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Cablegate: Daily Summary of Japanese Press 01/31/08

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PP RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #0255/01 0310823
ZNR UUUUU ZZH
P 310823Z JAN 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 1398
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 8224
RUEHFK/AMCONSUL FUKUOKA 5828
RUEHOK/AMCONSUL OSAKA KOBE 9495
RUEHNAG/AMCONSUL NAGOYA 4462
RUEHKSO/AMCONSUL SAPPORO 6436
RUEHBJ/AMEMBASSY BEIJING 1425
RUEHUL/AMEMBASSY SEOUL 7488
RUCNDT/USMISSION USUN NEW YORK 8124

UNCLAS SECTION 01 OF 16 TOKYO 000255

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 01/31/08

INDEX:

(1) "Dissolution of Lower House in April" totally avoided with
withdrawal of stopgap bill (Asahi)

(2) Difference underscored in interpretation of "a vote on budget
bills within fiscal year" between ruling camp, DPJ (Asahi)

(3) Conduct probing discussion on propriety of road-tax system
(Asahi)

(4) Maher: "Opposing training is odd" (Ryukyu Shimpo)

(5) No change in Futenma plan: Maher (Okinawa Times)

(6) Independence of Okinawa and coexistence with it: Progress of
relocation of Futenma functions; Continuation of sincere dialogue
urged (Ryukyu Shimpo)

(7) Editorial: Iwakuni mayoral election to question government's
base administration (Mainichi)

(8) Cabinet Office's experts council to hold its first meeting: Can
investment in Japan be boosted? Its ratio to GDP remains one-tenth
of that of Germany, France, barred by people's sense of alarm
(Sankei)

(9) Views split on restrictions on foreign investment in airports
(Asahi)

(10) Dialogue (2nd installment): Outlook for 2008-Cutting the world
(Sankei)

ARTICLES:

(1) "Dissolution of Lower House in April" totally avoided with
withdrawal of stopgap bill

ASAHI (Page 3) (Abridged)
January 31, 2008

Prime Minister Fukuda and major opposition Democratic Party of Japan
(DPJ) President Ozawa avoided a decisive showdown at the eleventh
hour. Minutes before a planned vote at a Lower House plenary session
yesterday on a stopgap bill aimed at extending the deadline for the
provisional tax rate for gasoline, the ruling and opposition parties
reached agreement on handling the bill. Ozawa has given up on his
strategy of using the tactic of forcing the lowering of the gasoline
price in order to drive the Fukuda administration into dissolving
the Lower House for a snap general election. Instead, Ozawa intends
to now watch for the opportunity to turn the tables. Meanwhile,
Fukuda, having pursued the possibility of having "talks" with
(Ozawa) until the last minute and thus avoiding a possible
dissolution of the Lower House in April, did not rule out the
possibility of forming a grand coalition with the DPJ. Forming a
grand coalition is still seen as the ultimate breakthrough to
resolve the current divided Diet.

DPJ give policy priority over resistance

"We thought that we had to take whatever measures were to prevent
passage of (the stopgap bill)." DPJ Secretary General Yukio Hatoyama

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made this comment yesterday when he was asked by reporters about the
reason why his party made a move to handle the situation.

Some in the DPJ leadership were optimistic until the last minute
that the ruling parties, perhaps fearing the public's criticism of
their violating the Diet's right to deliberation, would not force a
vote on a stopgap bill. In fact, Ozawa told a press briefing
yesterday: "If some of good judgment exists in the government and
the ruling bloc, the act of forcing a vote will not be taken."

When the ruling bloc introduced a stopgap bill in the Diet on the
night of Jan. 29, the DPJ was deeply wrapped in a sense of crisis.
For the party, it is difficult to obstruct the passage of the bill
in the Lower House, where the ruling bloc holds a two-third majority
of seats. At noon yesterday, Ozawa suddenly met with Hatoyama and
other party leaders, and they decided to accept mediation proposed
by the Lower House speaker and the Upper House president.

The mediation included the passage saying "reaching a conclusion to
a certain level by the end of this fiscal year," inclusion of which
the ruling bloc strongly called for. As of Jan. 29, the DPJ argued
that it "can't accept any condition with a time limit, for such a
condition means to oust it from the right to deliberate" as its Diet
Affairs Committee Chair Kenji Yamaoka put it. But the DPJ gave
priority to an agreement with the ruling parties and accepted the
mediation. Ozawa's strategy was to drive the Fukuda administration
to dissolve the Lower House in April for a snap general election
with a gasoline price cut as a leverage, but this strategy has now
been sealed.

The mediation also included the item that revisions would be made in
the legislation to what has been agreed on among parties. The DPJ
intends to urge the ruling parties to incorporate tax revenues for
road projects into general revenues and scrap the provisional tax
rate.

Deputy President Naoto Kan asserted at a meeting yesterday of the
party's lawmakers: "My understanding is that the gong signaling the
start of a match has formally been sounded. By holding thorough
debate, we will not fail to scrap the provisional tax rate, which
means a big tax break. In so doing, we expect the public to conclude
that the DPJ needs to take the helm."

Fukuda leaves possibility of forming a grand coalition

Late yesterday Fukuda, apparently relieved, told reporters: "This is
the result of tenacious negotiations between concerned officials
from the ruling and opposition parties. That's good, indeed." He
added: "It's necessary to have in-depth discussion. I've
consistently maintained doing so is necessary. I've not asserted
anything other than that."

