JAPANESE MORNING PRESS HIGHLIGHTS 06/18/09

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SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 06/18/09

Index:

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

Foreign and security affairs:
4) Defense Ministry analysis: Next North Korean missile launch could
be targeting Hawaii (Yomiuri)
5) LDP's foreign affairs panel presents list of policy proposals
(Yomiuri)
6) Next consul general for Okinawa: Not prepared to discuss
relocation of Futenma base outside the prefecture, even if promoted
by a DPJ administration (Ryukyu Shimpo)
7) Prime Minister Aso denies press reports of existence of "secret
agreement" with U.S. connected to the reversion of Okinawa to Japan
(Tokyo Shimbun)
8) Text of exchanges in one-on-one party heads debate on North Korea
and security affairs (Sankei)

Political agenda:
9) As Prime Minister Aso, Democratic Party of Japan President
Hatoyama go one-on-one in Diet debate, Aso rapidly losing support of
his party (Asahi)
10) Sagging badly in the polls, will Aso shuffle cabinet, delay
timing of general election to October, or speed up the LDP
presidential election? (Nikkei)
11) LDP trying to extinguish rumor that the July Tokyo assembly
election will be a litmus test for Aso, resigning to take
responsibility if the party suffers a big loss (Yomiuri)
12) Opposition camp is all fired up, expecting an early general
election (Yomiuri)

Scandals:
13) METI Minister Nikai is again under scrutiny for money links to
corrupt construction company (Akahata)
14) DPJ lawmaker apparently involved in bureaucrat's welfare scam
(Sankei)

15) Finance Minister Yosano declares that the economy has bottomed
out (Mainichi)

16) President of the Philippines Arroyo wants to strengthen the EPA
with Japan (Tokyo Shimbun)

17) Beijing's plan to start construction of an oil and gas pipeline
from Middle East across Burma (Myanmar) to China could adversely
impact Japan's energy supply (Sankei)
Articles:

1) TOP HEADLINES

Asahi:
Fever outpatient clinics to be discontinued in principle to prepare
for second wave of new-strain influenza

Mainichi:
Minister Yosano declares bottoming out of economy; monthly report to
delete word "worsening"

Yomiuri:
Defense Ministry analysis: DPRK's missile targeting Hawaii in early

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July may fly over Aomori

Nikkei:
Nine health care groups to merge corporate physical checkup
operations

Sankei:
China starts construction of pipelines via Burma in September, may
affect Japan reliant on Middle East oil

Tokyo Shimbun:
Succession in North Korea: Cable indicating third son "selected
unofficially" sent to embassy in Beijing in May

Akahata:
Three tasks for JCP in new Diet session to increase its power,
realize politics of hope

2) EDITORIALS

Asahi:
(1) Aso vs Hatoyama: Take the debate promptly to the general
election
(2) U.S.-ROK talks: Building the foundation level-headedly is most
important

Mainichi:
(1) Party leaders' debate: Lack of ardor befitting "eve of the
showdown"
(2) Economy bottoming out: No peace of mind yet in people's lives

Yomiuri:
(1) Party leaders' debate: Prime Minister's explanation on Japan
Post unconvincing
(2) U.S.-ROK summit: How to repel the North's provocation

Nikkei:
(1) Do not let up even with "bottoming out of economy"
(2) Go into deeper discussions at party leaders' debate

Sankei:
(1) Party leaders' debate: Go into specifics of agreement on ship
inspection
(2) Amended agricultural land law: Review of acreage reduction
policy needed as well

Tokyo Shimbun:
(1) Second party leaders' debate: Difference in momentum evident
(2) Economic trends: Optimistic projection aimed at election?

Akahata:
(1) Do not allow passage of unconstitutional bills

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, June 17

NIKKEI (Page 2) (Full)
June 18, 2009

07:53 Took a walk around his official residence.
10:01 Attended an Upper House plenary session.

