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Cablegate: Daily Summary of Japanese Press 11/09/07

VZCZCXRO2568
PP RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #5202/01 3130837
ZNR UUUUU ZZH
P 090837Z NOV 07
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 9445
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//
RHMFIUU/USFJ //J5/JO21//
RUYNAAC/COMNAVFORJAPAN YOKOSUKA JA
RUAYJAA/CTF 72
RUEHNH/AMCONSUL NAHA 6744
RUEHFK/AMCONSUL FUKUOKA 4339
RUEHOK/AMCONSUL OSAKA KOBE 8006
RUEHNAG/AMCONSUL NAGOYA 3145
RUEHKSO/AMCONSUL SAPPORO 5009
RUEHBJ/AMEMBASSY BEIJING 0064
RUEHUL/AMEMBASSY SEOUL 6120
RUCNDT/USMISSION USUN NEW YORK 6901

UNCLAS SECTION 01 OF 12 TOKYO 005202

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 11/09/07


Index:

(1) Continuing talks on host nation support confirmed (Nikkei)

(2) Prime Minister Fukuda to visit US, saddled with tough issues
pending (Asahi)

(3) Many hurdles should be cleared to enact new refueling bill
(Tokyo Shimbun)

(4) LDP secretary general: Lower House dissolution might come sooner
than expected (Sankei)

(5) Defense Minister Ishiba strongly denies consultation by former
Defense Planning Division director general on amount of fuel
supplied to US (Mainichi)

(6) 100 Defense Ministry officials on Yamada Yoko's rank-based gift
lists screened by Miyazaki (Yomiuri)

(7) Reporters' roundtable on political situation -- Grand coalition
plan continues to rock political community (Part 3) (Nikkei)

(8) Concern about possible economic slowdown in age of crude oil
costing 100 dollars per barrel: Could affect personal consumption,
corporate performance (Sankei)

(9) Food-labeling scandals coming up in succession (Akahata)

ARTICLES:

(1) Continuing talks on host nation support confirmed

NIKKEI ONLINE NEWS (Full)
November 9, 2007, 13:04 p.m.

Visiting US Secretary of Defense Gates this morning called on
Finance Minister Fukushiro Nukaga at the Ministry of Finance. In the
meeting, both senior cabinet members confirmed the policy line of
continuing working-level talks to discuss the question of revising
the special measures agreement that enables Japan to bear the
financial burden for stationing US forces in Japan (host nation
support). The agreement expires at the end of next March. Prior to
this meeting, Nukaga in a press conference this morning after a
cabinet meeting said: "We are strictly assessing expenditures in
every sector. We will properly assess (the host nation support), as
well, in terms of whether we can improve its efficiency."

(2) Prime Minister Fukuda to visit US, saddled with tough issues
pending

ASAHI (Page 3) (Full)
November 9, 2007

Nanae Kurashige, Toshiya Umehara

Prime Minister Fukuda is to visit the United States possibly late
next week for his first overseas trip since taking office. He wants
to reaffirm in his meeting with President Bush the importance of
Japan-US relations, but Japan has yet to resume its refueling
mission in the Indian Ocean, which was halted with the expiration of
the Antiterrorism Special Measures Law. Fukuda yesterday met with

TOKYO 00005202 002 OF 012


visiting US Secretary of Defense Gates and conveyed to him Japan's
intention to make every effort to resume the refueling operation as
quickly as possible, but at this point in time, there is no prospect
for the new antiterrorism legislation that would allow a resumption
of the refueling mission to be adopted. So far, there has been no
progress seen on the relocation of the US Marine Corps Air Station
Futenma in Okinawa, and discord is increasing between Japan and the
US over the issue of whether the US should delist North Korea as a
state sponsor of terrorism. Saddled with such tough issues, Fukuda
will soon go to meet with Bush for the first time as prime
minister.

Honeymoon-like alliance now getting cold; When to resume refueling
mission unpredictable; No progress seen on realignment plans for
USFJ

"Based on the Japan-US alliance, I will actively promote Asia
diplomacy," Fukuda said yesterday, when he met with Gates at his
Prime Minister's Official Residence (Kantei).

In his policy speech delivered immediately after taking office as
prime minister, Fukuda indicated his way of thinking that he would
make a "resonance" between the Japan-US alliance and Asia diplomacy.
His US visit and his planned attendance at the East Asia summit in
Singapore, which will occur soon after he returns from the US, are
seen as the first steps for him to translate his diplomatic concepts
into reality.

