Met at Kantei with Cabinet Office International Peace
Cooperation Headquarters Chief of Secretariat Takada, followed by
METI Vice Minister Mochizuki.
11:32 Taped a video for a general meeting of the National Federation
of Small Business Associations.
12:54 Attended meeting of LDP Lower House members in the Diet

TOKYO 00001361 003 OF 014


building. Policy Research Council Chairman Hori remained. Met with
Shimamura, special advisor to the LDP president.
13:05 Attended Lower House plenary session.
13:48 Returned to Kantei.
15:02 Met with Deputy Chief Cabinet Secretary Asano.
16:05 Met with Yoshihiro Katayama, vice chairman of the regional
system Research commission. Met later with Azerbaijan Foreign
Affairs Minister Mammadyarov.
17:45 Met with Kawamura.
18:41 Attended meeting of the Council on Economic and Fiscal Policy.
Kawamura and Sato remained.
19:44 Met with METI Minister Nikai at Japanese restaurant Yamazato
in Hotel Okura.
22:16 Returned to his official residential quarters.

4) N. Korea preparing to launch Taepodong 2

SANKEI (Top play) (Abridged)
June 17, 2009

North Korea is preparing to launch a long-range ballistic missile at
a site in its northwestern region and at another site in its
northeastern region, sources revealed yesterday. The two missiles
are believed to be Taepodong-2 or advanced versions of Taepodong-2.
Meanwhile, North Korea is also preparing to launch an
intermediate-range ballistic missile in its southeastern region. The
Defense Ministry also presumes that the North will shortly launch a
new short-range ballistic missile. The ministry has decided to step
up the Self-Defense Forces' radar warning and has also decided to
ready the SDF to intercept missiles should the situation become
imminent. The ministry is planning to deploy Patriot Advanced
Capability 3 (PAC-3) surface-to-air guided missiles in the Tokyo
metropolitan area and in the Kansai region.

In the run-up to missile launches, equipment for long-range
ballistic missiles was confirmed to have been loaded into a freight
train in late May at a munitions factory located near Pyongyang.
South Korea's news media reported all at once that the missile
equipment has arrived at a newly built missile site located in
Dongchang-ri in the northwestern North Korean province of North
Pyongan.

There are also signs indicating that long-range ballistic missile
materials were also carried to a missile site located in Musudan-ri
in the northeastern North Korean province of North Hamkyong,
according to findings from the Japanese government's analysis and
other sources. The government believes that North Korea is
concurrently preparing to launch missiles at the Dongchang-ri and
Musudan-ri sites.

In order to drop a warhead or booster in international waters, North
Korea will likely launch a long-range ballistic missile from
Musudan-ri. That missile, after being launched, is expected to pass
across over Japan's northeastern districts like the one launched in
April. The other long-range ballistic missile being prepared at
Dongchang-ri is highly likely to be launched to the south, possibly
passing through over the Sakishima Shoto archipelago of islands.
However, there is no knowing if the missile will be launched in that
direction.

Some Japanese government officials surmise that the ongoing
preparations at Musudan-ri or Dongchang-ri are dummy activities for

TOKYO 00001361 004 OF 014


a feint operation intended to confuse Japanese and U.S. intelligence
gathering activities. However, the Defense Ministry is considering
counteractions, assuming that North Korea will launch missiles from
both sites. Earlier this week, the SDF switched its ground-based
FPS-5 and FPS-3 radar to ballistic detection mode.

In order to intercept ballistic missiles with the missile defense
system, an Aegis-equipped destroyer of the Maritime Self-Defense
Force, loaded with Standard Missile 3 (SM-3) sea-based intercept
missiles, will be staged in the Sea of Japan. However, the focus of
concern, as in April, is on where to mobilize PAC-3 missiles. Last
time, North Korea announced the ballistic missile's flight course,
and the SDF deployed PAC-3 batteries in the Tokyo metropolitan area
and the northeastern districts.

This time, North Korea is expected to make no announcement. The
government will therefore be called upon to make an even more
difficult judgment. However, the Defense Ministry will likely plan
to move out the PAC-3 batteries to the metropolitan area and the
Kansai region.

