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Cablegate: Japanese Morning Press Highlights 11/09/07

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UNCLAS SECTION 01 OF 14 TOKYO 005175

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: JAPANESE MORNING PRESS HIGHLIGHTS 11/09/07


Index:

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

Visit of Secretary Gates:
4) Secretary Gates meets Prime Minister Fukuda and key cabinet
members (Asahi)
5) Good mood prevails during Defense Secretary Gates' visit
(Mainichi)
6) Government, ruling camp giving top priority to passing new
antiterrorism bill out of consideration to US, aware that largest
opposition party has stumbled badly (Yomiuri)
7) Prime Minister Fukuda in meeting with Secretary Gates stresses
early restarting of refueling operations, strong alliance
relationship (Yomiuri)
8) Fukuda aims to resume MSDF Indian Ocean activities as soon as
possible (Nikkei)
9) In Secretary Gates comments seems to lie a sense of alarm about
the US-Japan alliance (Yomiuri)
10) Gates visit marked by three outstanding issues between US and
Japan: halted refueling in Indian Ocean, stalled Futenma plan, and
host-nation support cuts (Tokyo Shimbun)

11) Defense Minister Ishiba in Diet reply says US ship refueled by
MSDF that returned to homeport was engaged in OEF (Yomiuri)

12) Yamada Corp. former managing director arrested for embezzlement;
prosecutors also probing into his cozy ties with former vice
minister Moriya (Tokyo Shimbun)

13) Democratic Party of Japan (DPJ) loses momentum in opposing
antiterrorism bill in the Diet due to weakened status following
Ozawa caper (Mainichi)

14) DPJ head Ozawa, one day after he talked about "self-reflection"
and changing ways, absents himself from the Diet session (Tokyo
Shimbun)

15) China receives final yen loan of 4.6 billion yen (Asahi)

16) 90 PERCENT of procurement from Independent public corporations
under discretionary contracts and not competitive bidding (Tokyo
Shimbun)

17) Prime Minister Fukuda instructs fiscal and economic policy panel
to come up with a new growth strategy that would keep in balance
with fiscal reconstruction (Nikkei)

Articles:

1) TOP HEADLINES

Asahi: Mainichi: Yomiuri: Sankei: Tokyo Shimbun: Akahata:
Former Yamada Yoko executive director issued arrest warrant on
suspicion of embezzlement of 120 million yen: Collusive ties with
former Administrative Vice Defense Minister Moriya to be brought to
light

Nikkei:
Prime minister orders compilation of new growth strategy at CEFP,

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eyeing both growth and fiscal reconstruction

2) EDITORIALS

Asahi:
(1) Former Yamada Yoko executive director under arrest: Shed light
on suspected defense interests
(2) History book screening on mass-suicides: Screening council also
called into question

Mainichi:
(1) Former Yamada Yoko executive director under arrest: Shed light
on shady defense interests
(2) Two different systems for medical bills -- one with medical
insurance and the other without it: Explanations given by state have
not reached patients

Yomiuri:
(1) US defense secretary visits Japan: Settle individual issues to
strengthen alliance with US
(2) Former Yamada Yoko executive director: Will embezzlement scandal
spill over into Defense Ministry?

Nikkei:
(1) Thorough investigation into scandals involving defense interests
urged
(2) Widen options for patients with double billing system

Sankei:
(1) Former Yamada Yoko executive director issued arrest warrant:
Expose collusive ties with former Administrative Vice Defense
Minister Moriya
(2) Mixed medical services system: Further discussion urged for sake
of patients

Tokyo Shimbun:
(1) Former Yamada Yoko executive director: Expose wrongdoing
concerning defense interests
(2) Turkey and Kurds: Keep war from widening

Akahata:
(1) Do not use subsidies regarding US force realignment as tool to
make residents follow national policy

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, Nov. 8

NIKKEI (Page 2) (Full)
November 9, 2007

10:02
Met at the Kantei with Foreign Ministry's Deputy Foreign Minister
Yabunaka, North American Affairs Bureau Director General Nishimiya,
Asian and Pacific Affairs Bureau Director General Sasae, and
others.

11:13
Met Chief Cabinet Secretary Machimura and Deputy Chief Cabinet
Secretary Futahashi. Later, Met Economic and Fiscal Policy Minister

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Ota.


TOKYO 00005175 003 OF 014


13:40
Met Finance Minister Omi. Followed by advisor to Mitsubishi Corp.
Makihara.