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10:27 Met at the Kantei LDP diplomacy special committee chairman and
former Prime Minister Yoshiro Mori, the committee's vice chairman
and former Chief Cabinet Secretary Machimura, and others. Afterward
met Upper House member Ichiro Tsukada.
11:31 Met Chief Cabinet Secretary Kawamura.
15:00 Attended a party-head debate.
16:42 Met Deputy Chief Cabinet Secretary Uruma at the Kantei.
18:04 Attended a meeting of ministers connected with the monthly
economic report.
19:20 Met Kawamura.
19:35 Dined at a Hotel New Otani Japanese restaurant with Vice
Finance Minister Sugimoto, Budget Bureau Director-General Tango, Tax
Bureau Director-General Kato, and Deputy Vice Minister Katsu.
21:35 Returned to his official residence.

4) N. Korean missile possibly set to pass over Aomori for Hawaii

YOMIURI (Top play) (Abridged)
June 18, 2009

North Korea is now preparing to launch another long-range ballistic
missile from a facility at Dongchang-ri in its northwestern province
of North Pyongan. The missile is highly likely to head for Hawaii,
passing over Aomori Prefecture, according to the Defense Ministry's
analysis. The missile could be launched in early July, sources said.
Based on this analysis and intelligence from U.S. reconnaissance
satellites, the Defense Ministry has moved into top gear its study
on how to deploy Aegis-equipped destroyers equipped with Standard
Missile 3 (SM-3) interceptor missiles and ground-based Patriot
Advanced Capability 3 (PAC-3) missiles.

According to the Defense Ministry, it has been confirmed that North
Korea has missile sites at Kitairei near the military demarcation
line with South Korea and at Dongchang-ri near the Yellow Sea, in
addition to a missile site at Musudan-ri in its northeastern region,
where North Korea launched a long-range ballistic missile in April.
At the Dongchang-ri facility, either a Taepodong-2 missile or an
upgraded Taepodong-2 projectile was believed to have been brought
from a missile manufacturing facility near Pyongyang on May 30.

On the assumption that this missile is a two- or three-stage type
and has capability equal or superior to the long-range ballistic
missile North Korea launched in April, the Defense Ministry predicts
that one of the missiles now being prepared will likely be launched
toward Hawaii, with the possibility of a launch toward Okinawa and
Hawaii. If a missile was launched toward Okinawa, when its
first-stage booster is separated it could fall in waters off China
and might anger China. In the case of a launch toward Guam, the
launched missile will overfly South Korea and Japan's Chugoku and
Shikoku regions, so the booster would have to be dumped onto a land
area. As such, the Defense Ministry sees both possibilities as
extremely low.

In the case of a launch toward Hawaii, the booster could be dumped
into the Sea of Japan. If the test missile is successfully
long-ranged, it will be a great military threat to the United
States, which has not regarded North Korean missiles as a threat to
North America or Hawaii. The Defense Ministry therefore concluded
that the Hawaii route is most likely.

Hawaii, however, is situated about 7,000 kilometers away from North
Korea. The upgraded version of the Taepodong 2 only has a range of

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4,000 to 6,500 kilometers. The Defense Ministry believes that this
latest missile, even if it took the shortest route over Aomori
Prefecture, would not reach Hawaii.

5) LDP's Special Foreign Policy Committee makes proposals

YOMIURI (Page 4) (Full)
June 18, 2009

Former Prime Minister Yoshiro Mori, chair of the Liberal Democratic
Party (LDP) Special Committee to Strengthen Foreign Policy,
yesterday visited Prime Minister Taro Aso at the Prime Minister's
Official Residence (Kantei) to hand him a set of proposals,
including one calling for appointing persons from diverse
backgrounds to diplomatic posts. The proposals include: 1) upgrading
and expanding the government official development (ODA) program; 2)
positioning support for Japanese companies advancing overseas as a
duty of the diplomatic establishments abroad; and 3) increasing
opportunities for young Foreign Ministry personnel to work in
developing countries. Aso promised to look into the
recommendations.

