JAPANESE MORNING PRESS HIGHLIGHTS 06/24/09

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SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 06/24/09

Index:
1) Top headlines
2) Editorials

Defense and security issues:
3) U.S. Congress in fiscal 2010 budget proposal adds provision that
could block relocation of Futenma Air Station in Okinawa (Yomiuri)

4) Ruling parties agree to let Maritime Self-Defense Force handled
cargo searches of North Korean ships in proposed new legislation
(Yomiuri)
5) Ruling camp shelves plan to provide rear support for foreign
forces under new legislation allowing ship searches of North Korean
vessels (Asahi)
6) Two destroyers are speeding to Somalian waters for antipiracy
duty under new legislation (Mainichi)
7) Democratic Party of Japan (DPJ) drafts policy paper for "new age
of Japan-U.S. alliance" (Asahi)
8) DPJ wants to revise Status of Forces Agreement as part of its
foreign and security policy goals (Asahi)
9) Text of DPJ's foreign and security policy paper (Asahi)

10) Statement by G-8 foreign ministers' meeting to call for
countries to impose sanctions on North Korea under new UN resolution
(Yomiuri)

Political agenda:
11) Prime Minister Aso might dissolve Diet early once the speeded up
budget guidelines are set (Nikkei)
12) LDP asks popular Miyazaki prefecture governor to consider
running for the Lower House, but he lays down unusual condition
(Tokyo Shimbun)
13) Finance Minister Yosano's political group took illegal political
donations from a company (Mainichi)
14) Another bureaucrat-linked bid-rigging scandal involving the Land
and Transport Ministry (Asahi)

Economy:
15) Unrestrained fiscal spending marks the new FY2009 "big-boned"
economic policy guidelines (Asahi)
16) Fy2009 "big-boned" policy guidelines allow additional defense
budget and agricultural budget outlays (Yomiuri)

Articles:

1) TOP HEADLINES

Asahi:
FTC finds another case of bureaucrat-led bid-rigging at Ministry of
Land, Infrastructure, Transport, and Tourism over official vehicle
operations

Mainichi:
Futures trading company gives donations to Yosano through dummy
firm

Yomiuri:
Just "not guilty" unacceptable: 17.5 years lost; false charge should
be examined

Nikkei:
Showa Shell to go into solar power generation with Saudi state-run

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oil company

Sankei:
Bureaucrat-led bid-rigging in official vehicle operations;
improvement order slapped on Ministry of Land, Infrastructure,
Transport, and Tourism

Tokyo Shimbun:
FTC slaps improvement order on Ministry of Land, Infrastructure,
Transport, and Tourism for bureaucrat-led bid-rigging in official
vehicle operations

Akahata:
Cap on social welfare to continue; 220 billion cutback not to be
included next year

2) EDITORIALS

Asahi:
(1) Retrial of Ashikaga case: Examination of mistaken verdict
indispensable
(2) Big-boned policies: Confusion brought about by deferring costs

Mainichi:
(1) Retrial of Ashikaga case: Speed up the restoration of honor and
human rights
(2) President Nishikawa keeping his job: Even more unconvincing

Yomiuri:
(1) President Nishikawa keeping his job: Unacceptable lenient
"disciplinary action"
(2) Big-boned policies 2009: Lifting of cap on social security
spending a matter of course

Nikkei:
(1) Regression of both reform and fiscal discipline in "big-boned
policies"
(2) Iran put to test on essence of "democracy"

Sankei:
(1) Big-boned policies 2009: Tighten discipline firmly once again
(2) Japan Post president keeping his job: Restore trust with
transparency in management

Tokyo Shimbun:
(1) Big-boned policies: Where are the new controls?
(2) Japan Post president keeping his job: People's distrust not
dispelled

Akahata:
(1) "Big-boned policies": Deceptive agreement eyeing the election

3) U.S. House approves bill including clause that rejects Futenma
relocation; Dark cloud over Japan-U.S. agreement

YOMIURI (Page 2) (Abridged slightly)
June 24, 2009

Satoshi Ogawa, Washington

It became clear on June 22 that the U.S. House Armed Services
Committee has added an amendment to the fiscal 2010 defense budget

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that would make it hard to realize an agreement reached between the
Japanese and U.S. governments to relocate the U.S. Marine Corps'
Futenma Air Station in Ginowan, Okinawa, to Camp Schwab in the
prefecture.

