DAILY SUMMARY OF JAPANESE PRESS 07/14/09

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SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 07/14/09

INDEX:
(1) Aug. 30 mid-summer Lower House election to create long political
vacuum; Ship inspection bill to be scrapped and budget requests to
be fettered (Nikkei)

(2) Moves to oust Aso contained; "Anti-Aso forces" taken by
surprise, no time to elect new president (Asahi)

(3) Aso pressed to make decision, unable to find good opportunity
for advantageous dissolution (Nikkei)

(4) Forecast of Lower House election (Part 1): Favorable wind blows
for DPJ; Party may win up to 249 seats (Tokyo Shimbun)

(5) Amended Organ Transplant Law passed by Diet: Determining brain
death of children difficult (Mainichi)

(Corrected copy): Competition between Japan and Italy over Nasiriyah
oil field development right (Mainichi)

ARTICLES:

(1) Aug. 30 mid-summer Lower House election to create long political
vacuum; Ship inspection bill to be scrapped and budget requests to
be fettered

NIKKEI (Page 3) (Abridged)
July 14, 2009

Now that Prime Minister Taro Aso has decided to dissolve the House
of Representatives as early as July 21 for an election on Aug. 30,
the political world is likely to revolve solely around election
campaigning this summer. The election campaign is expected to leave
behind such important policy issues as the handling of key bills and
budget requests for fiscal 2010.

The Prime Minister's intention to dissolve the chamber before the
current Diet session adjourns on July 28 is expected to seriously
affect the fate of those bills yet to be discussed in the Diet. It
is customary for all bills not yet enacted to go be scrapped when
the Lower House is dissolved. A total of 17 government-sponsored
bills, including those carried over from the previous Diet session,
are likely to die.

Included is a bill allowing the inspection of cargo of vessels
heading to and from North Korea. Although the ruling bloc intends to
have the bill clear the Lower House today, there are no prospects
for the opposition-controlled House of Councillors to begin
discussing the legislation.

At yesterday's government and ruling coalition liaison meeting,
Prime Minister Aso ordered to make utmost efforts for the enactment
of the cargo inspection bill. This was followed by a board meeting
of the Lower House antipiracy committee yesterday during which
Takashi Fukaya decided to put the bill to a committee vote on July
14 in his capacity as its chairman.

The major opposition Democratic Party of Japan (DPJ) submitted
yesterday a no-confidence motion against the cabinet to the Lower
House and a censure motion against Prime Minister Aso to the Upper
House. The party is not going to respond to calls for deliberations
on any bills. The cargo inspection legislation is necessary for

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implementing the latest UN Security Council resolution to strengthen
sanctions on North Korea. There is a view in the government that
Japan's failure to adopt the legislation will raise questions about
the stance of Japan, which took the initiative in adopting the UN
resolution.

There is a good chance that the bills related to reform of the
national civil service system and a bill amending the law banning
child prostitution and child pornography that are under revision
talks between the ruling coalition and the DPJ will not be enacted
during the current Diet session.

The election planned for Aug. 30 is also likely to affect the
government agencies' work to come up with their budget requests at
the end of August. Finance Minister Kaoru Yosano indicated to the
press corps last evening that he would not change the Aug. 31
deadline for them.

Ministries and agencies will examine their budget requests in
earnest in line with the budget guidelines determined by the Finance
Ministry in early July. Areas that clearly divide the ruling
coalition and the DPJ are a headache for officials responsible for
policies. An economic division director said, "Given unclear chances
for realization, we cannot ask for funding for new policies." In the
event the DPJ takes the rein of government, policy officers even
envision a situation in which they will be pressed to make major
changes to their policies.

If economic downturn risks cannot be wiped away, calls for
additional economic measures may arise from the United States, for
example. There is concern that Kasumigaseki bureaucrats may not be
able to deal with matters flexibly if the bedrock of policies
remains elusive.

LDP, DPJ rushing to formulate their manifestos

An agreement was reached yesterday between Prime Minister Aso and
the ruling parties to dissolve the Lower House in the week of July
21 to hold the election on Aug. 30. This plan will create the
longest interval between Lower House dissolution and a general
election under the current Constitution. Dissolution on July 21 will
leave election campaigning of 40 days, the maximum under Article 54
of the Constitution. Further, a Lower House election in August will
be the first in 107 years.

