DAILY SUMMARY OF JAPANESE PRESS 06/25/09

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SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 06/25/09

INDEX:

(1) DPJ Secretary General Okada to U.S. Undersecretary of Defense
Flournoy: "The party will aim to revise SOFA" (Jiji)

(2) Governor in prefectural assembly interpellations says,
"Relocation of Futenma within prefecture inevitable," dismissive of
DPJ plan (Okinawa Times)

(3) Kadena base noise marked a record 267 times on end-of-battle
memorial; A sharp rise in engine adjustments; 324 times, third
highest, on June 22 (Ryukyu Shimpo)

(4) Aiming at global scale alliance on 50th anniversary of
conclusion of revised U.S.-Japan Security Treaty (Yomiuri)

(5) "Seiron" column: Do not frustrate U.S. experts on Japan again
(Sankei)

(6) "In My Opinion" column: Debate on enemy base strike capability
should not be handled thoughtlessly; synchronize this with
Japan-U.S.-ROK cooperation (Mainichi)

(7) Indirect political donations: Yosano offered Orient Trading his
congratulations upon company's anniversary history book (Mainichi)

(8) Fiscal policy guidelines for 2009 pushing back reforms,
abandoning policy course (Nikkei)

(9) Probe into Aso administration: Measures to deal with greatest
economic crunch of the century; Extra budget compiled in a manner
that makes over 10 trillion yen a foregone conclusion (Tokyo
Shimbun)

(10) Interview with JICA President Sadako Ogata: Africa is also a
neighboring country; fulfill pledge to double ODA; infrastructure
important for peace building (Asahi)

(11) Uniqlo, Unicharm to expand overseas operations (Nikkei)

ARTICLES:

(1) DPJ Secretary General Okada to U.S. Undersecretary of Defense
Flournoy: "The party will aim to revise SOFA"

JIJI Online (Full)
June 25, 2009

Democratic Party of Japan (DPJ) Secretary General Katsuya Okada met
with visiting U.S. Undersecretary of Defense Michele Flournoy at
party headquarters yesterday. In the meeting, Okada indicated that
if the DPJ takes the reins of government, it will address such
challenges as consolidating and reducing the U.S. military bases in
Okinawa, as well as reviewing the Status of Forces Agreement (SOFA).
He said: "Japan-U.S. relations are still in the shadow of the last
war that ended 64 years ago. In order to stabilize the bilateral
ties on a long-term basis, it is necessary to review them."

Okada also asked the undersecretary for her cooperation in arranging
a meeting between DPJ President Yukio Hatoyama and U.S. President
Obama, remarking: "If a change of government takes place, the top
leaders of the two countries should meet first to establish a

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relationship of trust."

In response, Flournoy tried to restrain the DPJ's intention to
review the agreed plan to relocate the U.S. Marine Corps' Futenma
Air Station (in Ginowan city, Okinawa Prefecture). She said: "If we
drop (the current relocation plan),we will lose leverage in
resolving the Okinawa issue, resulting in a serious blow to our
alliance."

(2) Governor in prefectural assembly interpellations says,
"Relocation of Futenma within prefecture inevitable," dismissive of
DPJ plan

OKINAWA TIMES (Page 2) (Full)
June 25, 2009

Interpellations started on June 24 in the Okinawa prefectural
assembly regular July session. In response to the Democratic Party
of Japan's (DPJ) assertion that it will discuss the option of moving
Futenma Air Station out of the prefecture with the U.S. side,
Governor Hirokazu Nakaima expressed a dismissive view, saying:
"Moving it to a location outside the prefecture is the best option,
but in view of past developments in talks on U.S. force realignment,
such seems difficult. In order to eliminate danger at the earliest
possible time, relocation within the prefecture is unavoidable." He
was replying to questions from Atsushi Sakima of the Liberal
Democratic Party and Katsuo Tome of the Social Democratic
Party/Goken Network.

About the four-party talks to discuss promotional measures with
three districts (Henoko, Kushi, and Toyohara) in Nago's Kube, the
planned relocation site for Futenma Air Station, Okinawa Governor's
Office Director Yoshiyuki Uehara said, "We think it is necessary for
the central government to take steps, such as measures for promoting
local economies to reduce burdens, for areas that will bear new
burdens because of U.S. force realignment." He also explained that
for the establishment (of the four-party talks),the prefectural
government will continue making adjustments with the Okinawa Defense
Bureau, Nago, and affected municipalities.

Planning Department chief Yoshihisa Kawakami offered the following
projection about a possible effect on the prefectural economy by the
supplementary budget in the emergency economic measures:
"Expenditures for related facilities, excluding the addition to the
fund in the next supplementary budget and beyond, will total 30.7
billion yen, and there will be 48.4 billion yen of an economic
effect. This will increase the economic growth rate by 0.7 points."

He also showed a projection that 3,700 jobs will be created in a
year and the unemployment rate will be reduced by 0.6 points. There
were in response to a question from Yoshihiko Yoshimoto of the LDP.

Regarding the basic concept on the modalities of prefectural
hospitals that show a direction of the reform of prefectural
hospitals, prefectural welfare and health department chief Keiko
Okumura indicted that the prefectural government will formulate by
the end of fiscal 2010 the contents and the scope of policy-related
medical services to be provided by the prefecture and the basic
policy on a fiscal burden. She said, "We will sort out basic
thinking and make adjustment with organizations concerned, such as
hospitals." Okumura was responding to a question from Mio Nakamura
of the SDP/Goken Net.

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About the reason why members landed in an area outside the provided
water area in the parachute drop training on Tsukenjima Island on
June 11, Governor's Office Director Uehara explained, "According to
the U.S. military, they were blown away by gusty winds."

