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Cablegate: Japanese Morning Press Highlights 02/28/07

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UNCLAS SECTION 01 OF 12 TOKYO 000832

SIPDIS

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DEPT FOR E, P, EB, EAP/J, EAP/P, EAP/PD, PA;
WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST DIVISION;
TREASURY/OASIA/IMI/JAPAN; DEPT PASS USTR/PUBLIC AFFAIRS OFFICE;
SECDEF FOR JCS-J-5/JAPAN,
DASD/ISA/EAPR/JAPAN; DEPT PASS ELECTRONICALLY TO USDA
FAS/ITP FOR SCHROETER; PACOM HONOLULU FOR PUBLIC DIPLOMACY ADVISOR;
CINCPAC FLT/PA/ COMNAVFORJAPAN/PA.

E.O. 12958: N/A
TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA

SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 02/28/07


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

Visit of Deputy National Security Adviser Crouch:
4) Deputy National Security Adviser Crouch in news conference says
it will take time before North Korea can be removed from
terrorist-supporting nation list
5) Defense Minister Kyuma tells Deputy National Security Adviser
Crouch that he envisaged "no problem" in the relocation of Futenma
to an alternate site

National security:
6) Government panel finishes report on creating Japan-style National
Security Council (JNSC), headed by prime minister and three cabinet
members
7) Prime Minister Abe orders new JNSC to study possibility of using
right of collective self-defense
8) Government to expand Cabinet Intelligence Council to make it the
"control tower" over gathering, analyzing information on foreign and
security affairs

9) Russia's economic delegation arrives in Japan aiming at expansion
of trade with Japan that is now far below that between Japan and
South Korea

China connection:
10) Prime Minister Abe finds "no problem" with LDP policy chief
Shoichi Nakagawa's remark about China's military buildup
11) China reacts sharply to Nakagawa remark

Political agenda:
12) Opposition Minshuto (Democratic Party of Japan) to present bill
designed to correct social and economic disparities in Japanese
society
13) Minshuto may "back" but not "sponsor" Asano as candidate to run
against Ishihara in Tokyo gubernatorial race
14) Abe trying to draw curtain on issue of his drive to reinstate
postal rebel and friend Eto into LDP and support him as Upper House
election candidate
15) LDP's Yamasaki, Kato critical of Abe for giving priority to
friend Eto by reinstating the postal rebel into LDP and backing him
in Upper House election
16) Reinstated postal rebel Eto will not run in Oita face, where he
would have to face candidate of LDP coalition partner New Komeito

17) US, European funds are major stockholders in Nikko Cordial

18) Buying and selling of greenhouse-gas emission rights to start in
Japan in June

Articles:

1) TOP HEADLINES

Asahi:
Details of suppression of the 3.1 Movement in 1919: Diaries of
General Utsunomiya covering 15 years discovered; Massacre covered
up; Rebellious Koreans killed

Mainichi: Yomiuri: Sankei: Tokyo Shimbun
Supreme Court for first time deems order to play national anthem is

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legal, does not infringe on freedom of conscience

Nihon Keizai:
Nikko Cordial Group to be delisted from Tokyo Stock Exchange; TSE to
make final decision in April

Akahata:
Preferential securities tax system benefits those whose declared
annual income tops 10 billion yen: Seven billionaires get tax cuts
worth 20 billion yen

2) EDITORIALS

Asahi:
(1) Supreme Court decides making teacher play national anthem is
legal: Decision confirms compulsion
(2) Japanese version of NSC is still half-baked

Mainichi:
(1) Court decision on national anthem: It should not be made
official approval
(2) Japanese equivalent of NSC: Just establishing a panel will not
do

Yomiuri:
(1) Court decision on national anthem: No violation of freedom of
conscience
(2) Japanese version of NSC: Speed up efforts to create central
command for national strategy

Nihon Keizai:
(1) Whether proposed Japanese equivalent of NSC will function or not
depends on prime minister
(2) Court decision on national anthem appropriate

Sankei:
(1) Japanese version of NSC: We expect panel to function as central
command
(2) National anthem ruling: Supreme Court decision only natural

Tokyo Shimbun:
(1) NSC: Concern about new system getting nowhere
(2) Cut carbon dioxide emissions using more natural energy

Akahata:
(1) Dowa (antidiscrimination) management: Completely end illegal
activities by members of Buraku Liberation League

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, February 27

NIHON KEIZAI (Page 2) (Full)
February 28, 2007

08:28
Met supporters of Lower House member Masatoshi Ishida in the Diet
building.