6) Interview with next consul general for Okinawa: Not prepared to
discuss relocation of Futenma base outside the prefecture, even if
promoted by a DPJ administration

RYUKYU SHIMPO (Page 1) (Full)
June 18, 2009

(Tokyo)

The U.S. Embassy's security policy unit chief, Raymond Greene, who
is slated to become the next consul general for Okinawa, stated in
an interview by the Ryukyu Shimpo that even if the Democratic Party
of Japan (DPJ) were to assume power, and asks the U.S. government to
relocate Futenma AIR Station outside the prefecture, and to
reconsider the (U.S. FORCE realignment) package that includes the
Guam Relocation Agreement, "The U.S. side is not prepared to discuss
relocating Futenma outside the prefecture or revising the Guam
Agreement." Greene stressed the U.S. intent to proceed with the
current Japan-U.S. agreements.

Asked about local requests, including by the prefecture, to alter
the Futenma relocation site into the sea, Greene avoided making a
clear yes or no statement, saying, "We would like to complete the
environmental assessment and start construction as soon as
possible."

As for the reason the U.S. FORCE realignment plan would not be
reviewed, he stated: "U.S. FORCE realignment lies at the foundation
of the U.S.-Japan alliance, and if we do not implement the basic
agreement, under the current severe security environment in East
Asia, it would send the wrong message." He emphasized that the U.S.
would proceed according to the agreement.

7) Aso again denies 'secret deal' over Okinawa reversion

TOKYO SHIMBUN (Page 2) (Full)
June 18, 2009

The Japanese and U.S. governments reportedly exchanged "secret deal"
notes concerning the reversion of Okinawa (in 1972),and the

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government has been sued for its information disclosure. In
connection with this, Prime Minister Aso has denied that there was
such a secret agreement. "All I can say is that there is no secret
agreement," Aso said yesterday evening, adding, "I have been saying
so all along."

The government has asserted in a court hearing that it has no such
document. In oral proceedings, the presiding judge called on the
government to give a rational explanation about why it does not have
the document. Asked about this, Aso said: "That's a matter of
diplomatic documentation, so I'd like you to ask the Foreign
Ministry. Anyway, this matter is pending in court, so I can't give
you an answer."

8) Main points from one-on-one debate

SANKEI (Page 5) (Abridged)
June 18, 2009

The following is the gist of yesterday's one-on-one debate in the
Diet between Prime Minister Taro Aso and Democratic Party of Japan
(Minshuto) President Yukio Hatoyama.

North Korea problem

Hatoyama: If it's necessary to enact a new law for cargo
inspections, we would be willing to discuss this legislation. I
promise we will try to reach a conclusion as soon as possible. We
will cooperate on what we should, while scrutinizing the bill's
content. It's my understanding that the House of Representatives
will be dissolved shortly for a general election, so let me ask you
to come up with the bill as soon as possible.

Aso: The new United Nations Security Council resolution is far
stricter than the one adopted last time. That's a result in its own
way. We should respond to it sincerely. We will present the bill
immediately, and I want to see the ruling and opposition parties
concur and reach a conclusion.

Security affairs

Aso: I think what's most important now is to make the Japan-U.S.
Security Treaty steadfast. Concerning whether the (U.S. Navy's)
Seventh Fleet alone can protect the security of Japan, there is
obviously something biased (in DPJ Deputy President Ichiro Ozawa's
standpoint). I want the Diet to hold another one-on-one debate for
us to discuss ways and means (over whether or not to hike the
consumption tax) and security issues.

Hatoyama: Absolutely. In the end, you suddenly brought up something
about security matters. The people must be flabbergasted. While
holding full-blown discussions, I would like to clarify why the
public is disgusted with the Aso government.

