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Cablegate: Japanese Morning Press Highlights 03/12/08

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UNCLAS SECTION 01 OF 13 TOKYO 000656

SIPDIS

SIPDIS

DEPT FOR E, P, EB, EAP/J, EAP/P, EAP/PD, PA;
WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST DIVISION;
TREASURY/OASIA/IMI/JAPAN; DEPT PASS USTR/PUBLIC AFFAIRS OFFICE;
SECDEF FOR JCS-J-5/JAPAN,
DASD/ISA/EAPR/JAPAN; DEPT PASS ELECTRONICALLY TO USDA
FAS/ITP FOR SCHROETER; PACOM HONOLULU FOR PUBLIC DIPLOMACY ADVISOR;
CINCPAC FLT/PA/ COMNAVFORJAPAN/PA.

E.O. 12958: N/A
TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA

SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 03/12/08


Index:

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

Child-pornography issue:
4) Ambassador Schieffer in meeting with Justice Minister Hatoyama
seeks ban on simple possession of child pornography (Mainichi)
5) Japan UNICEF makes appeal for elimination of child pornography
(Mainichi)

Defense and security affairs:
6) Defense Minister Ishiba denies saying he favors revising SOFA and
security treaty (Nikkei)
7) Foreign Minister Koumura tells Okinawa governor that revising the
SOFA would be difficult (Tokyo Shimbun)
8) Fourteen governors of prefectures housing U.S. bases ask
government to revise the SOFA (Sankei)

Political agenda:
9) Diet to return to normal deliberations tomorrow, but no prospect
in sight for adopting the tax-related bills in the Upper House
(Yomiuri)
10) DPJ-led Upper House today to reject Muto as candidate for Bank
of Japan governor (Mainichi)

11) Muto testifies in Diet hearings on qualifications to be BOJ
governor, but opposition shows no sign of softening its stand
rejecting his candidacy (Sankei)
12) Signs within the DPJ that some members are wavering in their
hard-line stand against Muto as BOJ governor (Asahi)
13) Liberal Democratic Party (LDP) seeks to counter DPJ drive to
force Diet dissolution in April by statements on the Lower House
serving a full term (Tokyo Shimbun)
14) Former Prime Minister Koizumi and LDP election chair Koga agree
that the next Lower House election should be next year after the G8
summit (Tokyo Shimbun)

Fukuda in action:
15) Prime Minister Fukuda orders front loading part of his
administration's new growth strategy (Asahi)
16) Fukuda makes a 40-minute pitch to top business leader on the
need to boost employee wages to settle annual management-labor
negotiations (Tokyo Shimbun)
17) Fukuda in telephone to Russian president-elect discusses
northern territories problem (Tokyo Shimbun)

Trade and economic issues:
18) Senior Chinese official admits that Japan has a legally good
stance on gas-field development in E. China Sea (Sankei)
19) IWC mulling proposal to allow Japan coastal whaling, with some
members conditioning that to ruling out waters near Antarctica
(Sankei)
20) Cabinet adopts amendments to the Anti-Monopoly Act that would
toughen bid-rigging penalties for leading companies (Mainichi)

Articles:

1) TOP HEADLINES

Asahi:

TOKYO 00000656 002 OF 013


Kibo module launched to be delivered to International Space Station

Mainichi:
Selection of BOJ governor: Upper House to vote down government
nomination of Muto

Yomiuri:
Upper House to vote down promotion of Deputy BOJ Governor Muto to
governor at plenary session today; Nomination of Ito as deputy
governor also to be rejected

Nikkei:
Central banks of U.S. and four European countries to expand
provision of funds: FRB to supply 20 trillion yen; Constraining
financial turmoil eyed

Sankei:
Gas fields in East China Sea: "Japan would win, if the case were
brought to a court," senior Chinese government official says

Tokyo Shimbun:
Talks to transfer ShinGinko Tokyo's business to other banks bog
down, as 100 billion yen in deposits demanded; 44.7 billion yen to
sour if bank goes under