08:32
Attended a cabinet meeting. Agriculture Minister Matsuoka stayed
behind. Followed by METI Minister Amari.

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09:30
Met Deputy Chief Cabinet Secretary Matoba at the Kantei.

11:15
Met Diet Affairs Committee Chairman Nikai.

13:15
Listened to a speech by Mongolian President Enkhbayar in the Upper
House plenary session.

14:15
Met Ambassador to Russia Saito and Foreign Ministry's European
Affairs Bureau Director General Harada at the Kantei, with Assistant
Deputy Chief Cabinet Secretary Ando and others.

16:54
Met Special Advisor Nemoto.

17:35
Met former Finance Minister Shiokawa and Nippon Budokan Hall
President Katsuhiko Aoki.

17:42
Attended a meeting on strengthening the Kantei's functions related
to national security.

18:04
Attended a meeting of the Council on Economic and Fiscal Policy.

19:42
Met Japan IBM Supreme Advisor Takeo Shiina, Kikkoman Corp. Chairman
Tomosaburo Mogi and others at the ANA Hotel.

21:50
Returned to his official residence.

4) It "will take time" to remove DPRK from the list of state
sponsors of terror: US deputy national security advisor

MAINICHI (Page 2) (Full)
February 28, 2007

Takayasu Ogura

Visiting US Deputy National Security Advisor Jack Crouch yesterday
met with the press including the Mainichi Shimbun. Referring to the
recent six-party agreement stating that the United States will begin
the process for removing North Korea from the list of the state
sponsors of terror, Crouch indicated it would take time to remove
that country, noting: "In order to remove it from the list, we must
satisfy our Congress. Frankly speaking, that is not an easy task."

He continued: "There is not only a political problem but also a
legal one. In order to remove North Korea from the list, North Korea
and other state sponsors of terror (such as Iran and Cuba) must
follow the same procedures. It will take time to do so."

Meanwhile, on Japan's assistance to Iraq and Afghanistan, Crouch
stated, "It's incorrect to think that I am visiting Japan in order
to make a special request," but he added, "In Afghanistan,
assistance for improving roads and power supply is necessary, in

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addition to the security area." He thus expressed the hope for
Japan's aid in the area of infrastructure.

5) "Don't worry" about Futenma relocation

NIHON KEIZAI (Page 2) (Full)
February 28, 2007

Defense Minister Fumio Kyuma yesterday met with visiting US Deputy
National Security Advisor Jack Crouch at the Defense Ministry. On
the deadlocked issue of relocating the US Marine Corps' Futenma Air
Station (in Ginowan City, Okinawa), Kyuma stressed, "The United
States doesn't have to worry," and asked the US to watch and wait on
the process of coordination with local residents. Touching on the US
force transformation, Crouch stated, "We have placed more emphasis
on the realignment of things relating to the Japan-US alliance than
redeployment of forces." He thus called on Japan to implement the
plans Japan and the US agreed last May as swiftly as possible.

6) JNSC: Leaks subject to severe penalties

ASAHI (Page 1) (Full)
February 28, 2007

A government panel released a report yesterday featuring a plan to
launch a new body called the Japan National Security Council (JNSC),
which is to build Japan's diplomatic and security strategies. The
panel, with Prime Minister Abe presiding, has discussed measures to
consolidate the functions of the prime minister's office (Kantei) on
national security. The JNSC's planned establishment is a step to
strengthen the Kantei's functions and is aimed at enabling the prime
minister to make prompt policy decisions with a small number of
cabinet ministers. In addition, the panel report also suggests the
necessity of creating a law at an early date to protect secrets with
severe punishment against leaking secrets related to national
security.