However, when it comes to relations with the US, the fact is that
"There is nothing good to say at present," a senior Foreign Ministry
official commented.

Japan's active contribution to the war on terrorism underpinned the
long Koizumi-Bush honeymoon. Fukuda, as well intends to emphasize
the need for Japan to continue the refueling operations in the
Indian Ocean, but the Antiterrorism Special Measures Law expired (on
Nov. 1) in the wake of the ruling bloc's defeat in the July Upper
House election, which means that the ruling bloc controls the Lower
House but it no longer holds a majority of seats in the Upper House.
Consequently, the refueling mission was halted.

In order to enact a special refueling bill into law, the government
and the ruling bloc decided to extend the current session of the
Diet until Dec. 15, and they have demonstrated their eagerness to
resume the refueling operations. But the Democratic Party of Japan
(DPJ) remains opposed to the refueling bill.

A Pentagon official, just before Japan suspended the refueling
mission, took the trouble to release a statement saying that "The US
hopes for the resumption of Japan's refueling operations, but the
suspension in itself is not a matter of a nature that will affect
the overall alliance." Regarding Secretary of Defense Gates' visit
to Japan this time, as well, the US is trying not to give the
impression that his visit is taken to mean to put "foreign pressure"
on Japan, or America's interference in the domestic affairs of
Japan.

As for the Japan-US alliance, Senior Fellow Derek Mitchell at the
Center for Strategic and International Studies commented: "The
foundation of the alliance remains solid."

But some Asia experts in Washington have a strong sense of distrust

TOKYO 00005202 003 OF 012


in Japan for its repeated inquiries about how oil it provided was
used, a matter that is presumably taken by the US during a war that
is claiming a toll of many lives to be a small matter. One expert
noted that the suspension of the refueling operations "has withered
the growing expectations for the role Japan will play in the future
in the operations led by the Coalition of the Willing."

Japan and the US face other difficult issues in the security area,
as well. In May 2006, the two countries agreed on the realignment of
the US Forces Japan (USFJ), the core of which is the relocation of
the Futenma airfield (in Ginowan City, Okinawa Prefecture). But the
Futenma relocation has run aground in the face of local objections.

On Nov. 7, the central government, after a lapse of 10 months,
reopened a consultative council meeting with Okinawa at the Kantei.
Chief Cabinet Secretary Machimura, when meeting with Secretary Gates
yesterday, highlighted the Kantei's stance of leading the
consultative council, telling the Secretary: "We want to put into
execution realignment plans, including the relocation of the Futenma
airfield, at a steady pace." Even so, the Kantei is not sure when
the relocation will be completed, as Okinawa is insisting on
altering the construction plan for a pair of airstrips planned for
the relocation site.

Furthermore, coordination with the US on the host nation support is
proceeding with difficulty. Japan has suggested cutting Japan's
financial contribution for the costs of the stationing of US forces
in Japan because of stringent state finances, but the US is
unwilling to accept Japan's proposal for a cut in host nation
support.

Discord between Japan and US over DPRK

Washington is moving to remove North Korea from the list of state
sponsors of terrorism possibly by the end of the year. Meanwhile, a
high-level US government official commented, "We will not put Prime
Minister Fukuda in a fix." A notice delisting North Korea is not
expected to be sent to the Congress during the period when Fukuda is
visiting the US.

However, a team of US experts is working on disabling nuclear
facilities in Yongbyon, North Korea. Sung Kim, director of the
Korean Affairs desk at the US Department of State, noted, "The work
is going smoothly, so it is possible to disable them by the year's
end," indicating that an environment to delist North Korea is being
prepared.

With only one year left before the presidential election, the Bush
administration, which has repeated setbacks as a result of being
involved in the Iraq war for a longer period of time, has a desire
to "somehow produce diplomatic results" regarding North Korea's
nuclear issue.

In his policy speech delivered in October, Fukuda stressed the need
to "resolve the North Korean issue swiftly," but he has not found
any way out of the current stalemate in Japan-North Korea relations.
The concern heard in the Japanese government is that if US-North
Korea relations make progress in a way to leave the abduction issue
behind, anti-US sentiments in Japan could intensify. If North Korea
is delisted, even though delisting comes after Fukuda's US tour, the
prime minister "would be exposed to criticisms, like for what
purposes he visited the US," a Foreign Ministry official noted.