The amendment says the U.S. defense secretary should not give his
approval to the alterative facility as long as the U.S. military
fails to comply with minimum flight safety requirements. The office
of Representative Neil Abercrombie, D-Hawaii, who proposed the
amendment, told the Yomiuri Shimbun that the alternative under the
current plan contravenes safety standards on the following points:
(1) The runways are too short, (2) a school, Okinawa National
College of Technology, is located nearby, and (3) there are
obstacles, such as utility poles, along the flight path. As a
result, Abercrombie indicated that the U.S. military should look for
a new site to relocate the air station. A Japanese government source
expressed strong concern, saying, "The content of this amendment
suggests the transfer of the alternative facility agreed by Japan
and the United States will not be permitted."

The defense budget, including the amendment, was adopted by the U.S.
House Armed Services Committee on June 16. Discussion of the budget
at the Senate Armed Services Committee was due to start on June 23.
After joint committee discussions, the budget is expected to be
adopted by the two chambers. The Defense Department is expected to
try to persuade Congress to remove the amendment from the final
defense budget. If Congress passes the budget intact, there is a
possibility that President Barack Obama will veto it.

U.S. Marine Corps commandant Gen. James Conway, too, expressed
before the Senate Armed Services Committee on June 4 his discontent
with the envisaged replacement facility under the current relocation
plan.

4) Coalition project team agrees to allow MSDF to conduct cargo
inspections without prior Diet approval

YOMIURI (Page 2) (Abridged slightly)
June 24, 2009

The project team of the Liberal Democratic Party (LDP) and the New
Komeito that is studying a special measures law governing ship
inspections based on UN Security Council Resolution 1874 agreed at
its meeting yesterday to allow both the Maritime Self-Defense Force
(MSDF) and the Japan Coast Guard (JCG) to conduct ship inspections.
The project team also decided not to specify clearly role-sharing
between the MSDF and JCG so that they can deal with the matter in a
flexible manner. MSDF activities will not require prior Diet
approval. The team also confirmed that (1) the use of weapons should
be limited to legitimate self-defense and emergency evacuations, and
(2) the law's term should coincide with the duration of Resolution

1874.

Following this, the government will begin work with the aim of
submitting a bill to the Diet in early July. The idea of allowing
only the JCG to carry out inspections is deep seated. As such, a
plan to mobilize the MSDF under a maritime policing provision of the
SDF Law as necessary has also emerged.

A senior project team member explained, "The SDF is superior to the
JCG in terms of collecting information and pursuing vessels." As
specific cases, he cited, (1) when a destroyer is navigating near

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the ship in question, and (2) when the vessel in question is heavily
armed.

5) Ruling parties decide to forego rear support for foreign troops
in DPRK cargo inspections

ASAHI (Page 4) (Full)
June 24, 2009

The ruling parties' project team (co-chaired by Gen Nakatani,
chairman of the Liberal Democratic Party Research Commission on
Security, and Shigeki Sato, chairman of the New Komeito Security
Division) drafting a special measures law for cargo inspection on
ships entering and leaving North Korea decided on June 23 not to
include rear support activities by the Self-Defense Forces (SDF) for
foreign forces, which was included in an earlier draft. The Diet's
involvement in the process will be changed from ex post facto
approval to ex post facto reporting. The team aims to finalize the
outline of the bill on June 25, and submit the bill to the Diet
before the end of the month.

Fuel supply, transport of personnel, and such other operations had
at first been envisioned in terms of rear support for foreign
troops. However, since ship inspections are concerned with the
inspection of individual ships based on information obtained by
satellites or aircraft, foreign ships are unlikely to stay at sea
for extended periods of time, so such support operations were judged
to be unnecessary. Furthermore, since cargo inspections will be
based on the consent of the flag state and are not arbitrary, Diet
approval was also judged to be unnecessary.