14:31
Delivered a message for video-taking for the national forum "Ties
among family members and communities." Then, met Yabunaka, Sasae,
and Southern Asia Department head Atsumi. Sasae stayed behind.

15:39
Met Machimura. Then, met New Komeito President Ota, with LDP
Secretary General Ibuki, New Komeito Secretary General Kitagawa, and

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Machimura.

16:28
Met US Defense Secretary Gates, with US Ambassador Schieffer and
others.

17:02
Met US Ambassador Schieffer. Later, attended a meeting of the
Council on Economic and Fiscal Policy.

19:41
Returned to his private residence in Nozawa.

4) US Secretary of Defense Gates, in meeting with prime minister,
expresses hope for early resumption of Japan's refueling operation

ASAHI (Page 1) (Full)
November 9, 2007

Visiting US Secretary of Defense Gates yesterday met with Prime
Minister Fukuda, Defense Minister Ishiba and other key cabinet
members in succession. Gates expressed a strong hope for an early
resumption of Japan's Maritime Self-Defense Force's (MSDF) refueling
mission in the Indian Ocean, which was halted when the Antiterrorism
Special Measures Law expired (on Nov. 1). In response, Fukuda said,
"We on the part of the government are making every effort to resume
the mission as quickly as possible." Ishiba conveyed to Gates that
the Japanese government planned to discuss a permanent law (general
law) that would serve as a legal basis for Japan to dispatch the
Self-Defense Forces (SDF) abroad.

Gates is visiting Japan for the first time since becoming the
secretary of defense. Ahead of Fukuda's planned first visit to the

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United States as prime minister and at a time when it is impossible
to tell when Japan resumes the refueling mission, both Japanese and
the US leaders reaffirmed the need to strengthen the bilateral
alliance, but they failed to deepen discussions on individual
subjects, including the realignment of the US Forces Japan (USFJ)
and the host nation support (commonly called the sympathy budget).

After meeting with Fukuda, Gates met with Ishiba at the Defense
Ministry. In the session, Ishiba referred to a permanent law aimed
at allowing Japan to send the SDF abroad and emphasized: "The Fukuda
administration is strongly aware of the need to create such a law."
Noting that some in the opposition bloc are also supportive of
creating such a law, Ishiba conveyed to Gates that the government
would start a full-scale discussion of such legislation.

In this regard, Gates expressed his hope at a joint press briefing
after the meeting: "I hope to see Japan play an active part on the

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international scene. I hope Japan will play an appropriate role as
one of the leading wealthy democracies."

On the MSDF's refueling mission in the Indian Ocean, Gates said at
the press briefing: "We've appreciated Japan's contribution." In
response, Ishiba noted: "Japan has a responsibility to the
international community to provide the refueling services. The
mission is important also for the Japan-US alliance."

According to an account by the Japanese side, Gates said this of the
realignment of the US forces in Japan: "The realignment plan needs
to be implemented as swiftly as possible and as negotiated." He
urged Japan to implement the bilateral agreement reached in May of
last year, bearing in mind, for instance, the plan for the
relocation of the US military's Futenma base.

On the question of the host nation support, the special agreement on
which is to expire in next March, both Japan and the US agreed to
finalize it as quickly as possible.

Gates also met with Foreign Minister Koumura and Chief Cabinet
Secretary Machimura. In the talks between Koumura and Gates, Koumura

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mentioned the question of the military-civilian joint use of the
Yokota Base (in Tokyo) in connection with the realignment of the
USFJ and said, "We hope to continue talks in this regard, for we are
going to come up with a specific plan." In response, Gates
reportedly expressed disapproval, noting, "There are difficult
problems."

5) US Secretary of Defense Gates makes effort to create friendly
atmosphere, refraining from referring to pending issues

MAINICHI (Page 5) (Full)
November 9, 2007

US Defense Secretary Robert Gates, who is now visiting Japan for the
first time since he assumed his post, met yesterday with Prime
Minister Yasuo Fukuda, Foreign Minister Masahiko Koumura and Defense
Minister Shigeru Ishiba, respectively. In his meetings, Gates
brought up such comprehensive issues as the need for strengthening
bilateral relations as the main topics. Although this was in
consideration of the prime minister's planned visit to the US about
one week from now, there remain many pending issues between the two
countries such as the suspension of the refueling operation by the
Maritime Self-Defense Force, as well as Japan's planned cut in its
host-nation support (or the so-called sympathy budget) for the US
forces in Japan. Gates appeared to be making an effort to create a
friendly atmosphere by avoiding discussing specific topics, although
he referred to some pending issues.

