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Cablegate: Daily Summary of Japanese Press 06/18/07

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UNCLAS SECTION 01 OF 09 TOKYO 002739

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 06/18/07


INDEX:

(1) Total lifting of the ban on US beef imports so quickly? - Part
1: US becoming more aggressive, backed by OIE endorsement; Japan may
flinch and respond to talks to ease import conditions

(2) 2007 Upper House election: LDP may face uphill battle even in
conservative electoral districts -- Ishikawa, Saga

(3) 2007 Upper House election (Part 4): Aftermath of controversial
postal reform still lingers on

(4) 20 million voters in "lost generation" the greatest variable in
Upper House election

(5) Policy watch: Economic policy guidelines should not be regarded
as end of debate

ARTICLES:

(1) Total lifting of the ban on US beef imports so quickly? - Part
1: US becoming more aggressive, backed by OIE endorsement; Japan may
flinch and respond to talks to ease import conditions

TOKYO SHIMBUN (Page 20) (Full)
June 18, 2007

By Takeshi Yamakawa

Seiyu started selling US beef in late March of this year. It is the
first leading supermarket chain to resume dealing with US beef. This
reporter visited its Akabane outlet in Kita Ward, Tokyo, where its
head office is located, several times.

I obtained various responses from shoppers whom I interviewed. A
housewife (50), who bought domestically produced beef offered at a
bargain price, said, "I only buy home-grown goods, whether it is
beef or vegetables." Another customer (46), a part-time worker,
said, "US beef? My resistance to US beef has disappeared. I am more
concerned about food additives than BSE. I attach more importance to
price than to country of origin." She put pork instead of beef in
her basket after much wavering. Another shopper (56), also a
part-time worker, picked Australian beef, saying, "I do not mind
having US pork, but I still hesitate to eat US beef. I will perhaps
eat it if everybody else eats it."

Sales of US beef appear to greatly differ depending on the area.
However, as long as I have observed this Seiyu store, domestic beef
appears to be selling more than US beef, though the allergic
response to US beef has certainly weakened. I also had the
impression that pork and chicken were selling better than beef. The
poor showing of beef sales seems to be due to a slow recovery of
demand for the product, which fell in the wake of the BSE problem,
and to high prices.

Responses of supermarket chains and beef-bowl restaurants differ.
Seiyu on June 1 increased the number of outlets that sell US beef
from 52 to 158, covering all outlets in the Kanto region and part of
the Tohoku region, as it sold better than the company had expected.

The Aeon Group remains cautious about selling US beef noting that
although it has no particular concerns about the safety of US beef,
it has yet to determine that consumers feel reassured about the

TOKYO 00002739 002 OF 009


safety of US beef. Aeon has its own ranch in Tasmania, Australia.
Its sales of US beef, therefore, had been small -- 15% -- even
before the import ban was placed on US beef, with Australian
products at 35% and domestic products at 50%.

Ito-Yokado sold US beef at one outlet in Tokyo and another in Sendai
in May as test marketing. It appears to have received a good
response with one official noting, "Even though the prices were
rather high, all the products sold out. We have received a report
from our beef buyer who inspected production facilities in the US
noting that they have improved in their quality checking system."
However, he said, "We need to have several more test sales before we
officially decide to sell it."

Among various beef-bowl restaurant, Yoshinoya D&C tends to be most
affected by the fate of US beef. It started selling beef bowls using
US beef from 11:00 a.m. through 24:00. Since it has become
impossible to cover the necessary amount with US beef alone, it is
now covering the shortage using Australian and Mexican beef, up to
30%. It intends to patiently wait for the total lifting of the
import ban with one official noting, "The cost of purchasing US beef
is now two to three times more than before. We highly hope that
imports of US beef will normalize. However, we have stopped swinging
between elation and desperation due to short-term developments."

Zensho, Yoshinoya's rival company, which runs Sukiya and Nakau,
categorically said that it has no intention of purchasing US beef.
It harshly criticized the situation in the US with one official
saying, "The US beef policy has not changed at all whether it is
feed-grain regulation, the removal of specified risk materials (SRM)
and BSE inspection. It has refused to carry out full inspections
probably because it is afraid of spotting BSE-infected cattle."