He also indicated that about the cancellation of the training
planned in Oura Bay for June 18, there was a reply saying that the
U.S. military gave consideration to a peace praying event around
Camp Schwab in addition to bad weather. This was in response to
Tome.

(3) Kadena base noise marked a record 267 times on end-of-battle
memorial; A sharp rise in engine adjustments; 324 times, third
highest, on June 22

RYUKYU SHIMPO (Page27) (Full)
June 25, 2009

Kadena

The acoustic meter, installed by Kadena Town in the town's Yara
district to measure noise from Kadena Air Base, showed that noise
exceeded 70 dB 324 times on June 22, the third highest since the
town began measuring noise in 1999. On June 23, noise exceeded 70 dB
267 times, the highest ever on the anniversary of the end of the
Battle of Okinawa. The level of noise in the town has increased in
June. As of June 23, the number of average daily loud noises reached
134, far greater than 110 recorded in fiscal 2008. The town has
received complaints, such as irritation, from local residents.

It is the third time that noise has exceeded 300 times per day, with
the latest being 315 times in January 2005. In September 1999, noise
marked a record 329 times. The number of roars of noise on the
end-of-the-battle anniversary was always smaller than that of other
days due to the stipulation in the 1996 Japan-U.S. Joint Committee
aircraft noise regulations requiring U.S. forces to give
consideration to keep aircraft flights to a minimum. In fiscal 2008,
loud noise marked only 49 times that day. It is the second time that
the number exceeded 200 since fiscal 2005.

About the reason why noise has increased, an official of the town's
base affairs department said:

"It is partly because of an increase in training by the aircraft
from outside Okinawa, including the F-22s. The biggest reason is
because there has been a huge increase in adjusting engines by
aircraft in June. Fighters make less noise when adjusting engines
than when taking off from the base, but the process lasts longer,
and many residents find it distressing. We will send a letter of
protest to Kadena Air Base as early as this weekend."

Of the 267 times recorded on the end-of-the-battle anniversary, 258
times that marked between 70 - 80 dB are believed to have resulted
from the adjustment of engines. As for noise on June 22, 258 times
seem to be attributable to engine adjustments. The town's base
damage desk has received calls from local residents complaining that
noise from the base that exceeded 200 times for two consecutive days
was unbearable and irritating. A man of Yara said: "On June 22 and
23, it was so noisy that I could not do what I had to do. They were
my days off and it was really annoying."


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(4) Aiming at global scale alliance on 50th anniversary of
conclusion of revised U.S.-Japan Security Treaty

YOMIURI (Page 13) (Abridged slightly)
June 24, 2009

Michael Schiffer, deputy assistant secretary of defense for Far East
Asia

The recent nuclear test, missile launches, reckless and provocative
words and acts by North Korea have again given the impression that
in order for the international community to address pressing issues,
cooperation in a form in which Asia participates and displays
leadership is indispensable. Pressing issues include stopping the
proliferation of weapons of mass destruction, strengthening the
global economy, dealing with the climate change problem, and taking
steps to prevent pandemics.

The U.S.-Japan alliance is a cornerstone of American policy in the
Asia-Pacific and is a foothold for the United States to again
strengthen its involvement in Asia. Based on such common values as
democracy, the rule of law, human rights, and the free-market
economy, the United States and Japan, as the world's two richest
democracies, share the common interests of promoting stability and
prosperity in Asia and the world. In the world today, it is
difficult to find two countries that fundamentally trust each other
as deeply as the United States and Japan.

In order to strengthen lasting and true security cooperation, it is
essential to have interoperability at all levels. The force
readiness of the alliance is necessary to meet the challenges
resulting from the new security environment.

We were able to fully prepare for and deal with (North Korea's)
launch in April of a Taepodong long-range ballistic missile. Such
was possible because both the United States and Japan have invested
in a missile defense system, shared information, and perfectly
coordinated their policies. The United States has promised to
provide the necessary capabilities to defend Japan.

Close cooperation between the United States, Japan, and regional
partners will help North Korea abide by its pledge of denuclearizing
itself in a complete and verifiable manner. It will also form the
basis for the DPRK to earnestly address the issue of Japanese
abductees that is indispensable for an ultimate peaceful solution.

To revitalize the alliance so that it can face challenges over the
next 50 years, the realignment of U.S. and Japanese forces,
especially those in Guam and Okinawa, must be fully implemented.

Both the United States and Japan will review their respective key
strategies from this year through next year. For instance, reviews
on the U.S. side include the Quadrennial Defense Review (QDR),the
Nuclear Posture Review (NPR),and the ballistic missile defense
review. On the Japanese side, there is a review of the National
Defense Program Guidelines. Close talks will help the two countries
incorporate more strategic approaches into those final documents and
share views on such extremely important tasks as nonproliferation.

Next year marks the 50th anniversary of the signing of the revised
U.S.-Japan Security Treaty. This will serve as a good opportunity to
celebrate what the alliance has accomplished and to broaden it into

TOKYO 00001436 005 OF 018


a truly global-scale alliance. It may be overly ambitious, but by
pursuing those challenges that the alliance can overcome, we will be
able to create a strategic environment in the Asia-Pacific region,
make clear the United States' involvement in the defense of Japan,
and continue strengthening each other's capabilities as allies.

In view of the new regions and the realities in the world the
alliance is facing, the United States cannot, and should not, take
the management of the alliance with Japan for granted. As long as
Japan has a solid future vision and the will and ability to play a
leading role in creating a peaceful and prosperous Asia, not only
the United States but the international community as well will gain
tremendous benefits from close, productive, and cooperative
relations with Japan. The United States must refocus its energy on
U.S.-Japan cooperation on a global scale.

