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Cablegate: Daily Summary of Japanese Press 03/29/07

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PP RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #1379/01 0880801
ZNR UUUUU ZZH
P 290801Z MAR 07
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 2162
INFO RUEKJCS/SECDEF WASHDC PRIORITY
RHEHAAA/THE WHITE HOUSE WASHINGTON DC PRIORITY
RUEAWJA/USDOJ WASHDC PRIORITY
RULSDMK/USDOT WASHDC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC//J5//
RHHMUNA/HQ USPACOM HONOLULU HI
RHHMHBA/COMPACFLT PEARL HARBOR HI
RHMFIUU/HQ PACAF HICKAM AFB HI//CC/PA//
RUALSFJ/COMUSJAPAN YOKOTA AB JA//J5/JO21//
RUYNAAC/COMNAVFORJAPAN YOKOSUKA JA
RUAYJAA/COMPATWING ONE KAMI SEYA JA
RUEHNH/AMCONSUL NAHA 2922
RUEHFK/AMCONSUL FUKUOKA 0459
RUEHOK/AMCONSUL OSAKA KOBE 3974
RUEHNAG/AMCONSUL NAGOYA 9800
RUEHKSO/AMCONSUL SAPPORO 1405
RUEHBJ/AMEMBASSY BEIJING 6370
RUEHUL/AMEMBASSY SEOUL 2446
RUCNDT/USMISSION USUN NEW YORK 3750

UNCLAS SECTION 01 OF 08 TOKYO 001379

SIPDIS

SIPDIS

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: DAILY SUMMARY OF JAPANESE PRESS 03/29/07


INDEX:

(1) Futenma relocation: US consul general shows understanding on
offshore shift

(2) US consul general shows understanding on offshore installation;
A step to break deadlock; Okinawa Prefecture, Nago City appreciate;
Defense Ministry coolheaded

(3) Regulatory reform panel determines seven-item agenda, keeping
Abe's policy imprint in mind

(4) Deregulation generates 140,000 yen in economic effect per capita
over 15 years

(5) Japanese economy on smooth track: Belated recovery of personal
consumption seen with baby-boomers gradually loosening their purse
strings

ARTICLES:

(1) Futenma relocation: US consul general shows understanding on
offshore shift

OKINAWA TIMES (Page 1) (Full)
March 29, 2007

Kevin Maher, US consul general in Okinawa, expressed his views
yesterday on the issue of building an alternative facility in a
coastal area of Camp Schwab in Nago City for the US Marine Corps'
Futenma Air Station. Okinawa Prefecture and Nago City have been
seeking to install the planned facility at a site in waters
southwest of the camp. "We will fully consider local views and will
determine the relocation plan while understanding that we need to
place it toward the ocean as much as possible (dekiru dake okiai ni
yoseru)," Maher told reporters at the US Consulate General in Urasoe
City, Okinawa Prefecture. Nago's municipal government and Okinawa's
prefectural government welcome Maher's remarks on the issue. If the
Japanese government shows a similar view officially, its talks with
Okinawa and its local communities over Futenma relocation will
likely be accelerated.

Maher clarified that the United States, when working out a
masterplan to build the Futenma alternative facility, would consider
Nago City's request to install it in waters southwest of the
currently planned relocation site. However, Maher stressed that it
does not mean revising the Futenma relocation plan. It is unclear
whether the construction site will be actually changed to an
offshore site.

"A US government official in charge made remarks that shows
understanding on our request, so I think our proposal can get the
government's understanding in our talks with the government from now
on," Nago Mayor Yoshikazu Shimabukuro said. "This is a big step
forward," the mayor added.

Gov. Hirokazu Nakaima took the position that he would have to nail
down whether Maher stated his personal views or not. However,
Nakaima gave high marks to Maher's remarks, saying, "That's what
Okinawa Prefecture and local communities want."

