DAILY SUMMARY OF JAPANESE PRESS 01/26/10

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E.O. 12958: N/A TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 01/26/10 INDEX: (1) U.S. requested joint statement on 50th anniversary of security treaty be downgraded to ministerial level due to Futenma dispute (Sankei) (2) Chief Cabinet Secretary Hirano indicates choice of Futenma relocation site does not necessarily require local government's consent (Mainichi) (3) PM Hatoyama driven into corner over the Futenma relocation issue (Nikkei) (4) Futenma in turmoil; (Part 1): Okinawa distrustful of government due to its precautionary measures (Yomiuri) (5) Responsibility for confusion rests with Hatoyama (Yomiuri) (6) Editorial: Government must expedite efforts to find relocation site for Futenma base outside Okinawa (Asahi) (7) Editorial: Nago's decision is expression of opposition to Futenma relocation within Okinawa (Tokyo Shimbun) (8) Japan's future course -- 50th anniversary of revision of Japan-U.S. Security Treaty (Party 2-5, conclusion): Discussion on nuclear policy now necessary (Yomiuri) (9) Shockwave of President Obama's financial regulation: Japanese banks may have to change their comprehensive business policy line (Nikkei) ARTICLES: (1) U.S. requested joint statement on 50th anniversary of security treaty be downgraded to ministerial level due to Futenma dispute SANKEI ONLINE (Full) 09:32, January 26, 2010 Rui Sasaki in Washington It was learned that the U.S. government had asked the Japanese side to "downgrade" the joint statement by the two countries to mark the 50th anniversary of the signing of the bilateral security treaty from a document signed by the top leaders of both countries to one issued by the ministers of foreign affairs and defense. This was due to the U.S.'s judgment that in case Prime Minister Yukio Hatoyama, who is looking for a relocation site outside Okinawa for the U.S. forces' Futenma Air Station (in Ginowan City, Okinawa),scraps the current plan to relocate the Futenma base to the coastal area of Camp Schwab (in Nago City),this might affect President Barack Obama's management of his administration. This episode shows that the U.S. government's distrust of the Hatoyama administration has affected the drafting of a critical document. According to sources on Japan-U.S. relations, the U.S. government had been preparing to draft the joint statement to be issued in January 2010 since spring 2009 on the assumption that it would be signed by the leaders of the two countries. However, since the inauguration of the Hatoyama administration, the TOKYO 00000165 002 OF 012 Prime Minister has postponed a solution on the Futenma relocation issue repeatedly. Therefore, White House officials told State Department officials in charge of relations with Japan last December "not to involve the President in this," requesting that the statement be dealt with at the ministerial level. This message was conveyed to the Japanese side through the State Department. For this reason, the joint statement, originally planned to be issued in the name of the two top leaders, was suddenly replaced by a statement signed by the ministers of foreign affairs and defense, and all mention of the Futenma issue was dropped. A source on Japan-U.S. relations said that the U.S. request to "downgrade" the document "was probably meant to avoid dragging the row over the Futenma issue into the White House." However, the two governments decided that the two countries needed to underscore a strong alliance relationship both domestically and internationally for peace and stability in Asia and the Pacific in light of North Korea's development of nuclear arms and missiles and the acceleration of China's military expansion. Therefore, President Obama and Prime Minister Hatoyama both issued statements and decided to go forward with the talks on deepening the alliance without waiting for a solution to the Futenma issue. This was the background of the meeting between Secretary of State Hillary Clinton and Foreign Minister Katsuya Okada in Hawaii before the joint statement was issued. Officials of the two governments were unable to enter into concrete discussions on the drafting of the statement soon enough due to the dispute over the Futenma relocation issue, and so the final drafting of the document had to take place in a rush at the State Department all night on Jan. 14. Hatoyama hopes to meet President Obama at the G-8 Summit in Canada in late June, but if he scraps the existing Futenma relocation plan, there is concern that "a summit meeting will be out of the question," according to the above source on bilateral relations. (2) Chief Cabinet Secretary Hirano indicates choice of Futenma relocation site does not necessarily require local government's consent MAINICHI (Page 1) (Full) Evening, January 26, 2010 Ai Yokota At a news conference on the morning of Jan. 26, Chief Cabinet Secretary Hirofumi Hirano discussed the need