Cablegate: Japanese Morning Press Highlights 03/11/08

DE RUEHKO #0628/01 0710118
P 110118Z MAR 08





E.O. 12958: N/A



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

4) Japanese police identify North Korean organization, directly
under Kim Il Sung, responsible for two of the abductions (Asahi)

China connection:
5) Chinese government accuses Japanese diplomats of being spies
6) Tokyo's improving relations with Beijing could be shaken by
China's charges of spying by Japanese diplomats (Yomiuri)

7) New Komeito head Ota meets South Korean President Lee (Yomiuri)

Defense affairs:
8) Japanese government tells U.S. that Futenma relocation project
faces eight-month delay due to environmental impact assessment
9) Defense Ministry's project team readies report on strengthening
procurement system to prevent further corrupt practices (Asahi)

Diet agenda:
10) After week at a standstill, the Diet is expected to normalize
tomorrow and return to deliberations on legislation (Nikkei)
11) Very difficult to pass tax-related bills this fiscal year (by
end of March) with opposition parties adamantly opposed and ready to
boycott deliberation (Mainichi)
12) Upper House is now deliberating the national budget bill but
ruling and opposition camps not talking the same language (Tokyo
13) Democratic Party of Japan (DPJ) not budging an inch in opposing
appointment of Muto as Bank of Japan governor, with Muto testifying
in Diet today (Sankei)
14) While most of DPJ hard-lined toward Muto as BOJ governor, some
members willing to compromise (Nikkei)
15) In meeting of four opposition parties, Japanese Communist Party
blasts DPJ for boycotting strategy instead of deliberating bills in
the Diet (Tokyo Shimbun)
16) Watered down version of plan for cabinet personal agency
creating internal tensions in Fukuda cabinet (Mainichi)

17) Japan woefully behind other advanced countries in inward foreign
direct investment, revealing need to further ease restrictions on
foreign capital (Tokyo Shimbun)



Names of two senior officials of North Korean intelligence agency
floated as allegedly involved in abductions of Chimura, Hasuike
floated, according to investigation by police: Under direct control
of general secretary

Internal investigation of ShinGinko Tokyo avoids question of
responsibility of Tokyo governor: Seeking compensation from former

TOKYO 00000628 002 OF 011

management personnel under consideration

Chinese court closed to public rules that "Japanese diplomats are

Nikkei Stock Average closes at lowest level in two and half years at
12,532 yen: View that U.S. economy has entered recession phase gains

Report on investigation into ShinGinko Tokyo blames former president
as responsible for sloppy lending practices; Likely to be charged
with criminal and civil liability

Tokyo Shimbun:
Report on investigation into ShinGinko Tokyo: 35 borrowers suspected
of having window-dressed their accounts statements, revealing sloppy

Japanese Communist Party's Agricultural Revitalization Plan hailed


(1) We want to see dialogue on whaling issue deepen
(2) Amendment to Anti-monopoly Law: Focus should be placed on
boosting Fair Trade Commission's capability to crack down on illegal
trading practices

(1) Reallocation of road funds: It is absolutely necessary to
reexamine special account system
(2) Marathon runners chosen for Olympics

(1) Foreign currency reserves top 1 trillion yen: Huge amount poses
(2) Order to pay administrative surcharges given to three NHK
reporters who engaged in insider stock trading: NHK needs outside

(1) Stock market alert to slowdown of U.S. economy
(2) Revival of Imperial-style press conferences, in which only
convenient information is presented, by Defense Ministry

(1) Marathon runners chosen for Olympics: Preparation for Beijing
(2) Scandal involving Ministry of Land, Infrastructure and

Tokyo Shimbun:
(1) Age of majority: Flexible discussion needed
(2) Shooting at divinity school in Israel: Break cycle of violence

(1) Agricultural revitalization plan: Policy proposal to address

TOKYO 00000628 003 OF 011


3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, March 10

NIKKEI (Page 2) (Full)
March 11, 2008

Met at the Kantei with Chief Cabinet Secretary Machimura, Deputy
Chief Cabinet Secretary Futahashi, Assistant Deputy Chief Cabinet
secretaries Saka and Ando. Machimura stayed behind.


Met Vice Defense Minister Masuda. Followed by Economic and Fiscal
Policy Minister Ota.