(5) "Seiron" column: Do not frustrate U.S. experts on Japan again

SANKEI (Page 7) (Slightly abridged)
June 25, 2009

Hisahiko Okazaki, former ambassador to Thailand

Gesture of goodwill from Campbell and others

The Obama administration has shown tremendous goodwill toward Japan.


This was evidenced by Secretary of State Hillary Clinton's testimony
at her Senate confirmation hearing, the fact that she chose Japan as
the first country she visited after taking office, and that Prime
Minister Taro Aso was the first foreign leader President Barack
Obama met after his inauguration.

This is an epoch-making development in Japan-U.S. relations
attesting to the success of diplomacy on both sides. As a matter of
fact, both Deputy Secretary of State James Steinberg and Assistant
Secretary of State for East Asia and the Pacific Kurt Campbell have
both made remarks emphasizing that these are proof of the importance
the Obama administration attaches to Japan.

However, the Japanese media at that time mostly focused on reporting
on then Minister of Finance Shoichi Nakagawa's embarrassing behavior
at the G-20 and failed to convey the United States' gesture of
goodwill adequately to the public.

In my opinion, the Japanese media have also demeaned themselves in
this incident.

The Obama administration's favorable consideration given to Japan is
not only demonstrated in its gestures, but also expressed clearly in
the lineup of senior officials in charge of East Asian affairs.
While there are many Americans who know Europe and the West well,
few are knowledgeable about Asia. Policymaking tends to rely very
much on the expertise of officials responsible for East Asia.

Japan should think of contributing to the alliance

During the first half of the Clinton era, when frictions between
Japan and the U.S. were serious, officials in charge of East Asia in
the White House and the State and Defense Departments were all China
experts. There was not a single person knowledgeable about Japan, so

TOKYO 00001436 006 OF 018


Japan was helpless.

However, the present chief policy-maker on East Asia at the
Department of Defense is Assistant Secretary Wallace Gregson, who
used to be the Marine Corps commander in Okinawa and who knows Japan
well. Moreover, Kurt Campbell, who places high priority on the
Japan-U.S. alliance, is slated to be the new assistant secretary of
state for East Asia and the Pacific.

This is good news for Japan. On the other hand, what can Japan do in
this situation?

Actually, the Pacific Forum and three other groups held four
seminars attended by more than 50 Asia experts last year. The result
of the discussions was published in February as new proposals on
Asian policy for the Obama administration. It is said that Campbell
exercised strong leadership in the drafting of the report.

In one passage, the word "enough!" was used. What it is meant was
that since the United States is committed to the alliance, Japan
should not be talking about such things as "Japan passing," and be
so wishy-washy. Instead, it should think of ways to contribute to
the alliance on its own.

Campbell is one of the few experts on Japan from the Democratic
Party camp. During the last days of the Clinton administration, he
reportedly was fed up with the stream of Japanese politicians and
business leaders always calling on him.

Expectation on settling the issue of right of collective
self-defense

However, in his recent hearings in the Senate, he did not seem to
have been affected by this tedious experience. He stated in no
uncertain terms that the Japan-U.S. alliance is at the center of
U.S. policy in Asia and that the U.S. should make this guarantee to
its Japanese friends.

Shortly after the inauguration of the Bush administration, Deputy
Secretary of State Richard Armitage proposed a vice ministerial
dialogue to strengthen the bilateral alliance. At that time, the
Japanese Ministry of Foreign Affairs was unable to respond to this
effectively, so Armitage left office in disappointment. In contrast,
his successor Robert Zoellick started the U.S.-China vice
ministerial dialogue, which was hugely successful from the first
round. China immediately obtained the status of a "stakeholder."

This time, the U.S. side is again hopeful that moves to help propel
the Japan-U.S. relationship forward will be made under Campbell and
Gregson's watch.

The political situation in Japan is such that the state of affairs
after the Aso cabinet steps down remains completely uncertain. But
at least, the Aso cabinet should still be in power when Campbell
visits. Even during the little time left, we hope that meaningful
exchange of views with the new Obama administration will take place,
and the course for the strengthening of the alliance in the future,
even just portions of it, will be laid down for future
administrations. Otherwise, the opportunity presented by the
Campbell-Gregson team, as well as the team made up of James Jones,
Hillary Clinton, and Robert Gates may be wasted, and they may become
frustrated with Japan at an early stage.

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It is also becoming evident what Japan needs to do.

The recent statements of Japan experts in the U.S. show that
although they had been coy in the past about their expectations
about Japan using the right of collective self-defense, they are now
speaking up on this subject. Next will come the issue of Japan
boosting its defense capabilities in order to maintain the
deterrence of the bilateral alliance.

The immediate issue for the two countries is the realignment of
military bases, but this is a complicated issue linked to local
circumstances in Okinawa. Certain aspects of the issue cannot be
resolved by the central government's policies, so prospects remain
unclear. While it goes without saying that Japan needs to make
efforts to resolve this problem, this does not mean that the more
fundamental questions of the right of collective self-defense and
Japan's need to increase defense spending can be deferred.

(6) "In My Opinion" column: Debate on enemy base strike capability
should not be handled thoughtlessly; synchronize this with
Japan-U.S.-ROK cooperation

MAINICHI (Page 9) (Full)
June 25, 2009

Akihisa Nagashima; Democratic Party of Japan (DPJ) deputy secretary
general

The Liberal Democratic Party (LDP) National Defense Division has
included the possession of "enemy base attack capability" using
cruise missiles and other weapons in its recommendation for the
National Defense Program Guidelines to be compiled in late 2009. It
can be said that this reflects the growing threat perception in
Japan after North Korea fired its missiles and conducted its nuclear
tests, despite the international community's repeated demand to
exercise restraint.