The government will introduce a package of relevant legislative
measures to the Diet during its current session, including a bill to
revise the Security Council of Japan (SCJ) Establishment Law. The
government eyes launching the JNSC in April next year. Meanwhile,
another government panel, chaired by Chief Cabinet Secretary
Shiozaki, has been discussing how to strengthen the government's
intelligence-gathering functions. This panel is also expected to
work out a report today and recommend measures, such as creating
rules to provide information to the JNSC.

In its report, the Abe panel proposes reorganizing the current SCJ
and establishing the JNSC as a new body for a small number of
members. The JNSC is to be made up of the prime minister and three
cabinet ministers: the chief cabinet secretary, the foreign
minister, and the defense minister. The panel first considered
including the finance minister, but the finance minister is not
included. The JNSC will discuss diplomatic and security strategies
and will also consult on how to deal with emergency situations, such
as an armed attack against Japan. The outcome of JNSC meetings will
constitute the government's course of action with cabinet
endorsement.

The JNSC is to call in the prime minister's special advisor for
national security affairs. In addition, other cabinet ministers and
the Self-Defense Forces' joint staff office chief are also to attend

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JNSC meetings as needed. The JSC's framework will be retained to
discuss Japan's national defense program guidelines (NDPG) and other
matters.

The JNSC's secretariat will be staffed with 10-20 persons, including
SDF officers and private-sector experts. A special advisor to the
prime minister can concurrently serve as chief of the JNSC's
secretariat. Two assistant chief cabinet secretaries, one for

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foreign affairs and the other for security and crisis management,
are to serve concurrently as deputies to the chief of the JNSC's
secretariat. In addition, the report also specifies the necessity of

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creating a law to strictly punish those who leak secrets, saying it
is one of the most important tasks in protecting information. The
report seeks new legislation, suggesting the necessity of
establishing safeguards to protect secrets, such as obligating JNSC
officials to protect secrets with particularly heavy
confidentiality.

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In this connection, the prime minister told reporters at his office
yesterday evening: "We will discuss whether the Diet can enact the
bills into law during the current session, but we should remain
cautious in our discussion on legislating measures to protect
secrets."

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7) Abe suggests that JNSC will study collective self-defense right

TOKYO SHIMBUN (Page 2) (Full)
February 28, 2007

Prime Minister Shinzo Abe last night indicated that the
Japanese-style National Security Council (JNSC) would look into the
issue of Japan exercising the right to collective self-defense,
which is now prohibited under the government's interpretation of the
Constitution. "The NSC might study it, as necessary," he said.

Nobuo Ishihara, chairman of the council to strengthen the Prime
Minister's Official Residence's (Kantei) national security
functions, which just produced a report on the Japanese-style NSC,
also indicated that the JNSC would discuss this matter ahead of
other issues. Abe and Ishihara were responding to questions from
reporters at the Kantei.

8) Cabinet Intelligence Council to be expanded

NIHON KEIZAI (Page 2) (Full)
Eve., February 27, 2007

A government panel to step up the government's
intelligence-gathering capability will make public its interim
report this week. According to the report revealed yesterday, the
panel, chaired by Chief Cabinet Secretary Yasuhisa Shiozaki,
proposes expanding the Cabinet Intelligence Council's functions and
members. The CIC currently meets twice a year or so for information
exchanges at the subcabinet level. In the report, the CIC is
positioned as a control tower of intelligence functions and is to
direct government ministries and agencies to collect and analyze
information needed for the government's policy planning.

The CIC, chaired by the chief cabinet secretary, is made up of vice
ministers from four central government offices, including the
Foreign Ministry and the Defense Ministry, and reports domestic and
international situations. However, each of the CIC member offices is

TOKYO 00000832 006 OF 012


prone to report extremely important information directly to the
prime minister or the chief cabinet secretary. The CIC cannot
necessarily integrate or share necessary information, according to a
government official.