for the consent of the local government in selecting the relocation site for the U.S. forces' Futenma Air Station (in Ginowan City, Okinawa). He said: "While this is an issue on which we need to seek the local government's understanding, I wonder if the issue should be kept from moving forward if consent cannot be obtained." He thus indicated that it cannot be helped even if the consent of the local government cannot be obtained by late May, the deadline set by the government for a solution to the issue. Hirano said that the national government has to exercise leadership in deciding "this issue affecting Japan's security." He added: "I do think that we need to seek (the local communities') understanding, but seeking their understanding is only an ideal. Is this an issue TOKYO 00000165 003 OF 012 that requires the consent of every citizen?" Regarding the local communities' strong reaction to his statement that "there is no reason why the result of the Nago mayoral election should be taken into consideration," Hirano said: "I have no intention to deny that (the election result) is a manifestation of popular will. However, this does not determine whether (the current relocation plan) should be eliminated as an option or not," thus reiterating his stance that the existing plan to relocate the Futenma base to the coastal area of Camp Schwab (in Henoko, Nago City) is not being ruled out. (3) PM Hatoyama driven into corner over the Futenma relocation issue NIKKEI (Page 3) (Full) January 26, 2010 The issue of the relocation of the U.S. forces' Futenma Air Station (in Ginowan City, Okinawa) has been thrown into increasing confusion. The candidate opposed to Futenma's relocation won in the mayoral election in Nago City, Okinawa, on Jan. 24. While Prime Minister Yukio Hatoyama has pledged to reach a conclusion on this issue by May, it will be extremely difficult to select a relocation site in a short period of time. A solution is not in sight. We looked into the possible scenarios. Forcing through the existing relocation plan -- SDP, local communities will protest Hatoyama told reporters on the evening of Jan. 25: "I would like you to understand that every proposal is included (as an option)," indicating that the plan to relocate the Futenma base to the coastal area of Camp Schwab, as agreed upon by Japan and the U.S., will also be considered as an option. Earlier, he stated at the Ministerial Committee on Basic Policies that "if we come up with a proposal that Japan and the U.S. cannot agree on, we will be a laughing stock." Foreign Minister Katsuya Okada also indicated on a TBS TV program that the current relocation plan is not being ruled out, saying: "In the end, the national government is responsible for making the decision." If the government decides on the current plan despite the result of the mayoral election, it is possible that construction work cannot take place. Reclamation of the sea requires the permission of Governor Hirokazu Nakaima. If the governor pushes for the current plan, there is a strong possibility that the Prefectural Assembly, where the advocates of Futenma's relocation out of Okinawa control a majority of seats, may pass a motion of no confidence against him. The government's selection of the current plan would also energize the Social Democratic Party (SDP),which advocates relocation out of Okinawa. The SDP is poised to leave the ruling coalition if Hatoyama insists on the current plan. There is a growing opinion in the government that "it is pointless to grow a tree that will not bear fruit" (Defense Minister Toshimi Kitazawa's words),which means that a decision to adopt the current plan is virtually impossible. Relocation of exercises only - no relocation site can be found A proposal has come up in the government to retain the Futenma base, TOKYO 00000165 004 OF 012 but transfer some exercises to other U.S. military bases or Self-Defense Forces facilities. Within Okinawa, the islands of Shimojishima and Iejima have been cited as possible sites, and outside of Okinawa, the Maritime Self-Defense Force's Omura base (in Nagasaki Prefecture) and the U.S. forces' Camp Fuji (in Shizuoka Prefecture) have been mentioned. However, the citizens of Ginowan City will not be satisfied with mere relocation of exercises, so the protest movement will heat up again. On the other hand, municipalities in Okinawa being cited as possible relocation sites have reacted strongly. Their local assemblies have adopted resolutions opposing relocation. Mayor Takashi Matsumoto of Omura City in Nagasaki at a news conference on Jan. 18 also stressed that he will "absolutely refuse to accept" the exercises. The mayors of Gotenba City, Susono City, and the town of Oyama in Shizuoka Prefecture, the site of Camp Fuji, also voiced opposition at a news conference in Gotenba on Jan. 12. Even the relocation of exercises alone will be very difficult, and the reality is that no local government is willing to accept the