Elections in August are rare due to intense summer heart and the
O-bon holiday season. The month also has the atomic bomb and
the-end-of-the-war anniversaries and other commemorative events.

The LDP and DPJ are rushing to draw up their manifestos that are
likely to gather weight with the approach of the "marathon" election
campaigning.

The LDP's manifesto team will hold its plenary meeting on July 16
ahead of intraparty procedures to determine its framework on July

17. Meanwhile, the DPJ generally nailed down its manifesto by the
end of June and the party has given its confirmation to the
manifesto in outline. The party plans to announce its manifesto
featuring support for households immediately after the Lower House
dissolution.

The period of election campaigning will effectively create a

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political vacuum in which implementing new policies is difficult.

The Lower House election will be followed by a special Diet session
in which a new prime minister will be elected and a new cabinet will
be formed. As such, the new administration will probably not able to
move into full action until mid-September or later. It might take
two months to establish the new administration after the Lower House
dissolution in the face of mounting challenges, such employment
insecurity and the North Korean issue.

(2) Moves to oust Aso contained; "Anti-Aso forces" taken by
surprise, no time to elect new president

ASAHI (Page 3) (Full)
July 14, 2009

The announcement of Diet dissolution only one day after the crushing
defeat in the Tokyo Metropolitan Assembly election took the anti-Aso
forces in the Liberal Democratic Party (LDP) and prospective
candidates to succeed him by surprise. There is no time to topple
the prime minister before the Diet is dissolved next week, and there
is even an air of despair about this "do-or-die dissolution." The
possibility of desperate Diet members taking reckless measures
cannot be discounted, and what is going to happen in the run-up to
the general election remains unpredictable.

Former Secretary General Hidenao Nakagawa, who had been urging Aso
to step down, appeared baffled when he talked to reporters on July
13:

"To be honest, I am surprised. I thought he would make an honorable
decision after seeing the results of the Tokyo election yesterday.
This is very regrettable."

Nakagawa had known that it would not be easy to hold the
presidential election ahead of schedule, although mid-ranking and
junior party members had started a signature campaign to demand
holding the election. On the other hand, with less than two months
to go in Aso's term, a growing sense of alarm had permeated the
whole party that they would not be able to win the election under
the prime minister. Nakagawa had hoped that the mounting pressure to
"oust Aso" might move former Prime Minister Yoshiro Mori and the
other party heavyweights backing the Aso administration to ask him
to resign voluntarily.

On June 30, Nakagawa called Mori, whom he had parted ways with early
in 2009, for the first time in a long while to talk about the Aso
administration. He said: "Unless we replace Aso, we are in trouble."
He saw a glimpse of hope when Mori asked: "Who else is there (to
become the LDP president)?" Former Prime Minister Junichiro
Koizumi's remark that, "Mr. Aso will not be able to dissolve the
Diet" had also given rise to optimism among the anti-Aso forces that
he might "resign voluntarily," causing them to slow down their
campaign.

The announcement of Diet dissolution came as a complete surprise.
Most anti-Aso forces are at a loss.

Nine groups of mid-ranking and junior members, including former
Chief Cabinet Secretary Yasuhisa Shiozaki, met on the evening of
July 12. They were planning to distribute a document entitled
"Request for Assessment of Six Consecutive Defeats in Local

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Elections and the Holding of a General Meeting of Members of Both
Houses of the Diet" on July 13 and were checking on how things were
proceeding that evening.

However, now that the Diet will be dissolved on July 21, the mood
has suddenly been dampened. According to party rules, a general
meeting of Diet members has to be called within seven days when
there is such a request from at least one-third of LDP Diet members.
Members of these groups lament that "there is not enough time before
the dissolution on July 21" and suspect that "the announcement of
Diet dissolution is probably meant to avoid the Diet members'
general meeting." The fate of the signature campaign is now in
limbo.

A heavyweight LDP Diet member thinks that the campaign to oust Aso
is, in effect, over. He observes that: "There is not enough time to
oust Aso. Everybody will be going back to their constituencies. Even
though some people will be discontented and will complain, they will
not become the mainstream."