However, the fact that even proposals were made for "preventive
preemptive strikes" in a situation where there is no imminent
threat, which would be a violation of international law, indicates
that reaction has been overly emotional. This writer recognizes the
need to discuss "defensive preemptive strikes" premised on an
imminent crisis. However, Japan should not take action unilaterally,
but should take cautious steps within a framework of cooperation
with the U.S. and South Korea.

Probably in reaction to discussions in the LDP, U.S. Secretary of
Defense Robert Gates made remarks shortly before the DPRK missile
launch (in April) to the effect that the missile "will not be
intercepted unless it is targeting the United States." If the U.S.
will not intercept missiles targeting Japan, this amounts to the
U.S.' abandoning the exercise of its right of collective
self-defense, which means the disintegration of the underlying
assumption of the Japan-U.S. security alliance. In which case, it is
understandable that there are advocates of Japan dealing with the
situation on its own.

For sure, an effective combination of "repulsive deterrence" to ward
off attacks and "punitive deterrence" to retaliate against attacks
is necessary for perfect deterrence. The former requires the
improvement of missile defense while "enemy base strike capability"

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is one form of the latter. While this capability has been regarded
as constitutional and falling within the scope of the exclusively
defensive policy based on the interpretation Prime Minister Ichiro
Hatoyama gave to the Diet in 1956, Japan has never attempted to
possess offensive weapons. Nevertheless, in the face of a growing
threat, Japan cannot also afford not to do anything about the
imperfect deterrence.

However, enemy base attack capability is not a simple matter. Most
of North Korea's mid-range missiles, the Nodong, which encompass
almost all of Japan in their range, are fired from underground silos
and are technically very difficult to detect. Even if Japan is lucky
enough to destroy a few missiles, it would not be able to deal with
missiles fired in quick succession. Furthermore, the LDP's rash
proposal on Japan possessing enemy base strike capability
unilaterally is risky in that it may undermine the basic concept of
Japan-U.S. division of labor under the alliance, where "the
Self-Defense Forces serves as the shield and the U.S. forces Japan
as the spear."

Uncoordinated efforts to reinforce deterrence in Japan, the ROK, and
the U.S., even if in the name of responding to North Korea's threat,
may give rise to mutual distrust. It is important for Japan, the
ROK, and the U.S. to pay attention to the following two points and
consult closely in building deterrence, as well as coordinating
North Korea policy:

First, the implementation process: Right now, denuclearization and
deterrence through conventional weapons is being discussed as the
strategy to counter the DPRK's nuclear armament in the ROK. Japan
should support the ROK's efforts to lift the restriction imposed by
its agreement with the U.S. limiting the range of its missiles to
300 kilometers. Simultaneous with this, Japan should also enter
negotiations with the U.S. on acquiring Tomahawk cruise missiles.
The acquisition of F-22 fighters, which possess offensive capability
and are able to evade radar detection, should be considered in this
context.

Second, the timing for acquisition: The "Double-Track Decision" that
led to the complete elimination of NATO's theater nuclear forces
from the second half of the 1970s to the 1980s will serve as a good
model. That is, Japan, the ROK, and the U.S. will negotiate with
North Korea to discontinue its development of nuclear arms and
ballistic missiles by 2012, which is an important historic date for
this country. At the same time, it will proceed with trilateral
talks on the possession of cruise missiles and other weapons for
enemy base attack, and will go ahead and deploy such weapons if
North Korea does not change its behavior.

In any case, the purpose of the reinforcement of deterrence is
security. We should avoid the folly of causing regional instability
instead in our frenzy to acquire offensive weapons.

(7) Indirect political donations: Yosano offered Orient Trading his
congratulations upon company's anniversary history book

MAINICHI (Page 29) (Slightly abridged)
June 24, 2009

Taichi Yamamoto, Takua Ito

Finance Minister Kaoru Yosano, who concurrently serves as state

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minister of finance services and state minister of fiscal policy,
was found to have offered his congratulations on the 40th
anniversary of the founding of Orient Trading, a commodity futures
trading company, in Shinjuku Ward, Tokyo, in its history book
published in 2000. In the book, Aso wrote: "Orient Trading is the
linchpin of the solidarity of the commodity futures trading
industry." Orient Trading played the central role of an indirect
political donation scandal. Yosano served as international trade and
industry minister (MITI),the predecessor of the Ministry of
Economy, Trade and Industry (METI),which oversees the commodity
futures trading companies. Later, as minister in charge of financial
services, he made replies in Diet deliberations on a commodity
futures trading bill. A secretary to Yosano told the Mainichi
Shimbun that the Orient Trading owner was "a goodwill supporter,"
who had backed Yosano for a long time since he was young. The
secretary ruled out the relations between Yosano's Diet replies and
political donations from Orient Trading.

The commodity futures trading law was amended in 1998 to drastically
relax regulations. The commodity future trading companies welcomed
the sweeping relaxation of the regulations. Yosano was serving as
MITI minister at a time when the law was amended.

Yosano extended in 2000 his congratulations to Orient Trading with
his title as former MITE minister and Lower House member. He gave
words of encouragements in the history book, writing: "As an asset
management arena for the public, opened commodity future trading is
important. I expect the company to become a cornerstone for
development of the commodity future trading industry."