9) Aso on defensive in Diet debate with DPJ chief Hatoyama

ASAHI (Page 2) (Excerpts)
June 18, 2009

Prime Minister Aso and Democratic Party of Japan President Hatoyama
faced off in the Diet in their second debate yesterday. Now that his
administration's management has entered the danger zone as public

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support has sharply plunged, Aso wanted to fight back in the debate.
But as he was apparently thrown on the defensive, his irritation was
underscored. In the Liberal Democratic Party, calls for dumping Aso
are growing. Depending on the outcome of the Tokyo metropolitan
assembly election on July 12, the political situation might become
even more intensified.

Hatoyama takes lead

When "remaining one minute" was announced, Aso suddenly took up the
national security issue.

"We place emphasis on the security issue. There was a suggestion
that only the deployment of the (U.S.) Seventh Fleet is sufficient.
I think it is most important to strengthen the Japan-U.S. Security
Treaty."

Former DPJ President's seventh fleet remark was good material for
the prime minister to attack the lack of the ability to hold the
reins of government. But his abrupt change of topics invited
sniggers even from among ruling party members. Hatoyama snapped: "I
think the people listening must be amazed."

During the 45-minute debate, Hatoyama took the initiative from the
beginning to the end.

Upon saying, "I was advised by other lawmakers not to take up this
topic," Hatoyama brought up the issue of Japan Post Holdings Co.
President Yoshifumi Nishikawa's reappointment at the outset, saying:
"You cannot make proper judgments, you cannot make consistent
judgments, and you make wrong judgments. From the point of view of
me and the people, you fired a person who should not have been
fired."

Moves for ousting Aso speeding up in LDP

The prime minister's lack of emotional capacity might be attributed
to accelerated "Aso-dumping" moves in the LDP.

A senior LDP member who is close to Aso said last night, "Since he
has busily stumped (to support LDP potential candidates for the
Tokyo assembly election),if the party loses the election, he might
have to take responsibility. The prime minister must be ready for
that," causing a stir in the party. His remark might be premised on
a victory in the Tokyo assembly election, but some speculate that
depending on the outcome of the election, the prime minister might
be pressed to step down.

Aides close to the prime minister are frantically trying to put out
the fire. Chief Cabinet Secretary Kawamura said in a press
conference yesterday: "A Tokyo assembly election is to elect
assembly members. The outcome is not linked to the prime minister's
responsibility." Another aide also said yesterday: "Even if the
party loses the Tokyo election, the prime minister will not need to
resign."

Even so, an increasing number of LDP members have begun to distance
themselves from Aso in the wake of the issue of reappointment of
Japan Post President Nishikawa. Many members see the Tokyo election
as a prelude to the coming general election and the outcome of the
election as a final judgment on whether the general election should
be carried out under Prime Minister Aso.

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A senior New Komeito member said on June 16, the day before the
party head talks: "If he is unable to fight back, it might determine
the outcome of the election." But he was not able to perform
satisfactory enough to regain political foothold in the debate
yesterday.

Meanwhile, LDP House of Representatives member Koichiro Shimizu, a
member of the Koga faction, started an activity yesterday to call
for a vote of confidence in the prime minister. Machimura faction
Lower House member Taku Yamamoto has begun collecting signatures to
call for moving up the general election.

10) LDP in agony due to dismal support ratings for Aso cabinet; No
effective means in sight

NIKKEI (Page 2) (Abridged slightly)
June 18, 2009

The Liberal Democratic Party (LDP) is becoming restless due to
declines in support ratings for the cabinet of Prime Minister Taro
Aso. There are growing calls for a cabinet shuffle, and some members
have begun openly discussing "emergency measures," such as an early
LDP presidential election with the aim of unseating Aso. The
situation reflects the government and the LDP which lack effective
means to buoy up the administration ahead of the next House of
Representatives election.

A rumor is circulating in the LDP that Prime Minister Aso made a
call to Finance Minister Kaoru Yosano's cell phone to tell him that
he would carry out a minor cabinet shuffle on July 2.