Even so, there is more time to oust Aso now compared to the prime
minister's original scenario to dissolve the Diet right after the
Tokyo election and hold the election on August 8. The chairman of a
faction supporting Aso worries that, "There is still one week left
before July 21. There will be various moves." Junior party members
who have a weak political base in their constituencies are bound to
fight an uphill battle. They may become so desperate for survival
and resort to joining hands with forces outside the party, such as
Yoshimi Watanabe, former minister for administrative reform, who has
announced his intention to form a new party.

Former Secretary General Tsutomu Takebe held an urgent meeting with
Lower House member Yukari Sato and the other "Koizumi children" on
July 13 to confirm their plan to demand an early presidential
election. Sato stressed after the meeting that, "If the election is
taking place on August 30, there is still time to hold the
presidential election in early August." Another participant in the
meeting had not lost hope: "The election was originally supposed to
take place on August 8. At least it has been put off to August 30.
Mr Aso has decided to dissolve the Diet but has not actually done
so." One Diet member who is close to Nakagawa called a senior New
Komeito official on July 13 and told him: "The present leadership
which lost the Tokyo election has no right to decide on Diet
dissolution. We will launch our move to oust Aso tomorrow."

Shiozaki and other mid-ranking and junior legislators who supported
the Koizumi reforms met at a hotel in Tokyo on the evening of July

13. They eventually joined the gathering of former Secretary General
Koichi Kato and a group of veteran Diet members who are critical of
the Koizumi reforms, who happened to be meeting in the same hotel,
because they "share the same thoughts." Cooperation among the
anti-Aso groups is also evolving.

Contenders to succeed Aso discontented; "Think of Japan's future"

The contenders to take over Aso's position also resent the surprise
announcement of Diet dissolution.

After the crushing defeat in the Tokyo election became a reality on
the evening of July 12, Finance Minister Kaoru Yosano, who was
elected to the Lower House from the first district of Tokyo, asked
an aide to the prime minister who called him on the phone not to

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dissolve the Diet at an early date. "Don't do anything rash. We will
be in big trouble."

Even in Yosano's constituency, the secretary general of the LDP's
Tokyo chapter lost his seat. The aftermath of the election is very
serious. If the Diet was dissolved based on Aso's personal wish to
contain the moves to oust him, the "complete devastation" of the LDP
in Tokyo might become a reality.

On the morning of July 13, Yosano made a statement before reporters
that could be taken to be a suggestion for the prime minister to
resign voluntarily. He said: "Since the party is under this much
criticism, Mr. Aso should think of Japan's future with a clear
mind."

One faction leader cites Yosano as a key person who might stand in
the way of Aso's strategy for Diet dissolution. He said that "Mr.
Yosano may refuse to sign the documents on dissolution." When
reporters asked him about the possibility of refusing to provide his
signature, Yosano would only say: "I think the prime minister will
reexamine the situation in the party after he gauges public opinion
in the party from tomorrow."

Deputy Secretary General Nobuteru Ishihara, who was forced to resign
as chairman of LDP Tokyo chapter, is as shocked as Yosano by the
defeat in the Tokyo election. He stated on a special TV program on
the election on the evening of July 12 that "the Tokyo Metropolitan
Assembly was made a target of criticism for issues at the national
level," criticizing the drifting Aso administration indirectly.

Minister of Health, Labor and Welfare Yoichi Masuzoe, who is eyed as
a possible candidate for prime minister by the anti-Aso forces, has
given no comment on the dissolution announcement of July 13. He even
refused to answer reporters' questions on the amended organ
transplant law, which comes under his jurisdiction, and was in a
foul mood all day.

When Aso was making statements about the Tokyo election and national
politics being two separate things, Masuzoe stated unequivocally at
a news conference that: "It is unthinkable that the Tokyo election
will have no impact on politics at the national level. A variety of
things could happen depending on the outcome," pointing out the
prime minister's responsibility. In his campaign speeches for Tokyo
candidates, he talked about "changing Japan centering on Yoichi
Masuzoe," revealing his desire to replace Aso. To reporters'
question: "Do you intend to fight in the general election under Mr.
Aso?" he would not give a positive answer and merely said: "This is
for the party to decide."