Orient Trading's political organization called the Study Group on
Political and Economic Policies was established in 1981. Yosano
designated the political group as his support organ for 21 years
since 1981. He received donations from the group in 1998 and 1999
when he served as MITI minister. With regard to this, Yosano's
secretary said: "At that time, since we could not collect a lot of
funds, we appreciated the 250,000 yen in donations (per month)."

The Financial Instruments and Exchange Law, enacted in 2006 when
Yosano was state minister of financial services, excluded commodity
future trading from the subjects to the regulation. During Diet
deliberations on the legislation, Yosano said: "(Commodity future
trading) is not a game, but it greatly supports production and
distribution," indicating a cautious stance toward expanding targets
to the regulation. Aso's secretary emphasized: "Yosano's Diet
replies were not intended to support the commodity futures trading
industry. There was nothing to do with the political donations."

However, a former Orient Trading executive said: "If donations are
prohibited, the company will not carry out business. A former group
company executive commented: "I think that the commodities futures
industry at that time had many troubles, so the industry wanted to
change the law to its advantage."

Orient Trading owner Yukio Kato refused to respond to a Mainichi
Shimbun's interview, citing an illness. A former Study Group on
Political and Economic Policies accountant said: "The entity made
donations to politicians who had good ties with Kato. Kato is the
only person who knows the details."

Commentary


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Shusaku Sugimoto

The tax system that a portion of donations to a political support
group is deducted from the income tax imposed on the donator was
incorporated in a revision of the Special Taxation Measures Law in

1975. The original purpose was to promote individual political
donations for political activities.

However, a group of five companies, including Orient Trading, abused
the system. The group deducted almost forcibly the money from the
salaries of executive members to let them make donations to the
Study Group on Political and Economic Policies. Finance Minister
Yosano and former Administrative Reform Minister Yoshimi Watanabe
received a lot of political donations. Their responsibility for
neglecting the illegal management of their support entity is
serious.

One executive member said: "I was unhappy with the mandatory
deduction from my salary but I unwillingly followed the company, as
I was told that contributions were tax exempt. It can be said that
the money was corporate contributions in effect, not the donations
made by individuals." Nishimatsu Construction's back-door political
donations through dummy political organizations were subject to a
crackdown by the special investigation squad of the Tokyo District
Public Prosecutors Office. A similar donation case by Kumagai Gumi
Co. was discovered by the media. It has become evident that the
pattern of evasions of the law is rampant in Japan.

According to the Internal Affairs and Communications Ministry, Diet
members' political organizations whose political contributions are
tax exempt number about 640, all of which are overseen by the
internal affairs ministry. Political organizations are designated by
politicians, but there are no limits to the number of political
organizations designated. Many Diet members have several political
entities. There must be political organizations that have made
illegal contributions.

There are moves to amend the law aiming at a complete ban on
corporate donations and at a preferential tax system. However, since
the abuse of the preferential system was clarified this time, a
drastic reform to prevent loopholes is required.

(8) Fiscal policy guidelines for 2009 pushing back reforms,
abandoning policy course

NIKKEI (Page 3) (Excerpts)
June 24, 2009

The government adopted in a cabinet meeting yesterday a set of
economic and fiscal policy guidelines for fiscal 2009. The
guidelines put off the set goal of reconstructing the nation's
financial system and set aside the policy of curbing spending on
social security. The guidelines did not step into regulatory reforms
to restore the nation's economic strength, underscoring a switch
from the structural reform policy line.

Fiscal reconstruction goal, plan to curb social security costs
watered down

Setting "security, vitality, and responsibility," as its subtitle,
the set of guidelines demonstrated the government's determination to
maintain its responsibility to restore the nation's fiscal health,

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while pledging to boost its growth potential. But in the 2009 policy
package, reform efforts were considerably watered down.

In a press conference held after the guidelines were adopted,
Finance Minister and Financial Services, Economic and Fiscal Policy
Minister Kaoru Yosano indicated that the government will not curb
the natural increase in social security costs in compiling the
fiscal 2010 budget.

The policy of curbing a natural increase of 220 billion yen has been
inserted in the annual policy guideline since 2006 under the Koizumi
administration. Although this goal was attained only in the fiscal
2007 budget, the Finance Ministry has so far managed to go along
with this policy even by disbursing funds from special accounts,
fearing that a removal of the policy could generate calls for more
spending on public works projects and defense policies.

Yosano has emphasized that the government will not collapse the
framework of expenditure reform, but the government has undoubtedly
become less eager (about reforms). Tokyo University Professor
Toshihiro Ihori commented: "Since the government compiled a
huge-sized supplementary budget, it should have included a plan to
review expenditures as its exit strategy in the 2009 guidelines. It
is now ambiguous who should take responsibility for restoring the
nation's fiscal soundness."

Regarding how to establish the foundation for economic growth, the
guidelines gave no clear-cut vision. For instance, no progress was
made on concluding economic partnership agreements (EPA) with Asian
and other countries, although such partnerships are becoming more
important as a driving force to maintain the nation's growth
potential. In the agricultural sector, too, the guidelines did not
incorporate such reform measures as reviewing the policy of cutting
rice acreage.

In the medical and nursing sectors, which have high potential, the
guidelines proposed creating 300,000 jobs over the next three years
but stopped short of mentioning such specific measures to achieve
the goal as a relaxation of restrictions on new market entrants. In
preventing environmental contamination and declining birthrate, some
signs of progress were observed, but any signs of the government's
determination were nowhere in sight in the guidelines.