"I had expected that (Gates) would bring up the Futenma issue, but
he did not," Koumura told the press after his meeting with Gates.

The issue of relocating the US Marine Corps' Futenma Air Station (in
Ginowan) is the biggest issue in the realignment of US forces in
Japan. The government held on Nov. 7 consultations with Okinawa
government and municipalities for the first time in about 10 months
over the government's plan to construct an alternative facility, but
Okinawa Prefecture demanded again revising the government's plan.
The gap between the two sides remains unfilled.

Yesterday considerations by the defense secretary were seen

TOKYO 00005175 005 OF 014


everywhere. He did not repeat the request he made in a press
conference on Nov. 1 that he wanted Japan to resume the refueling
mission within several weeks. Regarding the scale of a cut in
Japan's host-nation support budget, he did not refer to specifics,
just saying, "Let working-level officials take charge for the time
being."

In preparatory meeting for Ishiba-Gates talks, officials from the
Japanese and US sided repeatedly said: "Let them focus on positive
aspects," and "Let them talk about big picture issues." Although the
Defense Ministry has been busy with dealing also with the scandal
involving former Vice Minister Takemasa Moriya, Ishiba ordered
ministry officials to check Gate's interests or hobbies and recent
events. He seemed to have made efforts to building friendly ties
with Gates since he was constrained from talking about specifics on
pending issues.

6) Government, ruling camp giving top priority to enacting new
antiterrorism bill, out of consideration for US

YOMIURI (Page 2) (Excerpts)
November 9, 2007

Giving consideration to relations with the United States, the
government and ruling parties have decided to extend by 35 days the
current extraordinary Diet session in order to place top priority on
enacting a new antiterrorism special measures bill. Following the
turmoil in the main opposition Democratic Party of Japan (DPJ or
Minshuto) caused by President Ichiro Ozawa's on again off again
resignation, the sense of alarm has now eased in the ruling
coalition that an increasing fierce battle between the ruling and
opposition camps over the antiterrorism bill would force (Prime
Minister Yasuo Fukuda) to decide to dissolve the House of
Representatives for a snap election. The government and ruling bloc
intend to take the offensive in dealing with Diet affairs, taking
advantage of their two-thirds majority in the Lower House when
readopting the new antiterrorism bill (that is expected to be
blocked in the Upper House).

Ruling Liberal Democratic Party (LDP) Secretary General Bunmei
Ibuki, in a press conference yesterday, stated: "We have decided to
extend by 35 days the Diet session to carry out intense
deliberations on the new antiterrorism measures bill." He expressed
his determination to put all his energy into enacting the
legislation. New Komeito Secretary General Kazuo Kitagawa also
stressed in a press briefing yesterday: "I believe that most members
of the DPJ share the view that Japan has to contribute to the
international community in preventing terrorism."

Japan's Maritime Self-Defense Force's refueling activities in the
Indian Ocean were suspended on Nov. 1 when the Antiterrorism Special
Measures Law expired. In case the new antiterrorism bill is carried
over to the regular session next year, the MSDF refueling operation
will likely be resumed next spring or after at the earliest, since
the Diet must prioritize deliberations on the state budget for next
fiscal year. A government official expressed anxiety, saying, "If
the suspension is prolonged, Japan would lose international
confidence in it and the Japan-US relationship would be damaged."

Prime Minister Fukuda is expected to tell US President George W.
Bush his resolve to aim at an early resumption of the refueling
operation in his first trip to the US since he took office, starting

TOKYO 00005175 006 OF 014


on the 15. He therefore cannot give up the goal of enacting the bill
in the current Diet session.

In an attempt to ease the DPJ's stance of opposing the legislation,
the government and ruling coalition are trying to find a way to hold
consultations on revising the bill.

Moreover, they intend to re-adopt the bill in the Lower House with
approval of a two-thirds majority if it is voted down in the Upper
House.

7) Gov't doing utmost to resume refueling activities: Fukuda

YOMIURI (Page 2) (Full)
November 9, 2007

Prime Minister Fukuda yesterday met at his office with visiting US
Secretary of Defense Gates for about 30 minutes, during which he

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told the Pentagon chief that the Japanese government would do its
utmost to pass a new antiterror bill in order for Japan to resume
the Maritime Self-Defense Force's refueling activities in the Indian
Ocean. "We're doing our best for early resumption," Fukuda
explained. Gates expressed hopes for the Japanese government's
efforts.