(2) 2007 Upper House election: LDP may face uphill battle even in
conservative electoral districts -- Ishikawa, Saga

NIKKEI (Page 2) (Full)
June 15, 2007

Ichiro Ozawa, president of the major opposition Democratic Party of
Japan (Minshuto) on June 12 arrived in Ishikawa Prefecture after
cutting short his business trip to the Kyushu region. Meeting
reporters at a hotel in Kanazawa City, he told them: "Although our
party may be behind in starting to campaign here, I will do
everything I can to have our candidate win this electoral district
in the upcoming Upper House election." Ozawa chose former House of
Representatives member Yasuo Ichikawa as a Minshuto-authorized
candidate for the single-seat constituency. Ichikawa was the last
candidate to be chosen by the party to run in single-seat
constituencies across the country.

Ishikawa Prefecture is former Prime Minister Yoshiro Mori's home
turf and lawmakers elected from that prefecture are all ruling
Liberal Democratic Party (LDP) members. A prevailing view there
accordingly is that the LDP has an advantage in the upcoming Upper
House election as well -- but things are not that simple.

Kanazawa City "opposed to Mori"

"Shinshin (New Frontier) Ishikawa" is a prefectural assembly group
formed to back the late Keiwa Okuda, who left the LDP after a fierce
battle with Mori under the multiple-seat constituency system. The
reason why Minshuto delayed choosing its candidate is because it was

TOKYO 00002739 003 OF 009


looking for ways to team up with Shinshin Ishikawa, which has a
solid political base in Kanazawa City. A former local public servant
explained: "Voters in Kanagawa are not anti-LDP but anti-Mori."

Minshuto initially sought to back former Okuda's son, Ken, a former
House of Representatives member, but this idea was aborted. Next,
Shinshin Ishikawa moved to field Tetsuo Kutsukake, an incumbent
House of Councilors member of the LDP who is at odds with Mori over
when to retire. But meeting with a fierce objection from the LDP,
Kutsukake was forced to declare he would give up running for the
Upper House election. Shinshin Ishikawa Chairman Hiroshi Kanehara
met with Ozawa and entrusted the selection of a candidate for the
Upper House election entirely to Ozawa, telling him: "I'll work
together to win the Upper House election." Kanehara promised Ozawa
he would cooperate with him to unseat the LDP.

Meanwhile, former Prefectural Assembly member Tomiro Yata, whom the
LDP has put on its ticket in this past January, is stepping up the
efforts to ensure organized support by touring 70 companies and
organizations in a day. Most municipality heads in the prefecture
favor the LDP. On June 9, Yata attended a gathering of dieticians in
Kanazawa City and declared, "I will do my best for the people of the
prefecture."

Yata comes from Tsubata Town, adjacent to the northern part of
Kanazawa City. On June 2, he set up an election headquarters of the
(LDP) Kanazawa chapter and is busying himself putting into practice
his strategy to win a victory in Kanazawa. Kutsukake has distanced
himself from Yata, proclaiming he will focus his energies on backing
his relative, who is to run as an LDP candidate for the proportional
representation seat.

Candidates replaced

In the conservative constituency in the Kyushu region as well, the
LDP is put in a shaky situation. In Saga Prefecture, the LDP
replaced its authorized candidate, making the only case of
replacement among the constituencies across the country.

Specifically, incumbent member of the House of Councilors Takao
faced the trouble involving the bankrupt Saga Fire Mutual Aid
Association on Commerce and Industry, in addition to criticism of
his being old age as a candidate. Jinnai eventually refused to run
as an LDP authorized candidate, and following that, on May 25, the
LDP decided to field former Vice Gov. Yoshiyuki Kawakami. On June
11, Kawakami sought support at a gathering of supporters by telling
them: "I have no time to lose before the election. I pin my hopes on
your support." His staff is making desperate efforts to make his
name known widely to construction companies and commerce and
industrial organizations.

Minoru Kawasaki, who is on the Minshuto ticket for the Upper House
election, garnered some 20,000 votes in the previous election. "I
have given public speeches here for three years, and I now need your
support to work at the center of the political world," Kawasaki
shouted at a crossroad of highways at the outskirts of Saga City.
There were few pedestrians, but at times the driver of a vehicle
waiting for a change of the signals shouted back: "Do you best!"

Until recently, Kawasaki's campaigning staff planned to garner as
many votes critical of Jinnai as possible in urban areas, including
Saga and Tosu, describing Jinnai as a potential enemy. But with the
replacement of Jinnai, one member of Kawasaki's staff said, "Because

TOKYO 00002739 004 OF 009


of the replacement, we've found it rather difficult to fight." The
staff already has mounted 4,000 posters throughout the prefecture in
an effort to make Kawasaki's name widely known even in the
mountainous areas. One aide to Kawasaki noted: "The question is how
to destroy the LDP's bastion."