Akahata:
Tokyo governor responsible for failure of ShinGinko Tokyo: Japanese
Communist Party calls for ending capital increase worth 40 billion
yen

2) EDITORIALS

Asahi:
(1) Selection of new BOJ governor: DPJ's reason for opposing
promotion of Muto is incomprehensible
(2) ShinGinko Tokyo: Governor Ishihara also responsible

Mainichi:
(1) Selection of new GOJ governor: DPJ allowed to abstain from
voting
(2) Launch of space laboratory Kibo should be made opportunity to
reshape Japan's manned flight strategy

Yomiuri:
(1) Kibo: A Japanese hub in space
(2) ShinGinko Tokyo: Are only former management personnel
responsible for its failure?

Nikkei:
(1) DPJ's preordained opposition to promotion of Muto irresponsible
(2) Space experiments: Produce results

Sankei:
(1) Selection of new GOJ governor: Do not trigger slump
(2) Kibo: Hope for Japanese astronaut Doi's success

Tokyo Shimbun:
(1) Selection of new GOJ governor: Government responsible for quick
resolution
(2) Olympic marathon runners: We hope they will inspire us

Akahata:

TOKYO 00000656 003 OF 013


(1) Columbian troops cross border to attack Ecuador: Speedy
reconciliation efforts indicate joint regional power aimed at
maintaining peace

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, March 11

NIKKEI (Page 2) (Full)
March 12, 2008

09:00
Attended a cabinet meeting in the Diet Building. Internal Affairs
Minister Masuda stayed behind.

09:51
Met Deputy Chief Cabinet Secretary Futahashi at the Kantei. Followed
by Special Advisor Ito. Then met Upper House member Kazuya Maruyama.


11:02
Met Chief Cabinet Secretary Machimura. Later, met Chiba University
of Commerce Professor Haruo Shimada.

11:53
Met Special Advisor Nakayama.

12:38
Met Cabinet Special Advisor Okuda.

14:40
Met Assistant Deputy Chief Cabinet Secretary Saka.

15:01
Met Deputy Foreign Minister Kono. Followed by Environment Minister
Kamoshita and Japanese Association of Corporate Executives President
Masamitsu Sakurai.

16:35
Met former Secretary General Nakagawa. Followed by Cabinet
Intelligence Director Mitani.

17:30
Talked on the phone with Russian President-elect Medvedev.

18:28
Returned to his official residence.

4) U.S. Ambassador to Japan Schieffer stresses to Justice Minister
Hatoyama need to ban simple possession

MAINICHI (Page 2) (Full)
March 12, 2008

Takashi Sakamoto

Justice Minister Kunio Hatoyama yesterday met with U.S. Ambassador
to Japan J. Thomas Schieffer at the Ministry of Justice and the two
exchanged views about tightening regulations on child pornography
that is proliferating on the Internet.

According to an informed source, Schieffer, speaking of Japan and

TOKYO 00000656 004 OF 013


Russia, which have not prohibited simple possession of child
pornography among the Group of Eight countries, insisted: "The only
way to eliminate child pornography that victimizes children is to
ban simple possession of such pornography in order to impact the
market." In response, Hatoyama said: "Personally, I agree with the
ambassador."

5) Japan Committee for UNICEF launches campaign for elimination of
child pornography

MAINICHI (Page 2) (Full)
March 12, 2008

Yumi Isozaki

The Japan Committee for UNICEF yesterday launched a campaign aimed
at seeking to amend the Law for Punishing Acts Related to Child
Prostitution and Child Pornography, in an effort to prevent children
from being exploited for commercial purposes. The campaign calls for
punishing even simple possession of sexual images and pictures of
children aged 18 or below, as well as banning cartoon portrayals of
sexual abuse involving children as "quasi-child pornography."
Through the campaign, the Japan Committee for UNICEF will gather
signatures and present them to the government and the Diet.

Participating in the campaign as promoters are 25 individuals from
nongovernmental organizations (NGOs) that advocate children's rights
and the academic community. Yahoo and Microsoft are also supportive
of the campaign.