Fukuda envisions a possible dissolution of the Lower House for a
snap general election sometime after the Group of Eight Summit in
Lake Toya, Hokkaido, (G8 Toyako Summit) in July. So his real feeling
is not to bring about any definite showdown with the DPJ, because
such could lead to an early dissolution of the Lower House. In fact,
a senior LDP member noted: "If both sides insisted on their
respective assertions, it was highly likely that the Lower House
would be dissolved for a snap general election."

Fukuda also appeared reluctant to rule out the possibility of

TOKYO 00000255 003 OF 016


forming a grand alliance with the DPJ by forcing a vote on "a
throat-cutting bill for the opposition parties," a senior member of
the junior coalition partner New Komeito explained.

For Fukuda, losing the chance to establish a coalition government
with the DPJ is tantamount to giving up a strong tool for managing
the political situation. It also means that he can switch from the
hard-line stance of repeatedly having to take second vote on Upper
House rejected bills. If that happens, it could help bring down
further the already sluggish approval ratings for his cabinet and
could drive him into corner before he decides to dissolve the Lower
House after the G8 Toyako Summit.

When he was told by a ruling bloc lawmaker that "if a stopgap bill
is submitted to the Diet, an idea of forming a grand coalition with
the DPJ would be totally impossible," reportedly Fukuda appeared
hesitated to (submit such a bill).

Details of the medication by the heads of both chambers of the Diet

1. In examining a total budget bill and an annual revenue bill,
in-depth discussion, including holding public hearings and
question-and-answer sessions involving unsworn witnesses, should be
held, and both sides should reach a certain degree of conclusion
before the end of this fiscal year.
2. Revisions will be made in the legislation on what is agreed on
among parties through Diet debate.
3. Regarding the above (1) and (2), if a clear consensus is reached
between the ruling and opposition parties with the heads of both
chambers of the Diet present, what is called a safety net (or
bridging) bill will be withdrawn.

Note: Reaching a certain degree of conclusion before the end of this
fiscal year means to follow the past practices for deliberations on
a budget bill and an annual revenue bill in both chambers of the
Diet (according to Lower House Speaker Kono's oral explanations.

First step to break impasse in divided Diet

Commentary

How to best use the divided Diet? The divided Diet was described in
a negative manner, but now the Diet has made a step forward to break
the impasse in the lopsided Diet.

The bridging bill introduced by the ruling bloc is seen as an
outlandish measure to cleverly use a constitutional provision. The
bill is aimed at silencing the Upper House on the strength of a
two-third majority of seats in the Lower House. It could lead to
arguing that the Upper House is of no use.

Recently, after a bill was rejected by the Upper House, a
second-vote on the bill was taken for the first time in 57 years in
the lower House. At the time, Lower House Speaker Yohei Kono
revealed, "This is an act that is insulting to the Upper House."
Perhaps for this experience, Kono was tenacious in negotiations. We
appreciate that each party accepted the mediation and had the
stopgap bill withdrawn.

This outlandish measure has set the stage for concessions in the
Diet. The mediation includes this passage saying, "Alternations will
be made in the legislature to what is agreed on in deliberations."

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This may be a good opportunity to break the impasse in the current
lopsided Diet, instead of being forced to make choice between two, a
clash and a grand coalition.

"How well to use the divide Diet to promote politics is a
challenge," said Upper House Speaker Satsuki Eda at a press briefing
when he, along with Kono, proposed the mediation. The ruling and
opposition parties are both being tested for their capabilities as
to whether they can produce fruit through debate after avoiding a
clash.

(2) Difference underscored in interpretation of "a vote on budget
bills within fiscal year" between ruling camp, DPJ

ASAHI (Page 4) (Full)
January 31, 2008

In negotiations between the ruling and opposition parties yesterday,
the ruling side set forth as an absolute condition for withdrawing
the stopgap bills for extending the provisional gasoline tax rates
the Democratic Party of Japan's (DPJ) guarantee that a vote on
budget-related bills will be taken within this fiscal year without
fail. Until yesterday morning, the DPJ requested that the parts
pertaining to the provision tax rates should be separated from the
bills, and on "a vote within this fiscal year," the main opposition
party did not make the promise, using only this expression: "Both
sides will make utmost efforts to reach a certain conclusion."

A compromise proposal by the House of Representatives speaker,
agreed on between both sides, noted: "A certain conclusion will be
reached by the end of this fiscal year." Regarding its
interpretation, Lower House Speaker Yohei Kono said: "It means that
we will follow custom." House of Councillors President Satsuki Eda
also said at a press conference: "That probably means that (a
decision) will be made." The ruling side interprets that a vote by
the end of March has been guaranteed. But DPJ Secretary General
Yukio Hatoyama told reporters: "We have not promised to end the
entire process by the end of this fiscal year," underscoring a
difference in both sides' interpretations.

(3) Conduct probing discussion on propriety of road-tax system

ASAHI (Page 4) (Full)
January 31, 2008

The ruling and opposition camps agreed yesterday to thoroughly
deliberate on a bill designed to extend the current provisional
higher gasoline tax rate. Following this, both sides will start
discussing the propriety of the road tax system - whereby revenues
from certain taxes are exclusively set aside for road construction -
as well as on whether the system is necessary in the future. Both
camps should conduct thorough discussion, focusing on these
questions by the end of March, until when both sides pledged to
reach a conclusion.