Concerning the alternative facility, Maher noted that Japan and the
United States released an interim report in 2005, incorporating an

TOKYO 00001379 002 OF 008


intergovernmental agreement on the planned realignment of US forces
in Japan. In this regard, Maher said the Japanese and US governments
agreed at that time to minimize noise and other impacts on local
residents. He stressed that his views clarified this time do not
mean to change the United States' stance. Meanwhile, the governor
has been calling for Futenma airfield to be turned into a state of
closure within three years. "It's difficult to close down Futenma
airfield in three years," Maher said. He went on: "It would be
better to speed up the Futenma relocation as much as possible. We're
ready to make efforts to dissolve the concerns of local residents
living near the airfield as early as possible."

In addition, Maher also referred to the fact that Japan and the
United States have now finalized a report on the US military's
realignment, incorporating an agreement to return bases located
south of Kadena Air Base. "We don't have to wait until the Futenma
alternative is completed in 2014 and Marine relocation is
completed." With this, Maher clarified that the United States would
consider returning some of those bases earlier than scheduled.

(2) US consul general shows understanding on offshore installation;
A step to break deadlock; Okinawa Prefecture, Nago City appreciate;
Defense Ministry coolheaded

OKINAWA TIMES (Page 3) (Full)
March 29, 2007

On the issue of relocating the US Marine Corps' Futenma Air Station
in Okinawa Prefecture, US Consul General in Okinawa Kevin Maher has
indicated that the United States would consider the request of local
communities to install an offshore alternative facility. Behind the
scenes, Okinawa Prefecture and Nago City have been seeking to break
the deadlock in their consultations with the Japanese government
over Futenma relocation. Okinawa Prefecture appreciates Maher's
remarks. "It's very wonderful if the Defense Ministry and the
Japanese government also think that way," one of Okinawa's
prefectural government officials said. Okinawa Prefecture, which
frowns on the Japanese government's plan to send in an environmental
assessment paper at this point of time, is also showing a positive
posture to accept it. Meanwhile, the Defense Ministry remains
cool-headed, with one of its officials taking the position that
Maher did not clearly say the United States agreed to install an
offshore facility.

Maher's remarks came after certain developments.

Defense Ministry: "The US side will not consent (to shift the
planned coastal location of a new airfield)."

Okinawa Prefecture: "The US side has only to consent?"

On Feb. 16, the Okinawa prefectural government and the Defense
Ministry held a meeting of senior officials at the prefectural
government office. In that meeting, Okinawa Prefecture endorsed Nago
City's request to shift a V-shaped pair of airstrips to an offshore
site in waters southwest of the currently planned relocation site.
However, the Defense Ministry side rejected the Nago-proposed idea
of installing an offshore facility, saying, "The current plan is
best."

On March 19, Consul General Maher, Okinawa Gov. Hirokazu Nakaima,
and Nago Mayor Yoshikazu Shimabukuro met at a hotel in the city of
Naha. In that meeting, an official from the Okinawa prefectural

TOKYO 00001379 003 OF 008


government stressed that the danger of Futenma airfield to local
residents in its vicinity and the noise problem must not be carried
over to the relocation site in the city of Nago. This official
added, "Relocating Futenma airfield without destroying the daily
lives of local communities in Nago will lead to ensuring the
feasibility of Futenma relocation and securing the new facility's
stable operation." With this, Okinawa Prefecture pressed Maher to
have Nago's request reflected in determining the newly planned
airfield's detailed location.

On March 11, Maher also met in Okinawa Prefecture with Defense
Minister Fumio Kyuma, who has shown a flexible posture to Nago on
the issue of Futenma relocation. Okinawa Prefecture has expectations
for Maher, with one of its officials saying the consul general was
one of the working-level officials when the bilateral agreement was
reached on Futenma relocation.

The Defense Ministry remains coolheaded about Maher's remarks. One
of its officials said, "The consul general said the US government
would consider local residents, but he didn't clearly say it's okay
to install the Futenma alternative out at sea." The official added:
"His understanding is the same as ours, and he only said what's a
matter of course.

The focus is now on whether or not to reposition the newly planned
airfield. The foregoing Defense Ministry official said the Defense
Ministry, with an eye to modifying the construction plan, would
create a preparatory document based on the governor's statement in
the process of going through procedures for an environmental
assessment. "Right now," the official added, "I can't say anything
with my prediction (about whether to reposition the relocation
site)."