The panel has therefore made a fundamental review of the CIC's
character. Meanwhile, the panel report suggests the need for the CIC
to expand its members, including the chief of the secretariat to the
Japan National Security Council (JNSC), a newly planned body to be
tasked with planning foreign and security policies. The panel will
also study a system under which the CIC can meet frequently.

In addition, the panel also proposes setting up intelligence analyst
posts in the Cabinet Intelligence and Research Office. The
intelligence analysts, including those from the private sector, will
be positioned under the director of cabinet intelligence. They are
to evaluate information in a report to the CIC and other government
offices on various themes, such as the issue of North Korea's
nuclear weapons programs.

9) Russia's presidential mission focuses on practical gains,
sidestepping "territorial issue," aims to expand trade

TOKYO SHIMBUN (Page 2) (Full)
February 28, 2007

Shohei Yoshida

Russia's Premier Fradkov arrived in Japan yesterday, together with a
group of his country's entrepreneurs. Ahead of him, Industry &
Energy Minister Khristenko and his group arrived in Japan on Feb. 26
and are now here in Japan. Combining that group, Russia has
dispatched a "grand economic mission" of some 200 persons to Japan.
A top-level Russian official's visit to Japan followed the one by
President Putin in 2005. Russia places emphasis on practical gains,
putting aside the northern territories issue, as it did before.

It is often the case with Russia that it prioritizes economic
affairs over the territorial issue. In fact, when Putin visited
Japan, some 140 Russian business leaders, along with him, visited
Japan. The Japan Business Federation (Nippon Keidanren) hosted a
forum for them.

In Russia, foreign and security policies are under the jurisdiction
of the president. Fradkov is number two in Russia following the
president, but he is in charge of trade and economic affairs. His
mission is accordingly more economic-oriented.

According to Fradkov's itinerary, he is to meet with Prime Minister
Abe, to speak at the Japan-Russia investment forum to be attended by
400 business leaders from the two countries, and also to meet
separately with leaders of Japanese companies. Russia apparently is
using this mission as leverage to expand economic and trade ties
with Japan.

The trade value between Japan and Russia has been on the rapid
increase over the past three years. Economic affairs going ahead of
other matters between Japan and Russia have become evident even in
statistics since Putin's visit to Japan in 2005.

In 2002, the number of the member firms of the Japan Chamber of
Commerce and Industry in Moscow totaled 60, but the membership has

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increased 2.5 times to 153 (as of February 2007). Japan's direct
investment in Russia also doubled from the year earlier and reached
10.6 billion yen in 2005.

However, in a comparison in Japan's trade value between Russia and
South Korea, which is on the same GDP scale as Russia, the trade
value between Russia and Japan is only one-sixth of that between
South Korea and Japan. Personnel exchanges between Japan and Russia,
too, are a mere 150,000 or so, much fewer than that with other trade
partners.

Japan and Russia are still far away from each other, just as the gap
over the territorial issue remains wide.

10) Abe sees no problem in Nakagawa's remarks on China's military
buildup

ASAHI (Page 4) (Full)
February 28, 2007

In a speech, Liberal Democratic Party Policy Research Council
Chairman Shoichi Nakagawa said in view of China's rapid military
buildup: "Japan might become a Chinese province." Touching on this
statement, Prime Minister Shinzo Abe said yesterday: "People used to
say that Japan would become America's 51st state. It is meaningless
to take out part of a speech and discuss it." Abe was talking to a
group of reporters at his official residence.

Nakagawa said in the speech in Nagoya on Feb. 26:

"(The economy) of a major power across from the narrow strip of the
sea has grown 10% annually. Its military spending has been growing
at a pace of 15% to 18%. If something happens to Taiwan in the next
15 years, Japan might become a Chinese province over the next two
decades."