1) Judgment on propriety of use of tax revenues for limited purpose
to be made by end of March

House of Representatives Speaker Yohei Kono held a press conference
last evening after the ruling bloc agreed on his compromise proposal
and decided to withdraw stopgap bills to extend the high
road-related tax rates. Asked if the provisional tax rates will be

TOKYO 00000255 005 OF 016


maintained for another decade in accordance with the government's
plan, Kono replied: "Please ask each political party about it. I
think their committees concerned will make efforts."

The compromise proposal specified that the relevant bills will be
revised if political parties agree. But the ruling and opposition
parties remain far apart over the issue, particularly, on whether to
maintain the current system under which tax revenues of 5.4 trillion
yen collected by both the central and local governments are used
exclusively for road-building projects.

The Democratic Party of Japan (DPJ) insists that the role of the
system has come to an end. Gasoline tax revenues began to be used
only for road-construction projects back in 1954. Kakuei Tanaka, who
was then a lawmaker and later became prime minister, made the
proposal, explaining that road construction is urgently needed to
reconstruct the nation's postwar economy. He succeeded in
introducing the tax-road system over the opposition of the Finance
Ministry.

In a meeting of the Lower House Budget Committee on Jan. 28, DPJ
Deputy President Naoto Kan stressed: "I wonder why road-construction
projects alone have to be still financed by special tax revenues 54
years after (the system was introduced)." In response, Prime
Minister Fukuda said: "In the case of roads, there apparently is a
definite relationship between the benefits offered to and the
burdens borne by auto users."

2) 10-year road-construction plan

Critics may begin to call for reviewing the mid-term plan on road
construction (covering the decade from fiscal 2008) that dictates
how the earmarked funds for road projects should be used. The plan -
adopted by the government and the ruling parties last December -
features the construction of 14,000-kilometer-covering high-standard
highways proposed in the 4th National Development Plan in 1987.
There is a case in which 2,900-kilometer highways were constructed
under the Koizumi administration, incurring criticism from the
opposition camp.

New Komeito Secretary General also began to suggest: "It might be
natural to review (the mid-term plan)." The ruling partner has
already called on the opposition bloc to establish a joint
consultative panel for both camps to discuss the road tax system and
the mid-term plan. The Liberal Democratic Party road-policy clique
in the Diet is still eager to promote road construction as before.
Under such a situation, it will not be easy to coordinate different
views.

3) Consideration to environment

Views from the viewpoint of environmental protection are also likely
to come up.

The government and the ruling parties have reiterated that a drop in
the gasoline tax rate will boost gasoline consumption and eventually
allow the international community to be skeptical of Japan's
eagerness for protecting the environment. Even so, traffic will
increase if highways are extended. Their assertion contains
contradictions.

Will the gap between the ruling and opposition camps be bridged?

TOKYO 00000255 006 OF 016


Lower House Steering Committee Chairman Takashi Sasagawa commented:
"Both sides might agree on a plan to allow tax revenues for road
construction to be used also to finance environment-protection
measures."

(4) Maher: "Opposing training is odd"

RYUKYU SHIMPO (Page 2) (Full)
January 31, 2008

The Ground Self-Defense Force will now start its joint use in March
of Camp Hansen, a U.S. military base in Okinawa Prefecture. In this
regard, Kevin Maher, U.S. consul general in Okinawa, raised a
question about local opposition to the GSDF's joint use of the base.
"I wonder why they are opposed to the Japanese Self-Defense Forces'
joint use and training within the area of a U.S. military facility
in Japanese territory," Maher said, adding: "This is for the defense
of Japan and should be welcome. Joint training will also benefit
both countries. We would like to push it." With this, Maher
underscored its significance. Meanwhile, the U.S. federal court in
San Francisco has ordered the U.S. Department of Defense to report
potential environmental effects that the planned construction of an
alternative facility for Futenma airfield in Okinawa will have on
the dugong. "I'm sure we will be able to carry out the plan (to
construct an alternative facility for Futenma airfield) as
scheduled," he said.

Concerning the planned construction of an alternative facility for
Futenma airfield, Maher said, "The assessment (of the potential
impact on the Futenma relocation site's environs) is also going on
(in its procedures)." In this connection, he noted that the governor
of Okinawa Prefecture has now made two comments and that the Defense
Ministry has also given more information. According to Maher, the
Japanese government is scheduled to hold the first bidding in early
February for the work of dismantling facilities existing at Camp
Schwab where Futenma airfield will be relocated. "The plan is well
underway," he added.

Meanwhile, Maher warned the Japanese government against its flexible
stance shown in response to Okinawa Gov. Hirokazu Nakaima's call for
moving the Futenma alternative's planned construction site to an
offshore area. "They (Japanese government) are reportedly saying the
relocation site should be somewhat moved out at sea," he noted.
"But," he added, "the agreed plan should be carried out."

In addition, Maher touched on the U.S. military's recently announced
plan to ship its storage of materials containing polychlorinated
biphenyl (PCB) from U.S. military facilities in Okinawa to the
United States in February. He said, "I can't say that's all for now,
but we would like to process them in the United States as soon as
possible." He also said that the joint use of Camp Hansen would
start in March. "We hope this will help improve the capability and
deterrence of our bilateral alliance," he said.