The relocation site's offshore shift will destroy the environment,
such as the seaweed beds. An environmental assessment survey, if
implemented for data, is therefore likely to result in finding a
negative impact on the natural environment.

Maher recounted that his remarks did not mean a revision of the
Futenma relocation plan. An Okinawa prefectural government official
remains calm, saying, "We're not asking them to revise the plan."
Nago City is calling for the relocation site to be positioned within
the framework of the bilateral agreement. If the Japanese government
and Nago City coincide with each other in their respective
interpretations, Okinawa Prefecture may soften its attitude even
though the relocation plan is not revised.

Gist of US Consul General Maher's remarks

The following is a gist of US Consul General Kevin Maher's remarks
regarding the planned construction of an alternative facility for
the US military's Futenma airfield.

-- What about the Futenma alternative facility?

Maher: When the Japanese and US governments decided on where to
locate the runways in the so-called interim report that was released
in October 2005, the two governments agreed to minimize its impact
on the environment and to ensure operational capability, considering
and analyzing factors that will not cause any negative impact on the
daily lives of local residents. We fully considered the local
request to install the Futenma alternative at a site that is as far
away from populated areas as possible and to place it toward the

TOKYO 00001379 004 OF 008


ocean as much as possible, and we're thinking of determining the
relocation plan while understanding that we need to do place it
toward the ocean as much as possible. It would be better to carry
out the intergovernmental decision.

-- Will the US government consider the relocation site's offshore
shift before the environmental assessment?

Maher: In my view, this is not the question of whether to revise the
plan as the media says. I think the two governments are fully in
consideration of local views. I think it would be better to carry
out the legally required environmental assessment early so that we
can carry out this plan as early as possible. We still can't say
anything about what will come out of the environmental assessment.
What I want to stress is that we are going to determine the plan
while understanding that we need to place it toward the ocean as
much as possible.

-- When do you expect the masterplan?

Maher: We still have to coordinate details. The plan is almost
complete. I don't know when it will be made public. However, we need
to coordinate with the Japanese government.

-- Is your view this time shared by Japan and the United States?

Maher: It's my interpretation. It's the US government's view. I
don't know what has become of the Japanese government's view. That's
up to the Japanese government. However, the two governments showed
their ideas in the agreed interim report.

(3) Regulatory reform panel determines seven-item agenda, keeping
Abe's policy imprint in mind

NIHON KEIZAI (Page 3) (Slightly abridged)
March 29, 2007

The government's Regulatory Reform Council (RRC) (chaired by Nippon
Yusen K.K. Chairman Takao Kusakari) yesterday started working out a
first package of recommendations due out in May. It first decided
seven agenda items, including regional revitalization and assistance
for a second-chance program, and then began mapping out specific
measures. The panel, selecting the seven items, gave priority to the
viewpoint of market functions and coordination with the priority
policies put forth by Prime Minister Shinzo Abe. But the package, in
a sense, lacks showcase measures. The prime minister's backup will
be imperative for the panel to accelerate its regulatory reform
drive again.

Key lies in prime minister's support

Acting Chairman Tatsuo Hatta, professor at International Christian
University, said in a press conference held after an RRC meeting
yesterday: "Deregulation may result in expanding the existing social
disparity, but its major purpose is to bring in those who remain
unable to join new businesses." He thus stressed that deregulation
would contribute to creating new markets and job opportunities.

Keeping in mind the criticism of the existing social discrepancy
from opposition parties and others, the deregulatory panel has come
up with measures in wider-ranging areas, such as employment,
welfare, and child-rearing.


TOKYO 00001379 005 OF 008


In reviewing the employment conditions in the public sector, the
panel plans to study raising the age of eligibility to take civil
servant examinations. Hatta said in the press conference: "We keep
in mind the age of women who have finished child-bearing so that
they find it easier to get a new job."