11) China rebuts Nakagawa's statement

ASAHI (Page 4) (Full)
February 28, 2007

Yusaku Yamane, Beijing

In reaction to Liberal Democratic Party Policy Research Council
Chairman Shoichi Nakagawa's statement underlining the need to keep
tabs on China's rapid military buildup, Chinese Foreign Ministry
spokesman Qin Gang said in a press conference yesterday:

"What is the true purpose of constantly making a big fuss over China
as if it is a threat. Japan's landmass is 25 times smaller than that
of China, and its population is 10 times smaller. Despite that,
Japan's military spending is enormous, which is absurd. China's
military spending is 67% of Japan's, and only 7% per capita."

12) Minshuto drafts bill correcting social disparities, readying
education and Iraq countermeasures

NIHON KEIZAI (Page 2) (Slightly abridged)
February 28, 2007

The main opposition party, Minshuto (Democratic Party of Japan),
yesterday drafted the outline of an emergency measures bill to

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correct the social divide, featuring a hike in the minimum wage to
an average of 1,000 yen nationwide. Minshuto has set the narrowing
of the income gap in society as the main issue at the current
session of the Diet. In a bid to make a clear distinction between
the party's position and that of the government of Prime Minister
Shinzo Abe with the July House of Councillors election in mind, the
largest opposition party intends to submit to the Diet measures
against the government-sponsored bills on education reform and Iraqi
reconstruction assistance. As the ruling parties have strengthened
criticism of Minshuto's such an election strategy as impracticable,
heated debate will likely occur at the Diet.

"Deliberations on the budget at the House of Representatives are
crucial, and we will face real debate after the deliberations,"
Minshuto Acting President Naoto Kan said in a strong tone yesterday
at the beginning of a meeting of the project team to deal with the
social disparities.

Countering the Abe administration, which has positioned
constitutional reform as the main campaign issue for the July Upper
House race, Minshuto has come up with a strategy of placing priority
on policies that deal with the daily lives of the people. In
addition to a hike in the minimum wage, Minshuto's social-gap
correction bill includes: (1) realization of the same wage for the
same labor, (2) promotion of the status of part-time workers to that
of permanent workers, (3) a ban on age-discrimination when
advertising and hiring and regarding with an eye on a huge number of
retirements of baby boomers.

Prime Minister Abe is negative about the idea of raising the minimum
wage across the board, and he commented: "We should be careful so as
not to bring pressure on small businesses." Liberal Democratic Party
(LDP) Secretary General Hidenao Nakagawa also cast a doubt toward
the idea in a party yesterday in Tokyo. He said: "Smaller companies
will not pay a minimum wag of 1,000 yen."

Minshuto President Ichiro Ozawa, since assuming his current post,
has five times adopted the strategy of boycotting Diet debate,
including one against the ruling coalition's voting on the bill
revising the Basic Education Law without the presence of opposition
parties, as well as an all-out boycott against the ruling camp's
rejection to its call for dismissing Health, Labor and Welfare
Minister Hakuo Yanagisawa. However, he has failed to reflect his
party's policies in the government-sponsored bills through
deliberations with the ruling parties, even though his party
submitted counterproposals to the education reform bill and other
legislation.

13) Asano starts coordination, with eye on running in Tokyo
gubernatorial election; Minshuto may support but not endorse him

TOKYO SHIMBUN (Page 1) (Excerpts)
February 28, 2007

Shiro Asano, 59, former governor of Miyagi Prefecture, has started
coordination with an eye to running in the Tokyo gubernatorial
election in April. Asano told reporters after delivering a speech in
Fuchu, Tokyo, yesterday, "Although I am confused (about the upsurge
of calls among citizens for my candidacy), I have to make a response
in an adult way."

Asano has been sounded out by Minshuto (Democratic Party of Japan)

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as a potential candidate. But in a public meeting in Tokyo on Feb.
25, he said in response to participants' calls for his candidacy, "I
am so moved, I don't know what to say." Asano appears intent on
winning broad support without showing any political coloring. In a
press conference yesterday, Minshuto President Ichiro Ozawa
indicated an understanding of Asano's intention, remarking, "We do
not mean that we must absolutely make him our party's own
candidate."