(5) No change in Futenma plan: Maher

OKINAWA TIMES (Page 2) (Full)
January 31, 2008

Kevin Maher, U.S. consul general in Okinawa, met the press yesterday
and reiterated that the plan to relocate the U.S. Marine Corps'
Futenma Air Station should be carried out in accordance with the

TOKYO 00000255 007 OF 016


agreement reached between Japan and the United States. Okinawa's
prefectural and municipal governments have asked the Japanese
government to move the planned construction site of a new airfield
to an offshore location. "If the runway is further moved out to sea,
there will be more landfill," Maher noted. "Based on common sense,"
he added, "it's inconceivable that the impact on the environment
will lessen." With this, he indicated a negative view of allowing
revisions to the Futenma relocation plan after an environmental
assessment of the relocation site. He also stressed that the work of
relocating Futenma airfield is well underway, including
environmental impact assessment procedures.

Meanwhile, the U.S. federal court in San Francisco has ordered the
Department of Defense to submit documents describing the potential
impact of Futenma relocation on dugongs. In this regard, Maher
pointed out that Japan and the United States considered the
project's environmental effects on the dugong in the process of
bilateral consultations. "I'm sure that we can carry out the plan as
scheduled," he said. With this, he indicated that there would be no
alterations to the schedule of Futenma relocation.

The U.S. military will now share Camp Hansen with the Ground
Self-Defense Force, beginning in March. Maher welcomed this as
"significant." "Joint use from now on and joint training thereafter
will benefit both countries," he added.

(6) Independence of Okinawa and coexistence with it: Progress of
relocation of Futenma functions; Continuation of sincere dialogue
urged

RYUKYU SHINPO (Page 5) (Abridged slightly)
January 31, 2008

It will have been 11 years next month since I became involved in
Okinawa affairs. I was assigned as the first state minister for
Okinawa in February 1997. Then, I was assigned as an ambassador to
Malaysia and retired that position as my last assignment. It now has
been nine years since I moved to Okinawa after my retirement.

I recall the duties I was assigned by then Prime Minister Ryutaro
Hashimoto before I left for my new post in Okinawa 11 years ago.
First, I was told to do my utmost to settle the U.S. forces' base
issue. I was also told to eliminate gaps in the views of Okinawa and
the mainland over various issues as much as possible.

Looking back on the past decade, unfortunately it can hardly be said
that major progress has been achieved in any issues, despite efforts
by persons involved in the past, although there are some
improvements observable. There are even issues that have worsened.

The root cause of the problem is how human populations with
different histories and cultures can jointly deal with new
challenges by understanding each other's problems. Indeed, saying
something is one thing, doing it is another. In particular, ethnic
disputes throughout the world after the end of the Cold War and
tragedies stemming from cultural frictions are in a shambles.

On the other hand, there are cases in which danger of ethnic or
cultural confrontation has been avoided with thoroughgoing
approaches. One of such cases is seen in Malaysia, to which I was
assigned, after serving in Okinawa. People with different languages
and religions are making effort there to build a new country,

TOKYO 00000255 008 OF 016


overcoming religious, cultural and historical differences.

"Yamatonchu" (people on the mainland) and "Uchinanchu" (people of
Okinawa), who have shared history since the second half of the 19th
century, have a common challenge of how to secure peace and
stability in Northeast Asia and the world. There are some
indispensable elements in order to meet this challenge. First, an
honest and sincere dialogue must be continued. It was unfortunate
that explanations on the realignment of the U.S. forces stationed in
Japan (USFJ) given by the U.S. Consul General in Okinawa have been
more accurate than those provided by the Japanese government over
the past several years. Talks on the Futenma functions relocation
issue appear to have gotten on track following the inauguration of
the Fukuda cabinet. It is too early to be optimistic, but I am
hopeful.

Ehime Prefecture, from which I come from, plans to hold an
exhibition in June this year to introduce the history of ground
battles in Okinawa, its military base issues and tourists spots as
well as its performance art and products, with cooperation by
sources related to the Okinawa Cultural Hall. The plan also includes
exchanges of young people. Okinawa Prefecture appears to have
received similar requests from other prefectures. If one such an
event is held in one prefecture every year, it would take 46 more
years to hold such an event in all prefectures. Achieving this goal
is my New Year's resolution. This is not at all Hatsuyume or the
first dream of the new year.

Hideki Harashima: First state minister for Okinawa.

(7) Editorial: Iwakuni mayoral election to question government's
base administration

MAINICHI (Page 5) (Full)
January 31, 2008

A small city with a population of 150,000 is going to make its third
decision on the realignment of U.S. forces in Japan (USFJ).

Iwakuni City in Yamaguchi Prefecture will announce on Feb. 3 the
start of official campaign for the mayoral election scheduled for
Feb. 10. The major campaign issue is whether the city will accept
the government's plan to transfer carrier-borne aircraft to the U.S.
Marine Corps Air Station Iwakuni from the U.S. Naval Air Facility
Atsugi in Kanagawa Prefecture.

The central government compiled an interim report on the realignment
of USFJ in October 2005 without coordinating views with local
municipalities. The interim report included the construction of
replacement facility for the U.S. Marine Corps' Futenma Air Station,
the realignment of Camp Zama, and the transfer of 59 carrier-borne
aircraft from Atsugi to Iwakuni.

The contents of the interim report were confirmed in a final report
made in May 2006. The governments of Japan and the United States
agreed to complete by 2014 the USFJ realignment plan. After the
issuance of the final report, the Japanese government appears to
have become less enthusiastic about USFJ realignment.