Met Machimura.

Met Environment Research Committee Chairman Kawaguchi.

Met Vice Health, Labor and Welfare Minister Edogawa. Followed by
Consumer Administration Promotion Minister Kishida.

Handed official nomination certificate to potential candidate for
the by-election in Yamaguchi 2nd District for a Lower House seat,
with Secretary General Ibuki and others present. Attended an
executive meeting.

Arrived at the Kantei.

Returned to his official residence.

4) Two senior North Korean agents under Kim Jong Il's direct control
surface in connection with abductions of Chimura, Hasuike, police

ASAHI (Top play) (Excerpts)

Police authorities identified yesterday two senior North Korean
agents suspected of having had a hand in the abductions of Yasushi
Chimura (52) and his wife and Kaoru Hasuike (50) and his wife, and
that the two agents had belonged to the North Korean Research
Department for External Intelligence (currently called No. 35
Office). Police authorities believe that those two senior agents
were aides to North Korean leader Kim Jong Il. This is the first
time that senior agents who were directly under Kim have been linked
to the series of abductions of Japanese nationals by North Korean
agents. The police are carrying on their investigation in order to
build a case. This discovery is likely to have a significant impact
on diplomatic normalization talks between Japan and North Korea, in
which Japan has called for progress on the abduction issue.

According to informed sources, the two senior agents are Li Wan Gi,
former director of the Research Department for External

TOKYO 00000628 004 OF 011

Intelligence, and Kang Hae Ryong, former deputy director of that
department. The allegations are that when the two served as director
and deputy director respectively around 1978, they schemed to abduct
Japanese nationals and instructed their staff to do so. The two
senior officials are suspected of instructing suspect Sin Gwang Su
(78) and suspect commonly called Che Sunchol to abduct couples. Sin
Gwang Su is suspected of having abducted Yasushi Chimura and his
wife and also Tadaaki Hara, and another suspect commonly called Che
Sunchol, who is placed on the international wanted list, is
suspected of having abducted Kaoru Hasuike and his wife.

5) Japanese diplomats were spies: China

YOMIURI (Top play) (Lead paragraph)
March 11, 2008

The Higher People's Court of Beijing Municipality of China, in a
final ruling handed down in September 2006, concluded that two
Japanese diplomats were spies for the Intelligence and Analysis
Service of Japan's Foreign Ministry, which the court ruled was an
espionage organization, informed sources in Tokyo revealed
yesterday. According to the sources, the ruling said a senior
Foreign Ministry official, who had worked at the Intelligence and
Analysis Service, and a secretary of the Japanese Embassy in Beijing
were spies. China's court trial is under a two-instance system. The
ruling was part of the Beijing higher court's decision to uphold a
first-instance sentence of life imprisonment imposed on a Chinese
man, 48, who had met with the two Japanese diplomats. It is
extremely unusual for a Chinese court ruling to describe an
organization of Japan's Foreign Ministry as an espionage
organization and Japanese diplomats as spies to be made public. The
ruling reflects China's deep-seated wariness of Japan during the
then administration of Prime Minister Junichiro Koizumi, when
bilateral relations had reached a nadir.

6) Commentary: China's judiciary affected by politics

YOMIURI (Page 2) (Full)
March 11, 2008

The Higher People's Court of Beijing Municipality of China
(corresponding to a high court) concluded in its final ruling handed
down in September 2006 that two Japanese diplomats were spies, and
the court also imposed a sentence of life imprisonment on a Beijing
man. The ruling reflects the facts about China's judiciary that is
placed under the guidance of its communist party and is inevitably
subject to political influence. In addition, the ruling might have
strongly mirrored bilateral relations that wavered in recent years.

The ruling described the two Japanese diplomats, including a
high-ranking official of the Foreign Ministry, as spies. This was a
decisive factor to affect charges for the Chinese man, who was
sentenced to life imprisonment. According to informed sources,
however, the ruling did not specify the two Japanese diplomats'

According to the informed sources, the ruling did not prove that the
Chinese man had known that the two Japanese diplomats were spies,
nor did it specify when, where, and how often the two Japanese
diplomats met with the Chinese man and what they ordered the man to
do. These are critical points that affect a court in its judgment of
criminal facts and in its determination of appropriate punishment.