When the annual economic and policy guidelines were drawing much
attention, government agencies were eager to put their policies in
the guidelines in an effort to secure budgetary allocations. In
preparations to win a forthcoming general election, however, a
senior official of a government economic agency said: "The
guidelines for this fiscal year might turn into a scrap of paper. So
it is becoming less necessary to pour our efforts in it."

The 2009 guidelines noted that the government will reduce debts held
by central and local governments and steadily lower the rate of
debts to gross domestic product (GDP) starting in the early 2020's.
The government also decided to give up on its efforts to achieve a
surplus in the primary balance by fiscal 2011. Instead, the
guidelines inserted the goal of halving the percentage by fiscal

2013.

To attain that goal, a bumpy road lies ahead. The Cabinet Office
came up with a severe projection in its fiscal estimate, noting: "It
will be necessary to gradually raise the consumption tax by 7

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percent starting in fiscal 2011 in order to achieve the goal." JP
Morgan Securities chief economist Masaaki Sugano said: "An about 3
PERCENT as the nominal growth rate is overly high. No prospects are
in sight for a consumption tax hike, and no progress has been made
in slashing expenditures, either. It is unlikely for the goal to be
attained." While losing momentum for reforms, the government will
start the process of compiling a state budget for next fiscal year.

This kind of guidelines unnecessary

By Akio Fujii, a Nikkei editorial committee member

The economic and fiscal policy guidelines for fiscal 2009 represent
the current state of Japan, which is just drifting without
presenting its future policy course.

The administration of prime minister Junichiro Koizumi started
forming the government's annual policy guidelines as the foundation
for promoting its planned structural reforms such as disposal of
nonperforming loans, privatization of postal services, and reform of
government-affiliated financial institutions.

Recently, however, attention has been focused only on the propriety
of the 2006 guidelines, which proposed cutting expenditures on
social security, and no discussion has been conducted on structural
reforms.

In final coordination between the government and the ruling parties,
attention was focused on what to do about the target of curbing a
natural increase in social security costs by 220 billion yen, with
such questions as how to effectively use social security expenses
and how to finance the costs were pushed backstage.

In the debacle over the reappointment of Japan Post Holdings
President Yoshifumi Nishikawa, as well, the focus of attention in
debates was not on the contents of postal privatization but on the
propriety of Nishikawa staying on.

With an eye on the upcoming general election, the government has
given priority to policies to ensure secure society by disbursing
money to the people while setting aside necessary systemic reforms
that require the government to make difficult efforts to persuade
the people. The government, though, has not presented a blueprint
regarding the financial resources to support such measures and how
much the people will have to pay to that end in the future. Not only
the government and the ruling parties but even the Democratic Party
of Japan, which is aiming at grabbing political power in the next
election, appeared to be resorting to this election strategy.

Agricultural reform measures alone drew attention as apparently real
reform in the 2009 guidelines. Agriculture, Forestry and Fisheries
Minister Shigeru Ishiba tried to step into such reforms as a review
of the rice acreage-reduction policy, but his idea was pushed away
due to opposition from the agriculture policy clique in the Diet
prior to the election.

The global economy has emerged from its worst period, and money has
gradually come back to the market. But the government remains unable
to come up with reforms necessary for the people and to present a
future vision. Investors will surely abandon such a country in the
future.


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(9) Probe into Aso administration: Measures to deal with greatest
economic crunch of the century; Extra budget compiled in a manner
that makes over 10 trillion yen a foregone conclusion

TOKYO SHIMBUN (Page 2) (Full)
June 25, 2009

Prime Minister Taro Aso on April 6 called in Finance Minister Kaoru
Yosano to the Kantei and ordered him to compile a fiscal 2009 extra
budget to finance a package of additional stimulus measures.

He asked Yosano, "I would like you to compile a budget that exceeds
2 PERCENT of the gross domestic product (GDP)." The reason why the
prime minister ordered that the size of the extra budget should be
more than 2 PERCENT of the GDP" is clear.

Participants in the emergency summit, held in London joined by 20
countries, agreed to implement economic stimulus measures totaling 5
trillion dollars (roughly 500 trillion yen). Aside from that, the
U.S. had asked various countries to take fiscal action involving
more than 2 PERCENT of their GDPs." In response, the prime minister
came up with an approach of placing top priority on international
cooperation.

Japan's GDP is approximately 500 trillion yen, and 2 PERCENT of
this comes to 10 trillion yen. The compilation of the largest-ever
fiscal 2009 extra budget topping 10 trillion yen got under way,
based on that calculation. It was thus compiled in a manner that
makes over 10 trillion yen a foregone conclusion.

In compiling the budget, Yosano stressed his intention to aim for
wise spending. However, ...

The extra budget totaling 13.9 trillion yen was compiled in the same
way. One trillion and six hundred billion yen was appropriated for
the creation of a low carbon revolution, of which 370 billion yen
was earmarked for 100,000-yen assistance for the purchase of a
brand-new "green car." Two hundred and ninety billion yen was
earmarked for the dissemination of green home electronics under an
eco-point system. It appears that bold investment was adopted for
environmental measures. However, this system sounds paradoxical
because those who purchased a large TV set, instead of an
eco-friendly small TV set, gets more points. Kazuo Mizuno, chief
economist of Mitsubishi UFJ Securities, pointed out, "Environmental
measures are mixed with stimulus measures."

The extra budget also included funds appropriated to suit government
agencies. Various government agencies' budgets for the purchases of
home electronics and green cars and the installations of solar
energy generation panels totaled 381.2 billion yen.

Budgetary funds were also appropriated to organizations, which had
been set to be downsized, consolidated or reorganized in the reform
of independent administrative agencies, virtually serving as a
"life-support" measure for them.