The government had to make more efforts after the agreement was
reached with Washington rather than before the agreement. We learn
that from Iwakuni's current situation, which was split between the

TOKYO 00000255 009 OF 016


group favoring the government's plan and the other being against
it.

Former Mayor Katsusuke Ihara, who has opposed the realignment plan,
resigned late last year over a conflict with the municipal assembly,
many of whom go along with the government's plan. He then made a
choice of running again for the mayoral election to seek the
judgment of the people.

The group in favor of the government's plan has backed former Lower
House member Yoshihiko Fukuda. Fukuda's resignation was approved on
Jan. 22.

In 1999 when first elected as Iwakuni mayor, Ihara stated that the
city would accept the transfer of refueling aircraft from the
Futenma Air Station to a base in the city, but he refused to accept
the transfer of carrier-born aircraft to the city for the reason
that the city's burden would be excessive. In a referendum held in
March 2006, those who disapproved the government's plan accounted
for 89 PERCENT . Ihara was reelected as mayor in April 2006.
Therefore, Iwakuni City has already shown twice its refusal of the
government's plan.

The central government decided to subsidize the costs for
construction of a new city hall because Iwakuni accepted the
transfer of refueling aircraft to a base in the city. It then
provided 300 million yen in fiscal 2005 and 1.1 billion yen in
fiscal 2006 to Iwakuni.

The government, however, has now suspended 3.5 billion yen, which
was supposed to be subsidized in fiscal 2007, although it had
decided to do so in December 2006.

The subsidies for the construction of a new city hall were decided
before the plan to transfer of carrier-born aircraft came up. The
government is using strong-armed measures to draw out a commitment
from Iwakuni by putting pressure on it financially. It goes without
saying that the Defense Ministry is responsible primarily for making
the issue worse.

The major purpose of the realignment of U.S. forces in Japan was to
reduce Okinawa's burden of U.S. military bases. It is true that the
government cannot accomplish its goal if it respects only the wishes
of municipalities to which U.S. military facilities are relocated.
Therefore, it is necessary for the government to hold thorough
discussion with these local governments. What will be on the hot
seat in the Iwakuni mayoral election is the central government's
base administration.

(8) Cabinet Office's experts council to hold its first meeting: Can
investment in Japan be boosted? Its ratio to GDP remains one-tenth
of that of Germany, France, barred by people's sense of alarm

SANKEI (Page 10) (Full)
January 31, 2008

The Cabinet Office's Experts Council on Investment in Japan (chaired
by Chiba University of Commerce President Haruo Shimada) to consider
measures to promote inward foreign direct investment in Japan held
its first meeting in Tokyo yesterday. The panel aims at attracting
foreign investors as a last card to revitalize the Japanese economy,
which is expected to slow due to progress of the declining birthrate

TOKYO 00000255 010 OF 016


and the aging population. However, whether it will be able to come
up with effective measures is unclear, because a sense of alarm
about the idea of foreign companies setting up shop in Japan remains
deep-seated among domestic companies and the public.

State Minister for Economic and Fiscal Policy Hiroko Ota during the
meeting called for a change in thinking, noting, "It may be an
illusion to think that foreign companies want to enter the Japanese
market."

The outstanding balance of inward foreign investment in Japan stands
at 15.4 trillion yen as of the end of September 2007, showing a
marked increase from the 6.6 trillion yen recorded at the end of
2001. The government in 2003 mapped out the inward foreign direct
investment in Japan promotion program with the aim of doubling the
rate of inward foreign direct investment to gross domestic product
(GDP). It has given high scores to the program as having produced a
certain level of results in expanding investment through the
enactment of the Company Law and the introduction of the triangular
merger system.

The ratio of the outstanding balance of inward foreign direct
investment in Japan to GDP stands at the 2 PERCENT level, which is
way behind South Korea's 8.8 PERCENT , Germany's 25.1 PERCENT and
France's 33.2 PERCENT .

Chairman Shimada during a press conference after the meeting
underscored the need to promote inward foreign direct investment in
Japan, saying, "The growth is a bit slow under the present program.
It is necessary to further promote investment in Japan."
Participants in the meeting analyzed factors that hampering
investment, such as regulations, the M&A mechanism, and problems
with the tax system. The panel wants to make specific proposals that
would lead to a substantive expansion of investment in a final
report, which it plans to issue in April.

Domestic companies' resistance to M&A's by foreign companies is
deep-rooted, as can be seen in Bulldog Sauce's response to a U.S.
investment fund's takeover bid. With the Supreme Court's decision
that Bulldog's takeover defensive measures were valid as the
occasion, "Japan passing," or the trend of foreign investors
avoiding making direct investments in Japan, is spreading. Regarding
the tax system, too, there are growing calls for a corporate tax
break, but such a request remains unrealized.

To what extent those impediments can be eliminated holds the key to
the panel's discussion. To begin with, it appears necessary to
change the mindset of those Japanese who are against foreign
penetration of the Japanese market. Promoting investment would seem
to be a difficult task.