full relocation of the Futenma base along with its large number of U.S. Marines. Further delay - rift between Japan and the U.S. to worsen In the end, it is possible that the government may be unable to decide on Futenma's relocation site by May and may put off a conclusion once again. Since the Prime Minister keeps saying a solution will be reached by May, if he is unable to fulfill his commitment to the U.S., the Japan-U.S. relationship will deteriorate further. This situation may also lead to the Futenma base's remaining permanently. Strong criticism can be expected from Okinawa, which is demanding the early return of Futenma, and this is certain to impact the House of Councillors election in summer. Experts' views Implementation of current relocation plan nearly impossible Doshisha University Professor Koji Murata The result of the Nago mayoral election has tipped the delicate balance in the Nago City Assembly, so a resolution opposing Futenma's relocation will probably be passed. Okinawa Governor Hirokazu Nakaima will not be able to approve the start of construction work. The Hatoyama administration may have actually included in its calculations the further deterioration in the Japan-U.S. relationship. Unless Prime Minister Yukio Hatoyama determines that dissolving the coalition with the SDP is inevitable after the FY2010 budget is passed in May, when he is supposed to make his final decision, it will be near impossible to go back to the existing relocation plan in the teeth of the SDP's opposition. One would think that the Prime Minister has a miracle plan up his sleeve, but he actually has nothing of the sort. It's the same situation as when he told U.S. President Barack Obama "trust me." Observe the U.S. response Tetsuo Maeda, visiting professor at Okinawa University TOKYO 00000165 005 OF 012 I think the U.S. government takes the outcome of the Nago mayoral election very seriously and is making its analysis. Assistant Secretary of State Kurt Campbell and others who have been advocating the implementation of the current plan were the ones who drew it up. We have not heard the opinions of President Obama and other officials. The Japanese government needs to watch whether the U.S.'s stance toward Japan remains the same or whether it is going to change. Under Liberal Democratic Party administrations, the bilateral relationship consisted of the U.S. making one-sided demands and Japan accepting them. With the change of administration, a dialogue is finally about to begin. While the relationship seems to be strained because both sides are not familiar with how to conduct this dialogue, I think the U.S. is trying to understand Japan and put this dialogue onto the right track. (4) Futenma in turmoil; (Part 1): Okinawa distrustful of government due to its precautionary measures YOMIURI (Page 4) (Abridged) January 26, 2010 "There must be something wrong with a politician who does not respect popular will," Susumu Inamine said at his office in Nago around noon yesterday. Inamine had won the mayoral election in Nago, Okinawa Prefecture, the previous day. The victory of Inamine, who opposes the existing plan to relocate the U.S. Marine Corps' Futenma Air Station to the Henoko district in Nago, has now made the rejection of the existing plan the popular will of the city. But Prime Minister Yukio Hatoyama and Chief Cabinet Secretary Hirofumi Hirano have expressed a plan not to exclude the existing plan from the options, saying, "There is no reason why we have to take the election results into account." Advocating a review of the existing plan under a Japan-U.S. agreement, Hatoyama has referred to the possibility of moving Futenma out of Okinawa or even out of Japan, stirring up the expectations of people in Okinawa, including the residents of Nago. Hatoyama has also repeatedly made remarks that could be interpreted as leaving the decision to the Nago mayoral election, saying, "I will take the sentiments of the residents of Nago into consideration." But the government and the ruling coalition have not yet been able to come up with a new relocation plan that is acceptable to the three parties concerned: the U.S. government, the ruling parties, and the affected municipalities. Hatoyama and Hirano's remarks yesterday have increased Okinawa's distrust in the government, with one member saying, "The government has taken precautionary measures to keep the existing plan alive." "If the government does not recognize that relocation to Henoko is 100 percent impossible, the matter will only get more complicated," Yasuhiro Aragaki, secretary general of the DPJ Okinawa prefectural chapter, expressed deep resentment yesterday. "If the government presses us again to make a difficult decision, that will be totally unacceptable." Kadena Air Base straddling Kadena and other municipalities, TOKYO 00000165 006 OF 012 Shimojishima Airport in Miyakojima City, Iejima Auxiliary Air Base in the village of Ie, and other places have been