5) Special legislation incorporates fueling for foreign forces

ASAHI (Page 1) (Full)
June 17, 2009

The United Nations Security Council has now adopted a resolution of
sanctions incorporating cargo inspections on the high seas for ships
to and from North Korea. In the wake of this move, the government
and the ruling parties are going to present a bill to the Diet
during the current session for a special measures law to inspect
ships related to North Korea. The draft bill stipulates ship
inspections to be conducted by the Japan Coast Guard or the
Self-Defense Forces. In addition, it incorporates the SDF's
rear-echelon support for foreign forces.

The current ship inspections law is premised on recognizing
"emergencies in the neighborhood of Japan" that will have a serious
influence on the peace and security of Japan. The government does
not regard the present situation as a neighboring emergency or
contingency, so the draft bill bases the ship inspections and other
relevant bills on the U.N. resolution. However, the bill, if enacted
into law, will enable the SDF to engage in such activities as ship
inspections and rear logistics like those that will be conducted in
the event of regional contingencies in the periphery of Japan.

According to the draft bill, the SDF will conduct rear support
activities in Japan's "territorial waters or in international waters
around Japan," where the SDF will carry out refueling and personnel
transportation. The SDF is expected to conducting underway
replenishment or seaborne refueling services like those conducted by
the SDF in the Indian Ocean for U.S. and other foreign naval
vessels. These activities preclude providing weaponry and
ammunition.

Meanwhile, the JCG or the SDF will conduct ship inspections at the
prime minister's judgment and will inspect ships to check their
cargoes with consent from their countries and their skippers.
Inspected ships, if loaded with contrabands like missile-related
materials, will be asked to alter course. These activities will be
restricted to Japan's territorial waters or the high seas around
Japan and will be clearly differentiated from the area of foreign

TOKYO 00001361 005 OF 014


naval activities, according to the draft bill.

Upon conducting these activities, the prime minister will call a
cabinet meeting to adopt a masterplan that specifies ship
inspections and rear support. The draft bill stipulates that the
Diet is to give ex post facto approval and that the government is to
ask the Diet for its approval within 20 days after the start of
activities. The use of weapons is allowed for legitimate
self-defense or emergency evacuation only.

The ruling parties will likely decide today to set up a project
team, which will begin next week to put the finishing touches on the
draft bill. However, if the bill is before the Diet, the House of
Representatives' current membership will end Sept. 10. It is
therefore unclear whether the bill will clear the Diet.

6) DPJ cautious about North Korean ship inspection law

ASAHI (Page 4) (Full)
June 17, 2009

There is a growing opinion in the Democratic Party of Japan (DPJ)
that favors a cautious response to a bill on sanctions against North
Korea, which the government and ruling parties are looking into
submitting to the current Diet session. The DPJ predicts that Prime
Minister Taro Aso is trying to expose differences in views on
security policy in the party by presenting such a bill. However, the
DPJ has yet to look into counterproposals.

Immediately after North Korea's nuclear test, the DPJ's foreign
affairs and defense council proposed the need for a new law, prior
to the government taking action. However, the directors of the panel
in a meeting yesterday went no further than to confirm that the DPJ
would come up with a view on legal improvements in cargo inspections
on ships going in and out of North Korea, while watching the
government's response. This is because Aso has remarked that his
government will submit the bill as means of testing the DPJ's
capability of assuming the political reins, since the disclosure of
the move to submit the bill by the government-ruling coalition. DPJ
President Yukio Hatoyama stressed at a press conference yesterday:
"We will not give carte blanche. It depends on the content." He
feels that if the Self-Defense Forces (SDF) is responsible for ship
inspections, it will be difficult for his party to reach a
consensus. Therefore, he said: "If the Japan Coast Guard takes on
the mission, there will be a possibility that our party can
approve."

7) Koike to resign as military base panel chairperson in protest
over moderated expression on preemptive strikes

T OKYO SHIMBUN (Page 2) (Full)
June 17, 2009

In a meeting of the Liberal Democratic Party's Executive Council
yesterday, Yuriko Koike said she will resign as chairperson of the
party's Special Committee on Military Bases. The expression on
possession of a capability to strike enemy bases - inserted in a
report with recommendations for an outline of defense policy
produced by a subcommittee of the party's National Defense Division
- was rewritten to a more moderate one. In protest over the change,
Koike decided to resign from the post.