(9) Views split on restrictions on foreign investment in airports

ASAHI (Page 11) (Abridged)
January 31, 2008

The question of maintaining the restrictions on foreign investment
in major facilities at Narita and Haneda Airports has cropped up
over ways to achieve increased investment in Japan, a key element in
the government's growth strategy. The Ministry of Land,
Infrastructure, and Transport (MLIT) eyes a cabinet decision on a
related bill next week. Criticism is simmering in the Liberal

TOKYO 00000255 011 OF 016


Democratic Party saying that keeping restrictions in place goes
against the government's goal of increased investment in Japan. The
Cabinet Office hosted yesterday the inaugural meeting of the experts
council on investment in Japan, chaired by Chiba University of
Commerce President Haruo Shimada, to study ways to increase
investment in Japan. Attention is focused on how foreign investors
will react to the new restrictions.

An LDP Land, Infrastructure and Transport Division meeting was held
on Jan. 29 at party headquarters. In the session, former Chief
Cabinet Secretary Yasuhisa Shiozaki criticized the MLIT-drafted bill
revising the airport development law, saying: "Restrictions on
foreign investment in airport facilities will send the wrong message
at a time like this when we are trying to attract foreign capital."
The bill is designed to curb foreigners' stakes in companies running
main facilities at Narita and Haneda Airports to less than one-third
on a voting right basis.

Only Hiroshige Seko supported Shiozaki. The two are a minority in
the party. Many LDP lawmakers applauded when a senior MLIT official
explained: "There have been many cases in which airports in other
countries were purchased by investment funds, so we need to take
countermeasures."

National assets

MLIT had initially considered regulating foreign investment on the
assumption that Haneda Airport would be listed. An Australian fund's
acquisition last summer of a nearly 20 PERCENT stake in JAL
Building at Haneda resulted in MLIT's decision to expand the scope
of foreign investments subject to restrictions. Another MLIT
official explained: "International hub airports are national assets.
It is undesirable for foreign capital to control them. Haneda
Airport is a vital metropolitan airport."

Such policy first drew objections from some private-sector members
on the Council on Economic and Fiscal Policy. One member said at a
Jan. 17 meeting: "Keeping international hub airports under some
restrictions is understandable. Still, the government should
consider restrictions without discrimination between domestic and
foreign capital."

The Council for Regulatory Reform is also considering submitting an
opinion paper opposing restrictions on foreign investment. Council
member Ushio Chujo, a Keio University professor noted: "Not all
foreign capitals are ill-intended. Restrictions must be placed on
acts (that must not be done)."

Economic and Fiscal Policy Minister Hiroko Ota attended yesterday's
investment expert council meeting, in which she said: "The premise
that foreign enterprises want to enter the Japanese economy might be
an illusion."

The council, established at Ota's proposal, is tasked to discuss
impediments to foreign investment in Japan. The panel is scheduled
to hold three to four plenary sessions and sub-panel meetings as
necessary to produce a report in April that will go into the basic
policy guidelines to be out in June.

The Japan Investment Council, a cabinet-level panel chaired by the
prime minister, was abolished at the end of last year. Expert
council chair Shimada said enthusiastically, "Our panel, whose

TOKYO 00000255 012 OF 016


results will go directly into the basic policy guidelines, is more
effective than the dissolved Japan Investment Council." Regulatory
and tax reforms are expected to draw fierce objections. After the
meeting, Shimada said: "The attitude blindly disliking foreign
capital must be changed."

Market also concerned

The balance of direct investment in Japan stood at 2.5 PERCENT to
the country's GDP, which was far lower than the United States' 13.5
PERCENT and Britain's 47.3 PERCENT , according to 2006 UNCTAD
(United Nations Conference on Trade and Development) statistics.
With slow economic growth projected due to a shrinking population,
the government is aiming to double foreign investment in Japan as
the leverage to achieve economic growth. At the same time,
regulatory and tax reform proposals are expected to draw heavy fire
from political and industrial circles.

Insiders of the market, where the benchmark Nikkei Stock Average has
plunged on heavy selling by foreign investors, are also concerned
about the future. Norihiro Fujito of Mitsubishi UFJ Securities Co.,
warned: "Although 'promoting investment in Japan' sound easy on
ears, investors watch only the bottom line."

Some observers support heavy restrictions on foreign investment in
airport facilities from the viewpoint of security. Hitotsubashi
University Professor Hirotaka Yamauchi commented: "Ownership of
airports is also discussed in foreign countries from the perspective
of national interests. For security reasons, the government must be
involved to a certain extent in airports that also serve as
distribution bases."

Prime Minister Fukuda in his policy speech on Jan. 18 pledged to
double foreign investment in Japan by making the investment system
more transparent. Since then, he has apparently taken a wait-and-see
attitude. A Cabinet Office source noted: "MLIT is trying to reach a
decision in a short period of time. It must discuss the matter
thoroughly, while hearing a wide range of opinions."

(10) Dialogue (2nd installment): Outlook for 2008-Cutting the world

SANKEI (Page 12&13) (Full)
January 24, 2008

The following is the second and last section of a dialogue between
Yukio Okamoto, a consultant on international affairs, and Masaru
Sato, a writer and a Foreign Ministry official currently suspended
under indictment. (Moderator: Akio Takahata, a senior writer for the
Sankei Shimbun)

-- Last year, there was also an uproar over a grand coalition of the
ruling and opposition parties.