TOKYO 00000628 005 OF 011

However, the ruling left these points ambiguous and imposed a
sentence of life imprisonment on the Chinese man.

In China, whose judiciary is under the guidance of its communist
party, investigations and court trials are easily affected by the
political situation.

The Chinese man was detained in the spring of 2005, when Japan-China
relations had fallen into their worst-ever state since the two
countries normalized ties. Then Prime Minister Koizumi paid homage
at Yasukuni Shrine, and bilateral relations went from bad to worse
thereafter with no prospects for repair. There were large-scale
anti-Japan demonstrations in China.

China's public security authorities could likely arrest a "dangerous
figure" who has contact with Japan, without fearing any negative
impact of the man's arrest on bilateral relations.

7) New Komeito leader meets with ROK president

YOMIURI (Page 4) (Full)
March 11, 2008

Masakazu Hamasuna, Seoul

New Komeito Representative Ota yesterday afternoon met with South
Korean President Lee Myung Bak at the Blue House. On the question of
whether to grant permanent foreign residents local election voting
rights, Lee told Ota, "South Korean residents in Japan have strongly
desired such rights over the years. I ask for your cooperation to
move the matter forward." In response, Ota said, "I will strive to
move the issue forward."

In the dialogue, Lee mentioned North Korean issues and indicated his
intent to proactively address the abduction issue by noting: "The
previous administration paid little attention to the human rights
issues, but our understanding is that they need to be resolved. In
fact, not only Japanese nationals but also more than 400 South
Koreans have been abducted."

8) EIA for relocation of Futenma airfield expected to be delayed by
up to eight months

YOMIURI (Page 4) (Full)
March 11, 2008

The Japanese government conveyed to the United States government
that an environmental impact assessment (EIA) of a coastal area on
Camp Schwab, a location planned for an alternate facility of the
U.S. Marine Corps Air Station Futenma in Okinawa Prefecture, will be
delayed by up to eight months from the initial schedule. According
to the initial schedule, the EIA was supposed to be completed at the
end of July 2009. In Japan-U.S. working-level talks held in the
prefecture on March 6, the Japanese side briefed the U.S. side on
this delay.

9) Defense Ministry to continue procurement via trading houses

ASAHI (Page 4) (Full)
March 11, 2008

A Defense Ministry project team has studied how to improve the

TOKYO 00000628 006 OF 011

Defense Ministry's procurement of defense equipment for the
Self-Defense Forces in the wake of a bribery case involving its
former administrative vice minister, and the project team yesterday
finalized a report featuring a plan to check procurement in order to
prevent trading companies' bill-padding practices. Defense Minister
Ishiba had initially implied his intent to abolish the Defense
Ministry's current procurement system of importing defense equipment
through trading companies, noting that there are problems with such
a procurement system. However, the Defense Ministry will maintain
the system.

The project team will work out and release a report late this

The draft report suggests the need for the Defense Ministry to
establish an import control division under the Equipment Procurement
and Construction Office (EPCO) in fiscal 2009. The Defense Ministry
will employ certified public accountants, trading company retirees,
and others with expertise for that division to heighten its function
of overseeing trading companies.

The Defense Ministry will also inquire of foreign manufacturers
about all estimates submitted by trading companies, beginning in the
new fiscal year. In this connection, the Defense Ministry will post
seven more officials in the United States for a total of 10 import
procurement officials to enhance its overseas fact-finding surveys.
Furthermore, the Defense Ministry will add up to a penalty for
overbilling. The draft report also says the Defense Ministry will
enter into more direct contracts with overseas manufacturers by
providing information in English about its procurement plans.

10) Stalled Diet session expected to return to normal tomorrow or

NIKKEI (Page 2) (Full)
March 11, 2008

The House of Councillors Budget Committee discussed in its executive
meeting yesterday the issue of starting deliberations on the budget
bill for FY2008, but the ruling and opposition parties failed to
find common ground. As a result, the Diet session is expected to
return to normal tomorrow or later. In the meeting, the ruling camp
proposed starting deliberations today, but the Democratic Party of
Japan (DPJ) refused to set any specific date for starting
deliberations, saying that the ruling side has presented a proposal
that cannot be accepted over the nomination for the post of Bank of
Japan (BOJ) governor.