TOKYO 00001361 006 OF 014


The report specified Japan's possession of an enemy base strike
capability to counter North Korea's missile and nuclear threats. But
reflecting complaints from party members who once served as defense
agency director general or defense minister, the report added this
proviso: "Japan will not launch a preventive/preemptive attack."

Koike criticized the proviso yesterday, remarking: "Japan will be
caught in its own trap. Its deterrent capability will be
undermined."

8) Koike resigns as LDP base issues committee chair in protest of
"consideration for neighboring countries" restricting defense
policy

SANKEI (Page 5) (Full)
June 17, 2009

Former Defense Minister Yuriko Koike of the Liberal Democratic Party
(LDP) told reporters at the party headquarters that she had resigned
as chair of the party's special committee on base issues. This was
in protest of the inclusion of the passage that Japan will not make
"preventive preemptive strikes" in the recommendation presented by
the joint meeting of the LDP defense-related divisions to Prime
Minister Taro Aso (LDP president) on the "possession of the
capability to attack enemy bases."

This passage was included in the drafting process because a meeting
of former Defense Agency directors general and defense ministers
heeded the opinion of former Vice President Taku Yamasaki and others
that Japan "should not arouse any misunderstanding from other
countries." Attacking enemy bases is a type of "preemptive strike"
within the scope of international law, the Constitution, and the
exclusively defensive policy. On the other hand, "preventive
preemptive strike" refers to attacking an enemy that does not
represent an imminent threat but may become an intolerable threat if
left alone. This is illegal under international law and had not been
the assumption of the recommendation.

In response to Sankei Shimbun's query, Koike said: "We tie our hands
with an exclusively defensive policy and further tie our hands with
the passage on 'preventive preemptive strike.' They only talk about
restrictions. Is it right that we continue to restrict Japan's
defense policy? We give consideration to our neighbors but they
don't give any consideration to us."

9) Government decides on additional sanctions on North Korea

YOMIURI (Page 2) (Full)
June 17, 2009

The government formally decided on June 16 to enforce a complete ban
on exports to North Korea as Japan's own additional sanction on this
country after circulating the draft resolution among cabinet
ministers. It also decided on reinforcing control on travels by
Korean and other foreign residents in Japan to and from the DPRK.
This is in reaction to North Korea's nuclear tests and ballistic
missile launches and its refusal to take any concrete action toward
resolving the abduction issue.

The export ban will take effect from June 18 to April 13, 2010,
while the travel ban will take effect immediately and will be
enforced indefinitely.

TOKYO 00001361 007 OF 014



At a news conference on June 16, Chief Cabinet Secretary Takeo
Kawamura issued a statement on the sanctions against North Korea. He
said: "If (North Korea) takes concrete action toward the resolution
of the pending issues, including the abduction, nuclear, and missile
issues, all or some of the sanctions will be suspended. We ask that
it take such action promptly."

Since the ballistic missile launches in 2006, Japan has imposed
sanctions on the DPRK, including a ban on imports. With the latest
additional sanctions, trade between the two countries, both imports
and exports, will be completely banned.

The travel ban is aimed at making the Korean residents in Japan, who
have close links with the DPRK, abide by Japan's sanctions.
Specifically, if found guilty of violating the sanctions, (1)
re-entry of foreign residents of Japan who have traveled to North
Korea will not be allowed; and (2) foreign seamen will not be
allowed to embark.

List of Japan's sanctions on North Korea
(first two are sanctions newly added)

-- Complete ban on exports
-- Foreign seamen violating the sanctions will be refused
embarkation in principle, and foreign residents violating the
sanctions who have traveled to the DPRK will be refused re-entry in
principle.
-- Lowering the amount of fund transfer to North Korea requiring
reporting from 30 million to 10 million yen
-- Lowering the amount of cash taken to North Korea requiring
reporting from 1 million to 300,000 yen
-- Ban on port calls by all North Korean ships
-- Complete ban on imports
-- Ban on entry of North Korean citizens in principle
-- Ban on chartered flights between Japan and North Korea
-- Suspension of travel by Japanese civil servants to North Korea in
principle and call for voluntary restraint by private travelers
-- Strict export control for the non-proliferation of missiles and
nuclear weapons

10) Tokyo judge asks government to give reasons for claiming secret
agreement during Okinawa's reversion does not exist

ASAHI (Page 31) (Abridged)
June 17, 2009

In the court case on information disclosure in relation to the
"secret agreement" said to have been exchanged between Japan and the
United States at the time of Okinawa's reversion to Japanese
administration in 1972, Chief Justice Norihiko Sugihara of the Tokyo
District Court told the government's representatives on June 16 that
they "need to give a rational explanation of the reason" for
claiming that the government "does not possess such documents,"
asking them to do so at the next hearing. This is an unusual order
by a judge putting the responsibility to explain on the defendant,
the government.