It was Prime Minister Shinzo Abe, president of the LDP, who insisted
on the replacement of candidate. Abe is to arrive in Saga on June
16, but local residents are somewhat cool, with one person saying:
"Jinnai was rejected unilaterally. If the LDP lost the seat, the
party headquarters should be to be blamed."

(3) 2007 Upper House election (Part 4): Aftermath of controversial
postal reform still lingers on

NIKKEI (Page 2) (Abridged)
June 16, 2007

Takao Fujii, an independent candidate, addressing a gathering in
Gifu City on June 15, emphatically said: "There is a world of
difference between wearing a Diet member's pin and not wearing one.
Thank god, I will have another chance."

In the 2005 House of Representatives election, the controversial
postal-privatization plan (of former Prime Minister Koizumi)
directly hit Gifu. In District 1, anti-postal-privatization lawmaker
Seiko Noda, running as an independent, faced off against LDP
candidate Yukari Sato, while in District 4, the anti-postal
privatization group's Fujii ran against the LDP candidate Kazuyoshi
Kaneko. Fujii lost that race, but he now has decided to run in the
upcoming Upper House race.

Noda camp vs. Sato group

Tsuyako Ono, the LDP incumbent, has announced that she would not run

SIPDIS
in the upcoming Upper House race in Gifu. Liberal Democratic Party
Secretary General Hidenao Nakagawa has told Fujii that if he is

SIPDIS
elected, the LDP would let him to rejoin the party.

At the same time, the LDP Gifu chapter is still deeply divided
between Noda and Sato supporters. This has forced Fujii to produce
two types of posters: one showing him posing him with Noda, who has
rejoined the LDP, and the other showing him with Sato.

The major opposition Minshuto (Democratic Party of Japan) is no
better than the LDP when it comes to party unity. Some 30 party
members in the Gifu chapter who were urging generational change left
the party this January in protest against the party leaders'
decision to endorse Kenji Hirata for a third term.

Although a senior prefectural chapter official said, "It will not
impact negatively on the race," the Hirata camp has set up a
pension-complaint box in front of the campaign office. The camp is
apparently trying to win the hearts of unaffiliated voters.

The fallout of the postal privatization is being felt even more
acutely in single-seat electoral districts in Oita.

The LDP's freshman candidate Yosuke Isozaki, attending a gathering
attended by Lower House lawmaker Masazumi Gotoda, made this pitch:
"Although many candidates are running in this constituency, no one
knows more about what's really happening in this prefecture than I
do."

TOKYO 00002739 005 OF 009

The baseline number of votes projected by the Isozaki camp is
300,000, close to the win-lose borderline. Isozaki's chances of
winning a seat will increase once 70,000 to 80,000 New Komeito votes
are added. At the same time, however, the expected candidacy for a
proportional representation seat by Seiichi Eto, a postal rebel who
has been allowed to rejoin the LDP, is casting a shadow on Isozaki's
bid.

Opposition camp also disunited

Coalition partners LDP and New Komeito originally envisaged campaign
cooperation to support the former candidate in the electoral
district and the latter candidate in the proportional representation
segment. However, now that Eto is a candidate, the votes of LDP
supporters might flow to him rather than to the New Komeito's
candidate.

The situation is not necessarily advantageous to opposition parties,
either. "I won't be able to win a seat without LDP and Social
Democratic Party (SDP) votes," said Taiwa Yano, an independent
candidate and a former Saiki City assemblyman backed by the Minshuto
prefectural chapter. He was addressing a crowd of some 1,200 people
on June 13.

Minshuto searched for ways to join forces with the Social Democratic
Party (SDP), but that party decided to back physician Bunroku
Matsumoto at an early stage. The SDP has thus "split" with the
Minshuto Oita chapter, which was insistent on supporting Yano. With
the Rengo (Japanese Trade Union Confederation) Oita chapter having
decided to let its 60,000 members cast their votes independently,
supporters for Minshuto and the SDP are also likely to split
evenly.

The People's New Party lawmaker Hiroko Goto, a former postal rebel,
has abruptly joined the Oita race, reversing her earlier decision to
seek a proportional representation seat. "She will garner
conservative votes that have nowhere to go by taking advantage of
the splits between the LDP, New Komeito, and the SDP," a senior Goto
camp official declared. Fierce competition is expected.