"The Japan-US alliance is indispensable not only for the security of
Japan but also for peace and stability in the region," Fukuda said,
adding, "I'd like to continue to strengthen it." With this, Fukuda
stressed his intention to give priority to Japan-US relations. Gates
said: "We'd like to promote our defense cooperation with Japan in a
steady way on various issues, such as the realignment of US forces
in Japan. The United States will push for its Asia policy in
cooperation with Japan."

Gates also met with Chief Cabinet Secretary Machimura, Foreign
Minister Koumura, and Defense Minister Ishiba.

Ishiba told Gates that the government would create a permanent law
(general law) that would set the standards for sending the
Self-Defense Forces overseas. "I told him that this is a challenge
that the government and the Diet will address," Ishiba told a news
conference after meeting with Gates. Koumura and Gates agreed that
the six-party talks over North Korea's nuclear development would
face a "critical phase" toward the end of the year. They confirmed
that Japan and the United States would work together to deal with
North Korea.

8) Fukuda tells Gates that government will make maximum efforts to
quickly resume MSDF refueling operation

NIKKEI (Page 2) (Full)
November 9, 2007

Visiting US Secretary of Defense Robert Gates yesterday held
meetings with Prime Minister Yasuo Fukuda, Foreign Minister Masahiko
Koumura, Defense Minister Shigeru Ishiba and others. Regarding the
Maritime Self-Defense Force's refueling operation in the Indian
Ocean, the prime minister indicated that the government is making
maximum efforts for an early resumption of the operation, pledging
to make utmost efforts for the early enactment of a new refueling
bill. Gates expressed strong hope for a swift resumption of the
operation, while expressing gratitude for Japan's contributions.

TOKYO 00005175 007 OF 014

This is Gate's first visit to Japan as defense secretary. He showed
a certain level of understanding toward Japan's position that the US
government should make a decision on delisting North Korea as a
state sponsor of terrorism based on progress on the abduction
issue.

In the meeting with the defense minister, an agreement was reached
to increase cooperation on the operation of the missile defense (MD)
system. The two defense chiefs also confirmed to steadily push ahead
with US force realignment, such as the relocation and return of the
US Marine Corps' Futenma Air Station and the planned relocation of
US Marines from Okinawa to Guam, based on the final report produced
in May 2006. The dense minister also expressed eagerness to
establish a permanent law allowing the government to dispatch the
Self-Defense Forces on overseas missions as necessary.

In the session with the foreign minister, an agreement was reached
to accelerate administrative-level talks on revising the special
agreement on Japan's host-nation support (sympathy budget) for US
forces in Japan that is slated to expire at the end of next March.

The series of talks was intended for the two countries to confirm
common perceptions to pave the way for the Japan-US summit planned
for Nov. 16. The prime minister is likely to visit the United States
with an armful of homework on Japan-US relations.

The Futenma relocation consultative council involving Okinawa and
Nago reopened on Nov. 7 after a hiatus of 10 months. Views with
local municipalities remain wide apart. With the cost of the war on
terrorism in Iraq weighing heavily on it, the US government is
nervous about a reduction in the sympathy budget. Gates expressed
his eagerness to settle the matter quickly to the foreign minister.

Asked yesterday by the press for his measures to deal with mounting
challenges facing Japan and the United States, the prime minister
said as if to remind himself: "Every country has its own problems.
Problems must be overcome for important relations."

9) Gates' words indicate a sense of crisis about Japan-US alliance

YOMIURI (Page 4) (Full)
November 9, 2007

US Secretary of State Gates met with Defense Minister Ishiba and
other Japanese government officials yesterday. In his meetings,
Gates expressed strong hopes for Japan to resume the Maritime
Self-Defense Force's refueling activities (in the Indian Ocean). He
also urged Japan, an ally of the United States, to continue playing
its role in the international community. The Pentagon chief came to
Japan to convey his requests at a time when there is no knowing what
is in store for Japan's refueling activities. His words indicated a
sense of crisis about the present state of the bilateral alliance.

"We're of course paying attention to Japan's law, but we want Japan
to play its appropriate role on the international stage." With this,
Gates stressed his view when he met the press with Ishiba yesterday
evening.