Former Minister of Internal Affairs and Communications Kunio
Hatoyama, who parted ways with Aso over the appointment of Japan
Post president, reiterated his opposition to Diet dissolution by the
prime minister on July 13. He said: "If we go into the general
election with the present cabinet and LDP, it is like committing
mass suicide." After resigning as internal affairs minister, he had
denied any plans of leaving the party, thinking Aso could be forced
into resigning, and had indicated he was working toward frontloading
the presidential election. The announcement on Diet dissolution came
as a surprise. He shifted to a new position on July 13. "I am doing
some mental exercises on the assumption of the worst scenario of
being unable to remain in the party in the process of pursuing a new
LDP," hinting at the possibility of forming a new party. That

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evening, he met with five Diet members close to him to discuss a
response.

For now, a "core" uniting all the anti-Aso forces is absent in the
LDP. However, if one of the cabinet ministers or candidates to
succeed Aso in the LDP leadership announces his candidacy openly, it
is possible that Diet members who feel insecure about going into the
general election under Aso may be drawn to support him all at once.
This can be said to be the Achilles heel of the prime minister's
dissolution strategy.

(3) Aso pressed to make decision, unable to find good opportunity
for advantageous dissolution

NIKKEI (Page 1) (Full)
July 14, 2009

Prime Minister Taro Aso had continued to explore an appropriate
timing for the next House of Representatives election over the past
10 months since he assumed office. As a result of delaying a
decision, he was finally pressed to decide to set the voting day for
Aug. 30, just ahead of the expiration of the Lower House members'
terms of office on Sept. 10. A gloomy atmosphere is now sweeping
across the ruling camp.

In a liaison meeting of the government and the ruling coalition held
yesterday midday, Aso said in even tones: "Only 60 days are left
until the Lower House members' 4-year term of office expires. I
would like to seek the people's judgment in the week starting on
July 21." Probably because his careful behind-the-scenes maneuvering
worked favorably, no objections were raised from among the senior
party members and cabinet members present there.

"Treasured sword" loses luster

The prime minister's right to dissolve the Lower House, even called
"a sword treasured in the family," is completely losing luster as
public support ratings of his cabinet have been on the decline and
the day of expiration of the Lower House members' terms of office
has reached the countdown stage. The prime minister had expected to
demonstrate his leadership in determining the election day, but he
was actually pressed to make a compromise.

Aso initially intended to dissolve the Lower House in the week
starting on June 13 and hold an election on Aug. 8 or 9. But the
Liberal Democratic Party (LDP) experienced a defeat in the Shizuoka
gubernatorial election on July 5 and then suffered a far more
devastating defeat than expected in the Tokyo Assembly election on
July 12. These poor election results narrowed down his options.

Aso was saying: "I am determined to dissolve the Diet on my own
discretion," but a number of senior LDP members dissuaded him from
carrying out an early election, as one member said: "Why do you want
to hold the election in a rush? If you decide to do so, the party
might break up." There are various unstable factors, such as a
feeling of war-weariness prevailing in the ruling parties, moves to
oust Aso, and a no-confidence motion submitted by the opposition
camp against the Aso cabinet. Bearing such factors in mind, Aso came
up with an unprecedented timetable for officially announcing the
election to come one month after the Lower House is dissolved.

The Constitution stipulates that an election should be held within

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40 days after Diet dissolution. To avoid a political vacuum,
however, the period between Diet dissolution and an election is
usually less than one month. In accordance with a plan agreed on
between Aso and the ruling parties, if the election is officially
announced on Aug. 18 and takes place Aug. 30 after the Diet is
dissolved on July 21, this will mark the longest record in terms of
the period under the current Constituency.

A cabinet member explained why Aso is eager to dissolve the Diet
based on his own judgment: "He is taking great pride in having made
utmost efforts to cope with the global economic crisis."

The ruling coalition had decided to dissolve the Lower House by the
end of last year. Many party members are still critical of the prime
minister's decision to delay the dissolution. Even so, it is true
that the government was able to implement more than 30 trillion yen
worth of emergency economic stimulus measures because the ruling
coalition was keeping its two-thirds majority in the Lower House.

Signs of intraparty conflict

Why was Aso pushed to this perilous position? That is because he was
unable to demonstrate his leadership in dealing with other matters
than the immediate economic crisis. The focus of attention was
focused mainly on his confusion in managing his government.