TOKYO 00005202 004 OF 012

By the order of the Kantei, Administrative Vice Foreign Minister
Shotaro Yachi therefore traveled to the US in late October and met
with Deputy Secretary of State Negroponte and warned him: "We hope
you will consider progress on the abduction issue when you move to
delist North Korea. Otherwise, there will be a panic in Japan."

Reportedly, Negroponte said, "We have understood well the situation
in Japan," but he did not mention whether the abduction issue would
be made a condition for the US to delist North Korea. Assistant
Secretary of State Hill also has assumed the position of aiming to

SIPDIS
delist the North by the end of the year.

Some in the US are concerned that if delisting North Korea provokes
a backlash in Japan, it would hurt the environment for Japan and the
US to address various tasks involving them and could trigger a chain
of negative reaction, which would drive a wedge in the bilateral
alliance.

(3) Many hurdles should be cleared to enact new refueling bill

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

The government and ruling parties have decided to extend the current
extraordinary Diet session until Dec. 15. They aim to enact a new
antiterrorism special measures law. However, they have yet to
determine their course to push forward with legislation since they
cannot predict how the main opposition Democratic Party (DPJ or
Minshuto) will respond. Meanwhile, the DPJ, which was shaken by a
turmoil caused by President Ichiro Ozawa, intends to turn around the
situation, stepping up its adversarial stance toward the ruling
camp.

Ruling coalition cautious about readopting refueling bill

The reason for the government and ruling camp having decided to
extend by 35 days the ongoing session is to secure enough time for
deliberations on the new antiterrorism bill at the House of
Councillors, avoiding an adverse effect as much as possible on the
compilation of a state budget for fiscal 2008. However, the largest
opposition party controls management of Diet affairs in the Upper
House. The ruling coalition has yet to be able to read whether the
DPJ will scrap the bill without completing deliberations or it will
vote it down. The DPJ has its position clear that its members will
vote against the bill.

All eyes are now on whether the ruling coalition will take a vote
again in the Lower House after the bill is voted down at the Upper
House. There is a possibility that readopting the bill will give
rise to a resolution of the Lower House after the opposition camp
adopts a censure motion against the prime minister.

The New Komeito, the coalition partner of the Liberal Democratic
Party (LDP), is eager to prolong Lower House dissolution until after
the Group of Eight summit at Lake Toya next July. The dominant view
in the LDP is that there is no need to hurry to dissolve the Lower
House since it is certain that the party will substantially decrease
its seats in the next Lower House election. There is a cautious view
also in the ruling camp that the new legislation should not be
enacted even by resorting to readopting it in the Lower House.


TOKYO 00005202 005 OF 012


In a meeting yesterday of Diet Affairs Committee chairmen, Kenji
Yamaoka of the DPJ asked the LDP's Tadamori Oshima, "Are you going
to pass the bill even using your two-third majority?" Oshima,
however, gave an evasive answer.

A senior LDP member lamented over the situation that it does not
appear likely that the bill will clear the Diet even though the
current session will be extended.

DPJ to try to turn the situation by stepping up the offensive

There is a growing mood in the DPJ to try to turn the situation in
the extended Diet session although the party is ostensibly opposed
to the extension of the session. The largest opposition party
intends to strengthen its confrontational stance toward the
government and ruling parties as there is a sense of concern about a
possible resolution of the Lower House.

Regarding the reason for the DPJ opposing the extension of the
current session, Deputy President Naoto Kan said, extending the
session to enact the bill is "too lax and irresponsible" because the
ruling camp created a political vacuum with the resignation of
Shinzo Abe as prime minister.

The DPJ, however, intends not to oppose completely the extension of
the session. Taking advantage of the extended session, the party
will enact such bills it sponsored as one to support hepatitis-C
patients, as well as shed light on suspicions about former defense
equipment trading house executive, who has been arrested on
suspicion of embezzling corporate funds and who had excessively
entertained former Administrative Vice Defense Minister Takemasa
Moriya.

Secretary General Yukio Hatoyama even said yesterday that his party

SIPDIS
would submit a censure motion against Fukuda to the Upper House if
the ruling coalition readopted the bill in the Lower House. It is
certain that the move is aimed at an early dissolution of the Lower
House.