Gates, who became Pentagon chief last December, is visiting Japan
for the first time. A high-ranking Pentagon official accompanying
Gates explained the purpose of Gates' first visit to Japan, saying:

TOKYO 00005175 008 OF 014


"Since we usually tend to talk about the particulars of domestic
politics in Japan, the secretary intends to raise discussions to a
strategic level."

Prior to the visit of Gates to Japan, the opposition bloc in the
Diet pursued allegations that fuel provided by MSDF supply ships was
used for US military operations in Iraq. The US government was also
driven to come up with details about the use of MSDF-supplied fuel.

The US side harbors some irritation at Japan. One accompanying
source noted that Japan has lost sight of "the greater purposes of
our alliance," such as dealing with China's military buildup and
strengthening antiterror cooperation.

Gates agreed with Ishiba in yesterday's meeting to expand and deepen
the bilateral alliance. However, there has been little progress in
the planned realignment of US forces in Japan. In addition, Japan
and the United States differ on their respective standpoints over
some issues, such as the Japanese government's host nation support
("omoiyari yosan" or literally "sympathy budget") for the stationing
of US forces in Japan. The two defense chiefs could not find a way
out of the difficulties over these specific issues that are still
casting a shadow on the two countries' discussion of the alliance
and the big picture.

This is the first visit of a Pentagon chief to Japan in four years
since Rumsfeld last visited Japan in 2003. Gates will meet today
with lawmakers, including those with the leading opposition
Democratic Party of Japan (Minshuto), and will ask them to make
supraparty efforts to strengthen the alliance.

Gates negative about revisions to Futenma relocation plan

US Secretary of Defense Gates met with Defense Minister Ishiba
yesterday, during which he suggested the need for Japan and the
United States to expedite the planned realignment of US forces in
Japan. "It should be implemented as negotiated," Gates said. In this
regard, Okinawa Prefecture has been calling for the Japanese
government to revise its plan to relocate Futenma airfield. Bearing
this in mind, Gates indicated that he was opposed to revising the
relocation plan.

10) Japan-US defense ministerial held; Bilateral alliance saddled
with tough issues, such as halted refueling operation, Futenma, and
sympathy budget

TOKYO SHIMBUN (Page 2) (Full)
November 9, 2007

A series of meetings took place yesterday between visiting US
Defense Secretary Robert Gates and Prime Minister Yasuo Fukuda,
Defense Minister Shigeru Ishiba, and other Japanese leaders.
Although the prime minister and others conveyed to Gates their
intention to make utmost efforts to swiftly resume the Maritime
Self-Defense Force's refueling operation in the Indian Ocean, there
is still no prospect for it in sight. There are numerous pending
issues, such as the planned relocation of the US Marine Corps'
Futenma Air Station and Japan's host-nation support ("sympathy
budget") for US forces in the country. These are all tough issues
that might rock the Japan-US alliance.

In the meetings yesterday, the two sides confirmed the need to

TOKYO 00005175 009 OF 014


resume the refueling operation at an early time, though there was no
penetrating discussion of specifics.

At a joint press conference after the Japan-US defense ministerial,
Ishiba said, "If the suspension drags on, Japan might be taken as
being passive about the war on terror." Gates, on the other hand,
expressed gratitude for Japan's efforts to resume the operation. The
two defense chiefs played up close cooperation between the two
countries for an early restart of the refueling operation.

At the same time, there is simmering dissatisfaction with Japan
within the US government, as seen in such comments from officials
as, "We were disappointed" with the suspension of the refueling
operation. Gates, too, called for Japan to make more efforts. In a
press conference on Nov. 1, he said, "I hope to see (the refueling
operation) resumed comparatively early, in several weeks."

In the divided Diet, in which the opposition camp holds a majority
in the House of Councillors, the Democratic Party of Japan and other
opposition parties remain opposed to the new antiterrorism bill. Now
that the LDP plan to form a grand coalition with the Ozawa-led DPJ
has ended in failure, there is no prospect for smooth enactment of
the bill.

The US government is aware that for the Japanese government at time,
there is no other option but to say that it will make utmost
efforts. Out of consideration for Japan, the US side expressed only
hope for the early resumption of the refueling mission.

On Futenma, although the consultative council between Tokyo and
Okinawa, including the affected municipalities, to discuss the
relocation issue met on Nov. 7 for the first time in 10 months, the
gulf between the two sides remains wide. In addition, Japan has
proposed cutting the Japanese employees' pay and allowances by 10
billion yen - which are a part of the "sympathy budget." The US,
however, is seeking a large increase in coverage of utility costs.