The deregulation drive has apparently lost steam since the Abe
administration was launched in September of last year. The prime
minister has distanced himself from the stance of only giving
priority to market-based principles, remarking, "There are
regulations that should be retained in light of keeping the people's
livelihood stabilized." In education reform, which the cabinet
positions as its top priority challenge, too, the report represents
a willingness to have the central government involved more in boards
of education.

Concerned about its shrinking profile, the RRC keeps in mind the
need to have its measures linked to the priority policies set forth
by the prime minister, focusing on Abe's policy identity. The RRC
has decided to finalize the first package of recommendations in
mid-May and to have such recommendations reflected in the
government's three-year regulatory reform promotion plan covering
the period FY2007-FY2009 due out in mid-May. Afterward, the panel
plans to come up with a final report, possibly by the end of this
year.

In the course of discussion, contradictions might appear between
measures to promote thorough competition without restrictions and
such pending issues as correcting social disparities. Chairman
Kusakari indicated his confidence in a press conference, remarking,
"The report includes many showcase measures." The report, however,
covers the agriculture and medical areas, on which negotiations
often stood at a standstill due to opposition from the Liberal
Democratic Party and for other reasons.

With an eye to the House of Councillors election in July, the ruling
parties are now sensitive to the intentions of industrial groups and
relevant government agencies. Many RRC members take the view that it
might be difficult to produce results without the prime minister's
backup.

(4) Deregulation generates 140,000 yen in economic effect per capita
over 15 years

NIHON KEIZAI (Page 3) (Full)
March 29, 2007

The Cabinet Office yesterday released its survey that concluded that
the regulatory reform measures taken during the FY1991 - FY2005
period boosted the economy by approximately 18.3 trillion yen. The
report underscores the benefits of deregulation also reach consumers
through price drops and market expansion. The economic effect per
capita is calculated to be 144,000 yen. An official of the Cabinet
Office commented, "By promoting reform further, more benefits will
be generated for consumers."

The Cabinet Office calculated how many economic benefits were
generated through regulatory reforms in 14 areas, including
electricity and city gas. Upon working out the added value of "price
cuts owing to expedited competition" and "expanded demand for goods
and services (market expansion)," the survey compared the total
figure with that worked out on the assumption that no deregulatory
measures were taken. The total figure of economic effect increased

TOKYO 00001379 006 OF 008


by 3.8 trillion yen over that in the previous survey in FY2002.

In value terms, the electricity industry showed the largest economic
effect. This result is attributed to the measure taken in 2004 to
expand the scope of liberalization of retail sales, as well as the
improvement in the wholesale exchange market for surplus
electricity. Compared with FY1994, electric prices dropped 39.1% on
average, and the market expanded by 18.6%.

The trucking industry followed the electricity industry, generating
the economic impact of approximately 3.43 trillion yen. In 2003, the
government eased rate-setting regulations to enable entities to
change transport charges on their own judgment. Market-entry
regulations were also relaxed. Transport rates dropped 27.5% in
FY2004 from FY1990 levels.

In regulatory reform in the financing area, the government took
measures to completely liberalize commissions and fees in stock
brokerage and non-life insurance rates. In particular, the first
measure contributed to increasing individual investors, helped by
the spread of the electronic securities market.

In the cellular phone business, the price of a unit in FY2005 was
down 60% below in FY1993. The market expanded 20 times larger. The
deregulation measures taken so far generated 2.78 trillion yen worth
of economic effect. However, since major reforms have already been
carried out, a significant effect has not appeared recently.

In domestic air service and liquor sales, there is no significant
effect observed. Compared with the prices when regulatory reform
started to be carried out, the rate of decline stayed at only 8.8%
and 11.6%, respectively. In domestic air service, due to an increase
in demand for short-distance flights increased (less than 600
kilometers in distance), for which higher passenger fares are set, a
negative economic effect in price terms has been produced.

(5) Japanese economy on smooth track: Belated recovery of personal
consumption seen with baby-boomers gradually loosening their purse
strings

NIHON KEIZAI (Page 1) (Slightly Abridged)
March 28, 2008

The economy is on a mild but stable growth track. Consumption and
capital spending are following a steady path, but there are
potential risks about their future, including uncertainties about
the US economy. The underlying strength of domestic demand holds the
key to the sustainability of the longest economic boom in post-war
decades.