Meanwhile, the project team agreed that the executors of cargo
inspections will be both the Japan Coast Guard (JCG) and the
Maritime Self-Defense Force (MSDF) as originally proposed. While
certain ruling party members wanted this to be limited to the JCG,
out of their concerns about dispatching the SDF, it was thought that
there could be cases the JCG is not capable of handling, such as
when cargo ships are heavily armed. The JCG will take charge of ship
inspections, while the MSDF will be responsible for information
gathering and tracking with its P-3C reconnaissance planes and other
equipment.

6) Two escort ships to be sent to Somalia under new Anti-Piracy Law

MAINICHI (Page 2) (Full)
June 24, 2009

Yasushi Sengoku

The Ministry of Defense announced on June 23 the dispatched of a new
Maritime Self-Defense Force contingent to waters off Somalia in East
Africa under the Anti-Piracy Law enacted on June 19. The new law has
expanded the scope of security duties to escorting foreign ships and
has relaxed rules on the use of weapons. The two escorts to be
dispatched, "Harusame" and "Amagiri" have undergone training based
on the new law. They will set sail shortly and will replace around
late July the "Sazanami" and "Samidare," which have been on duty
since late March.

7) New Japan-U.S. alliance specified in DPJ draft policies not
convincing; Policies follow Ozawa policy course


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ASAHI (Page 4) (Excerpts)
June 24, 2009

Nao Fujita

The major opposition Democratic Party of Japan (DPJ) has drafted its
foreign and security policies for 2009 that include such slogans as
a "Japan-U.S. alliance of the new age." But the draft policies do
not clearly show the overall picture, including the party's view of
the international situation and its definition of national
interests. As the party aiming to realize a change of government,
what message is the DPJ going to send to the international community
and Japan and how is it going to convince them? The clock is ticking
for the DPJ.

The draft, led with the aim of establishing a Japan-U.S. alliance of
the new age, underlines the party's intention to play an active role
in the international community while sharing roles with the United
States. But when it comes to specifics, the policies are
unconvincing.

Since last year, scholars in the United States knowledgeable about
Japan have been asking the DPJ not to touch on four points that are
regarded as "anti-American": (1) the fundamental revision of the
Japan-U.S. Status of Forces Agreement, (2) the ceaseless examination
of the realignment of U.S. forces in Japan, (3) not dispatching the
Self-Defense Force to Afghanistan in the war on terrorism, (4) the
withdrawal of the Maritime Self-Defense Force from a refueling
mission in the Indian Ocean. The draft policies effectively gave "no
replies" to those four points.

Consideration was given only to (2). The DPJ's 2008 policies laid
out the relocation of Futenma Air Station outside Okinawa for
reducing the burden on the prefecture in defiance of the agreement
between the governments of Japan and the United States. But the 2009
policies simply stipulate that the party will "study the position of
the U.S. bases," leaving the question of whether to refer to the
planned Futenma relocation to the leadership.

In any case, the policy is a far cry from "sharing roles with the
United States." With respect to the overseas dispatch of the SDF,
the party has maintained the policy of "joining activities under
Article 42 (military measures) of the UN Charter." Such a policy is
distinct from the government's constitutional interpretation that
does not allow the use of force overseas. If the policy is
implemented, Constitution protectionists in the party and the Social
Democratic Party (SDP),which is considering joining a DPJ-led
coalition government, are likely to raise strong objections.

The draft policies incorporate President Hatoyama's "East Asia
Community" vision and Secretary General Okada's idea of
denuclearizing Northeast Asia - ideas the Hatoyama leadership places
importance on. But the policies are void of explanations on how to
pursue those ideas under the Japan-U.S. alliance, the cornerstone of
the country's security policy.