The Japanese government has consistently denied the existence of the
secret agreement despite the fact that diplomatic documents
attesting to this agreement were made public on the U.S. side. The
government's stance will be called into question again through this

TOKYO 00001361 008 OF 014


litigation.

The 25 plaintiffs in this case include writer Hisae Sawachi and
Rikkyo University lecturer Keiichi Katsura. They had requested the
disclosure of documents on the Japanese side last September based on
the Information Disclosure Law. However, the government's response
was: "The archives were searched but there has been no evidence of
such documents being written or obtained. They were also not found
in the records of documents destroyed or transferred." They filed a
lawsuit in March.

11) Aso finds no chance to rally, beset on all sides

TOKYO SHIMBUN (Page 2) (Full)
June 17, 2009

Seeing the recent sharp drop of public support ratings of the
cabinet, members of the Prime Minister's Office supporting Prime
Minister Aso are getting more desperate, but they remain unable to
find a way to turn the tables.

Chief Cabinet Secretary Takeo Kawamura yesterday called on Yoshiro
Mori and Yasuo Fukuda, both of whom have served as prime minister,
at their offices and received advice from them about government
administration.

Mori criticized Aso's replacement of Internal Affairs and
Communications Minister Kunio Hatoyama over the reappointment of
Yoshifumi Nishikawa as president of Japan Post Holdings Co.,
remarking: "I was worried that the situation could develop this
way." Mori had suggested that both Hatoyama and Nishikawa should be
dismissed. In the meeting with Mori, Kawamura became fully aware of
how fiercely many Liberal Democratic Party (LDP) members have
reacted to Aso. Fukuda, too, just said: "If he continues to perform
his duty patiently as he has done so far, I think he will be able to
get public understanding."

Kawamura visited LDP members who once served as prime minister and
factional chiefs when cabinet support ratings plunged in December of
last year, but he failed to assuage growing criticism of Aso. The
practice of visiting influential party members in an unmanageable
situation is to show that the Prime Minister's Office has no
settlement means.

Agriculture, Forestry and Fisheries Minister Shigeru Ishiba
commented: "Many members have said that the dismissal (of Hatoyama)
was improper." Other cabinet members have also voiced
dissatisfaction at Aso's decision. But Aso has no plan to give an
explanation of why he made the decision and intends to allow
Nishikawa to stay on.

In the Prime Minister's Office, a close aide to Aso, while looking
askance at Kawamura's efforts, desperately said: "It is
inconceivable that cabinet support rate will go up sharply during
his remaining term of office, which is drawing to an end."

12) Active election preparations underway; DPJ confirms campaign
cooperative system; LDP rushing to open campaign offices

NIKKEI (Page 2) (Abridged)
June 17, 2009


TOKYO 00001361 009 OF 014


The ruling parties began gearing up yesterday for House of
Representatives dissolution for the next general election. This is
because support ratings for the cabinet of Prime Minister Taro Aso
further dropped in many public opinion surveys and also because
there is a growing view that Aso, alarmed at a move to unseat him,
might dissolve the Lower House ahead of the July 12 Tokyo assembly
election. But a cautious view remains in the Liberal Democratic
Party (LDP) that an early dissolution would be suicidal in the face
of the major opposition Democratic Party of Japan (DPJ),which is in
a mood of an all-out battle.

DPJ President Yukio Hatoyama revealed this view to reporters
yesterday: "If Prime Minister Aso wants to dissolve the chamber
himself, we think that would happen in the next two weeks." Deputy
President Ichiro Ozawa, too, made the following comment at a press
conference in Nagoya: "There are 50-50 or 40-60 chances for the
prime minister to dissolve the Lower House later this month or early
next month, respectively."