In their Diet Affairs Committee chairmen's meeting on March 7, the
LDP and the DPJ agreed on normalizing the Diet session, starting
with the executive meeting on March 10.

However, the DPJ demanded in the meeting yesterday apologies by
Chairman Yoshitada Konoike for holding the meeting by exercising his
authority and (his) severe criticism of the DPJ. Konoike said in a
press conference yesterday: "It is outrageous to discuss the
selection of a new BOJ governor and Japan's budget at the same level
as a political issue."

In the House of Representatives, the secretaries general of the DPJ,
the Japanese Communist Party, the Social Democratic Party, and the
People's New Party met yesterday afternoon. They confirmed that they

TOKYO 00000628 007 OF 011

would (1) urge the ruling camp to deeply reflect on its way of
having passed the budget bill through the Lower House; (2) make
utmost efforts to set conditions for thorough deliberations in the
Upper House; and (3) continue to pursue Defense Minister Ishiba's

11) Bill amending Special Taxation Measures Law unlikely to clear
Diet within current fiscal year; Opposition camp refuses to begin
deliberations at Upper House Budget Committee

MAINICHI (Page 5) (Excerpts)
March 11, 2008

The directors of the ruling and opposition parties of the House of
Councillors Budget Committee met for the first time in a week to
discuss deliberations on the fiscal 2008 budget bill. The session
broke off with the opposition camp refusing to respond to the ruling
bloc's call for swift deliberations, citing the ongoing process to
determine a new Bank of Japan governor, which requires confirmation
by both chambers of the Diet. The committee is also still unable to
begin deliberations on a bill amending the Special Taxation Measures
Law, including the provisional gasoline tax rate. The government and
ruling bloc are increasingly finding it difficult to realize their
plan to enact those bills within the current fiscal year.

Upper House Budget Committee Chairman Yoshitada Konoike of the
Liberal Democratic Party in a press conference yesterday said: "It's
like wiping a fogged glass with your hand. You cannot see tomorrow."
At the directors meeting, the Democratic Party of Japan remained
determined to continue to protract the confusion, with one member
saying, "Because the government has presented at this particular
time a BOJ personnel plan that is hardly acceptable, we cannot
discuss a timetable."

Even if the Upper House does not put the budget bill to a vote, it
is certain to be enacted within the current fiscal year under the
Constitution. Given the situation, the DPJ is set to apply pressure
on the government and ruling coalition by blocking the Special
Taxation Measures Law revision bill from clearing the Diet within
the current fiscal year. Appearing on an NHK program on March 9, DPJ
Deputy President Naoto Kan said: "(The prime minister) should
dissolve the Lower House for a snap general election over the
road-related tax revenues. At this point, a decision must be made by
the public instead of by party interests."

Even if the Diet returns to normal within this week, a rocky path
lies ahead of the enactment of the Special Taxation Measures Law
revision bill by March 31.

Customarily, discussions on a budget-related bill begin when
deliberations on a budget bill reach a certain stage. The outlook is
that the Upper House Financial Affairs Committee will not discuss
the special taxation law revision bill until next week or later. In
view of the committee's timetable to meet on Tuesdays and Thursdays,
it can discuss the bill two or three times before the current fiscal
year ends.

12) Ruling, opposition camps fail to reach agreement on convocation
of deliberations on FY2008 budget bill

TOKYO SHIMBUN (Page 2) (Full)
March 11, 2008

TOKYO 00000628 008 OF 011

The ruling and opposition parties discussed in a directors meeting
yesterday afternoon of the House of Councillors Budget Committee the
question of when to launch deliberations on the fiscal 2008 state
budget and budget-related bills.

However, the discussion ended with the gulf remaining wide because
the opposition camp insisted that they could not decide on a
timetable for deliberations as the direction of appointments of
governor and deputy governors of the Bank of Japan have yet to be
decided, although the ruling coalition sought to start them on March

In a meeting on March 7 of their Upper House Diet affairs committee
chiefs, the ruling Liberal Democratic Party (LDP) and largest
opposition Democratic Party of Japan (DPJ or Minshuto) reached a
basic agreement to normalize Diet business on March 10, taking the
day's consultation as the opportunity. But chances are that
deliberations on the state budget and budget-related bills will be
delayed to the latter half of this week or later.