Referring to North Korea's resent missile launches and nuclear test,
the draft says, "There is no other country that is more exposed to
the threat of North Korea than Japan." The draft also expresses
concern over the transparency of China's military power. It also
points out the United Nations' loss of authority, saying that it was
not able to stop the United States from attacking Iraq. If the party

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is to aim at the denuclearization of Northeast Asia under such
circumstances, how is the DPJ going to handle the question of North
Korea and the Six-Party Talks and to deal with that country
bilaterally and to discuss disarmament with China? And what are the
timetables for U.S. force realignment and a review of Japan's
defense power?

The draft policies offer no explanations on those points. Secretary
General Okada indicated in a monthly magazine's July issue that
Japan should start from scratch in discussing the question of U.S.
force realignment with the Obama administration. Asked for details
in a press conference on June 12, Okada said: "It's too early to
discuss it. I would like to avoid mentioning it since we have yet to
take power."

There are no signs that President Hatoyama has displayed his
leadership in discussions. At a meeting on June 5 of the "Next
Cabinet," the leadership called for a review of the foreign and
security policies laid out under former President Ichiro Ozawa, but
there were no specific instructions. Reflecting a schism in the
party over a set of criteria on the overseas dispatch of the SDF and
other matters, the draft policies ended up carrying on with the
"Ozawa policy course" that includes many ambiguous points.

8) DPJ includes SOFA revision in draft foreign policy paper

ASAHI (Page 1) (Full)
June 24, 2009

The draft has been revealed of the Democratic Party of Japan's (DPJ)
foreign and security policy portion of its 2009 policy statement
that will form the basis of its manifesto (campaign pledges) in the
House of Representatives election,. The party puts forth an
Asia-centered policy, upholding President Yukio Hatoyama's pet
concept of an "East Asia community." It also includes proposals that
may give rise to friction between Japan and the United States, such
as a drastic review of the Status of Forces Agreement (SOFA) and the
withdrawal of the Maritime Self-Defense Force (MSDF) from its
mission in the Indian Ocean.

These proposals will form the basis for the DPJ's basic policies
after it takes over the reins of government. However, its assessment
of the international situation and methods for policy transition
remain unclear. The party's perspective and strategy are likely to
be questioned. The draft policies were formulated at a meeting of
the party's division on foreign affairs and defense. They will be
reviewed by Hatoyama and are expected to be finalized along with the
manifesto before the end of June.

The long-term goal of forming an East Asia community would be
realized through cooperation in such areas as energy, commerce, and
the environment. Like the present administration, the DPJ also
regards the Japan-U.S. alliance as the "cornerstone of Japan's
security." However, since the DPJ has criticized the government for
blindly following the U.S., its policy emphasizes the formation of
an "equal partnership." It calls for "beginning a drastic review of
the SOFA."

The MSDF refueling mission in the Indian Ocean will be terminated
when its legal authorization expires in January 2010. With regard to
dispatching the SDF to Afghanistan, the DPJ "will consider
humanitarian and reconstruction assistance after an agreement to end

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hostilities is reached."

9) Foreign and security policy portion of DPJ's draft policy
platform (main points)

ASAHI (Page 4) (Full)
June 24, 2009

Japan-U.S. relations:

We will form an equal partnership, in which Japan will clearly state
its views. Japan will pro-actively carry out its responsibilities in
the international community, sharing a role with the United States.
In order to truly make the Japan-U.S. alliance the linchpin of peace
and security in the Asia-Pacific region, we will look into the
positioning of U.S. forces in Japan, giving consideration to
civilian control and the reduction of the burden of (hosting) U.S.
bases, and will begin drastic revision of the Status of Forces
Agreement. We will carry out a thorough probe into the realignment
of U.S. forces in Japan, especially the way the expense burden was
set up for moving U.S. Marines on Okinawa to Guam, and we also will
probe unremittingly into the host-nation support budget.

Asian foreign policy:

Gazing fixedly at the goal of establishing an East Asian Community,
we will set up a regional cooperative system for the Asia-Pacific in
the fields of energy, commerce, and the environment. We will carry
out a dialogue with China on human rights issues, such as Tibet, the
environment, and removing concerns about the transparency of its
military power and the gas-development projects in the E. China Sea.
We do not support the unilateral independence of Taiwan, and oppose
resolutely China's use of armed force (against Taiwan). We premise
(our policy) on the 1972 joint communiqu between Japan and China.