mentioned as possible candidate sites. Municipalities hosting those bases and airports are now on high alert. "Relocation within Okinawa is not possible," Miyakojima Mayor Toshihiko Shimoji complained. "It is wrong to begin discussing sites. There is a lack of discussion on fundamentals, such as what is deterrence." Gov. Hirokazu Nakaima is also in deep distress. After learning of the results of the Nago election on the night of Jan. 24, Nakaima vented his anger at the people around him, saying, "What is the government doing? Why is the government constantly being tossed about by the Futenma issue?" Concluding that the existing plan is the best way to alleviate the dangerous situation of Futenma Air Station, which is surrounded by densely populated areas, Nakaima used to move in step with Yoshikazu Shimabukuro, who lost in the Nago race. But now that Inamine has won the election, Nakaima is likely to come under heavy pressure to shift his policy. (5) Responsibility for confusion rests with Hatoyama YOMIURI (Page 2) (Full) January 26, 2010 By Keiko Iizuka, deputy political editor Prime Minister Yukio Hatoyama put the existing plan Japan and the U.S. agreed on in 2006 to relocate the U.S. Marine Corps' Futenma Air Station to Nago City back to square one. Our understanding is that this decision stemmed from his stance of respecting the will of Okinawa's people and the aim of lightening the excessive burden of bases on their prefecture. But on Jan. 25, the day after the Nago mayoral election in Okinawa, Chief Cabinet Secretary Hirofumi Hirano made a statement at a press conference that can be taken as even ignoring this policy stance of the prime minister. In the recent Nago mayoral election, Susumu Inamine, who is opposed to the current plan, was elected. Hirano referred to this election result and said that the study committee on Okinawa base issues of the government and the ruling parties is "considering (the relocation site) from scratch." He also said: "There is no reason for the assertion that (the election result) should be taken into account. We do not think that (the current plan to relocate the Futenma airfield to the Henoko district in Nago) should be eliminated from the list of options." Hirano also emphasized: "The government should determine the relocation site," citing the reason that "if we always take into account local governments' intentions, we will always face the question of where to locate the alternative facility." He might think it possible to decide on the relocation site even without the agreement of the host community. However, doing so was impossible, so the Futenma issue has been left unresolved for as many as 14 years and has eventually become politicized. In his first policy speech on Oct. 26 of last year after assuming office, Hatoyama made the following statement. "We will thoroughly examine existing Japan-U.S. agreements and other matters also from the viewpoint of national security. Further, while TOKYO 00000165 007 OF 012 taking into account the burden on the people of Okinawa, as well as their agony and sorrow, we will seriously address the planned realignment of U.S. forces in Japan." To be sure, it would be a disgrace to depend on the outcome of a local mayoral election in determining the future course of the issue of U.S. forces in Japan, which affects the very basis of the nation's security policy. The Futenma relocation plan was about to be implemented, but Hatoyama decided to put the current plan back to square one. We understand that he was aware of the need to live up to his words in the policy speech. Hatoyama, however, indicated yesterday evening his willingness to keep the existing plan as an option, as Hirano did. If he is going to leave the existing plan as an option, why didn't Hatoyama make an all-out effort to implement it? Since he promised the U.S. and Okinawa to reach a conclusion by the end of May, it is necessary for him to obtain understanding from the local government to host the relocation facility and the ruling parties. The responsibility for the ongoing confusion rests with Hatoyama. He should devote himself to resolving the Futenma issue even at the risk of his political life. (6) Editorial: Government must expedite efforts to find relocation site for Futenma base outside Okinawa ASAHI (Page 3) (Full) January 25, 2010 Susumu Inamine, a new candidate opposed the existing plan to relocate the U.S. Marine Corps' Futenma Air Station to the Henoko district in Nago City, won yesterday's Nago mayoral election. As the relocation issue is a matter of national security, the government should take full responsibility for its judgment on the issue. However, Prime Minister Yukio Hatoyama must take the result of the election seriously, because he has stated that he would respect not only the significance of the Japan-U.S. agreement but also the sentiments of the people of Okinawa. As Hatoyama has pledged at home and abroad that he will resolve the