14) Eto submits to LDP letter asking for reinstatement; Prime
Minister Abe hurries to put end to the matter

NIHON KEIZAI (Page 2) (Full)
February 28, 2007

Seiichi Eto, a postal rebel and a former House of Representatives
member, yesterday submitted to the ruling Liberal Democratic Party
(LDP) a letter asking the LDP to let him rejoin. His submission of
the letter seems to be in line with the intention of Prime Minister
Shinzo Abe, who aims to draw a curtain on the matter. However, some
LDP lawmakers are unhappy with Eto's sudden reinstatement into the
party since the party had originally decided to let him join after
the House of Councillors election in July. The LDP will likely
reinstate Eto into it in early March and endorsed as an official
candidate (for the Upper House race). There is also a view in the
LDP calling on the party not to endorse him as a candidate for the
election, just allowing him to return to the party.

Abe told reporters last night: "I think a final timing for the Upper
House election is approaching. Mr. Eto is the only person who
submitted a letter to the party. But nothing has been decided." Eto
submitted the letter to the LDP just four days after Abe had
revealed his intention to let him rejoin. This move stemmed from the
judgment that the prolongation of the issue might weaken political
impetus, as well as lower the cabinet support rates.

Another reason is that LDP Secretary General Hidenao Nakagawa, who
had been reluctant to let Eto rejoin, was forced to change his
policy, intertwined with his remark calling on the cabinet
ministers' "loyalty" to the prime minister. In his meeting with
Lower House member Seishiro Eto, chairman of the LDP Oita
prefectural chapter, Nakagawa conveyed the party's conditions for
the reinstatement and endorsement of Seiichi Eto: (1) the party will
follow the prefectural chapter's policy and (2) an election office
will be set outside the prefecture.

Most LDP members are critical of Abe's decision. In a meeting
yesterday Takeshi Noda pointed out that the party's standards for
reinstating and endorsing former Lower House members were unclear.
Taku Yamasaki and Koichi Kato in their meeting last night agreed on
the perception that it is not desirable that the prime minister made
that decision because Eto is his friend."

As senior member of the Machimura faction, who senses the mind of
the New Komeito, which is concerned about a negative impact on
election cooperation with the LDP, stressed: "The party should
reconsider whether to field him as a proportional representation
candidate even though it will allow him to rejoin." A government
source said, "There will be no" reaction by voters, but many
observers are concerned about an adverse effect on the election.

15) Yamasaki, Kato complain about prioritizing friendship

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TOKYO SHIMBUN (Page 2) (Full)
February 28, 2007

Former Liberal Democratic Party Vice President Taku Yamasaki, former
Secretary General Koichi Kato, and others met in Tokyo last night

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and shared the view that the question of reinstating former Senior
Vice Health Minister Seiichi Eto, a postal rebel, must not be
resolved based on friendship ties.

One participant commented on party management: "The air of free
discussion in the party has diminished. The party leadership must
realize that members may look obedient on the surface but they are
rebellious inside." Another member noted about Secretary General
Hidenao Nakagawa's remarks calling for loyalty to Prime Minister
Shinzo Abe: "Such will create a bad image as if we were living in a
country like North Korea."

The participants included 11 senior members of the Asia policy and
security vision study group led by Yamasaki.

16) Eto presents letter asking LDP to allow him to return

ASAHI (Page 4) (Excerpts)
February 28, 2007

Ruling Liberal Democratic Party (LDP) Secretary General Hidenao
Nakagawa asked Party Ethics Committee Chairman Takashi Sasagawa to
discuss the issue of whether to reinstate Seiichi Eto, a postal
rebel who lost his House of Representatives seat in the 2005
election. The expectation is that the LDP will endorse Eto as a
proportional representation candidate for the House of Councillors
election after the committee decides to let him rejoin the party.
Giving consideration to concerns of the Oita prefectural chapter and
New Komeito that the decision would have an negative impact on
cooperation between the LDP and New Komeito in the Upper House
election campaign, the LDP leadership has made it a condition that
Eto will not campaign in Oita Prefecture.