For Japan, there is no more threatening country than North Korea.
While considering additional sanctions, we will develop an
independent policy so that through the United Nations and Six-Party
Talks, North Korea will scrap its nuclear program, and so that the
abduction issue will move toward resolution. Our aim is for a
denuclearized Northeast Asia.

Overseas dispatches of the Self-Defense Forces (SDF):

The activities of the United Nations differ from Japan in the use of
the right of self-defense and in character. We will participate
actively based on our independent decision and under democratic
control, including areas related to UN Charter articles 41 and 42.

As for Afghanistan, once there is an agreement to end hostilities,
we will consider carrying out humanitarian and reconstruction
assistance, including by the SDF. We will end the extension of oil
refueling operations in the Indian Ocean carried out under current
law. We will concur with the dispatch of the SDF for anti-piracy
missions if it is difficult for the Japan Coast Guard to respond,
but premised on prior approval by the Diet.

10) G-8 to call on UN members to sanction North Korea; Ministerial
meeting stresses a tough posture

NIKKEI (Page 2) (Full)
June 24, 2009

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The draft of the chairman's statement to be issued by the G-8
foreign ministerial meeting opening in Trieste, Italy, on June 25
has been revealed. In light of the recent adoption of the UN
Security Council (UNSC) sanction resolution against North Korea's
second nuclear test, the statement will "call on UN members to
implement sanctions based on this resolution without fail." It will
also touch on the protests relating to the outcome of the Iranian
presidential election and express concern on the Iranian government
for causing the strife.

This is the first time that the G-8 will be calling on UN members to
impose sanctions on a specific country. The G-8 wants to appeal to
the international community for the strict enforcement of the
sanctions and emphasize its tough stance. Regarding North Korea's
apparent preparations to conduct a third nuclear test and another
round of long-range ballistic missile launches, the document
"demands that it desist from further provocative actions." It also
expresses concern on abduction and other humanitarian issues.

On Iran's nuclear issue, the statement asks Iran to comply with its
obligation to stop uranium enrichment activities under past UNSC
resolutions. Based on the Obama administration's dialogue policy,
the statement also stipulates the importance of dialogue with the
Iranian government.

A separate meeting on aid to Afghanistan and Pakistan will be held
alongside the foreign ministerial meeting. The international
community attaches importance to stabilizing the security situation
and economic development in the border area between the two
countries, which has become a hotbed of terrorist activities. The
G-8 and neighboring countries will discuss regional cooperation and
issue a joint statement confirming the G-8's continued support.

11) Possibility of moving up Lower House dissolution to early July

NIKKEI (Page 2) (Abridged slightly)
June 24, 2009

It is expected that the cabinet of Prime Minister Taro Aso will
approve a set of fiscal policy guidelines for fiscal 2010 in its
meeting on June 30 at the earliest, since he has ordered the meeting
to be held earlier than due. With this, there will be room for him
to dissolve the House of Representatives to call a general election
after July 1. Aso appears to be motivated to seek to check moves to
remove him from office by brandishing the threat of dissolving the
Lower House in early July. But there is a lot of skepticism about
such among Liberal Democratic Party (LDP) lawmakers since they would
suffer a crushing defeat in the general election if it were held
under the leadership of Aso, whose popularity is low.

"I want you to compile budget guidelines for next fiscal year by the
end of next week," Aso last evening instructed Kaoru Yosano, finance
minister, state minister for financial services, and state minister
for economic and fiscal policy.

The government annually sets the budget guidelines only after late
July. Based on the government's decision, all the ministries and
agencies present their budgetary requests to the Finance Ministry by
the end of August. In order to avoid impacting on the Lower House
election, the government this year had looked into deciding on July
3, but Aso called for an even faster timetable. Aso's aide said:

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"Setting the budget guidelines for fiscal 2010 is the last job for
the Prime Minister. If it is done, the Aso cabinet will be
completely free."