Shortage of boats in stock

Baby-boomers have begun spending money for their post-retirement
interests. Customers in their late fifties have visibly increased on
the digital single-lens reflex camera sales floor at Yodobashi
Camera Multimedia Akiba in Chiyoda Ward, Tokyo. A half of the
customers who visit there on weekend are baby-boomers. Though many
are beginners, cameras in the price range between 100,000 yen and
130,000 yen for intermediate users sell well. According to BCN, a
research company based in the Bunkyo Ward, Tokyo, the sales of
digital single-lens reflex cameras had remained on the same level as
the preceding year up until last summer, but a 60% -70% increase
over the previous year is continuing since last September.

TOKYO 00001379 007 OF 008

President Koichi Hattori of Hattori Marine, a boat shop in Yasu
City, which deals with used boats, expressed his surprise, "The
shortage of boats to sell will likely continue. The number of
baby-boomers who want to enjoy fishing when they retire is sharply
increasing.

Personal consumption is beginning to pick up. The Bank of Japan's
indices of aggregated sales gauging consumption from an overall
perspective took an upward turn in January. One factor for the rise
is increased consumption among baby-boomers. A household economy
survey carried out in January found that expenditures by households
headed by those in the 55-59 age bracket increased for the first
time in seven months.

The baby-boomer population born from 1947 through 1949 is
approximately 7 million. They have potential to have a major impact
on the economy. Goldman Sachs estimated that the total amount of
retirement allowances paid in the fiscal 2007-2009 period, when this
generation hit retirement age, would reach 13.9 trillion yen per
year, up 2.5 trillion yen over the average amount paid in the past
10 years. A large part of their retirement allowances will likely be
put aside as savings to pay living expenses or as investment in
investment trust funds, but the remaining portion will be spent.

Aeon set its eyes on their changing wardrobe in preparation for post
retirement life. It in mid-March carried out a campaign to take
unwanted suits from customers in exchange for 10% discount tickets,
which they can use when they buy casual clothes. 13,000 suits were
brought in to Aeon stores during the three-day campaign period. The
sales of jackets and pants jumped 70%, compared with the previous
year.

Wages hold key

Young people's consumption has also begun moving, as their purses
are getting fat due to the recruitment of many college graduates,
raises in their initial salaries and wages for part-timers. Both
Royal Host and Sky Lark, family restaurants with many young
customers, saw an increase in per-customer spending in fiscal 2006.

Will consumption continue to pick up smoothly? There remain some
unclear elements. One is a sluggish increase in wages. Though the
overall income of wage earners has increased at a pace of over 1% on
average since 2005, per-capita income or cash earnings have not
increased. Per-capita income in January suffered a drop for the
second straight month, marking a 1.4% fall in comparison with the
preceding year. Taro Saito at the Nissei Basic Research Center said
that the rise in consumption thus far has been led not by wage
increases but by an increase in the number of people who got into
the workforce thanks to the upturn in the employment situation.

However, there are signs of wages increasing. According to the first
aggregation of wage negotiations in the spring of 2007, which the
Japan Business Federation (Nippon Keidanren) compiled on Mar. 22,
the rate of wage hikes reached 1.85%, up 0.16 points over the same
period of the preceding year.

An increase in the number of permanent employees will boost
consumption due to heightened expectations on stable income. In one
labor force survey, the average number of permanent employees in the
October-December quarter last year increased by 590,000, compared
with the same quarter the year before, topping an increase in the

TOKYO 00001379 008 OF 008


number of part-timers. An increase in interest earnings from the
payment of dividends and interest rate hikes are also boosting the
household economy.

The spillover effect of the current economic growth on the household
economy has been very mild, unlike a boom in the corporate sector.
However, the income level of the household economy is gradually
increasing, even though the growth occasionally comes to a
standstill. If this trend continues, it would become possible to
declare that personal consumption has recovered.

SCHIEFFER

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