The government plants to adopt the basic economic and fiscal policy
guidelines for fiscal 2009 at a cabinet meeting on June 23. Key
bills and fiscal 2009 extra budget-related bills now under
deliberations are also expected to clear the Diet by June 26. At
present, Yosano is concurrently serving as finance, financial
services, economic and fiscal policy minister and Tsutomu Sato as
internal affairs minister and national public safety chairman. The
view is that Aso will carry out a cabinet shuffle to appoint
individuals who are highly appealing to the public in the name of
removing Yosano and Sato from dual/triple posts.

But the Prime Minister's Official Residence (Kantei) and Yosano
totally denied the cabinet shuffle rumor. In any case, such an
observation reflects the anguish of the LDP which is struggling to
find a next step to increase the cabinet's support ratings.

Even more serious is the growing frustration in the Aso camp that
has been supporting the Prime Minister.

Former prime ministers Yoshiro Mori and Shinzo Abe, former Chief
Cabinet Secretary Nobutaka Machimura, and others hastily assembled
together in the Diet building on June 16. In the session, one
indicated that a cabinet shuffle before the Lower House election
could be an option. Another presented a plan to convene an
extraordinary Diet session immediately after the current session
ends on July 28 that would run until September 10 to coincide with
the expiration of the Lower House members' term in order to carry
out the next general election in October.

An LDP executive close to Aso complained to his aide, "The Prime

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Minister is slow to make decisions and his views are inconsistent."
Another executive who called for a cabinet shuffle said: "The Kantei
lacks a sense of crisis. If we were about to die, I would rather do
something about it than do nothing."

An LDP executive indicated on June 16 that if the party lost the
July 12 Tokyo assembly election, the Prime Minister would take steps
accordingly. The repercussions of this statement are still being
felt. The executive told the press corps yesterday: "We are working
hard to win the election. I didn't say (the Prime Minister) would
resign." Nevertheless, the prevailing view is that the trend of
unseating Aso is unstoppable.

First-term Lower House member Koichiro Shimizu of the Koga faction
kicked off a signature-collection drive yesterday for conducting a
confidence vote on the LDP president after the Tokyo election. The
drive effectively calls for an early LDP presidential election,
instead of in September as planned, before the next Lower House
election. Furthermore, some in the party are calling for the Prime
Minister's voluntary resignation.

Meanwhile, Aso had been considering visiting Shizuoka to stump for
the LDP candidate running in the July 5 gubernatorial race. But he
decided not to do so yesterday, the day before the election's
official announcement. Many think Aso made the decision in the hope
that in the event the LDP candidate loses the race, its outcome
would not affect national politics.

A New Komeito party leader muttered disgustedly: "Nothing can be
done at this stage. We will just do whatever we need to do."

11) LDP desperate to cap rumor that Aso would take responsibility if
his party is defeated in Tokyo Metropolitan Assembly election

YOMIURI (Page 4) (Full)
June 18, 2009

A senior Liberal Democratic Party (LDP) member said that if a
defeated in the Tokyo Metropolitan Assembly election (July 12) will
develop into the question of whether Prime Minister Taro Aso should
resign. This remark is creating quite a stir in the LDP. Although
LDP Secretary General Hiroyuki Hosoda is desperately trying to put
out the flames caused by the remark, Hosoda's attempt is instead
highlighting the LDP's lack of confidence and its impatience.

The turmoil this time was caused by the senior LDP member, who said
in the evening of June 16: "Since the Prime Minister visited many
electoral districts, he has probably made up his mind." The senior
member yesterday explained about his remark that "What I meant is
that the Prime Minister knows if we suffer a setback in the Tokyo
Metropolitan Assembly election, the political situation will become
fluid due to various views." For the reason that the senior member
is Aso's close aide, there was strong speculation in the LDP that if
the party is defeated in the Tokyo election, Aso might leave office

Aso and the LDP leadership are desperately trying cap such
speculation. Aso said in a strong tone last evening to the press
corps: Local elections and national elections are totally
different."