Aso has already opened his campaign office in his home constituency.
By moving up the cabinet's adoption of the fiscal guidelines for
fiscal 2010, the Diet will have no schedule until July 3 when the
Emperor and the Empress leave for the United States and Canada.
Dissolving the Lower House in early July is the only option for Aso
if he wants to dissolve the lower chamber before he is forced to do
so.

If the LDP is defeated in the July 5 Shizuoka Gubernatorial election
and the July 12 Tokyo Metropolitan Assembly election, Aso will be
unable to dissolve the Lower House even if he wishes due to
opposition by the ruling parties. Lower House dissolution in early
July could prevent such a risk.

However, the approval rate for the Aso cabinet dropped to 25 percent
in a poll conducted in mid-June jointly by the Nihon Keizai Shimbun
and TV Tokyo. Many in the ruling camp are calling for delaying
dissolution. If Aso dissolves the Lower House before the enactment
of a bill revising the Organ Transplantation Law, he might be come
under criticism. A senior LDP member told reporters yesterday the
perception that it would be difficult to dissolve the Lower House
before the Tokyo assembly election because of deliberations on the
bill. Speeding up the cabinet's decision on the fiscal policy
guidelines may give Aso only the possibility of widening his option
for Lower House dissolution.

12) LDP's Koga asks Higashikokubaru to run in Lower House election

TOKYO SHIMBUN (Page 2) (Slightly abridged)
June 24, 2009

Liberal Democratic Party (LDP) Election Strategy Council Chairman
Makoto Koga called on Miyazaki Gov. Hideo Higashikokubaru at the
Miyazaki prefectural government office yesterday afternoon. Koga
asked Higashikokubaru to run in the next House of Representatives
election as a candidate on the LDP ticket for the Tokyo metropolitan
aria's proportional representation bloc. Since Higashikokubaru
presented such conditions as the LDP deciding to list him as a
candidate for party president, a conclusion was not reached.

Koga apparently aims to prevent a significant drop in the seats the
LDP will obtain by fielding the popular Miyazaki governor in the
proportional representation segment, at a time when Prime Minister
Taro Aso's popularity has been sagging.

It is unclear whether the candidacy of Higashikokubaru can be
realized because negative reactions are coming from senior LDP
members. One party executive member said: "When did we start
treating the position of LDP president so trivially." A former
cabinet minister made this comment: "The whole LDP is treated like a
doormat."

On June 23, Koga, chairman of the Japan Association of the Bereaved
Families of the War Dead, usually attends the annual memorial
ceremony of the end of the Battle of Okinawa. Changing the schedule,
He visited Miyazaki. At the outset of the meeting, Koga said: "I
want to talk with you in a serious manner."


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Higashikokubaru then presented his conditions for Koga's offer that
in addition to that the LDP will list him as a candidate for party
president, a decentralization draft plan compiled by the National
Governors' Association will be included in the LDP's manifesto and
it will be implemented in four years. Koga just replied: "I have
heard your proposals."

Higashikokubaru explained the reason for his proposals: "It is
necessary for the LDP to determine to bring about a fresh breeze and
a change of blood."

However, the LDP rules for the presidential election stipulate that
candidates for the party's presidency are chosen from its Diet
members. Even if Aso resigns before the Lower House election,
Higashikokubaru won't be able to become a presidential candidate.
What is the meaning of his running in the Lower House election as an
LDP presidential candidate?

13) Yosano, Watanabe received political donations from five
companies through dummy group

MAINICHI (Top Play) (Excerpts)
June 24, 2009

The political group registered with the Internal Affairs
Communications Ministry by Finance Minister and Financial Services,
Economic and Fiscal Policy Minister Kaoru Yosano and former
administrative reform minister Yoshimi Watanabe as their support
group was found to be a dummy group. Through this group, five group
companies, including the commodity futures trading company Oriental
Trading, made political donations totaling 55.3 million yen to
Yosano's office and 35.4 million yen to Watanabe's office during a
period between 1992 and 2005. Under the tax system, a portion of
donations to a political support group is deducted from the income
tax imposed on the donator. Taking advantage of this system, the
five companies had about 250 executive members donate a total of
approximately 40 million yen to the lawmakers' offices by deducting
the money from their salaries in order to receive tax credits.