It is not that all the DPJ members have accepted Ozawa's decision to
continue remaining in the presidential post. "I'm not at all
convinced," a junior lawmaker said. The unity in the party has
instead loosened. Since it is noticeable that Ozawa's grip on the
party has declined, it is uncertain how far the DPJ will take the
offensive.

(4) LDP secretary general: Lower House dissolution might come sooner
than expected

SANKEI ONLINE NEWS (Full)
November 9, 2007, 11:56 a.m.

Liberal Democratic Party (LDP) Secretary General Bunmei Ibuki
indicated in a press conference this morning that depending on moves
by the main opposition Democratic Party of Japan (DPJ), dissolution
of the House of Representatives for a snap election might come
earlier than expected. Commenting on the DPJ's negative response to
the new antiterrorism special measures bill, Ibuki said: "If the
party is overly-swayed by narrow party interests, various things
could happen all of sudden."

Ibuki stressed:

TOKYO 00005202 006 OF 012

"Should the party take action without considering national interests
and the will of the public, I cannot deny the possibility that
dissolution of the Lower House might come sooner than expected. That
depends on what actions the DPJ will take."

He thus sought to constrain the DPJ, which has made its position
clear that it will vote against the new antiterrorism bill.

(5) Defense Minister Ishiba strongly denies consultation by former
Defense Planning Division director general on amount of fuel
supplied to US

MAINICHI online (Full)
13:09, November 9, 2007

Concerning the issue of the Defense Ministry having concealed the
need correct the amount of oil fuel supplied to a US oiler, Defense
Minister Shigeru Ishiba during a press conference after a cabinet
meeting today revealed that former Maritime Staff Office (MSO)
Defense Planning Division Director General Masayoshi Teraoka
(retired last year) in a Diet summoning as a witness testified that
he consulted the matter with then Defense Agency Director General
Ishiba. He then strongly ruled out such a possibility, noting, "It
is impossible for a division director of the MSO to consult with the
director general under normal circumstances, and I cannot recall
such a matter, either."

He presented a shorthand note on the behind-the-door meeting of the
Lower House Antiterrorism Special Measures Committee held on Nov. 7.
The Joint Staff Office chairman during a press conference on May 5,
2003 explained that the amount of fuel supplied to the US was
200,000 gallons, but the press conference was disrupted with one
reporter questioning that that amount was too small for supplying to
an oiler. The former division director allegedly testified that he
had consulted with his superiors on how to deal with this matter.

In the summoning, former Division Director Teraoka also allegedly
testified, "I think persons I consulted with or talked with included
the Defense Policy Bureau director general, the director general of
the Secretariat, the administrative vice minister and the director
general at the time."

Defense Minister Ishiba said, "Even if I had been consulted, it
should have been before the former division director general
realized the need to correct the amount."

(6) 100 Defense Ministry officials on Yamada Yoko's rank-based gift
lists screened by Miyazaki

YOMIURI (Page 39) (Abridged slightly)
November 9, 2007

Yamada Corp., a Tokyo-based aviation and defense equipment trading
house, annually made summer and winter gift lists containing the
names of over 100 former Defense Agency (currently Defense Ministry)
officials that was finally screened by Motonobu Miyazaki, 69, a
former Yamada executive already under arrest on suspicion of
embezzlement, sources said yesterday. Former Defense Agency
officials working at Yamada after retirement played important roles
in compiling the lists. Part of Miyazaki's business activities was
trying to win over not only former Vice-Defense Minister Takemasa

TOKYO 00005202 007 OF 012


Moriya, 63, who was frequently treated to golf, but also other
defense officials. This has now become clear.

According to former Yamada executives, on the lists were mainly
internal bureau officials on the assistant division director level
and above and Ground, Maritime, and Air Staff Office officials on
the division director level and above. The lists were produced by
Yamada's general affairs department.

Ahead of the mid-August Bon and year-end holiday seasons each year,
the company's general affairs department compiled lists based on
names of Defense Agency officials worth receiving seasonal gifts
recommended by sales representatives responsible for the agency. The
lists were then examined by Miyazaki and became final with his seal
of approval.

A former general affairs department official said that the gifts had
been sent out after being checked by Miyazaki. The persons on the
list were classified by Miyazaki in accordance with ranks in the SDF
and the degree of their value to the company. Miyazaki also
determined specifics, such as the prices of gifts and whether to
send gifts in both seasons.