The current law punishes the possession of child pornography for the
purpose of selling or offering them, but it does not punish
individuals who collect child pornography for simple possession. For
this reason, images of children depicting sexual violence are
proliferating on the Internet.

Comics, animation, and video games realistically depicting sexual
poses or sexual abuse of children are not subject to the law on the
grounds that the individuals depicted do not exist, but the campaign
calls for treating such depictions as illegal. Furthermore, the
campaign seeks to prepare a system of providing care for the victims
and also calls on relevant industries to impose self-restrictions.

Ambassador of the Japan Committee for UNICEP Agnes Chan, a promoter
of the campaign, met the press in the Diet and said: "Those children
who were photographed suffer trauma throughout their life. It is
difficult to reduce the number of victims because of flaws in the
law. I hope you will sign a petition to help the children."
Everybody can sign a petition on the Japan Committee for UNICEF's
website: http://www.unicef.or.jp.

6) Defense Ministry denies Ishiba's SOFA revision remark

NIKKEI (Page 2) (Full)
March 12, 2008

The Defense Ministry's Press Secretary Takashi Toyota, meeting the
press yesterday afternoon, denied an alleged remark made by Defense
Minister Shigeru Ishiba, who was quoted as saying Japan would have
to hold fundamental discussions, including the Japan-U.S. Security
Treaty, in connection with the Japan-U.S. Status of Forces Agreement
that governs legal status for U.S. Forces Japan. "The defense

TOKYO 00000656 005 OF 013


minister has never said anything about adopting a certain course of
action to review the SOFA," Toyota stressed. "He also said nothing
(about the security pact)," he added. Toyota explained that he had
checked with Ishiba on the matter.

Kanagawa Gov. Shigefumi Matsuzawa yesterday called at the Defense
Ministry to propose revising SOFA provisions. After meeting with
Ishiba, Matsuzawa introduced the remark when he was asked by
reporters at the Defense Ministry about his meeting with Ishiba.
"Mr. Matsuzawa quoted Mr. Ishiba, and I have not confirmed Mr.
Ishiba had said so," Chief Cabinet Secretary Nobutaka Machimura told
a press conference yesterday afternoon.

7) SOFA revision difficult: Koumura

TOKYO SHIMBUN (Page 2) (Full)
March 12, 2008

Kanagawa Prefecture's Gov. Shigefumi Matsuzawa and Okinawa
Prefecture's Gov. Hirokazu Nakaima yesterday met separately with
Foreign Minister Masahiko Koumura and Defense Minister Shigeru
Ishiba. In the meetings, Matsuzawa and Nakaima petitioned Koumura
and Ishiba for a revision of the Japan-U.S. Status of Forces
Agreement, including the pre-indictment turnover of U.S. military
suspects to Japanese police.

"It would be very difficult (to revise the SOFA)," Koumura said,
citing a balance with other countries that have entered into a
similar accord with the United States.

Ishiba also showed a cautious stance, saying, "The government's
policy is to respond by improving its implementation." Ishiba noted
that the ruling Liberal Democratic Party's lawmakers have yet to
hold full-fledged discussions on the SOFA. "Someday," Ishiba said,
"when I'm back in the party, then I'd like to discuss the matter
well."

8) Base-hosting governors call for SOFA revision

SANKEI (Page 5) (Full)
March 12, 2008

A group of governors representing 14 prefectures hosting U.S.
military bases in Japan called yesterday on Defense Minister Shigeru
Ishiba and Foreign Minister Masahiko Koumura and petitioned them for
a drastic revision of the Japan-U.S. Status of Forces Agreement in
the wake of a junior high school girl rape in Okinawa. The governors
included Kanagawa Gov. Shigefumi Matsuzawa, who heads the group, and
Okinawa Gov. Hirokazu Nakaima, who is the group's deputy chair.