The two topics were hardly touched on in the Gates meetings. The
prime minister has a heavy load of homework to do before the
Japan-US summit, planned for mid-November.

11) US warship that returned home after receiving MSDF fuel engaged
in OEF: Ishiba

YOMIURI (Page 4) (Full)
November 9, 2007

In December 2001, the USS Antietam, a US Navy cruiser, received fuel
from a Maritime Self-Defense Force supply ship in waters off Mumbai,
India, and then returned to the United States. On this issue,
Defense Minister Ishiba, sitting in yesterday on the House of
Representatives Special Committee on Antiterror Measures, was driven
to explain.

Yorihisa Matsuno from the leading opposition Democratic Party of
Japan (Minshuto) and Tomoko Abe from the Social Democratic Party
(Shaminto) asked Ishiba if he had checked the facts with the United
States about the Antietam's operations and missions. "The Antietam's
website says it carried out a mission for Operation Enduring Freedom
(OEF)," Ishiba stated before the committee. However, when it comes
to whether Ishiba checked with the US government, he only said,
"There's no need to check; I think it was engaged in OEF."

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12) Former Yamada Corp. executive arrested on suspicion of
embezzling over 100 million yen; Prosecutors to pursue alleged cozy
ties with Moriya

TOKYO SHIMBUN (Top Play) (Excerpts)
November 9, 2007

The Tokyo District Public Prosecutors Office's special investigation
squad yesterday arrested former Yamada Corp. executive managing
director Motonobu Miyazaki on suspicion of embezzling approximately
120 million yen from Yamada Corp.'s subsidiary in the United States.
Miyazaki lavishly entertained former Vice Defense Minister Takemasa
Moriya, playing golf with him more than 200 times. Prosecutors will
start a full-scale investigation to uncover the details of collusive
relations between Miyazaki and Moriya.

Prosecutors also obtained an arrest warrant yesterday for Osamu
Akiyama, former president of the Washington-based Yamada
International Cop, a trading firm specializing in defense
equipment.

After leaving the trading firm Yamada Corp. in Tokyo specializing
defense and aircraft equipment, Miyazaki set up Nihon Mirise Corp.
in Tokyo in September last year. Miyazaki is suspected of having
instructed Akiyama to transfer approximately 120 million yen out of
the hundreds of millions of yen in slush funds that were placed
under the control of Akiyama to his bank account in Japan on four
occasions from September last year through January this year.
Prosecutors suspect that Miyazaki used most of the embezzled money
for the establishment and operation of the new company.

Akiyama, now in the US, allegedly cashed checks made out under the
pretext of remuneration for executives at the US subsidiary and
pooled the slush funds in several bank accounts in the US under the
instruction of Miyazaki.

(Commentary)

The main aim of the arrest of Miyazaki is to shed light on the
details of cozy ties between Miyazaki and Moriya.

In the process of investigating a collusive bidding case involving
the Defense Facilities Administration Agency in 2006, prosecutors
suspected that Moriya had acted as intermediary to enable a local
construction company to win an order in a construction project
related to US military bases in Okinawa. Based on the suspicion,
they started a secret investigation. Although the investigation was
canceled in the end, prosecutors continued to collect information
about suspicions around Moriya.

It was revealed in Moriya's Diet testimony on Oct. 29 that Miyazaki
had treated Moriya to free rounds of golf more than 200 times and
had repeatedly wined and dines him. Prosecutors suspect that Moriya,
in return for such lavish entertainment, might have given some
favors to Miyazaki when the Defense Ministry (or the former Defense
Agency) held bidding to procure defense equipment.

However, since Moriya's family and Miyazaki's are on good terms, as
told by Moriya that he became acquainted with Miyazaki 23 years ago,
it is not easy to link Moriya's favors in return for the excessive
entertainment by Miyazaki to influence-peddling.

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Miyazaki reportedly had also entertained members of the
defense-policy clique in the Diet and other Defense Ministry
official than Moriya with huge amounts of money from the company's
expense account. Prosecutors will try to find out the move and other
details of the funds from Miyazaki for the time being. Since defense
interests are highly confidential in view of national defense, full
investigation into such cases had never been carried out. The focus
of attention is on to what extent the special investigation squad
will be able to clear up the truth of cozy ties between the
government, the bureaucracy and the business world.