The opposition bloc has demanded that Upper House Budget Committee
Chairman Yoshitada Konoike make clear responsibility for repeatedly
exercising his authority in setting timetables for committee
sessions. The opposition also has demanded that Konoike take
responsibility for criticizing its strategy as a defeatist spirit in
their idea. The opposition parties agreed in a meeting yesterday of
their Diet affairs committee chairmen to set an apology by Konoike
as a condition for normalizing the Diet.

13) DPJ remains opposed to government's plan to nominate Muto as BOJ

SANKEI (Page 3) (Full)
March 11, 2008

The Diet is scheduled to hold hearings with the candidates the
government has nominated for the posts of Bank of Japan (BOJ)
governor and deputy governor and then hold question-and-answer
sessions in both chambers at their steering committees today. The
Democratic Party of Japan (DPJ) will formally determine today its
opposition to the government's proposal for promoting former
Administrative Vice Finance Minister Toshiro Muto to the
governorship. Meanwhile, Prime Minister Yasuo Fukuda yesterday
emphasized that he would not change the government plan and
indicated a willingness to hold talks with DPJ President Ichiro
Ozawa. The ruling camp has insisted on holding plenary session votes
in both chambers of the Diet on March 14, but the DPJ, the Japanese
Communist Party and other two opposition parties plan to hold
tomorrow a plenary session in the House of Councillors, which the
opposition bloc now controls, to take a vote with the aim of
blocking the nominations.

Asked who will be held responsible if a vacancy in the post of BOJ
governor is created, Ozawa said yesterday in a press conference in
Iwakuni City, Yamaguchi Prefecture: "The responsibility will
naturally rest with the government." He added that whether to hold a
meeting with Fukuda will hinges on a judgment by the party's
secretary general, Diet Affairs Committee chairman, and executive


Prime Minister Fukuda told reporters at his official residence

TOKYO 00000628 009 OF 011

yesterday: "We have submitted the plan, believing that it is the
best choice, looking at the current economic and financial
situations." Asked about the possibility of party head talks, he
replied: "We will hold talks if necessary."

The prime minister also said the same day: "There is no need to
think about a resubmission (of the government's plan for the
nomination of Muto)."

But Upper House Steering Committee Chairman Takeo Nishioka (DPJ)
indicated in a press conference that if the government resubmits its
plan, he would not approve holding a plenary session in the Upper

14) Tug-of-war continuing between ruling and opposition camps over
dates of vote on nominations of BOJ governor, deputies

NIKKEI (Page 2) (Excerpts)
March 11, 2008

A tug-of-war is continuing between the ruling and opposition parties
over the date of votes in both Diet chambers on the government's
nominations for the Bank of Japan (BOJ) posts of governor and
deputies to the new governor. The opposition bloc has proposed
holding a plenary session vote tomorrow, following hearings with the
candidates on their policy stances and a question-and-answer session
to be held today. In an effort to seek the understanding of the
opposition side toward the Muto plan, the ruling camp
unprecedentedly has been calling on the opposition side to conduct a
careful discussion, sensing the opposition camp's maneuvers to
quickly reject the government's nominations and propose

Liberal Democratic Party Diet Affairs Committee Chairman Tadamori
Oshima reportedly grumbled to his counterpart of the Democratic
Party of Japan, Kenji Yamaoka on the phone yesterday morning: "I
will contact you if views in the party are coordinated. Prospects
are quite gloomy."

Later, Oshima called on Yamaoka with New Komeito Diet Affairs
Committee Chairman Yoshio Urushibara and said: "It is not proper to
take a vote the day after the hearings. It is desirable to reach a
conclusion by taking votes in both Diet chambers on the same day."
He stressed that it would be desirable to take plenary session votes
in both chambers in the Diet on March 14, the day of a regular
plenary session.

15) JCP in four-party meeting criticizes DPJ

TOKYO SHIMBUN (Page 2) (Full)
March 11, 2008

In a meeting yesterday of the secretaries general of four opposition
parties from the two Diet chambers, the Japanese Communist Party
criticized the Democratic Party of Japan's (DPJ or Minshuto)
strategy of boycotting deliberations in the Upper House Budget
Committee, saying:

"The DPJ also has responsibility for taking a stance of skipping
deliberations for a week. The method of delaying deliberations on
the state budget bill will not be supported by the public."