Eto handed to Nakagawa a written pledge expressing his intention to
support postal privatization. Nakagawa told Eto that he should move
his address from Oita Prefecture and that he should not campaign in
Oita. Eto accepted these conditions. Nakagawa set out the conditions
in order to maintain election cooperation with the New Komeito.

17) European, US investment funds occupy upper echelon of list of
Nikko Cordial Group's stockholders: Battle being fought with eye on
reorganization of the group

ASAHI (Page 2) (Full)
February 28, 2007

Moves in the financial services industry are heating up with eye the
delisting of Nikko Cordial Group, the third largest securities
houses in Japan from the Tokyo Stock Exchange (TSE).

If Nikko were delisted, it would lose even more customers, resulting
in curtailed business activities and a decline in business
performances. Chances are that in the event its delisting becomes
certain and its stocks are put in the liquidation post at the TSE,
domestic and foreign investment funds would purchase its stocks
through a takeover bids at low prices and sell Nikko's group

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companies at the highest prices.

Several European and US investment funds have already purchased
Nikko stocks with eye on the group's reorganization. They now have
about 6% stake in the company, occupying the top three positions in
the list of its stockholders, overtaking the CitiGroup, a leading US
financial institution, and the Mizuho Financial Group - both have 5%
stake in NIkko. It is viewed that leading financial groups will
purchase Nikko stocks through a takeover bid for the purpose of
selling the acquired stocks at the highest price. Executives of the
Nikko Cordial Group are increasingly alarmed about the move with one
saying, "If our stocks are delisted, they will be traded at bargain
prices."

Assuming the worst-case scenario, Nikko has searched for the
possibility of going under a wing of a leading financial group or
entering a business tie-up. Leading domestic and foreign financial
groups have informally offered help to Nikko.

The CitiGroup, which has invested in Nikko since the late 1990s, is
considering placing Nikko under its umbrella to use it as its base
in Japan. It is now coordinating views with the possibility of
raising its stake to over 33.3% so that it can have a veto on key
issues at stockholders meetings. It is also considering the
possibility of wholly owning Nikko if it is delisted.

The Mizuho Financial Group is also pressing ahead with efforts to
expand its securities business, as can be seen its plan to merge
Mizuho and Shinko Securities Houses - both are its group companies -
next January. It has started looking into the possibility of bailing
out Nikko. If Mizuho's plan realizes in the form of not countering
the CitiGroup but extending helping hand jointly with it, chances
are that the two leading Japanese and US financial institutions will
seal a tie-up deal with Nikko in between. The Mitsubishi UFJ
Financial Group has also sounded out the possibility of extending
cooperation to Nikko with the aim of recovering from its late start
in the securities business. There is no knowing how the competition
over Nikko will develop.

18) Trade in greenhouse gas emission credits to start in Japan in
June

TOKYO SHIMBUN (Page 8) (Full)
February 28, 2007

The nation's first exchange for countries and companies to trade
greenhouse gas emission rights will be established in June.

Preparations for opening the exchange are being pushed mainly by the
Japan Bank for International Cooperation and the Cho Mitsui Trust
and Banking Company. The two banks expect to officially announce
this plan. They are also calling on other major trust and banking
companies to participate.

A number of countries have introduced emissions trading. By
establishing an exchange, Japan aims to make it easy to purchase
foreign emission credits from developing countries as part of
efforts to meet its target set in the Kyoto Protocol.

The Kyoto Protocol, which set its signatories' targeted reductions
in greenhouse gas emissions, allows the countries to purchase
emission rights from other countries or foreign companies.

TOKYO 00000832 012 OF 012

The planned exchange is a virtual one with no specific place or
organization. Under the plan, buyers and sellers open bank accounts,
sellers deposit their emission credits as a trust asset, while
buyers purchase the rights.

Japan will make it possible for foreign companies to open bank
accounts and call on companies in potential seller countries, such
as China and India, to take part in the exchange. The Japan Bank for
International Cooperation, which has know-how on emissions trading,
will offer assistance in managing the exchange.

DONOVAN

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