The over 100 persons on the list also included a dozen or so senior
ministry officials picked from Miyazaki's personal networks. Those
who returned the gifts were excluded from the list, which was
renewed annually.

Miyazaki also made former Defense Agency officials working at Yamada
after retirement obtain copies of lists of high-ticket defense
equipment likely to be procured by the agency as well as of files of
planned personnel changes and addresses of Defense Agency officials.
He was believed to have paved the way for receiving orders from the
agency by sending gifts to and lavishly entertaining promising
officials based those data.

Sauies handled by a fishery in the group were a standard gift item.
A former Yamada employee who had been involved in making lists
noted: "The prices started at 10,000 yen for high-class beef, crabs,
salted salmons and so on. Prices for the ranks also rose by 10,000
yen. The total cost came to several million yen to 10 million yen."

The former senior Yamada official explained Miyazaki's business
technique this way: "Once he found someone useful, Mr. Miyazaki
bombarded him with gifts and entertainment. He did the same with Mr.
Moriya. That was his approach."

Defense Ministry officials on edge

A tense atmosphere enveloped the Defense Ministry yesterday, the day
Miyazaki was arrested.

One senior ministry official said: "(Miyazaki's arrest) did not come
as a surprise, because I thought the Tokyo District Public
Prosecutors Office would take action someday. I'm afraid, however,
that the Defense Ministry, too, might be investigated." Miyazaki has
already found to have lavishly entertained former Vice-Defense
Minister Moriya. He is also suspected to have sent gifts to defense
officials and wined and dined officials other than Moriya. "Some
colleagues are on pins and needles," another official said.

(7) Reporters' roundtable on political situation -- Grand coalition

TOKYO 00005202 008 OF 012


plan continues to rock political community (Part 3)

NIKKEI (Page 4) (Full)
November 8, 2007

Lower House dissolution

-- How do you think (the Ozawa resignation fiasco) will affect (the
prime minister's) decision to dissolve the Lower House for a snap
general?

A: I don't know if Lower House dissolution for a general election
has moved away or come closer. In a normal sense, it must have moved
away.

F: He might opt for next spring after passing the FY2008 budget
bill. He would probably want to host the G8 Summit in July. But that
depends on whether the DPJ takes a confrontational or cooperative
policy course.

C: The Lowe House takes precedence regarding the budget bill. But
related bills might be rejected if the DPJ opposes them in the Upper
House. In such a case, there is no other way but to return them to
the Lower House to readopt them there based on two-thirds clause.
The same is true with the new refueling bill, now under discussion
in the Lower House.

B: If the matter develops into a situation in which the ruling camp
readopts it in the Lower House, the DPJ would be pressed for a
decision on whether to submit censure motions against the prime
minister and other relevant ministers in the Upper House.

C: Although they have no binding power, the adoption of censure
motions would be a blow to the administration. I think Fukuda will
venture to dissolve the Lower House rather than just watching such a
development.

-- Isn't there any chance for the prime minister to dissolve the
Lower House early by taking advantage of the DPJ's chaotic
situation?

A: People around Fukuda think he now has greater options for
dissolving the chamber. Until now, early dissolution has been
envisaged only as a result of heavy pressure, but given the DPJ's
blunder, he might now aggressively use that option.

E: The DPJ fears it. After all, Ozawa, the campaign strategist, has
admitted that bringing about regime change in the next general
election would be difficult. Those planning to run in the next race
on the DPJ ticket are becoming anxious as well. A veteran lawmaker
nervously said that some might even opt to give up DPJ endorsement.
Ways to eliminate blank constituencies also remain unclear.

D: In the 2005 election, the LDP and New Komeito won over two-thirds
of the Lower House seats. It now seems difficult for them to secure
that level.

F: A midlevel LDP lawmaker said that in view of election, it would
be more threatening for Okada, who has a fresh image, to become DPJ
president. In the DPJ, no one but Ozawa can paint the political
situation. With Ozawa losing his momentum, the DPJ is bound to
plunge into confusion.

TOKYO 00005202 009 OF 012

-- Did the grand coalition plan disappear altogether?