9) Diet business to return to normal possibly tomorrow; No prospect
for voting on tax-related bills

YOMIURI (Page 4) (Abridged slightly)
March 12, 2008

Directors of the House of Councillors Budget Committee are set to
meet today to discuss a timetable for deliberations on the fiscal
2008 budget bill. The ruling and opposition camps are likely to
reach an agreement to hold basic question-and-answer sessions on the
budget bill for two days from March 13 with the attendance of all
cabinet ministers, including Prime Minister Fukuda. The Diet, which

TOKYO 00000656 006 OF 013


has been stalled since March 3, is now likely to return to normal.
Nevertheless, because of a delay in deliberations on the budget
bill, there is no prospect that tax-related bills, including one
amending the Special Taxation Measures Law to maintain the
provisional gasoline tax rate, will clear the Diet within the
current fiscal year.

The ruling bloc rammed the fiscal 2008 budget bill and tax-related
bills through the House of Representatives on February 20. This
promoted the Democratic Party of Japan and other opposition parties
to boycott Upper House deliberations for a week.

The ruling and opposition camps started talks this week for
normalizing Diet business. The top directors of the LDP and DPJ of
the Upper House Budget Committee met on March 11 and basically
agreed to start deliberations on March 13.

Upper House deliberations on tax-related bills customarily begin
when discussions reach a certain stage after a question-and-answer
session. The budget bill that passed the Lower House in February
will automatically be enacted within the current fiscal year without
a vote in the Upper House in accordance with a constitutional
provision. Without such a provision, the environment surrounding the
tax-related bills is becoming severe.

Even if deliberations on the budget bill begin on March 13, chances
are that the Upper House Financial Affairs Committee will not start
discussing the bill amending the Special Taxation Measures Law until
next week or later. The DPJ, which holds the committee's
chairmanship, is unlikely to respond to calls for convening sessions
other than regular days -- Tuesdays and Thursdays. Further, with
March 20 being a national holiday, the committee can meet only twice
or three times in March.

The DPJ is also expected to demand the amount of time equivalent to
or more than that spent in the Lower House for deliberating on
tax-related bills in the Upper House. There is skepticism in the
ruling camp that they will have to wait until the end of April (when
inaction in the Upper House can be regarded as de facto rejection
and the ruling camp can again take a vote in the Lower House under
the Constitution).

Given the situation, the view is gaining ground in the ruling camp
that the government and ruling coalition will have to review the
medium term road construction program and revise the plan to place
the tax revenues into the general account on the condition of
maintaining the provisional tax rates.

Meanwhile, the DPJ, which wants to force the prime minister into
dissolving the Lower House, is determined not to make an easy
compromise.

10) DPJ formally decides to reject nomination of Muto for BOJ
governorship today, plans to endorse Shirakawa as deputy governor

MAINICHI (Top Play) (Excerpts)
March 12, 2008

The Democratic Party of Japan (DPJ) formally decided in its
executive meeting last evening to oppose the government's
nominations of Bank of Japan (BOJ) Deputy Governor Toshiro Muto for
the bank's governorship and of Tokyo University Professor Takatoshi

TOKYO 00000656 007 OF 013


Ito for the post of deputy governor. The main opposition party will
approve the appointment of Kyoto University Professor Masaaki
Shirakawa as deputy governor. The Japanese Communist Party has
decided to disapprove the nominations of all three, while the Social
Democratic Party will make the same decision as the DPJ. The
opposition bloc, which controls the House of Councillors, will hold
a plenary session in the Upper House this morning, in which the
government's nominations of Muto and Ito will be rejected.

The government and the ruling parties indicated a willingness to
resubmit its Muto proposal. But since some members in the ruling
camp are calling for caution, a vacancy may be created in the post
of the BOJ governor after the incumbent governor's term of office
expires March 19.

Both Diet chambers held their respective Steering Committee meetings
yesterday and held hearings with Muto, Ito, and Shirakawa on their
policy stances. Later, question-and-answer sessions were held. After
the sessions, the DPJ coordinated views. In a meeting of its fiscal
and financial section, views opposing Muto's promotion were
presented one after another, with one member saying: "He engaged in
monetary policymaking for only five years as deputy governor."
Regarding Ito's nomination, many posed questions about his policy of
inflation targeting.