13) Government and ruling bloc may put new antiterrorism legislation
to revote, anticipating that DPJ, out of fear of dissolution of
Lower House, is unlikely to submit censure motion

MAINICHI (Page 2) (Full)
November 9, 2007

Tomoko Onuki

The government and the ruling bloc yesterday decided to extend the
current session of the Diet for 35 days until Dec. 15, making it
clear that it will aim to get the new antiterrorism legislation
adopted during the current Diet session. They have now judged that
the major opposition Democratic Party of Japan (DPJ), which is in
turmoil caused by DPJ President Ichiro Ozawa's flip-flop on his
resignation, is less likely to submit a censure motion against the
Fukuda cabinet, which could trigger a dissolution of the Lower Hose
for a snap general election. The government and ruling parties
envision the possibility of again extending the Diet session in
order to put the new antiterrorism legislation to a revote if the
DPJ strengthens its confrontational line.

According to a source connected with the ruling parties, the
governing Liberal Democratic Party's (LDP) Secretary General Bunmei
Ibuki yesterday telephoned a senior official of the junior coalition
partner New Komeito and sounded him out about how long the current
Diet session should be extended, saying, "If (the Diet) is extended
beyond Dec. 15, it would become difficult to compile a budget bill
for next fiscal year." Ibuki reportedly indicated confidence in
getting the new antiterrorism bill approved without affecting the
work of compiling a budget bill slated for the year's end.

The government and ruling bloc were highly wary of the possibility
that the new antiterrorism bill would be adopted by a two-thirds
majority of votes but that a censure motion would be submitted
against the government. But they have now judged that that
possibility is less likely to come true given the recent turmoil in
the DPJ. Even in the New Komeito, which was cautious about putting
the bill to a revote, some are beginning to agree to take a revote,
with one senior member saying, "We may in the end resort to it."

Meanwhile, DPJ President Ozawa emphasized his opposition to the new
antiterrorism legislation at a press briefing on Nov. 7, in which he
retracted his resignation as party head. However, his party, which
has suffered serious damage from his flip-flop, is not ready to face
a general election.

A senior DPJ official tried to forestall a rising move in the ruling
bloc to put the new antiterrorism legislation to a revote, arguing,
"If that happens, we naturally have to submit a censure motion

TOKYO 00005175 012 OF 014


against the prime minister. If we don't do so, we would be
criticized as being gutless." But the fact is that the party can't
tell whether it should submit a censure motion, which could lead to
a dissolution of the Lower House for a snap general election.

The ruling parties are still looking into the possibility of holding
talks with the DPJ as to how revise the new antiterrorism
legislation. They have taken a carrot-and-stick policy toward the
DPJ in order to contain its move to submit a censure motion. Former
Prime Minister Yoshiro Mori insisted on the need to hold policy
talks with the DPJ at a general meeting yesterday of the Machimura
faction. In the meeting, Mori said: "If Prime Minister Yasuo Fukuda
and DPJ President Ozawa had a meeting sharing similar feelings,
that's praiseworthy. It would be good for the two to discuss such
problems as social welfare and the consumption tax."

14) DPJ President Ozawa absents himself from Lower House plenary
session day after he offered apology

TOKYO SHIMBUN (Page 2) (Full)
November 9, 2007

Ichiro Ozawa, president of the main opposition Democratic Party of
Japan (DPJ or Minshuto), absented himself from a Lower House full
session and meeting of the DPJ Lower House members yesterday, the
day after he withdrew his resignation as party head and offered an
apology for causing a turmoil in the party.

In a meeting on Nov. 7 of the DP lawmakers from both Diet chambers,
Yoshito Sengoku, former policy chief, urged Ozawa, who has a poor
attendance record, saying, "I want you to attend sessions although
you may be tired physically from your busy work." Ozawa then
replied: "I take your advice seriously and I will do my best."

According to a concerned source, Ozawa called a senior party member
yesterday morning and told him: "Let me stay away from sessions
because I have to visit (support) organizations." The concerned
source said that it was unusual for Ozawa to inform someone of his
absence by phone.

Sengoku told the press: "I understand that he did not attend the
sessions today for a special reason." He continued mirthlessly: "But
Diet members must attend at least the full sessions of the Lower
House." Ozawa, however, attended a party hosted last night by Hajime
Ishii, DPJ vice president. At the event, he offered an apology,
saying, "I'm sorry for having made you worry."