C: Ozawa in his press conference on Nov. 7 dismissed the coalition
vision. Then again, now that he has decided to stay on as DPJ
president, the grand coalition option might resurface before the
regular Diet session next year. If he says that he wants to form a
grand coalition, who can stop it?

A: Fukuda also tried to woo Ozawa, saying at the Diet on the same
day, "(Mr. Ozawa) and I can understand each other. I think we can
create something new." I think he will continue to use the "Ozawa
card."

E: In my view, no DPJ executives thinks the grand coalition vision
is completely over. If the DPJ fails to win a majority in the next
Lower House election, realignment might follow.

(8) Concern about possible economic slowdown in age of crude oil
costing 100 dollars per barrel: Could affect personal consumption,
corporate performance

SANKEI (Page 3) (Slightly abridged)
November 9, 2007

Futures prices of the West Texas Intermediate (WTI) on the New York
Mercantile Exchange, the international index for crude oil prices,
are for the first time close to the 100-dollar-per- barrel level.
Following a sharp increase in crude oil prices, a move to increase
prices has spilled over into wide areas, including petrochemical
products as well as food products. If high prices continue, it would
seriously affect corporate performance and personal consumption.

Behind the sharp increase in crude oil prices is the influx into the
crude oil money of speculative money, which has lost investment
targets following the commotion on the financial market triggered by
the soured Subprime loan, high-interest housing loan for people in
low income-brackets. Fumiaki Watari, chairman of the Petroleum
Association of Japan and Nippon Oil Corporation said, "The situation
is apparently abnormal, because the sharp rise has been brought
about not by the supply-demand trends but by the money game."

Yasuhiko Nagata, senior research at the Institute of Energy
Economics, Japan, has analyzed the phenomenon that investment funds
have been poured into the crude oil market out of concern about the
supply-and-demand trends, following a 5 PERCENT decrease in the US
crude oil stockpiles in the Oct-Dec quarter from the previous year's
level. The International Energy Agency (IEA) has also revised up the
long-term estimate for crude oil prices. Concern about price
increases is growing due also to an increase in demand in newly
emerging economies, such as China and India.

The price of regular gasoline per liter has topped 150 yen at many
gas stations since November 1. Voices concerned about a decline in
demand are growing, as Idemitsu Kosan President Akihiko Tenbo said,
"We are concerned about a decrease in demand stemming from pullbacks
in consumer spending.

Takashi Ishida, chairman of West Nippon Expressway Co., views, "The
use of highways and the distribution of goods are stable, but it
would not be strange even if the current price trend has affected
recreational drivers." There are indications that the high gasoline

TOKYO 00005202 010 OF 012


prices will lead to consumers holding off on driving their cars.

Some in the auto industry have expressed concern about a possible
slump in the sale of autos, with Toyota Motors Executive Director
Takeshi Suzuki noting, "Transportation costs and electricity bills
will rise" and Daihatsu Company President Teruyuki Minoura noting,
"Consumers will become unable to afford to buy cars." The high crude
oil prices can back the popularity of compact and fuel-efficiency
cars, the forte of Japanese manufacturers. Mitsubishi Motors
President Osamu Mashiko sees the setback as a business opportunity,
saying, "Automobile purchases in oil-producing countries would
increase." The impact of the high crude oil prices on the auto
industry is thus varied.

The impact on the aviation industry is serious. The international
index price of jet fuel shot up to 100 dollars per barrel at the end
of October. Both Japan Airlines and All Nippon Airlines placed
surcharges on international flight fares from October. However, if
the prices of jet fuel continue to remain at this level, fares could
be raised again as early as January.

With the high season for winter overseas travel just ahead, the
tourism industry is concerned that the number of travelers going
abroad during the year-end and New Year holiday season could fall
below the previous year's level.

Japan Airlines has decided to add about 7 yen per kilo to
international airfreight fares to cover the rise in fuel prices,
staring in December. The trucking industry, which has been unable to
shift the increase in gasoline prices on transportation prices,
complained that it is difficult to absorb the increased prices with
management efforts, as an official of Nippon Express put it.

The increased crude oil prices are also a life-or-death matter for
the petrochemical industry, because crude oil is their major raw
material. The price of naphtha (crude gasoline), a raw material for
petrochemical products, per kiloliter reached 60,740 yen, up 150
PERCENT from the previous year's level. The IEA has estimated that
if the price of 1 barrel of crude oil rises by more than 10 dollars,
it would push down Japan's GDP by 0.2 PERCENT , as chief researcher
Nagata explained. A decline in demand for oil as a result of an
economic slowdown will likely pose a major problem also for
oil-producing countries.