Keeping in mind such a situation in the party, DPJ President Ichiro
Ozawa, Secretary General Yukio Hatoyama, Deputy President Naoto Kan,
and other executives met yesterday and decided to disapprove of the
nominations of Muto and Ito. Hatoyama told reporters after the
meeting, citing that Muto used to be administrative vice finance
minister: "He is indisputably a man of the Finance Ministry, so it
will become impossible to ensure the independence of the central
bank."

Later, the Upper House held an executive meeting of its Steering
Committee. The opposition camp asserted that a plenary session be
held on the 12th, but the ruling camp reacted fiercely, calling for
a session on the 14th. The Upper House Steering Committee decided to
hold a session on the 12th, with the ruling parties absent. The
ruling coalition will not hold a Lower House plenary session on the
12th, so a vote in the Upper House will be taken first. Regarding
nominations for the post of BOJ governor and deputy governor,
approval from both chambers of the Diet is needed. If the
government's nominations are rejected, the process will return to
the starting point.

11) Muto vs. DPJ over BOJ governorship: Discussion on fiscal and
monetary policies goes nowhere

SANKEI (Page 9) (Excerpts)
March 12, 2008

The Diet yesterday held hearings with Bank of Japan (BOJ) Deputy
Governor Toshiro Muto, whom the government has nominated to be the
next BOJ governor. Muto emphasized his determination to secure the
central bank's independence. But the Democratic Party of Japan (DPJ)
did not back down on its opposition to the promotion of the former
vice finance minister. No prospects are in sight for the battle
between the ruling and opposition camps over the selection of a new
BOJ governor to be resolved. Some are now concerned that if the post
of governor is left unfilled for some time, monetary policymaking
may be stalled.

TOKYO 00000656 008 OF 013

The Democratic Party of Japan (DPJ) and other opposition parties are
against the government's plan to promote Muto on the grounds that it
goes against the principle of separating fiscal and monetary policy.
In response, Muto said in the hearings: "I am determined to secure
the independence of the BOJ in a steady way." In question-and-answer
sessions, too, Muto said: "During my five years as deputy governor,
I worked for the central bank from the standpoint of securing the
BOJ's independence, without being tied to my previous post." But the
opposition bloc remained tough.

The ruling and opposition camps were also at loggerheads over the
issue of the purchase of government bonds. DPJ member Masaharu
Nakagawa assailed: "It is suspected that the Finance Ministry may be
using the BOJ to help it issue government bonds." But Muto
reportedly explained that open-market operations have been carried
out to increase monetary supply.

Meanwhile, many participants asked about the central bank's policy
management after the burst of the bubble economy. Former Policy
Research Council Chairman Yoshito Sengoku pointed out the negative
effect of the bank's ultra-cheap money policy. Muto replied: "There
certainly was a problem, but the policy of keeping interest rates
low and the expansion of public investment were appropriate." He
thus indicated that they were unavoidable measures to underpin the
economy and emerge from a serious deflationary trend. But Sengoku
claimed: "Your explanation is not enough to erase the suspicions."

Meanwhile, the ruling camp has favorably responded to Muto's remarks
in the hearings. New Komeito member Noritoshi Ishida said: "I am now
convinced that he will make efforts to keep the BOJ independent." A
market observer, though, commented, citing growing uncertainty over
the political situation and limited hours for the hearings: "It is
impossible to conduct a cool and substantial discussion."

12) DPJ's timetable for a vote on BOJ nominees followed wild path

ASAHI (Page 4) (Excerpts)
March 12, 2008

The policy course of the Democratic Party of Japan has wavered over
a timetable for taking a vote in a House of Councillors plenary
session on nominees for the new Bank of Japan governor and deputy
governors. The party initially called for a vote on March 12, but it
gave up on the plan, as many party members expressed reluctance
about brushing aside the ruling bloc's opposition. But pressed by
other opposition parties to stick to its original plan, the DPJ
brought the matter to a vote on March 12 in the end. The leadership
apparently feared that a delay in disapproving the nominees would
rock the party.