TOKYO 00000628 010 OF 011

Although DPJ Secretary General Hatoyama called out to other
opposition parties for unity in managing Diet affairs, DPJ Chief of
the Secretariat Tadayoshi Ichida turned the guns not only on the
ruling Liberal Democratic Party but also on the DPJ over the
stalemate in the Diet.

In the recent extraordinary Diet session, the opposition parties
failed to unit in a crucial stage, for example, the decision to
summon witnesses before the Diet, which was made under the
initiative by the DPJ, was returned to square one due to objections
from other opposition parties.

Yesterday's meeting was held to make up for that, but the uneasiness
has remained instead.

16) Government to submit bill specifying establishment of cabinet
personnel affairs agency, which could become toothless

MAINICHI (Page 2) (Abridged slightly)
March 11, 2008

The government decided yesterday to submit to the current Diet
session a national civil service system reform bill clearly
specifying the establishment of the cabinet personnel affairs
agency. Prime Minister Yasuo Fukuda has accepted Administrative
Reform Minister Yoshimi Watanabe's view. But the system is still
designed to allow each cabinet minister to draft personnel plans on
senior posts. The plan to establish the personnel affairs agency
solely responsible for personnel affairs might become toothless at
the stage of working out specifics.

Chief Cabinet Secretary Nobutaka Machimura revealed in a press
conference yesterday that the decision has been made by the prime
minister. In a meeting on March 7, the prime minister reportedly
presented Watanabe with a memo listing three points: (1) the chief
cabinet secretary is to be responsible for the personnel affairs
agency, (2) each cabinet minister is to draft personnel affairs
plans, and (3) the option of expanding the basic labor rights to
cover civil servants is to be studied, as before.

The Watanabe plan was designed to allow the personnel affairs agency
to directly control appoints of senior officers with the aim of
eliminating harmful effects resulting from bureaucratic interests.
Keeping effectively each minister's power of personnel affairs
intact is equivalent to allowing the personnel affairs agency to
strengthen only the current personnel affairs council composed of
the chief and deputy chief cabinet secretaries and the Cabinet
Affairs Office.

The prime minister gave consideration to strong criticism in the
government of the Watanabe plan, while endorsing his plan to
establish the personnel affairs agency. Watanabe indicated to the
press yesterday that he would follow the prime minister's
instruction, saying: "There might be cases in which cabinet
ministers select senior officials based on plans worked out by the
personnel affairs agency." The system of the personnel affairs
agency must be specified in separate legislation. Watanabe also
indicated that he would keep a close watch on the process so that
the plan will not be watered down.

17) Stagnant investment in Japan: Easing foreign capital
restrictions urgently needed

TOKYO 00000628 011 OF 011

TOKYO SHIMBUN (Page 10) (Full)
March 11, 2008

Amid economic globalization creating a borderless capital market,
Japan remains unable to lure inward foreign direct investment. The
government aims at doubling the ratio of inward foreign direct
investment to GDP to 5 PERCENT . Removing the closed nature of the
domestic market and various barriers, such as strict foreign
investment restrictions, will likely become conditions for realizing
its goal.

The outstanding balance of inward foreign direct investment in Japan
stood at 12.8 trillion yen as of the end of 2006. Its ratio to GDP
is 2.5 PERCENT , which is one-eighteenth of the level of Britain and
one-third of that of South Korea.

The driving force of the Japanese economy is mainly exports. Its
exports to the U.S., and Asia, including China, have increased.
However, growth dependent on foreign demand tends to become
unstable. Other leading industrialized countries have also seen
increased exports, but they have also accepted inward foreign direct
investment to shore up domestic demand. In order for Japan with a
dwindling population to continue stable growth, it needs to
introduce foreign capital more than other industrialized countries.

In reality, however, Japan is keeping foreign investment away from
it. U.S. hedge fund Steel Partners last year tried to buy out
Bull-Dog Sauce. However, the Bull-Dog Sauce side won a court battle,
taking countermeasures against the takeover bid. The government
policy has also become inward-looking, following the ruling parties'
crushing defeat in the Upper House election last year. It is taking
an incongruous response, as can be seen in the fact that it decided
to dissolve the Experts Council on Inward Foreign Direct Investment
under the Prime Minister's Office (Kantei) last December.


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