Futenma relocation issue by the end of May, he should now do everything within his power to find a new relocation site. With the aim of relocating Futenma to a location other than Henoko, the Hatoyama administration and ruling parties have continued looking into new relocation sites. At the same time, there is still a possibility that the government will go back to the existing plan to relocate Futenma to Henoko. However, Inamine's victory has made that option extremely difficult to choose. Okinawa Gov. Hirokazu Nakaima, who has expressed his position of accepting the existing relocation plan, will likely find himself in a difficult situation. Following the result of the mayoral election, there are also moves within the prefectural assembly to adopt a unanimous resolution, with the approval of members of the Liberal Democratic Party (LDP) and New Komeito, to call for relocating Futenma outside Okinawa. In the election, Nago residents were forced to make a tough TOKYO 00000165 008 OF 012 decision. Incumbent Yoshikazu Shimabukuro, who accepts the existing plan, took a strategy of avoiding making the Futenma issue from becoming a campaign issue, while stressing his accomplishments in promoting the local economy during his four-year term. Meanwhile, Inamine underscored his opposition to the existing plan, saying, "I will not allow the construction of a new base in the bay of Henoko." Considering the risk of noise and accidents, Nago residents probably do not want to accept the existing plan. However, the high unemployment rate and economic slump there are extremely serious. As a result, some residents pin hopes on the construction of a base bringing new public works projects and economic promotion measures in return for accepting the existing plan. The residents were faced with this dilemma during the election. About 10 years have passed since Nago City was floated as a possible relocation site for the Futenma base. In the past three mayoral elections, candidates favoring the relocation plan won. This was the first time that voters opposed to the base outnumbered those willing to accept the base in exchange for local economic development measures. The inauguration of the government led by the Democratic Party of Japan (DPJ),which advocated the relocation of the Futenma base out of Okinawa or out of Japan, might have spurred a change in the voters' opinions. Consequently, Hatoyama, who has to give consideration to the people's will, is burdened with a heavy responsibility. The ruling parties will soon present their proposals for relocation sites other than Henoko at the working group of the government and ruling coalition. The names of a Self-Defense Forces (ADF) base in the Kyushu region and isolated islands of Okinawa Prefecture are being mentioned as relocation sites. The government should also consider dividing up the Futenma functions instead of insisting on keeping them all in one place. At any rate, the Hatoyama administration must convince the U.S. government after persuading local governments to accept the base. Considerable efforts will be required. The Hatoyama government must find a solution to the thorny problem of sharing the base-hosting burden being shouldered by the residents of Okinawa among all the Japanese people. (7) Editorial: Nago's decision is expression of opposition to Futenma relocation within Okinawa TOKYO SHIMBUN (Page 5) (Full) January 26, 2010 Susumu Inamine, a candidate opposed to the relocation of the U.S. Marine Corps' Futenma Air Station to the Henoko area in his city, has won the Nago mayoral election. Prime Minister Yukio Hatoyama should not hesitate to give up on relocating the Futenma base within Okinawa Prefecture and should start seriously looking into moving it out of the prefecture or out of Japan. Hatoyama said that the result of the election "is an expression of the will of Nago residents." Since foreign policy and national TOKYO 00000165 009 OF 012 security are fundamental national policies, the basic principle is that it is the responsibility of the government to make a decision and the decision should not be left up to a local election. However, if the government defiantly relocates Futenma to Henoko amid strong opposition by local residents, the stable use of the base will be difficult. As a result, the Japan-U.S. alliance will be weakened. Hatoyama has taken the stance of both placing importance on the Japan-U.S. agreement to move Futenma to Henoko and respecting the local people's will. It makes sense for him to take the election result seriously. Hatoyama has pledged at home and abroad to resolve the relocation issue by the end of May. The government committee studying the relocation issue will now expedite its efforts to search for a specific relocation site. Hatoyama should seriously look into moving the Futenma base out of Okinawa and out of Japan as he pledged during the campaign for last year's Lower House election, and come up with an alternative plan