Hosoda told reporters yesterday: "(The Prime Minister) puts his
faith in the next House of Representatives election. He thinks (the

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Lower House election) is of utmost importance." Chief Cabinet
Secretary Takeo Kawamura also stated in a press conference: "It is
true that the Prime Minister is putting all his energies into (the
Tokyo election). However, he does not think that (the result of the
election) will directly lead to (his course of action)."

In a meeting of yesterday of the ruling camp executive members, LDP
Diet Affairs Committee Chairman Tadamori Oshima bowed his head,
saying: "Various views are raised in our party. I'm sorry for
causing trouble." After the meeting, New Komeito Secretary General
Kazuo Kitagawa told reporters: "It is inappropriate for the third
person to talk about what course of action the Prime Minister will
take."

The reason for Hosoda attempting to put on the rumor is because
there still remains a drive to remove Aso from office in the LDP
because of the low public support rates for the Aso cabinet prior to
the Lower House general election. His effort, however, has caused
worries and doubts in the party that the LDP will likely suffer from
a setback in the Tokyo Metropolitan Assembly election, as well.

Young LDP lawmakers are apparently concerned about an impact that
the Aso cabinet's low approval ratings will have on their
campaigning for the Lower House election. Lower House member
Koichiro Shimizu, a Koga faction member, who is now serving his
first term in the Diet, yesterday distributed to LDP lawmakers
copies of the document calling for carrying out a confidence vote on
Aso as LDP president. He explained about his action that "If the LDP
president is replaced immediately after the Lower House election,
voters will lose their reason for voting the LDP." A senior LDP
member lamented such move, saying: "Everybody is doing his own
thing. The Aso administration is really in its final days."

12) Opposition parties preparing for early Lower House dissolution

YOMIURI (Page 4) (Full)
June 18, 2009

Predicting that there is a possibility that Prime Minister Taro Aso
will soon decide to dissolve the House of Representatives,
opposition parties are speeding up preparations for the general
election.

The secretaries general of the Democratic Party of Japan (DPJ),
Social Democratic Party (SDP),and People's New Party (PNP) held a
meeting yesterday in the Diet building. The three secretaries
general shared the perception that the Lower House will be dissolved
on July 2 for a snap election on Aug. 2. Their prediction is that
Aso will dissolve the Lower House before the Tokyo Metropolitan
Assembly election, since he might be forced to leave office
depending on the outcome of the Tokyo election. Azuma Koshiishi,
chairman of the DPJ caucus in the House of Councillors, said: "If
(Aso) does not dissolve the Lower House by (July) 2, he will not be
able to dissolve on his own. So, I have had the information that
that's possible."

In the meeting, the participants confirmed that the three parties
will launch discussion on common policy after the DPJ formulates by
the end of next week the framework of its manifesto (set of campaign
pledges) for the Lower House election.

13) Nishimatsu political donation scandal: Improper that Nikai

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faction was not indicted; Panel rules investigation was not
exhaustive

AKAHATA (Page 1) (Excerpt)
June 18, 2009

The political support group, New Wave (under the Nikai faction),of
which Minister of Economy, Trade and Industry (METI) Toshihiro Nikai
is the representative, received 8.38 million yen purchases of party
tickets from the dummy political organization of the second-tier
general contractor, Nishimatsu Construction Company. In that
connection, the special investigative unit of the Tokyo Prosecutors
Office decided not to indict Upper House lawmaker Shinya, the
accountant of the support group, and others relevant to the case.
However, in a decision revealed yesterday, Tokyo's third
investigative committee (a judicial panel) ruled that not indicting
those involved was improper.

14) Postal scam: Former welfare ministry chief says he reported
issuance of falsified certificate to DPJ member

SANKEI (Page 2) (Excerpts)
June 18, 2009

Osaka District Public Prosecutors Office is investigating a case of
the Health, Labor and Welfare Ministry's alleged issuance of a fake
certificate to allow a group involved in direct mail marketing to
claim a disability discount on postal costs. In questioning, a
former Handicapped Person's Health and Welfare Division chief, 57,
said that after Atsuko Muraki, who was a senior ministry official in
charge of administration pertaining to disabled people and was his
subordinate at that time, informed him of the issuance of a
certificate to the group Rin no Kai, "I reported it to a Democratic
Party of Japan (DPJ) lawmaker," according to informed sources
yesterday.