(4) 20 million voters in "lost generation" the greatest variable in
Upper House election

ASAHI (Page 3) (Abridged)
June 13, 2007

Young people aged 25-35 have had a hard time of it as their
postgraduate job-hunting season fell during the nation's prolonged
economic slump. They are called the "lost generation." This April's
local elections came out with a sharp increase in the numbers of
candidates and winners from the lost generation, and a tide of new
political participation from that generation came in sight. The next
focus, however, is on how the lost generation will come out as
voters in this July's election for the House of Councillors. The
ruling Liberal Democratic Party is rattled by a sharp drop in the
Abe cabinet's support rate, and the leading opposition Democratic
Party of Japan (Minshuto) is now on the offensive. Both the LDP and
the DPJ regard this lost generation as the final key to the upcoming
Upper House election. Meanwhile, online networks like Yahoo! Japan
and other organizations have set out to boost the turnout of voters
in trying to show the political power of young people. There are 20
million voters in this lost generation. How they vote may become one

TOKYO 00002739 006 OF 009


of the greatest variables in the election.

With the government's fiasco over its loss of pension records, the
opposition camp now sees a way to drive Prime Minister Abe and his
government into a corner. In 2005, Prime Minister Koizumi dissolved
the House of Representatives for a general election over his
initiative to privatize the nation's state-run postal services. At
the time, the LDP won votes from young people and floating voters
with no particular party affiliation to win the general election.
This time, however, the key is which side will win their votes.
"We've not necessarily seen an avalanche of the floating voters to
either side yet," DPJ Secretary General Yukio Hatoyama said on June
3. He added, "Our challenge is how to win their votes."

Kan Suzuki, 43, a DPJ member currently seated in the House of
Councillors, has a similar feeling as he is aiming for reelection in
Tokyo. On June 10, there was a group of DPJ junior lawmakers
gathered in front of the east exit of Shinjuku Station in Tokyo.
They walked down the street with "Minshu-kun," the DPJ's new
character created from the party's logo. In addition, the DPJ's
youth bureau also prepared 700 banners with a friendly mark printed.
The DPJ distributed those banners to its prospective candidates
throughout the country for this summer's House of Councillors
election. On the side of policies as well, Suzuki is attaching
importance to pensions and also to labor issues, such as correcting
wage gaps between full-time and part-time workers.

Another weapon for Suzuki is the Internet. On June 2, Suzuki became
the first incumbent lawmaker to hold a town meeting on "Second
Life," a virtual space on the Internet. "Let us increase
scholarships to reduce the burden of educational spending," Suzuki
said. There were only 134 participants in the online event. However,
Suzuki felt something greater than the number from responses to his
proposal of a new political campaign.

In the meantime, the LDP has also kicked off its campaign. On June
3, Prime Minister Abe went to the Hachiko statue in front of Shibuya
Station in Tokyo. "Before talking about the abduction issue," Abe
said there, "I'd like to talk about the pension issue, which is a
matter of very high concern to the public."

This was one of the LDP's street campaigns developed across the
nation at its youth bureau's initiative. At first, Abe had
considered focusing on the abduction issue. However, his cabinet's
support rate plummeted right before he was out on the street
campaign. Eventually, Abe's speech was about the pension issue
almost in its entirety.

In the fall of last year, Hiroshige Seko, one of Abe's special
advisors, launched a public relations strategy team in the LDP. The
team intended to make policy proposals based on its analysis of
public opinion, anticipating that young people in their 20s and 30s
would hold the key for the LDP to win in this summer's House of
Councillors election following the 2005 general election. However,
the Abe cabinet's support rate went down. The team meets every
Tuesday on the fourth floor of LDP headquarters. However, the team
is worried about what is now before its eyes. Satsuki Katayama, 48,
chief of the LDP's public relations bureau, is one of the team's
members. "The situation is now so chaotic that we cannot look ahead
into the future," Katayama says. She added, "I know we have to do
something in campaigning for young people's votes, but we don't know
what we can do."


TOKYO 00002739 007 OF 009


However, the LDP youth bureau's anxiety is growing strong.
"Generations affected in the aftermath of the bubble economy's
collapse are dissatisfied in some way with things around them," says
Koichi Hagiuda, 43, an LDP member seated in the House of
Representatives. He added, "Good or bad, their dissatisfaction will
get into politics."

(5) Policy watch: Economic policy guidelines should not be regarded
as end of debate

SANKEI (Page 1) (slightly abridged)
June 18, 2007

By Heizo Takenaka

At this time every year, attention is focused on the government's
annual "big-boned guidelines on economic and fiscal policy." This
year, though, people are somewhat less interested in them, their
attention turned toward the pension issue that was caused by sloppy
record keeping by the Social Insurance Agency. This does not mean
that the importance of the guidelines is fading.