Sato: In my understanding, if and when there is something serious
like a war or a major disaster and when the two sides cannot face
off, then they will get together for a limited period of time.
That's the way a grand coalition is, isn't it? If the LDP (Liberal
Democratic Party) and the DPJ (Democratic Party of Japan or
Minshuto) form a grand coalition, their lawmakers, including New
Komeito's lawmakers, will account for more than 90 PERCENT of the
Diet. That's really like creating a wartime cabinet. If they cannot
do so now, I wonder if they can do so when there is a really big

TOKYO 00000255 013 OF 016


crisis. Japan watchers cannot understand why they thought of doing
such a thing. They say, "Japan cannot be analyzed by the usual
international political methodology. We probably need an
anthropological approach."

Okamoto: Ha ha ha.

Sato: That would really stir up our patriotic spirit. I said, "Wait.
Is that a study of a primitive society?"

Okamoto: That's right. They need a special anthropology for Japan. I
remember that Newsweek magazine in 2002 carried a cover story, which
said Japan would become the Switzerland of Asia. That article was
titled, "Japan, the happy-go-lucky." The article said Japan is rich,
comfortable, "and irrelevant." It meant to say, "We don't care about
Japan any more. You guys can now live in easy retirement like
Switzerland." At that time, Japan's economy was down and out. Now,
we're going to see the same pattern.

Sato: I'm afraid that Japan may really become irrelevant. Opinion
leaders must have a sense of crisis about that. We're no longer
human beings for international political scientists; we're now human
beings for cultural anthropologists.

Okamoto: Last fall, China held the 17th National People's Congress
of the Chinese Communist Party and they went through a change of
generation. When I saw that (on TV), I thought to myself that China
was a terrific country. The Japanese media reported on something
about the Shanghai group or Ceng Qinghong's retirement. However, the
change of generation feature was most impressive. President Hu
Jintao is from the fourth generation of revolutionists. In 1992, he
for the first time became a member of the Standing Committee of the
Political Bureau (of the Central Committee of the Chinese Communist
Party). He was about 49 at that time. In the party convention of
2002, Jiang Zemin and all other leaders from the third generation
retired. There was a change of generation to Hu Jintao, Wen Jiabao,
and other leaders who are from the fourth generation. This time, Xi
Jinping and Li Keqiang joined. They are from the fifth generation.
When we see the trend in the past, these two persons will become the
party's general secretary and premier. In 2012, the fourth
generation will retire. And then, the fifth generation will replace
the fourth generation. One or two will come in from the sixth
generation. People in this sixth generation are terrific. They
graduated from top-notch universities in China. They studied at
universities in Europe or the United States. They have a Ph. D. or a
master's degree, and they are also good at English. They have an
adept understanding and deep knowledge of market mechanisms. Their
thinking is Westernized and sophisticated.

-- That sounds quite different from the change of generation in
Japan's political world...

Okamoto: Generations with strong messages toward the world will
begin to lead China in 2012. In 2017, five years from now, China
will totally be under the sixth generation's leadership. The change
of generation is steadily going on. However, Japan is still going
back and forth. When young people stand up, somebody will try to get
in their way. In the end, they will have to give up.

Sato: I entirely agree. They are only human, so, of course, there
are struggles for power along with changes of generation. I think
Jiang Zemin is the one who thought out the formula of creating a

TOKYO 00000255 014 OF 016


function beyond the power struggles and getting on that track. By
the way, what I noted in the party convention this time is that they
have changed the rules. Even in the days of Deng Xiaoping, they
could not change the rules. This time, they revised the rules and
incorporated a view of scientific growth in the form of replacing
Marxism-Leninism and Maoism. The view of scientific growth was first
advocated in 2003. In the days of Jiang Zemin, it was thoroughly
discussed in China. It was also studied in the Chinese Academy of
Social Sciences.

Okamoto: In the past, both Maoism and Deng Xiaoping theory came in
after their retirement. This time, the view of scientific growth
came in when Hu Jintao is still in power.

Sato: That's right. The view of scientific growth is like North
Korea's juche (self-reliance) philosophy. They say that the people
are everything and they must get back their identities. They have
considerably cited the juche doctrine. In addition, they have also
cited such ideas like the theory of evolution. In a word, they have
a kind of social Darwinism. In the growing world, there are people
that will survive and there are people that will not survive. They
say China has no problem because its people will survive and China
can evolve itself. That's their social Darwinism. They have cited
this idea for the party's doctrine. I think that kind of China will
have more friction with its neighbors.

-- What is social Darwinism?

Sato: It came from Herbert Spencer. It is the idea that (Charles)
Darwin's theory on the origin of species-or the survival of the
fittest-can be applied to human society. Qualified people will win
and survive. The law of the jungle is inevitable. I mean that the
strong prey upon the weak. China is on the side of the strong, so
they say there's no need to worry about China. Roughly speaking,
it's close to Nazism's racism. Everybody is not aware of this.

-- Japan has upheld "kyosei (??)" (in the meaning of "symbiosis" or
"living together") for its relations with China.

Sato: That word doesn't sound good. It phonetically sounds like two
other words ("??" and "??") which mean "forcing" and "correcting."
These two words make me feel that I'm forced to do something or I'm
corrected by someone. Such a nuance will remain in my depth
psychology. That's why. Sounds mean so much to politics.

Okamoto: That's interesting.

Sato: Lenin was sensitive to the sounds (of words). Lenin called his
group "Bolshevik" (majority). "Bolshe" is a Russian word, and they
use this word when they ask for "a little more alcohol" or "a little
more service." The word "soviet" means a conference. But there are
many other words for a conference. They chose "soviet." That's
because the word "soviet" sounds like "tsvet" (shining) and
"sovisch" (conscience). Lenin always chose good-sounding words to
account for themselves. I think it's very insensitive to choose the
word "kyosei." There was something like this before. That was
"genmei (??) shimashita" (strictly ordered).