Four DPJ executives, including President Ozawa, held a meeting at
11:00 a.m. on March 11. After the meeting, Secretary General Yukio
Hatoyama said to reporters: "We are planning to hold a plenary
session tomorrow and set aside some time (to replace nominees) after
rejecting the government's personnel plan. In that case, the LDP
would boycott deliberations. We exchanged views that such a
consequence was not desirable."

The DPJ has been boycotting deliberations in the Upper House
following the forcible adoption of the budget bill in the Lower
House. But views are growing in the Upper House that the party

TOKYO 00000656 009 OF 013


should swiftly return to deliberations to pursue the government and
ruling bloc on the road issue and other matters. Resuming
deliberation on March 12 was temporarily envisioned. However, if the
party pushed too hard on a timetable for the BOJ personnel issue,
the ruling bloc would boycott deliberations on the budget, thereby
forcing the DPJ to face public criticism. In order to avoid such an
eventuality, the DPJ Upper House proposed postponing the BOJ
timetable.

13) Senior LDP members say Lower House should be dissolved after
terms of Lower House members expire; Seek to check DPJ's call for
Lower House dissolution in April

TOKYO SHIMBUN (Page 2) (Full)
March 12, 2008

Senior Liberal Democratic Party members have begun to say that the
House of Representatives should not be dissolved before September
2009 when the terms of the Lower House members expire. Their aim is
to seek to contain the main opposition Democratic Party of Japan
(DPJ or Minshuto), which has taken the offensive to force Prime
Minister Yasuo Fukuda to dissolve the lower chamber early for a
general election.

The prevailing view in the LDP has been that it would be desirable
that the Lower House be dissolved this fall after the end of the G8
summit at Lake Toya in Hokkaido in July.

However, senior members of the Machimura and Tsushima factions
reached an agreement in a meeting on the night of March 8 that the
Lower House should not be dissolved before the terms of the Lower
House members expire. Election Committee Chairman Makoto Koga and
Vice Committee Chairman Yoshihide Suga have made similar remarks to
this effect.

The DPJ has made clear its policy is to force Lower House
dissolution in April by shaking the government and ruling parties
with such issues as the appointment of new Bank of Japan governor,
the provisional tax rates, and the pension-record mess.

In a press conference on March 10, DPJ President Ichiro Ozawa, who
had denied the possibility of an early Lower House dissolution,
stated: "We will have a general election before too long."

There is no sign that the Fukuda cabinet will be able to recover its
popular support. DPJ Deputy President Naoto Kan said: "It will be
impossible" for the ruling coalition to retain more than two-thirds
of the Lower House seats, which require for them to override Upper
House decisions, if the prime minister is forced to dissolve the
Lower House (in April). There is even the possibility that the
ruling camp will be lacking a majority in the Lower House and that
the DPJ will take over the reins of government.

The senor LDP members' remarks come from their desire to show their
determination that the Lower House will never be dissolved under the
disadvantageous situation for their party and to weaken the DPJ's
momentum.

One senior LDP member commented: "We will never allow (Fukuda) to
dissolve the Lower House after being forced (by the DPJ). We will
overcome the April crisis at any cost ."


TOKYO 00000656 010 OF 013


14) Koizumi, Koga, others want Diet dissolution put off until after
next year's summit

TOKYO SHIMBUN (Page 2) (Full)
March 12, 2008

Four ruling Liberal Democratic Party heavyweights met at a Tokyo
restaurant yesterday evening and agreed that the House of
Representatives should not be dissolved for a general election until
after next year's Group of Eight (G-8) summit. The four were former
Prime Minister Junichiro Koizumi, LDP Election Strategy Council
Chairman Makoto Koga, LDP General Council Chairman Toshihiro Nikai,
and former LDP Secretary General Tsutomu Takebe.

The House of Representatives' current tenure is up until September
2009. In this light, the four apparently want a general election to
take place after the lower chamber winds up its current term.