to replace the Henoko plan. During the election campaign, Inamine played up his opposition to the relocation to the city, while Yoshikazu Shimabukuro, the incumbent, who is in favor of hosting the base, stressed his achievements in developing the local economy during his four-year term. In the last three mayoral elections conducted after Henoko was floated as a possible relocation site for the Futenma base, candidates that approved of the relocation plan won. Nago residents were forced to make a tough decision in the election to choose between measures to stimulate the local economy and opposition to hosting the Futenma base. The result of the election is an expression of their rejection of the base. The election result was apparently spurred by the change of government realized by the Democratic Party of Japan (DPJ). At a press conference, Chief Cabinet Secretary Hirofumi Hirano, chair of the government committee, said, "The government will start from scratch in looking for the best site without excluding Henoko," indicating that the government will not exclude the existing plan. However, if the plan to relocate to Henoko is revived as a result of the review, the expectations of the Okinawan people, who have suffered from an excessive base-hosting burden imposed on them, will be betrayed. The return of the Futenma base, whose dangers have long been pointed out, is a thorny issue that has not been resolved even though Japan and the United States agreed on it in 1996. If the Futenma base is moved to somewhere in Japan other than Okinawa, the government will have to not only persuade residents at the relocation site to accept the base but also win the understanding of the U.S., which maintains that relocation to Henoko is the best option. Failure to do so might result in the worst-case scenario of the Futenma base remaining in its current location. TOKYO 00000165 010 OF 012 Since Hatoyama is the one who chose to take difficult path, it is his own responsibility to clear the way along that path. (8) Japan's future course -- 50th anniversary of revision of Japan-U.S. Security Treaty (Party 2-5, conclusion): Discussion on nuclear policy now necessary YOMIURI (Page 2) (Full) January 21, 2010 Foreign Minister Katsuya Okada told U.S. Secretary of State Hillary Clinton during their meeting in Hawaii on Jan. 12: "I will keep in close contact with you so as not to produce a negative impact on the Japan-U.S. alliance." Okada sought understanding from Clinton for the ongoing investigation by the Foreign Ministry's expert panel into the issue of alleged secret pacts between Japan and the U.S., including accords allowing the U.S. to bring nuclear weapons into the country. But Secretary Clinton just nodded her head. On the day when he assumed his post last September, Okada said that the issue of secret accords has heightened public distrust in and weakened Japan's foreign policy." He then instructed the Foreign Ministry to launch a thorough investigation into the matter. A number of related documents have already been found, including documents regarding a pact allowing the U.S. military to bring nuclear weapons into Japan that was concluded in 1960, when the Japan-U.S. Security Treaty was revised; and another pact concluded in the same year on combat action by the U.S. military in times of emergency on the Korean Peninsula. The expert panel intends to produce a report by the end of February. Okada had not anticipated that Japan's investigation would a major impact on Japan-U.S. relations, focusing on the fact that "most of the documents have already been disclosed in the U.S," as he said. But U.S. officials have begun to claim that the issue might not be dismissed as a past event and that the current U.S. nuclear policy could be adversely affected as a result. Defense Secretary Robert Gates took up this issue when he visited Japan last October and said: "I want Japan to be careful in handling the issue so as not to produce an adverse effect on Japan-U.S. bilateral relations." To keep the U.S.'s nuclear umbrella effective while giving consideration to the strong aversion to nuclear weapons among Japanese people in the Cold-War era, the then Japanese government decided to conclude the secret accords as a last resort. In the Foreign Ministry's investigation, a note written by Fumihiko Togo, who was involved in Japan-U.S. relations after the end of the war as ambassador to the U.S., was found. The note said, "I had no perception of having concluded secret agreements." A former senior Foreign Ministry official took the following view: "I guess the two countries concluded the accords based on a tacit understanding and without exchanging notes as a result of taking the circumstances at the time into consideration." Fifty years after the revised Japan-U.S. Security Treaty was signed, the "vagueness" of the treaty is being spotlighted. The question is: what effect will revealing the truth of the secret accord issue have