For the next general election, Aso was groping for an appropriate
timing when he can be sure of his party's victory. Meanwhile, some
LDP members, seeing public support ratings of the Aso cabinet
sharply declining, began to call for Aso to step down. As signs of
intraparty conflict began to appear, the Aso administration was
gradually driven into a corner.

The LDP is expected to have an uphill battle in the Lower House
election. Asked by reporters about his strategy toward the election
last night, Aso replied: "It is very vital for us to consider which
points we should reflect on, make corrections, and then revamp our
election strategy, based on the outcomes of the local elections."

In the final phase of formulating the party's policy manifesto for
the Lower House election, however, it is said that Aso gave no more
clear-cut messages than this instruction: "Remove my photo from the
cover of the pamphlet." Under such circumstances, he is apparently
unable to demonstrate his presence.

Aso has decided to put off the Lower House election until late
August. How the remaining time will be used will affect the fate of
not only the Aso administration but also the LDP.

(4) Forecast of Lower House election (Part 1): Favorable wind blows
for DPJ; Party may win up to 249 seats

TOKYO SHIMBUN (Page 28) (Abridged slightly)
July 14, 2009

Senior members of the ruling Liberal Democratic Party (LDP) probably
no longer are sleeping well. A strong tail wind blew for the
Democratic Party of Japan (DPJ) in the July 12 Tokyo Metropolitan
Assembly election, proving that the LDP has lost its stronghold and
record of achievements. Will the public's smoldering discontent with
the Aso administration put an end to the LDP?


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LDP, New Komeito lose majority in Tokyo Metropolitan Assembly

"The result of the Tokyo election is the opposite of the whirlwind
produced by then Prime Minister Koizumi, isn't it? The public has
been fed up with the LDP due to such issues as pensions." Hiroshi
Miura, an election planner, made this statement, citing the Lower
House race in September 2005.

Of the 58 candidates on the LDP ticket, 54 were elected, while only
four were defeated. The DPJ became the largest party in the Tokyo
assembly for the first time in the history of the city's
administration. Meanwhile, the LDP suffered a severe setback, the
number of seats won cut from 48 to 38.

Akita International University Prof. Rei Shiratori (political
science) pointed out:

"With the resignation of Ichiro Ozawa as president of the DPJ, the
old image of the DPJ has disappeared. If it comes to the crunch,
Katsuya Okada will be able to stand in for Yukio Hatoyama as
president of the DPJ. Naoto Kan is in charge of policy matters. The
DPJ has clearly defined the role-sharing system for its executives.
Therefore, Yukio Hatoyama, a consensus-oriented politician, can
serve as president. That is the difference between the DPJ and the
LDP."

Will a favorable wind blow for the DPJ again in the next Lower House
election?

Both Miura and Shiratori predict that a change in government will be
realized propelled by the result of the Tokyo election.

The full number of the Lower House seats is 480, made up of 304 LDP
members, 113 DPJ members, 31 New Komeito members, 9 Japanese
Communist Party (JCP) members, 7 Social Democratic Party (SDP)
members, five People's New Party (PNP) members, and one New Party
Daichi member. The DPJ intends to narrow down the number of
single-seat constituencies it will field candidates in the general
election, not filing its candidates in all the electoral districts
as usual.
On the assumption that more than 80 percent of the votes cast for
the JCP will go to the DPJ in the districts in which the JCP will
not file its candidates, Shiratori predicts that the DPJ will win
232 to 245 seats, while the LDP and New Komeito will jointly secure
207 to 222 seat.

Meantime, Miura analyzes that the LDP-New Komeito coalition will
secure 217 seats, while the DPJ will gain 229.

If the LDP-New Komeito camp loses more than 100 seats, the coalition
will lose a majority (241 seats) in the Lower House, following the
loss in the Tokyo assembly.

Shiratori calls the LDP an arbitrary, inconsistent and irresponsible
party. He predicts that since the LDP holds power, it is able to
bring politicians together. If the party loses that power, they will
break apart because there will be no need for them to remain there.
It is conceivable that the LDP, which has existed since 1955, might
disappear.

The DPJ has gained consecutive victories in recent elections to
decide the heads of local governments. In the mayoral election of

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Nara City on July 12, a young man in his 30's was elected as new
Nara mayor. Many those who are in their 30's were elected in the
Tokyo assembly race.

Miura threw a wet blanket, saying: "I approve the assembly being
rejuvenated. But they should not be satisfied with just being
elected."