15) Prime Minister Fukuda orders front-loading of part of growth
strategy

ASAHI (Page 4) (Full)
March 12, 2008

Prime Minister Fukuda yesterday at an informal meeting of his
cabinet ordered relevant ministries to implement on a front-loaded
basis starting in April a portion of the new economic growth
strategy that will be adopted by the cabinet in June. With the
currency market unstable and stock prices also falling, the prime
minister wanted to stop the economy from slowing down any further.

Specific measures for implementing the new growth strategy will be
compiled this spring by the Economic and Fiscal Policy Council. The
package then will be included in a set of "big-boned economic
guidelines" in June. Prime Minister Fukuda expressed his concern
this way: "with the U.S. economy slowing down and the rising trend
in crude oil prices, the risk of (the economy) starting to slide is
becoming greater." According to Economic and Fiscal Policy Minister
Ota, the front-loading will consist of three elements: measures to
strengthen the constitutions of small to medium-sized businesses,
improving the job environment, and regional revival.

16) In 40-minute monologue, Prime Minister Fukuda desperately asks
JBF chairman for employee pay raises; Effort to boost his
administration's popularity?

TOKYO SHIMBUN (Page 2) (Full)
March 12, 2008

Prime Minister Yasuo Fukuda is now paying close attention to the
results of this year's annual spring labor-management negotiations,
which are expected to be reach a climax today.

Positioning the improvement of the daily lives of the people as the
top priority of his cabinet, the prime minister appears to be
linking (employee pay raises) to boosting his government's
popularity. However, the daily lives of the public have increasingly
become difficult with food prices sharply increasing due to the
soaring prices of imported grains. Whether the burden on the
national livelihood can be eased by employee pay hikes is becoming
an important issue for the Fukuda cabinet.


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The Cabinet e-mail magazine, distributed on March 6, started with:
"I am Yasuo Fukuda, who will share with you the fruits of your
toil." What he meant was explained as: "Now is time for the
achievements of (structural) reform to be provided to consumers as
pay raises." With that, Fukuda pledged to back labor (and not
management).

On March 6, Fukuda called Business Federation Chairman Fujio Mitarai
in his office (Kantei) and asked him for employee pay increases.

In the meeting, Mitarai said: "I don't know what outcome will
emerge." Fukuda then told him: "That's why I am asking you." The
prime minister reportedly spoke unilaterally for about 40 minutes.

Fukuda told the press on March 10, as well, about the spring labor
offensive: "I understand individual companies have their views, but
I want them to make their utmost effort."

Referring to soaring food prices and the continued high-price of
crude oil, Fukuda said: "Prices have soared. But if employees' wages
are raised more than the high prices, there will be no problem."
Whether the management side will come up with the replies as Fukuda
expected is unclear.

17) Fukuda holds talks with Medvedev over territorial issue

TOKYO SHIMBUN (Page 2) (Full)
March 12, 2008

Prime Minister Fukuda talked with Russian President-elect Medvedev
over the telephone yesterday evening. Referring to the pending issue
of the Northern Territories, Fukuda told Medvedev: "I want to
cooperate to raise our two countries' bilateral relationship to a
higher level. I want to see specific progress for a settlement of
the territorial issue."

Medvedev responded: "We're ready to continue to talk about a
difficult issue like a peace treaty, based on various agreements and
principles accomplished by both countries."

Fukuda also congratulated Medvedev on his victory in the
presidential election. Medvedev said, "I'm willing to cooperate with
Japan for a successful G-8 summit (to be held at Lake Toya in
Hokkaido)."

18) High-ranking Chinese official: Japan will win if bilateral gas
dispute is taken to court

SANKEI (Top play) (Excerpts)
March 12, 2008

It was found yesterday that in talks between Japan and China over
the disputed gas exploration rights in the East China Sea, the
Japanese side proposed taking the matter to an international court.
In response, a high-ranking Chinese official effectively admitted
that the Japanese claim is more reasonable (than China's) under
international law, saying, "If it is taken to a court, Japan
probably will win." The official also reportedly strongly rejected
entering international court procedures, saying: "We cannot let
Japan win in court."