The extra budget also included the construction of a National Media
Art Center (tentative name) known by the name of hall of anime and
manga at the cost of 11.7 billion yen. Even the ruling parties are
calling for freezing that budget as a symbol of wasteful spending.

In the extra budget, 4.3 trillion yen or approximately one-third of

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the total funds was appropriated for reserves for 46 funds.

The implementation of those budgets will be put on the backburner to
be used in fiscal 2010 and after. This is in response to the prime
minister's wish that budgetary funds should be appropriated over
multiple years. This indicates that the government did not have
resourcefulness to use up those funds within the fiscal 2009.

The assessment of the compilation of an extra budget is lenient,
compared with the case of an initial budget. In addition, top
priority for the extra budget this time was it should exceed 10
trillion yen. The outcome was a list of spending items that are
nowhere near "wise."

The opposition camp, such as the Democratic Party of Japan (DPJ),
pursued the government, saying that the extra budget was pork
barrel. However, since the DPJ at the time was at the mercy of such
inward-focused arguments such as the resignation of then president
Ichiro Ozawa and the consequent presidential election, it was unable
to fully pursue the matter in the Diet. Opposition parties are
greatly responsible for the contents of the extra budget.

Of the 13.9 trillion yen extra budget, approximately 10 trillion yen
is to be financed with public bonds, that is to say, borrowings. Is
what will come next a hike in the consumption tax, which is the
prime minister's pet argument?

(10) Interview with JICA President Sadako Ogata: Africa is also a
neighboring country; fulfill pledge to double ODA; infrastructure
important for peace building

ASAHI (Page 5) (Full)
June 25, 2009

Interviewer: reporter Yasura Komori

The development of Africa has been in the limelight after the Tokyo
International Conference on African Development (TICAD) held in
Japan last year and the Hokkaido-Lake Toya Summit, where there were
lively debates on measures to reduce poverty and develop economies.
However, the situation in Africa has been deteriorating over the
past year. How should aid be provided in the future? We asked
President Sadako Ogata of the Japan International Cooperation Agency
(JICA),the body in charge of Japan's aid.

-- Can you tell us about the state of Japan's aid to Africa?

Ogata: When I took over as president six years ago, the ratio of aid
to Sub-Saharan Africa was 14 percent, but this has increased to 26
percent last year. JICA's Africa division has become the largest
division. For sure, one aspect of this is that the need for aid in
Asia has diminished thanks to economic growth.

The government has made an international pledge to double ODA to
Africa by 2012, so it should fulfill this pledge.

-- The world economic situation has worsened in the past year, and
we have been hit by ups and downs in the prices of resources, which
form the basis of development, and food crisis. What is your focus
at present?

Ogata: First, in order to achieve the Millennium Development Goals

TOKYO 00001436 015 OF 018


(MDGs) by 2015, we will concentrate our preventive measures on areas
where the economic situation is deteriorating.

Second is the building of infrastructure to make social development
sustainable. We need to think about investment to maintain the
momentum of economic growth and how to continue investment in
infrastructure in order to prevent the economy from deteriorating.

-- TICAD IV last year was a great success. This particular TICAD has
been complimented for having a solid follow-up system to discuss
progress after the conference, unlike the previous three sessions.

Ogata: A ministerial level follow-up meeting was held in Botswana in
March. A meeting on the "Coalition for African Rice Development
(CARD)," a program for doubling food production, rice production in
particular, will be held in Tokyo this month. Representatives from
12 countries, including those from Asia, will hold discussions. This
can also be considered a major follow-up step.

I was invited to TICAD twice as the UN High Commissioner for
Refugees. The discussions were lively but there was no follow-up
mechanism. The JICA Africa division has also created a "follow-up
operations office" to check the effect of aid and the donors'
commitment. I think this will contribute to full-fledged development
aid.

-- While JICA is putting a lot of effort into African aid, there
have been doubts about Japan's aid to Africa.

Ogata: I think although the Japanese people's consciousness has
changed dramatically compared to the past, there is still the
underlying thinking: "Why bother with faraway Africa and not the
close neighbors in Asia?" However, all countries are our neighbors.
The people of the second economic power in the world need to play a
suitable role. It is not acceptable for Japan to seek its own
stability when there are countries facing crisis and when people are
suffering.

Countries and people's consciousness need to change in an era of
inter-dependence where people and goods go around the world. The
thinking of Asian countries has also changed. China, the ROK,
Malaysia, and Singapore are all making inroads into Africa. This is
probably because they have come to think of their own prosperity in
the context of a much more extended spatial concept.

-- China has increased its aid to Africa tremendously and is being
criticized for using this as part of its unprincipled resources
diplomacy under the principle of non-interference in internal
affairs.

Ogata: China, for sure, is thinking of its own place in the world.
Japan does not interfere in internal affairs as well. In Ethiopia,
Japan is building the highways, while China is building the circular
roads in the cities. I think it is desirable for both countries to
cooperate and give full play to each one's strengths. It is also
important for aid donors to share information.

-- Perhaps one reason for the lack of support is because the effects
of aid to Africa are not visible.

Ogata: There were endless conflicts in Africa in the 1990s. It was a
difficult time. Even now, we are concerned about Congo or Sudan. But

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the situation has changed for the better. Countries like Mozambique
and Tanzania, which used to be in very bad shape, have acquired
governance ability. People who have moved the country have been
elected as president.

The Organization of African Unity (OAU) became the African Union
(AU) in 2002, and the African countries abandoned the principle of
non-interference in internal affairs. They now think that each
country should not be unconcerned about other countries. This is
significant.

-- After the North-South civil war that lasted over 20 years ended
in Sudan, aid that will contribute to peace building is being
undertaken.