Okamoto: Foreign Minister Makiko Tanaka (at that time) was "strictly
ordered" by the Chinese foreign minister (to stop Prime Minister
Junichiro Koizumi from paying homage at Yasukuni Shrine).


TOKYO 00000255 015 OF 016


Sato: Yes. I don't know if this "genmei" means that he only 'said'
(in the meaning of "??") to her or if he 'strictly ordered' her. We
must be careful about homophones, or they will be misunderstood. A
speech writer or someone close (to Prime Minister Fukuda) should
have advised him (Fukuda), in this way: "Mr. Prime Minister, the
word 'kyosei' (meaning "symbiosis" or "living together") sounds like
that in the word 'kyosei shuyojo' (concentration camp). It would be
better to consider another word."

Okamoto: That's the kind of scientific growth. By the way, the view
of scientific growth is an antithesis to Jiang Zemin's theory of
"three representations," isn't it? His theory of three
representations is that the Communist Party represents the
wide-ranging interests of all people. This "all people" includes not
only the working class but also the capitalist class, doesn't it?

Sato: Yes, of course.

Okamoto: If that is the case, they already treated people in
state-owned and private businesses as first-class citizens when they
revised their country's constitution in 2002. They admitted that
it's good for individuals to make money. Next, they admitted that
it's also good for the government to make money. Under the theory of
three representations, the Communist Party began to make money. That
caused corruption and widened disparity.

-- Is the view of scientific growth a theory to rectify that?

Okamoto: They cannot deny it suddenly and completely. That's why.
They are now free to make money in their own ways. Even so, there is
something they can do, and there is also something they must not do.
They are now trying to select these do's and don'ts for a harmonized
society. That's their view of scientific growth, isn't it? In that
sense, this is social Darwinism. But that does not lead to moral
values. China is a communist country. They can only say they will
try to harmonize their country or they will try to correct
disparities. That's why China is still weak. However, the question
is what will come as a new thesis after communism. They may skip
this stage, and when the sixth generation's pragmatism comes, I
think they would make a soft landing. China will not go under.
China's capacity will become bigger, and there will be progress in
the change of generation. In this move, China would manage well to
solve the problem, I think.

Sato: There is one more interesting thing to note. Unlike before,
none of China's leaders has been shot to death or confined after
they gave up staying in power. This makes the political elite of
that country feel easy, I think.

-- In the sixth generation, do you think China will have leaders
like 'IT nuts' with no morality?

Okamoto: There may be some people like that. In China, however,
excellent people will climb the ladder of success. China is a
society of meritocracy.

Sato: In that sense, do you think China is similar to America?

Okamoto: America is not a government of meritocracy. American values
are diversified. In the United States, excellent human resources
will go to various places. America is a country under a federal
system. That's why. On the other hand, China is a very centralized

TOKYO 00000255 016 OF 016


government. Excellent people all over China will go to the top. In
China, there are young guys taking the highroad to success. They
have a steadfast view of their country, and they also have their own
policies. They are also in the sixth generation.

Sato: One other thing is China's total manpower. That is 10 times
larger than Japan's manpower. This is also a big factor, for sure.

Okamoto: Certainly. I agree that China is also amazing. But you
know, Mr. Sato, the country I would like to take up is America. Just
until recently, I thought to myself that the United States'
population was 260 million. Japan has a population of 120 million,
so it's about 1 to 2. However, the United States now has more than
300 million people. In 2050, the United States' population will
reach 420 million. At that time, Japan's population will be 94
million. This is 1 to 4.5. In the 1980s, Japan was praised sky-high
like "Japan as No. 1." If there is such a gap with that enormous
country, Japan will be a far cry from that. Japan has no choice but
to follow the United States for its desperate survival. By the way,
what do you think about India, Mr. Sato?

Sato: India has yet to become civil society. India remains unable to
break away from its caste system. The IT business is growing in
India, but I think there is a limit to that growth given that
country's social structure. They will not think about expansion.
India will not become a big player. That's my impression.

Okamoto: India's population is now 1.1 billion, indeed. That
country's IT industrial population is 2 million. However, I think
India has a big potential. They call India the world's biggest
democracy, and India adopted democratic institutions from early on.
Countries democratized later on ruled their people with an iron
fist. Those countries did political Darwinism. After that, they
democratized themselves. India was democratized without going
through that process. In India, there are several hundred castes.
Depending on how to count, there are several thousand castes.

Sato: That's right. If there is someone who was born to those who
must not marry, that is another caste.

Okamoto: And, there are political parties that represent the
interests of specific people. That will come up to the central
government without being coordinated. Their ruling coalition is made
up of as many as 17 political parties. Otherwise, they cannot get a
majority. Each political party has veto.

Sato: In that case, they cannot make any important decision.

Okamoto: Their (decision-making) speed is very slow. However, the
growth rate of India was 9.8 PERCENT in 2006. So I wonder what
India will grow to be. But they cannot decide.

Sato: Geopolitically, India must not cave in to Islamic
fundamentalism. That's important. And, there is one more thing.
There is also a country like India that will not get greedy to
dominate the world. That's also important, I think.

SCHIEFFER

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