When the government launched work to lay out its first economic
policy guidelines in 2001, bureaucrats and politicians remained cool
to them. However, various advisory councils of government agencies
and divisions in the Liberal Democratic Party now issue reports with
recommendations and conduct debates in line with the government's
annual economic policy guidelines. This reflects that the annual
report has taken root as the cabinet office's systemic policy
guidelines

However, there could be a harmful side-effect from the establishment
of the policy framework, that is to say, we might begin to think it
is not necessary to carry out other measures than those included in
the policy guidelines. We must be careful so as not to fall into a
state of stopping thinking on our own. Since the government has
employed ingenuity, the annual guidelines have taken root to this
extent.

Some suggest that annual economic policy guidelines should be made
the end all of policy debate. To overcome such a backward-looking
view, I make the following three suggestions.

The first is that debate on macro-economic management should be
hurriedly carried out. The draft guidelines for fiscal 2007
apparently show a lack of discussion on how to manage the
macro-economy. It should be the priority duty for the Council on
Economic and Fiscal Policy (CEFP) to conduct checks on macroeconomic
management.

The GDP statistics released recently set the nation's real economic
growth rate in fiscal 2006 at 2.1% and the nominal growth rate at
1.4%.

The government and the ruling coalition have publicly pledged to
grow the economy by 2% in nominal terms in fiscal 2006 by overcoming
deflation. They have put forth this pledge since fiscal 2003. In its
initial economic outlook for fiscal 2006, the government also set
the real economic growth rate at 1.9% and the nominal rate at 2.0%.
The real growth rate in the GDP statistics is higher than that in
the outlook, but Japan failed to conquer deflation. I expressed my
view in a CEFP meeting two years ago that it would be impossible to
overcome deflation if no additional measures are taken. But the

TOKYO 00002739 008 OF 009


cabinet office remained unresponsive, without changing its outlook.
One of the private-sector panel members offered this optimistic
view: "The Japanese economy may finally emerge from the ongoing
deflationary spiral." Bank of Japan (BOJ) Governor Fukui replied:
"Japan, in the direction of emerging from deflation, is now at a
crucial juncture, so we must take proper measures." But Japan has
yet to emerge from deflation.

In recent years, the government has come up with several important
numerical targets as its public pledges, attaching deadlines, such
as halving the banks' non-performing loans, eliminating the
government's deficit in the primary balance, and doubling the number
of tourists from overseas. All these have already been implemented
or are about to be attained. But Japan has failed to meet only one
goal: ending deflation.

The Cabinet Office and the BOJ must clearly explain why the pledge
has not been attained on their own responsibility, as well as what
measures they plan to take to recover from this failure. The CEFP
has yet to discuss this point, although the statistics has already
been released. If the panel thinks it impossible to work out
measures before it completes the final version of annual economic
policy guidelines, the panel should immediately start discussion on
macroeconomic management outside the framework of policy
guidelines.

The second key point is that the economic policy panel should
declare continuing policy debate. Among key policy measures in the
fiscal 2007 guidelines, there are some for which satisfactory
achievement has yet to be produced due to strong opposition, for
instance, an "open-sky policy" I cited in this column when the
previous version of policy guidelines was announced. Despite
strenuous efforts by the Prime Minister's Office (Kantei), only
limited achievements have so far been produced. Reflecting time
constraints, it will be impossible to include every proposal in the
2007 guidelines, but such non-attainment measures should not be
treated as already settled in the guidelines.

Private-sector panel members should propose continuing such
non-attainment reform measures. Such a stance will contribute to
improving the CEFP and annual economic policy guidelines.

Third is that the government should demonstrate its eagerness to
promote reforms in appointing personnel, in particular, for top
posts in government-affiliated institutes. It usually takes long
time to carry through one policy and produce results.

However, there is a means for the government to show the public its
eagerness for reform quickly and clearly. That is to place the right
people in the right jobs. Recently, the Kantei under the lead of
Chief Cabinet Secretary Yasuhisa Shiozaki displayed leadership in
appointing a private citizen as president of International Airport
Corporation, with an eye to its future privatization. The
appointment was made over the protest of the Ministry of Land,
Infrastructure and Transport, which aimed to reappoint the incumbent
who used to be its vice minister.

What is to be noted from such a point of view is who will be picked
as presidents of the Development Bank of Japan and Shoko Chukin
Bank. The two companies are discussing details about what to do with
their business models after privatized. But it is a parody for the
appointment process to be carried out under their presidents,
because the president of the Development Bank of Japan used to be

TOKYO 00002739 009 OF 009


former foreign vice minister, and the president of Shoko Chukin Bank
a senior METI official.

Annual economic policy guidelines are extremely important. They
should not be treated as the termination of policy debate.

SCHIEFFER

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