on the security strategies of the Japan-U.S. alliance today? Are the secret accords to allow the U.S. to bring nuclear weapons into Japan still valid? What about their compatibility with the TOKYO 00000165 011 OF 012 Japanese government's three nonnuclear principles (not to make or possess nuclear weapons and not to allow their entry into Japan)? Is there any effect on the deterrence of the U.S.'s nuclear umbrella, which is the most certain evidence that the U.S. has been involved in Japan's defense? In light of national security, a cautious and tough strategy is needed for the nation's nuclear policy. But the Hatoyama administration apparently has not properly addressed this issue and made preparations for discussing the issue. Last July, the Aso government and the Obama government agreed to set up a regular discussion forum for Japan to receive detailed explanations on how the U.S. nuclear umbrella will be operated in a contingency and for both sides to exchange views. On the 50th anniversary of the signing of the revised Japan-U.S. Security Treaty on Jan. 19, U.S. President Barack Obama declared: "The U.S.'s commitment to Japan's national security is unshakable." How is the Hatoyama administration going to deal with the weight of the bilateral alliance on the occasion of the 50th anniversary of the Japan-U.S. security treaty? (9) Shockwave of President Obama's financial regulation: Japanese banks may have to change their comprehensive business policy line NIKKEI (Page 7) (Page 7) January 26, 2010 Details cannot be worked out U.S. President Obama on Jan. 21 announced a financial regulation plan, including a ban on commercial banks from making investment in investment funds. The Tokyo head office of Mizuho Corporate Bank immediately ordered its U.S. office to collect information on the plan. Mizuho Corporate Bank in Dec. 2006 obtained the qualification for operating as a financial holding company in the U.S. -- a first for a Japanese financial institution. Since it had promptly set up a system of moving ahead with investment bank business, it is becoming concerned about the new regulation. The person in charge at the U.S. office could only obtain a copy of a press release with a scant several lines explaining the specifics of the regulation. The executive complained: "There are so many unknown matters. I cannot work out the details." Only a few take the position that the new U.S. regulation will immediately have a major impact on Japan's megabanks, which have a high ratio of interest income. A trend for Japanese banks to undertake comprehensive financial operations involving both the banking and securities functions appeared 10 years after the U.S. abolished the Glass-Steagall Act in 1999. Japanese banks are now in a situation where they find it imperative to revise their future business vision. The impact of the U.S.'s strengthening its financial regulations was also felt by the securities industry. President Obama on the 14 announced a special tax targeting leading financial institutions ahead of the adoption of a new rule regulating banks. The U.S. is the only country where Nomura Holdings did not take over the business of Lehman Brothers. When it was about to expand business on its own, a taxation issued surfaced. TOKYO 00000165 012 OF 012 The special tax targets securities houses with assets worth over 50 billion dollars. At the moment, Nomura Holdings' assets are on the verge of exceeding that figure. If the company expands trading in U.S. stocks and securities, its assets are bound to top 50 billion dollars. One of its executives, puzzled by the U.S. regulation, said: "Will the U.S. government really impose a tax that will hamper the stable consumption of its bonds?" Japanese banks in advantageous position? However, some are taking the strengthened U.S. financial regulation as a good opportunity for Japan. A senior Financial Services Agency official compared the new regulation plan to a unilateral declaration by the U.S. to abolish its nuclear arms. U.S. banks have been enjoying high yieldability on the strength of know-how in derivatives and securitization. On the other hand, Japanese banks are earning much lower profits from margins on low interest rates on loans. The new regulation is in a way aimed at shifting U.S. banks' business style to the low-risk-low-return model adopted by Japanese banks. There is an observation that Japanese banks' relative position on the international financial market will surge. There is a possibility of European and U.S. financial institutions shifting their operation bases to Japan, where regulations are relatively moderate, shying away from the U.S. or Britain, where the financial crisis started and which are toughening financial regulations. This could be viewed as an opportunity for the Tokyo market to resurface as a financial center in Asia. However, there are no indications of the government and the ruling parties deepening discussion on this matter. ROOS