(5) Amended Organ Transplant Law passed by Diet: Determining brain
death of children difficult

MAINICHI (Page 2) (Abridged slightly)
July 14, 2009

An amended Organ Transplant Law designed to enable children under 15
to be organ donors was enacted on July 13. Patients and family
members who have been calling for increasing opportunities for organ
transplants in Japan have been looking forward to the enactment of
the amended law. Meanwhile, pediatric doctors involved in organ
donations have pointed out the difficulty of determining the brain
death of children. There are also many challenges to tackle,
including emergency medical services and the consolidation of a
system of supporting organ donors and their families.

Recognizing child abuse cases also important

Shizuoka Children's Hospital Pediatric Intensive Care Unit (PICU)
Director Ikuya Ueda, who has the experience of taking part in the
determination of brain death cases in the U.S., where there are more
than 8,000 organ donations by brain-dead persons, said, "Since
smaller children tend to have stronger brain recuperative power, it
is difficult to determine the brain death of children."

Tomoaki Kato, head of the Columbia University Department of Surgery
and an expert on transplant surgery, pointed out, "In order to
obtain an agreement from the family of a brain-dead patient, it is
important for them to be able to realize that brain death is the
death of humans." His proposal for the more definite determination
of the brain death of children is that an examination to check that
there are no flows of blood in the body of a brain-dead child brain
must be conducted, although this is not included in the list of
items indispensable for the determination of brain death.

Another challenge is how to determine child abuse cases. PICU
Director Ueda said: "There are cases in which doctors who are
inexperienced in emergency pediatric medical treatment could miss
some cases of child abuse. It is important to increase doctors who
can identify discrepancies between diagnoses and explanations
provided families."

Dr. Kato pointed out, "In the U.S., an ethics committee of each
hospital strictly screens organ donors in order to prevent child
abuse cases from mixing in. This system is producing results."


Holes in emergency medical services system: Strengthening donor
assistance urgent

The amended law does not include donors' consent as a condition for
organ donations by brain-dead persons. Instead, donors' families
decide whether to donate organs of their brain-dead relatives. In
order for bereaved families to accept requests for organ donations,

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they need to know that sufficient medical treatment was provided to
the patients. However, it has been noted that Japan's emergency
pediatric healthcare system is faulty.

According to a report compiled in March this year by a research team
of the Ministry of Health, Labor and Welfare, about 70 percent of
children aged between 1 and 4 who died in traffic accidents or in
fall accidents were carried to small medical institutions that had
no sophisticated high-degree medical treatment facilities, such as
an intensive care unit. It is believed that this is due to shortages
of doctors and medical facilities that can provide emergency
pediatric healthcare. A survey carried out by the Japanese Society
of Intensive Care Medicine in 2005 found that there were only 97
beds at the PICUs throughout the nation.

Promoting an assistance system for organ donors and their families
is also a challenge. In many cases, donors' families, who are
pressed to make a decision whether to donate organs of their
brain-dead relatives, continue to distress themselves even after the
donations.

The eldest daughter of Chairman Yoichi Mazawa, chairman of the Japan
Donors' Family Club," consisting of bereaved families that have the
experience of organ transplants by their family members, died in the
U.S. at the age of 24 and donated her organs. He said, "I am
perplexed by such words as 'the right to receive an organ
transplant' or 'there are few organ transplants.' I believe it is
impossible to expect an increase in donors without fundamental
understanding that it is not until an organ donor appears that an
organ transplant can be carried out, and a system of supporting the
families of donors."

The World Health Organization (WHO) plans to revise guidelines for
organ transplants. The revised guidelines will likely call on member
nations to consolidate regulations on live organ transplants, such
as kidney transplants, and tissue transplants, such as skin
transplants. The law amended in Japan this time did not include such
transplants. Immediate measures on such transplants are sought, as
such transplants could trigger organ trade.

(Corrected copy): Competition between Japan and Italy over Nasiriyah
oil field development right

MAINICHI (Page 4) (Full)
July 12, 2009

Cooperation between government and private sector

A Japanese consortium involving Nippon Oil Corporation (ENEOS) and
an Italian firm are competing to secure the right to develop the
Nasiriyah oil field in southern Iraq. Japan is aiming to secure the
right in a joint effort between the government and the private
sector, based on the bitter experience of losing the concession
rights for the Khafji oil field in Saudi Arabia, the first oil field
developed by a Japanese company. The Iraqi government will designate
a contractor shortly. Since the Italian company is pulling out all
the stops, the situation is still touch and go.