Muraki, who was arrested on charges of falsifying paperwork, has
denied the charges, but prosecutors take the testimony as evidence
to back up her charges. They have also judged it highly likely that
the former chief reported the issuance of a certificate to the
lawmaker over the phone. Prosecutors will conduct an investigation
to find out whether the former chief recognized that the paperwork
had been falsified.

In early June 2004, immediately after receiving information from
Muraki, the former chief made a phone call to the DPJ lawmaker,
according to the sources.

Kunio Kurasawa, 73, who is a key member of Rin no Kai, asked the DPJ
lawmaker in his office in February 2004 to act as an intermediary
between the group and the ministry. The lawmaker phoned the former
department chief there. It has already been learned that the former
chief later instructed Muraki to take action in response to
Kurasawa's request.

In early June, Muraki was asked directly by Kurasawa, who was
arrested, to quickly issue a certificate. In response, she
reportedly told Tsutomu Kamimura, who was arrested, to "issue a
certificate to the group even though it might not be involved in any
activity to help disabled people."

15) Finance Minister Yosano declares in monthly economic report that

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economy has bottomed out

MAINICHI (Top Play) (Full)
June 18, 2009

Kaoru Yosano, who is in charge of economic and fiscal policy as well
as financial services, on June 17 submitted the June monthly
economic report to a meeting of related cabinet ministers. In
response to the ongoing movements showing improvements of
China-bound exports and industrial output, the government removed
the word "worsening" from the overall assessment of the economy for
the first time in seven months and revised the report upward for the
second straight month, by including the wording "Although the
economy still remains in a harsh situation, an upward trend is seen
in some sectors." Yosano, during a press conference after the
meeting, effectively declared that the economy has bottomed out. He
said, "The economy bottomed out in the January-March quarter. Now
that exports and industrial production have taken an upward turn, it
can be strongly estimated that the economy has bottomed out."

The current economic recession kicked in in November 2007. The
economy significantly slowed due to the financial crisis that
occurred last fall. The overall assessments of the economy in
monthly reports since last December had included the wording
"worsening". The assessment in the May monthly report was revised
upward for the first time in three years and three months. Since
economic indexes for exports and industrial output improved, as can
be seen by the industrial production index recording its highest
rate of increase in 56 years compared with the preceding month's
level, the government has decided to further revise upward the
overall assessment of the economy.

Assessments of five out of 11 individual items in the report -
exports, imports, industrial production, personal consumption, and
bankruptcies - were revised upward. The wording for exports was
changed from "about to stop falling" to "showing moves to pick up,"
and that for industrial production to "picking up."

However, capital investment by companies and employment still
remains poor. In particular, the employment situation is continuing
to deteriorate with the job-offers-to-seekers ratio recording the
lowest-ever level of 0.46 in April and the overall jobless rate
reaching the 5 PERCENT level for the first time in five years and
five months.

Since the future course of overseas economies, such as the U.S. and
Chinese economies, is unclear, the Cabinet Office remains cautious
about the future of the economy. It says that since it cannot be
determined that the economy has entered the sustainable recovery
phase, there still is a high risk of the economy "hitting a second
bottom." Therefore, the wording that the economy is still in a grim
situation is kept intact. It is believed that the declaration that
the economy has hit the bottom was partly motivated by the Aso
administration's desire to stress the efficacy of a set of economic
stimulus packages adopted since the end of last year in the
run-up-to the upcoming general election and the G-8 Summit to be
held in July.