Employees get tax credits

Yosano and Watanabe have both served as financial services minister
and been involved in the task of placing restrictions on commodity
futures trading. The group they designated as their support
organization is now found to have backed political donations
suspected of being illegal. Their close relations with the political
group are likely to raise questions.

The political group in question is a group called "the study group
on political and economic policies" established in 1981. According
to political funding reports and other documents, Oriental Trading
Co. Head Yukio Kato represents the group, with the presidents of its
related companies serving as accounting managers. The office of the
group was located in the Tokyo branch office of Oriental Trading
until Kato retired from the business in 2006.

The money deducted from the salaries of executive members of the
five companies was donated to the politicians through the study
group. The five companies are suspected of having made political
donations by using the study group as a dummy, and the donations are
considered to be in violation of the Political Funds Control Law.


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Yosano designated in a report to the then Ministry of Home Affairs
the study group as his support group from 1981 through 2001. After
he lost in the House of Representatives election in 2000, Watanabe
registered the group as his support group until 2008.

The study group in question provided Yosano's fund-management group
with 2.5 to 6.5 million yen in political donations every year
between 1992 and 2005. Of the money, 6.8 million yen was offered in
the days when Yosano was responsible for supervising commodity
futures trading as internal trade and industry minister (from 1998
through 1999). The fund-management group's report noted that the
study group was located "within Oriental Trading."

Meanwhile, Watanabe's fund-management group also received 1 to 6
million yen annually from 1995 through 2005. When Watanabe was
serving as financial services minister in 2007 and 2008, he also
designated the study group as his support group.

(Comment by Yosano office member)

The group offered support stemming from its desire to see (Yosano)
become a great politician. We do not know how they collected the
money. If we had known, we would not have received any donations.
The group did not ask us for favors. The donations were made in a
proper manner, so we will not return it.

(Comment by Watanabe office member)

We had heard the group made political donations with funds collected
from individuals, so we did not harbor any doubts (about the
propriety of the donations). The group decided to offer donations to
this office, based on its relations with the late Michio Watanabe
(Yoshimi's father),who was a Lower House member. We will make a
proper response after holding discussions.

14) FTC concludes transport ministry took initiative in bid-rigging
again

ASAHI (Top Play) (Abridged slightly)
June 24, 2009

The Fair Trade Commission (FTC) on June decided to apply the law for
the prevention of collusive bidding at the initiative of government
agencies after finding that the head of Hokkaido Regional
Development Bureau of the Ministry of Land, Infrastructure,
Transport and Tourism's (MLITT) and several others were involved in
bid-rigging for contracts for official vehicle operations by such
service providers. It also ordered the ministry to improve its
practices. The officials involved have allegedly provided internal
information, such as changes in bid-rigging methods, to bidders.
Bid-rigging for vehicle operations contracts is also carried out at
the ministry's local offices other than the Hokkaido office as well.
Former MLITT officials who were hired by those companies were
allegedly involved in most of such bid-rigging practices.

According to the FTC, Hokkyo Renrakusha Kanri (Hokkyo),based in
Sapporo City, which had hired many former MLITT officials, have been
monopolistically winning contracts for official vehicle operations
services in the area under the jurisdiction of the Hokkaido Regional
Development Bureau. Other regional offices also introduced a
designated bidding system one-by-one between 2002 and 2006. The
senior managing director of Hokkyo, who was parachuted from the

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Hokkaido Regional Development Bureau, allegedly carried out
bid-rigging by creating a mechanism of choosing a pre-arranged
winner from among designated companies.

The head and deputy head of the Bureau's Development Administration
Department were found to have disclosed bid-rigging information,
such as which office will shift its bidding system from a
discretionary contract system to a designated bidding system and
which companies will be designated, to former Bureau officials who
were hired by Hokkyo as president or senior managing director.