Economy, Trade and Industry (METI) Minister Toshihiro Nikai at a
meeting with visiting Iraqi Oil Minister Husayn al-Shahristani on
July 9 made a remark backing Japanese companies' efforts to secure
the Nasiriyah oil field development right. He indicated the

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government stance of assisting with construction of infrastructure
in Iran, such as the building of railroads: "I would like you to
confer on the matter with related companies. The Japanese government
will provide full assistance."

Iraq, which is suffering from the aftereffects of the Iraq War,
approved foreign companies' entry into the development of domestic
oil and gas field so as to secure funds to finance the
reconstruction of the nation. It carried out bidding for eight oil
and gas fields in late June. Of those projects, a consortium formed
by BP, the largest oil company in Britain, and China National
Petroleum Corporation (CNPC) was awarded the contract to develop the
Rumaila oil field, one of the largest oil fields in Iraq.

Bidding for the Nasiriyah oil field falls under a separate framework
from bidding for those eight oil and gas fields. Consortiums of
Japan, Italy, and Spain are negotiating with Iraq on the oil field's
development. Iraq has narrowed down the bidders to a consortium of
Japanese companies' formed by ENEOS (the largest domestic primary
oil distributor),Inpex Corporation, and JGC Corporation (a major
plant engineering firm); and Italy's Ente Nazionare Idrocarburi. Oil
Minister al-Shahristani on the 10th told reporters that he will
reach a decision shortly, saying, "We have completed technical
screenings. All we have to do now is financial adjustments."

Security of esources

Securing the Nasiriyah oil development right is of vital
significance to Japan. Japan purchases almost all the crude oil it
consumes on the oil market. Crude oil prices skyrocketed last year
due to emerging countries' economic development and the influx of
speculative money into the oil market, dealing a blow to the
Japanese economy. It has now become difficult to secure stable
supplies of crude oil due to mounting resources nationalism.

However, if Japanese companies secure rights to develop oil fields
abroad, it will be possible for the nation to procure crude oil on a
stable basis even in the event of an emergency. Oil fields, in which
Japan has a large ratio of interest, are called "Japanese-flag oil
fields." Arabian Oil's Khafji oil field is one of those oil fields.

However, Japan's interest in the Khafji oil field expired in 2000,
when the Japanese side showed reluctance to accept a condition the
Saudi Arabia set in renewing Japan's concession rights - building
mining railways. Japan also transferred most of its interest in the
Azadegan oil fields in Iran due to pressure from the U.S. to suspend
the development of the oil field, making an issue with the nation's
nuclear development.

The government has set a goal to raise the ratio of oil produced
from Japan-developed oil fields to imported crude oil to 40 PERCENT
by 2030. According to METI, the ratio as of the end of 2007 stood at
about 19 PERCENT . For this reason, securing the Nasiriyah oil field
development right is an important issue in terms of energy security
as well, according to ENEOS executive. It is also Japan's long-held
ambition.

Fifty-fifty chance

In a bid to secure the Nasiriyah oil field development right,
Japan's consortium has proposed that it help Iraq to build
infrastructure, such as oil refineries and power plants, and provide

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financial assistance through the Japan Bank for International
Cooperation (JBIC). ENEOS Chairman Fumiaki Watari said in
confidence, "I have some leads."

ENEOS has independently developed oils fields in the North Sea and
in the Gulf of Mexico. Daily outputs from those oil fields total
130,000 barrels. Daily production of 600,000 barrels is expected
from the Nasiriyah oil field. An ENEOS executive expressed his
hopes, saying: "There will be no other opportunity for Japan to
become involved in the development of an oil field on this scale."
Domestic demand for oil is bound to drop. However, the company wants
to lead this opportunity to a pillar of earnings, since overseas
demand, mainly in emerging countries, is solid.

According to a related source, Japan was ahead of Italy as of May.
However, Italy reportedly made additional proposals regarding
conditions. The chances of the Japanese consortium to win the
development right are said to be about fifty-fifty.

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