16) President Arroyo replies in writing, "I would like to strengthen
the Japan-Philippines EPA"

TOKYO SHIMBUN (Page 3) (Full)

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June 18, 2009

Michio Yoshieda, Manila

Replying to Tokyo Shimbun's written interview before leaving the
Philippines, President Arroyo, who came to Japan on June 17,
stressed, "Japan is the most important partner for the Philippines'
success." She thus indicated her stance of aiming to strengthen the
Japan-Philippines Economic Partnership Agreement (EPA),which came
into effect late last year.

The president praised the EPA, saying, "Nurses and care-givers from
our country went to Japan in May. They are already beginning to
achieve results." She expressed expectations that the EPA will be
used in other areas as well in an effective way."

She also revealed her intention to ask for more investment by Japan
into the Philippines during the upcoming talks with Prime Minister
Aso, noting, "More investment is needed in order for our country to
create new jobs."

She also said that she hopes to see Japan sign EPAs with China,
South Korea, Australia, etc., in addition to Association of
Southeast Asian Nations (ASEAN) members with which Japan has already
signed EPAs, in order to establish economic partnerships involving
East Asia as a whole.

Concerning North Korea's nuclear development issue, Arroyo clarified
a stance of supporting Japan's position, noting, "Japan has
supported the Philippines and ASEAN. The Philippines must coordinate
with Japan in taking action against North Korea's threat, which is
imposing fear and anxiety on the East Asia region."

17) China to start construction of pipelines via Burma in September,
may affect Japan's reliance on Middle East oil

SANKEI (Top play) (Full)
June 18, 2009

Toshu Noguchi, Beijing

It was learned on June 17 that full-fledged construction work on
pipelines for oil and natural gas from Burma (Myanmar) to China will
start in September. With this, China will be able to transport crude
oil from the Middle East and Africa without passing through the
unstable Strait of Malacca or South China Sea. It is believed that
this will serve as one of the arteries to ensure stable supply of
crude oil for China, the world's number two oil importer, and may
possibly result in China's greater reliance on Middle Eastern oil.
This is also likely to have an impact on Japan, which relies on the
Middle East for most of its oil imports.

China and Burma signed an agreement on the construction of the
pipelines for oil and natural gas in March. According to the Diyi
Caijing Ribao (China Business News),officials of Petrochina, a
major Chinese oil and natural gas company, revealed on June 15 that
the construction project costing approximately 2 billion dollars
will go into full swing in September.

The pipelines will start from the port city of Sittwe (Akyab) in
western Burma, pass through Mandalay in the central part of the
country, and go into Yunnan Province in China, thereby reaching

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Kunming via Dali. It will have a total length of some 1,100
kilometers and is expected to transport about 20 million tons of oil
each year, or 400,000 tons daily.

The pipeline for natural gas will be completed as soon as 2012. It
will ultimately be extended to Nanning in Guangxi Province and will
transport 12 billion cubic meters of natural gas each year.

China became the number two oil consumer in the world in 2003 and
surpassed Japan to become the number two oil importer in May 2008.
It relies on imports for around 60 percent of domestic consumption.
In 2007, the top five suppliers were Saudi Arabia, Angola, Iran,
Russia, and Oman, with the Middle East taking up 45 percent and
Africa 33 percent.

At present, most crude oil from the Middle East and Africa passes
the Strait of Malacca enroute to China. Not only is the strait
crowded and plagued by pirates, there are other factors of
uncertainty in this area such as Indonesia, which has a history of
anti-Chinese campaigns. There is also the territorial dispute over
the Nansha islands in the South China Sea.

The Chinese government was looking for alternatives to relying on
the Strait of Malacca route to secure its energy supply. This fit in
nicely with Burma's desire to earn foreign currency, resulting in
the pipeline project.

Avoiding the Strait of Malacca when transporting oil also represents
cost cutting for China, where oil consumption is constantly on the
rise.

If China increases its procurement of oil in the Middle East after
the pipeline is completed, this may impact crude oil supply for
Japan, which imported 86.9 percent of its oil from this region in

2008. This may also contribute to a worldwide rise in oil prices.

ZUMWALT