The Diet is heading toward the enactment of key bills, including
antipiracy legislation, on June 19 and the settlement of the
remaining budget-related bills by June 26. If the Prime Minister
dissolves the chamber by early July, chances will grow for an
election in early August. At an executive meeting yesterday,
Hatoyama ordered the formulation of the party's manifesto (campaign
pledges) by July 2.

After much difficulty, the DPJ determined yesterday its official
candidate for the Lower House Aichi No. 1 district. The party also
formally decided on its official candidate for the July 5 Shizuoka
gubernatorial election. Hatoyama met yesterday with the People's New
Party representative Tamisuke Watanuki and chairman Yoshifumi Tsuge
of the postal policy study group composed of members of the National
Postmasters Association and confirmed election cooperation under the
new system. The DPJ will also accelerate local stumping tours with
executives, such as Tsuyoshi Takagi, president of Rengo (Japanese
Trade Union Confederation),the DPJ's support organization.

In the DPJ, there is an observation that voters will continue to
place its hopes on the Hatoyama leadership for three months at the
longest. That is partially why the party is inclined toward an early
dissolution. Some in the LDP think that an early dissolution would
only please the DPJ. Even so, unable to project future developments,
the LDP has to brace for the next general election.

Prime Minister Aso's local office has begun making preparations for
opening several campaign offices in Fukuoka No. 8 district that
includes Iizuka. Secretary General Hiroyuki Hosoda, too, intends to
resume activities by July 1 of his campaign office in his home turf
of Shimane No. 1 district.

The LDP finished last fall determining its official candidates for
all single-seat constituencies except for Tochigi No. 3, which is
represented by former Administrative Reform Minister Yoshimi
Watanabe, who has left the party. The LDP leadership is now having
difficulty finding an attractive catchphrase to counter the DPJ's
slogan of a change of government.

13) Fall in cabinet's public approval rates rattles LDP

NIKKEI (Page 2) (Full)
June 17, 2009

TOKYO 00001361 010 OF 014



A sharp plunge in the support rates for the Aso cabinet has left the
Liberal Democratic Party (LDP) shocked and shaken. When asked about
Prime Minister Taro Aso's active support for LDP candidates running
in the Tokyo Metropolitan assembly election by a Nihon Keizai
Shimbun reporter, a senior LDP member said last evening: "The Prime
Minister has probably made up his mind." The LDP member hinted at
the possibility that if the ruling bloc is defeated in the Tokyo
election, the situation could develop into the question of whether
Aso should leave office. The senior member referred for the first
time to the possibility of Aso's resignation as prime minister.

The Machimura faction in the LDP held yesterday a senior officials'
meeting to exchange views on future political schedules. The view
was raised that the cabinet should be shuffled before the next House
of Representatives election.

After the meeting, one member told reporters: "We simulated a
political schedule until October." The participant hinted at the
possibility of delaying the Lower House election to October after
the terms of the Lower House members expire. Former Chief Cabinet
Secretary Nobutaka Machimura, former Prime Ministers Yoshiro Mori
and Shinzo Abe, and Nariaki Nakayama, former Land, infrastructure,
and transport minister, attended the meeting.

In a meeting yesterday of the LDP's Lower House members,
Environment Parliamentary Secretary Sadahisa Furukawa criticized
Aso's dismissal of Kunio Hatoyama as internal affairs and
communications minister, noting: "Our party has definitely lost
public confidence due to the Hatoyama problem this time." He even
said: "In order to return to the origin of a conservative party, we
should transfer power (to the opposition). This is the shortest way
for our party to regain power," indicating the perception that the
LDP should prepare for the situation where it would fall into the
opposition.

Aso, too, attended the meeting. Furukawa has close ties to Hatoyama.
Some viewed that he urged Aso to step down from his post by using
the expression the transfer of power. Aso later told the press
corps: "I did not understand what kind of power should be
transferred. I thought that young lawmakers were feeling the
tension."