15) China to receive final yen loans of 46 billion yen

ASAHI (Page 4) (Excerpts)
November 9, 2007

Speaking before reporters in the Foreign Ministry yesterday, Foreign
Minister Koumura revealed that the government has determined the
amount of yen loans to China for FY2007. He said: "The government
will provide China with its last yen loans of 46.3 billion yen and
then terminate its yen loan program amicably." Yen loans occupy most
of the government's official development assistance (ODA) to China.
The offered money will be used by next March. With this as the last,
the history of Japan's yen loans to China, which started in 1979,
the year after Japan and China signed the Japan-China Peace and
Friendship Treaty, will come to an end.

TOKYO 00005175 013 OF 014

In reaction to China's rapid economic growth and escalating
anti-Japanese sentiment, a number of government officials and
citizens have called on the government to end its yen loans to
China. In the ODA project for China, the government will continue
non-reimbursable aid and technical cooperation. The amount for
FY2007 is down about 26 PERCENT below the 62.3 billion yen in the
previous fiscal year, and all the money will be used to finance
projects to protect the environment.

16) Survey finds 90 PERCENT of contracts by independent
administrative institutes with affiliated corporations were
discretionary

TOKYO SHIMBUN (Page 1) (Excerpts)
November 9, 2007

According to a survey revealed yesterday by the government's
administrative reform promotion headquarters, 40 independent
administrative institutes of the 101 surveyed concluded contracts
with affiliated corporations for construction, service and
procurement in FY2005, of which 89.9 PERCENT were discretionary
ones (not subject to open bidding).

The survey also found that 230 ex-officials of independent
administrative institutes assumed executive posts in 236 affiliated
corporations as of FY2005-FY2006. The administrative reform panel
intends to urge the administrative institutions to make clearer the
flow of money and personnel from independent administrative
organizations to affiliated firms, as well as to review their ways
to determine contractors.

17) Prime minister orders compilation of new growth strategy at
CEFP, eyeing both growth and fiscal reconstruction

NIKKEI (Top Play) (Full)
November 9, 2007

Prime Minister Yasuo Fukuda during a meeting of the Council on
Economic and Fiscal Policy (CEFP) ordered the compilation of a new
economic strategy aimed at strengthening the nation's economic
potential, noting, "I would like to see an immediate launching of
efforts to consider steps to strike a proper balance regarding a new
growth strategy concept and policies." In response, the CEFP will
start discussions from late November, and the government will
reflect the results in its medium-term guidelines "Course and
Strategy" due out in January. The prime minister appears to be
aiming at making economic growth and fiscal reconstruction
compatible in order to realize sustainable fiscal and social
security systems as well as to revitalize regional areas.

Sustainable social security system to be crafted

The prime minister during the meeting said, "I said in my policy
speech that fiscal reconstruction and economic growth are two wheels
of a cart. It is time for the cabinet to put together views on what
strategy should be taken in light of the present situation in
Japan." He indicated a plan to come up with a new policy, after
probing into the efficacy of the economic growth strategy compiled
by the previous Abe cabinet.

The new strategy will essentially become a Fukuda vision presenting

TOKYO 00005175 014 OF 014


the course of the administration's economic policy, according to a
senior Cabinet Office official. Boosting productivity in small- and
medium-size businesses and the service sector, promoting economic
partnership agreements (EPA), facilitating foreign direct investment
in Japan, easing regulations and reducing the corporate tax burden
will likely be discussed.

The government has a goal of moving the primary balance into the
black by fiscal 2011. If boosted corporate productivity pushes up
growth rates, tax revenues would increase, reducing the scope of a
necessary tax increase. Enhanced corporate productivity is also
expected to make it easier to sustain the pension, medical service
and nursing-care systems, which see payouts continue to expand due
to the aging of population, by boosting insurance-related income.

The prime minister hinted at a stance of considering a tax hike to
raise the government's share of paying for the basic national
pension program starting fiscal 2009. With the next Lower House
election close at hand, some ruling party members are increasingly
concerned about the idea of pushing a tax hike policy to the fore.
The prime minister appears to have ordered the compilation a new
growth strategy, motivated by the desire to give the public an
impression that the cabinet is steering policies, giving
consideration not only to fiscal reconstruction but also to growth.

Regarding measures to correct differences in tax revenues among
regional areas, the prime minister ordered the compilation of a plan
to review the distribution of revenues form two laws -- the
enterprise tax and the residential tax.

SCHIEFFER

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