Ogata: While Sudan still has the Darfur conflict, JICA and other
international aid groups have entered Juba, a major city in the
south, at an early stage. We built infrastructure and provided
occupational training for the refugees, which contributed to the
stabilization of southern Sudan. The building of infrastructure is
very important for peace building. We need to rush to the site,
build the most suitable structures for the locality, produce
results, and show hope.

-- Aid needs to be able to show results.

Ogata: International aid tends to be compared in terms of how much
money was given. I think there should be more comparison of the
results, and I would like to think of ways for doing this. It is
important in a globalized world to proceed from a point to a plane
and look at the results beyond the national boundaries at a regional
level. It is also important to device methods of assessment from the
standpoint of the aid recipients.

-- An announcement was made in 2008 on the merger of the yen loan
sections of the Japan Development Bank. Does this mean that the
methodology of aid is also changing?

Ogata: Yen loans are an attractive proposition; projects are
possible even in small countries. A few years ago, the Rwandan
ambassador said: "We want to become a country that does not receive
money all the time and that is able to borrow and repay the loan."
It is important for JICA officials in the field to see how aid is
being used.

-- Lastly, how would you like to proceed with aid to Africa from now
on?

Ogata: There are very few aid agencies in the world that engage in
infrastructure building. JICA will take advantage of its strength
and work on bilateral projects for roads, electricity, and so forth,
while also cooperating with the World Bank and the African
Development Bank.

In Asia, we have trained talented people through Japan's aid. We are
now seeing cases of rice experts from Malaysia and Indonesia going
to Africa. One issue is how to cooperate with countries that have
graduated from aid.

(11) Uniqlo, Unicharm to expand overseas operations

NIKKEI (Top Play) (Full)

TOKYO 00001436 017 OF 018


June 25, 2009

Leading manufacturers of daily goods are rapidly expanding
operations outside Japan. Fast Retailing Co. has continued efforts
to attain its goal of opening 100 Uniqlo casual wear stores annually
in Asia. The company expects to see foreign sales almost overtake
domestic sales in 2013. Unicharm Corp. has earmarked the largest
ever amount of overseas investment funds in fiscal 2009. In fiscal
2012, foreign sales are expected to top domestic sales. These
companies are aiming to emerge from the structure of being dependent
on the domestic market, which is shrinking recently due to declining
birthrate, mainly for internationally competitive businesses. Family
Mart also expects to have more outlets overseas than in Japan soon.
As it stands, industries that carter to domestic demands have
speedily shifted their strategic bases to new growing markets.

Fast Retailing intends to break into the markets of Thailand,
Malaysia, Vietnam, Indonesia and the Philippines within three years
in accordance with its goal of annual openings of 100 stores in Asia
alone, President and Chairman Tadashi Yanai said. The company eyes
mergers and acquisitions (M & A) investment in the U.S. and Europe,
but it intends to tap demand in Asia for low-priced, high-quality
goods.

Uniqlo expects to post sales of 558 billion yen for the year ending
August 2009, with only 37 billion yen generated overseas. But it
aims to boost both domestic and foreign sales to around 800 billion
yen in the business year ending August 2013. To that end, the
company will open stores in Russia next spring and in Australia
within three years. It also intends to open large stores in China.
In the year ending August 2014, the company expects to see overseas
sales surpass domestic sales.

Unicharm has earmarked 15 billion yen for investing abroad (10
billion yen for domestic investment) in fiscal 2009, up 50 PERCENT
over the previous fiscal year. The company will build plants in
China, Indonesia, India and Russia for mainstay paper diapers and
sanitary products. Its overseas production bases will increase by 50
PERCENT to 13 sites.

Unicharm is the world's third largest group in this area, following
Procter & Gamble Co. of the U.S. and Kimberly Clark Corp. of the
U.S. Its overseas sales accounted for 37 PERCENT of its total in
fiscal 2008 (with overseas sales totaling 129 billion yen). In
fiscal 2011, the company anticipates the percentage will surge to 50
PERCENT (with the aim of posting sales of 225 billion yen).

Other major daily goods manufacturers are also shifting strategic
points overseas. Shiseido Co. and Kao Corp. earned 38 PERCENT and
32 PERCENT overseas of their respective total sales in fiscal 2008.
They have expanded production and sales mainly in Asia. Shiseido and
Kao aim to increase the rate of sales overseas to over 50 PERCENT
in fiscal 2017 and fiscal 2020, respectively.

Japan accounted for only 8 PERCENT of global gross domestic product
(GDP) in 2008, down from 11 PERCENT in 2004. In contrast, such
emerging countries in Asia as China and India saw their average rate
shoot up from 8 PERCENT in 2004 to 12 PERCENT in 2008. All
emerging countries, including Russia and Brazil, generated 31
PERCENT of global GDP, up from 21 PERCENT in 2004. Given this,
there are apparently few prospects for growth for manufacturers that
cater to the domestic market, for instance, for daily necessities

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and clothing, as long as they depend on domestic demands, as seen
from the fact that the domestic market of paper diapers in fiscal
2008 was about 150 billion yen, a 5 PERCENT decrease from the level
in fiscal 2003.

Other industries are also eagerly moving to tap demands in newly
emerging countries. Family Mark, the third largest convenience store
chain in the nation, has opened more stores in South Korea, Taiwan,
and China. Of the M & A investment projects (worth nearly one
trillion yen) Kirin Holdings Co. has decided to implement since
2006, 70 PERCENT are overseas projects. The company aims to place
on influential company after another under its wings, in an effort
to become a survivor in the global market.

ZUMWALT