14) Senior LDP member: If LDP defeated in Tokyo election, Prime
Minister Aso's responsibility will be called into question

ASAHI (Page 4) (Full)
June 17, 2009

A Liberal Democratic Party (LDP) executive member said last evening
regarding the Tokyo metropolitan assembly election on July 12:
"Since Prime Minister Taro Aso has visited (candidates to give them
encouragement),I think he has made up his mind (on what he will do)
(if the LDP is defeated)." He indicated that if the LDP fails to
secure the largest number of Lower House seats, the prime minister's
responsibility will be called into question. He then said, "(Aso)
should not go" to Shizuoka Prefecture to support the LDP-recommended
candidate running in the Shizuoka gubernatorial election on July 5
although Aso is eager to do so.

15) JICA to resume overseas investment and financing project
possibly this fall

TOKYO 00001361 011 OF 014



ASAHI (Page 5) (Full)
June 17, 2009

The government in 2001 decided to end the Japan International
Cooperation Agency's (JICA) overseas investment and financing
projects, but it now has decided to resume such projects, possibly
this fall. The decision has been included in the basic policy
guidelines for the fiscal 2009 budget, which were presented on June

16. The government intends to promote financial assistance to
projects Japanese companies are carrying out in developing countries
with the aim of using such projects to help revitalize their
economies.

JICA's investment and financing program targeted projects with
major development effects but involving high investment risks.
However, since the program continued to incur losses, it was
abolished when JICA was subjected to reform of special public
corporations. Natural resources development and the agricultural
sector are expected to be eligible for the resumed JICA projects.

16) JAMSTEC to develop probes to locate undersea minerals

NIKKEI (Page 1) (Full)
Evening, June 16, 2009

Japan Agency for Marine-Earth Science and Technology (JAMSTEC) will
develop unmanned probes that will search for mineral deposits in
waters near Japan. The Ministry of Education, Culture, Sports,
Science and Technology, which has jurisdiction over JAMSTEC, will
invest about 3 billion yen in the project. The agency plans to
develop two prototypes - one that scours the seafloor autonomously
and the other that is remotely operated from a ship - during this
fiscal year. JAMASTEC will also team up with Nissan Motor Co. to
develop the next-generation technology for resource searching. This
is the first time for Japan to develop full-scale probes in a bid to
secure underwater resources. JAMSTEC aims to commercialize the
probes in about 10 years.

The self-navigating probe will be able to autonomously operate at
depths of up to 3,000 meters. It will install sensors that will
analyze input such as underwater topography and seawater compounds,
and locate mineral veins. To enhance mobility, the machine will be
4-5 meters long and run on long-lasting lithium-ion batteries.

JAMSTEC will work with Nissan to develop an advanced
image-recognition device that will be installed on the probes. The
device, based on the technology Nissan developed to help drivers
park cars, will give the machines the ability to search in all
directions, including underneath. A prototype of the device will be
produced within a year.

Hydrothermal mineral deposits are belched out with hot water at
depths of 500 to 3,000 meters. Valuable resources, such as gold,
cooper and gallium are included the deposits. It is said that in
Japanese waters, there are deposits worth 80 trillion yen. The most
promising sites are off Okinawa and Ogasawara islands.

17) China remains inactive one year after agreement reached on joint
development of gas field with Japan

ASAHI (Page 4) (Excerpts)

TOKYO 00001361 012 OF 014


June 17, 2009

June 18 marks the first anniversary of the Japan-China agreement to
jointly develop gas fields in the East China Sea. However, joint
development has yet to be started. Furthermore, talks to compile
specifics of the agreement into a formal treaty have not even been
started. While Japan is positive toward the project, the Chinese
side appears to be unable to enter talks out of concern over a
dispute over interests in the South China Sea and its impact on
public opinion.

Foreign Minister Nakasone during a press conference on June 16 said,
"It is very regrettable that talks to sign a treaty have not started
yet."

The situation was different a year ago, when the agreement was
reached. Then Foreign Minister Komura had proudly said, "This is a
good opportunity for Japan and China to show that they can settle
any difficulties through talks." Concerning the mapping out of a
treaty, he had said, "It will not take a long time."

However, a foreign ministry official said that the ministry is not
concerned about the current impasse.