When Prime Minister Yasuo Fukuda visited China late last year, an

TOKYO 00000656 012 OF 013


agreement was reached to aim at settling this issue before a visit
to Japan by Chinese President Hu Jintao. Bilateral talks have
stalled since then. Now that it has become clear that China is aware
of the validity of Japan's claim, Japan cannot make an easy
compromise for settling the matter speedily.

Tokyo claims that the median line that divides the Japanese and
Chinese waters in the East China Sea must be recognized as the
border, while Beijing maintains that Chinese territory extends to
the Okinawa Trough west of the Okinawa islands. The two sides'
claims have been wide apart since bilateral talks began in 2004.

19) Idea of allowing coastal whaling on condition that whaling be
banned in Southern Ocean floated by some antiwhaling countries

SANKEI (Page 2) (Excerpts)
March 12, 2008

Masato Kimura, London

In the latest midterm conference of the International Whaling
Commission (IWC) held in London on March 6-8, a compromise proposal
calling on Japan to suspend research whaling in the Southern Ocean
but to allow it to resume coastal whaling for commercial purposes
was floated, sources revealed yesterday. Reportedly, this proposal
was informally discussed between pro-whaling and antiwhaling
countries. The proposal is drawing attention as a measure to break
the impasse in the IWC talks. The proposal is expected to be
presented to the upcoming annual meeting of the IWC in Chile slated
for late May through June.

According to what IWC Secretary Grandy told the Sankei Shimbun
yesterday, the proposal was presented by the Netherlands and
Argentina, both antiwhaling nations, during the midterm conference.
The aim of the midterm conference was to discuss how to normalize
IWC activities, which have been stalled because of conflict between
pro-whaling and antiwhaling countries. So the proposal was not a
formal agenda item for discussion. But pro-whaling countries
including Japan and antiwhaling countries discussed the proposal
seriously in intervals between sessions.

A similar compromise proposal came up for discussion in the recent
International Whaling Symposium held in Tokyo in February. According
to the British Independent, although the United Kingdom is in the
van of antiwhaling countries, a British delegate indicated
understanding toward a resumption of coastal whaling that would lead
to banning research whaling in the Southern Ocean if a total ban on
whaling is not expected.

20) Antimonopoly surcharge against bid-riggers: Companies that
played leading role subject to surcharge 50 PERCENT higher than
present level: Amendment to AML adopted at cabinet meeting

MAINICHI (Page 2) (Excerpts)
March 12, 2008

The government yesterday adopted at a cabinet meeting a bill
amending the Anti-Monopoly Law (AML) featuring an increase in
surcharges imposed on companies that engaged in bid-rigging and the
reinforced protection of small- and medium-sized businesses. Under
the revised law, administrative surcharges imposed on companies that
played a leading role in bid-rigging or cartels would be increased

TOKYO 00000656 013 OF 013


50 PERCENT from the current level. The abuse of dominant position,
meaning leading companies make an undue demand to their
subcontractors, would also be added as a practice subject to
administrative surcharges. The government wants to see the amendment
enacted next spring.

According to the amendment bill, administrative surcharges imposed
on companies that played a major role in bid-rigging practices or
other unfair trade practices would be raised from the current 10
PERCENT to 15 PERCENT of sales made from illegal practices, if
they are major manufacturers. In the meantime, the system of
reducing administrative surcharges on companies that voluntarily
admitted to unfair trade practices would be improved.

The abuse of dominant position, misleading representation of
commercial products, including false or ambiguous labeling, and
exclusion-type private monopoly, would also be added to the list of
illegal trading practices subject to administrative surcharges.

Outline of bill amending AML

? 50 PERCENT increase in administrative surcharges imposed on
companies that played leading role in bid-rigging from the current
level
? Addition of the abuse of dominant position, false labeling and
exclusion-type private monopoly to the list of unfair business
practices subject to administrative surcharges
? Extension of the period of the imposition of administrative
surcharges from the current three years to five years.
? Mandatory prior notification when a company acquires stocks of
another company as is the case for a merger.
? Thorough revision of the judge system. Measures should be taken
after consideration within fiscal 2008.

SCHIEFFER

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