(9) Food-labeling scandals coming up in succession

AKAHATA (Page 3) (Full)
November 9, 2007

Apology ads and articles about food scandals involving major
companies and smaller specialty firms have appeared on newspapers
almost every day since early this year. It was found in January that
Fujiya Co. made cakes with ingredients past their expiry dates. In
June, Meat Hope in Hokkaido was found to have falsely labeled mixed
mince as pure ground beef. In October, it was reported that
Hinaidori Co. sold culled hens as Hinai-jidori chicken, a local
breed, and that such confectionery companies as Akafuku Co. and
Kiccho Co. mislabel products with improper expiration dates. The
Akahata probes into problems with food regulations that give
consideration to companies' profits.

Priority to profits causing series of cases involving leading makers

TOKYO 00005202 011 OF 012


In November, Mister Donut, a doughnut chain operated by Duskin Co.
in Japan, acknowledged it used out-of-date syrups in some of its
drinks. Some of the syrups were 29 days past their expiry date.

Included among false labeled products are "Shiroi Koibito" (White
beloved ones) chocolate made by lshiya Co., in August, "Akafuku" by
Akafuku Co., which started to mislabel products 30 years ago, and
Ofuku Mochi made by Ofukumochi Honke, which also continued
mislabeling products with improper expiration dates for 27 years.

Senba Kiccho in Fukuoka Prefecture was found to have shipped unsold
products after they were relabeled with improper expiration dates.

In the poultry processing business, Hinai-jidori and Nagoya Kochin
have already been embroiled in fake label suspicions.

Many of such companies in question continued illegal practices for
many years.

Government responsible for abolishing labeling requirement on
production dates under pressure from US

Ministry of Agriculture, Forestry and Fisheries (MAFF) Minister
Masatoshi Wakabayashi has emphasized the companies' responsibility,
saying: "This is an issue linked to corporate compliance." But the
series of scandals have exposed the government's responsibility.

The Liberal Democratic Party-led government abolished the labeling
system on the dates of production under pressure from the United
States government in 1995. The then US government applied pressure,
calling the labeling system as a non-tariff barrier.

The Japanese government instead introduced the labeling system on
expiration dates. Under this new system, consumers find it difficult
to learn when products were made. The government drew up guidelines
on setting expiration dates, but how to apply the system was
entrusted to the food industry's judgment, so there are no
consistent ways and items for setting a deadline.

Some also point out a lack of legal arrangements. The food labeling
requirement on expiry, quality, and origin of ingredients are
provided for in the Japan Agricultural Standards (JAS) Law, the Food
Sanitation Law, and the Fair Trade Law. The contents of these laws
are also inconsistent. Some voice criticism of the laws giving
consideration to companies' interests, rather than to consumers'
safety.

The recent false labeling scandals are punishable based on the JAS
Law under the jurisdiction of MAFF. But Satoshi Fujita, who
authorized the book titled: "False and genuine evaluations on food,"
said: "There are no companies that were punished. MAFF has
maintained the policy of protecting food makers."

Set off by a beef-mislabeling scandal, the government amended the
JAS Law in 2002 to introduce tougher punishments. Under the revised
version, an individual offender is sentenced to up to one year of
imprisonment or fined up to one million yen. A company offender is
fined up to 100 million yen. However, offenders will be actually
punished for the first time after they fail to follow an order three
times. The law is still lenient for food companies.

TOKYO 00005202 012 OF 012

It was exposed late last month by a report to MAFF on the phone that
about 1.4 million bottles of juice, more than 50 PERCENT of the
total shipping volume, were mislabeled with a false growing
district. MAFF, however, only instructed the company to improve its
business.

In a case in which a fugu-processed product imported from China was
labeled as a "thread-sail filefish processed product" in violation
of the Food Sanitation Law, as well, the Ministry of Health, Labor
and Welfare just took the step of collecting products through local
governments.

The government is now urged to change the current food regulations
into those designed to protect consumers. The series of illegal
practices teach us that the production day-labeling system should be
revived and that food sanitation regulations, including the
monitoring system and the spot inspection system, should be
significantly strengthened.

SCHIEFFER

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