When both countries reached the agreement in June last year, they
reached a consensus on capital participation by Japan in the
development of the Shirakaba gas field (Chunxiao in Chinese),which
China had already begun developing. As a result of the agreement,
the development by China was suspended until the time a treaty was
signed, eliminating Japan's concern that resources on the Japanese
side of the oil field would be siphoned off by China. The area
straddling the median line, which Japan claims to be the demarcation
line between Japan and China in the exclusive economic zone in the
East China Sea, became the target of the joint development. A senior
foreign ministry official revealed that since Japan's stance was
adopted, the agreement was highly praised as a victory by Japan.

In the meantime, the Chinese side is hardening its attitude.
Division director-level officials of the Japanese and Chinese
foreign ministries met informally in late May. A senior official of
China's newly established bureau responsible for national border and
marine affairs was in charge of the meeting on the Chinese side.
According to Chinese Foreign Ministry Spokesman Ma Zhaoxu, this
bureau is a highly specialized organ established to settled border
issues in various parts of China.

There is a strong possibility that behind China's stance is the
territorial dispute in the South East Sea, in which China is
contending with Vietnam and the Philippines. A diplomatic source in
Beijing speculated, "The Chinese government is afraid that its
concession made over the East China Sea will affect the South China
Sea issue." A source connected with the Chinese government revealed:
"The agreement was reached thanks to then Prime Minister Fukuda, who
attaches importance to relations with China. It is impossible for
China to press ahead with risky talks with Prime Minister Aso,
because he will dissolve the Diet anytime soon."

18) Top priority issues added to draft basic policy guidelines on
prime minister's orders: Spending cuts recede further

MAINICHI (Page 6) (Full)
June 17, 2009

TOKYO 00001361 013 OF 014



Draft basic policy guidelines on economic and fiscal management and
structural reforms for the fiscal 2009 national budget were
presented on June 16 at a meeting of the government's Council on
Economic and Fiscal Policy, chaired by Prime Minister Taro Aso.
Although the government did not change its stance of continuing its
regular efforts to cut spending in the next fiscal year's budget, it
decided to add immediate top priority issues, such as advancing
efforts to strengthen social security, on the prime minister's
orders. Kaoru Yosano, who is in charge of economic and fiscal policy
as well as financial services, indicated his intention to set up a
special framework when compiling a budget for the next fiscal year
and intensively inject budgetary funds into it.

This development is in response to mounting pressure from the ruling
parties to boost spending in the run-up to the upcoming general
election. As a result, the spending reform policy line based on
fiscal reconstruction has suffered a further setback.

The prime minister ordered the inclusion of two priority issues -
overcoming the economic crisis and realizing a secure society. An
immediate effort to maintain jobs, an approach to promoting
private-sector investment in environment-related markets, the
advance implementation of social security measures such as medical
services and pensions, and promoting measures to deal with the
declining birthrate, were added. In compiling the basic guidelines
for the fiscal 2009 budget, many ruling party members are calling
for shelving the guidelines of the fiscal 2006 budget, which
indicate specific goals for spending reforms. In particular, strong
opposition continues to an annual reduction of 220 billion from
natural increases in social security expenditures.

Yosano, during a press conference after the meeting, indicated his
stance of maintaining the goal to cut social security expenditures.
However, he also said, "The finance ministry should provide an
appropriate response." He indicated a policy of setting up a special
framework in budget request guidelines for the next fiscal year to
be adopted in July and intensively injecting budgetary funds into
it.

The government intends to search for common ground with ruling party
lawmakers who are against the idea. However, whether a settlement
can be reached still remains to be seen. The goal to cut
expenditures has been chipped away at without debate in past budget
compilations. Some finance ministry members said that if the
situation is left as it is, it would be impossible to maintain
fiscal discipline.

Spending cut goal indicated in fiscal 2006 basic policy guidelines

"Total of between 11.4 trillion yen and 14.3 trillion yen in
expenditures to be cut over five years from fiscal 2007 through
fiscal 2011."

Q Social security spending: 1.1 trillion yen to be cut (220 billion
yen a year)
Q Payroll cost for public servants: 2.6 trillion yen to be cut
Q Public works: Annual 1 PERCENT -3 PERCENT cut in comparison with
each of the previous years' levels
Q ODA: Annual 2 PERCENT -4 PERCENT cut in comparison with each of
the previous years' levels
Q Science and technology promotion expenditures: To be constrained

TOKYO 00001361 014 OF 014


within the scope of economic growth

ZUMWALT