The FTC the same day also found that companies involved in the
bid-rigging in question violated the Anti-Monopoly Law by repeatedly
carrying out since January 2005 at the latest such practices for
contracts for providing vehicle operations services linked to the
national road office and the river office, MLITT's local bodies. The
antimonopoly watchdog ordered 10 companies, including Hokkyo, which
were deeply involved in the bid-rigging practices, to pay fines
totaling 2.6 billion yen and ordered them to take measures to
prevent a recurrence.

15) Basic fiscal policy guidelines for fiscal 2009 shelve spending
cuts

ASAHI (Page 1) (Abridged slightly)
June 24, 2009

The government at a special cabinet meeting on June 23 adopted basic
policy guidelines on economic and fiscal management and structural
reforms for fiscal 2009. The guidelines included a policy of
maintaining cutbacks on expenditures, which has been in place since
the Koiuzmi cabinet adopted the 2006 basic policy guidelines. The
government has, however, pledged to the ruling camp not to constrain
social security and welfare spending by 220 billion yen a year. The
ruling parties, which have been intensifying pressure for more
spending, have had their own way on in the run-up before the general
election, putting a dent in the government drive to press ahead with
reforming expenditures.

The prime minister, who wanted to make a public appeal that the
Liberal Democratic Party (LDP) and the New Komeito are responsible
parties, adhered to the idea of leaving intact the wording for
maintaining the reform of expenditures in accordance with the 2006
basic fiscal policy guidelines. However, his administration, which
has seen a declining in its power base due to plunging support
ratings, did not have the power to repel pressure from the LDP's
welfare and labor policy clique, which called for the retraction of
the government's policy of constraining social security expenditures
by 220 billion yen.

In the end, the 2009 basic fiscal policy guidelines included such
descriptions as "necessary social security expenditures will be
financed" and "budget estimate guidelines that are different from
those of the previous fiscal year should be set." Finance Minister
Yosano on the 23rd exchanged a memorandum with top four LDP
executives, such as Secretary General Hiroyuki Hosoda and Hidehisa
Otsuji, head of the LDP caucus in the Upper House, who is also a
member of the welfare and labor policy clique, pledging to approve a
natural increase in social security expenditures in the next year's
budget as is and to make efforts to save expenditures within a
reasonable range.


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The prime minister wants to reflect the 2009 basic fiscal policy
guidelines in the party's manifesto. However, unless the LDP wins
the next general election and the LDP-New Komeito coalition
government continues, the guidelines will most likely be cancelled.


16) Basic fiscal policy guidelines for fiscal 2009: Concern about
bloating expenditures

YOMIURI (Page 2) (Abridged slightly)
June 24, 2009

Following the retraction of the government's policy of constraining
social security and welfare expenditures - the showcase of spending
cuts since the Koizumi administration, voices calling for greater
expenditures in such areas as public works, defense, agriculture and
education will likely grow stronger in the ruling camp. This will
gradually put a dent in the reform of government expenditures
intended to reconstruct the nation's fiscal base.

The policy of constraining social security and welfare expenditures
has been retracted as a result of the Japan Medical Association
(JMA) strongly working on lawmakers of the Liberal Democratic Party
(LDP) with the next Lower House election close at hand. A senior
Finance Ministry official said, "The activities of the JMA were
powerful." The LDP apparently brushed aside the government's
resistance with its heightening desire to hold a commanding lead in
the election campaign.

The government had been pursuing a scenario in which it would
promote a policy of constraining social security spending, even if
it is a policy target, and constrain pressure for expenditures in
other areas, such as public works and agriculture, as well.

However, the scenario is beginning to fall apart due to the shift
from the policy of constraining social security spending, the symbol
of the scenario. Calls for expanding expenditures, such as the view
that a 3 PERCENT cut in public works is impossible or that cutting
the defense budget would cause serious problems because of the tense
situation due to missile launches and nuclear tests by North Korea,
are growing stronger.

The government hopes to seek understanding from the public regarding
the reform of revenues, including a hike in sales tax, while
maintaining the spending cut policy. All the more for that reason,
if its policy of cutting expenditures is watered down, it could have
a negative impact on discussions on a hike in sales tax, which the
government wants to implement once the economy turns around.

ZUMWALT