Cablegate: Daily Summary of Japanese Press 03/17/08

DE RUEHKO #0707/01 0770818
P 170818Z MAR 08





E.O. 12958: N/A



(1) Survey of top executives of leading companies: 23 PERCENT see
economy deteriorating; Many wary of strong yen, weak U.S. economy

(2) G-20 ends; New framework proposed for global warming dialogue;
Idea of setting targets draws fire from developing countries; Japan
expected to run into difficulties in handling matter (Nikkei)

(3) Last-ditch battle over nomination for BOJ governorship to avoid
creating vacancy (Nikkei)

(4) Interview with Kunihiko Miyake, former minister at Japanese
Embassy in Iraq: Japan benefited from SDF dispatch to Iraq; Japan
secured U.S. confidence by sharing risk with other countries

(5) Australian prime minister enjoying high public support for
anti-whaling posture; Makes light of Japan while placing importance
on China (Yomiuri)


(1) Survey of top executives of leading companies: 23 PERCENT see
economy deteriorating; Many wary of strong yen, weak U.S. economy

NIKKEI (Top Play)
March 17, 2008

The Nikkei yesterday released the results of a survey of 100
presidents of major corporations. According to the result, those
executives who replied, "The economy is deteriorating" reached 23.8
PERCENT , three times higher than the 7.5 PERCENT who held that
view in the survey last December. The top corporate executives thus
are increasingly alarmed about the sharp rise in the yen and the
rapid slowdown of the U.S. economy. In the survey of 500 regional
companies also carried out by the Nikkei, 30 PERCENT of the top
executives replied, "The economy has taken a turn for the worse."
Regional companies are increasingly taking defensive actions to deal
with the rising cost of raw materials that is squeezing corporate
profits and dampening desires for increased capital investment.

The survey of 100 top executives was conducted in mid-March,
targeting presidents of leading domestic companies, including
chairmen and bank presidents. The survey elicited responses from the
leadership at 134 firms. The survey of 500 regional companies
received replies from 422 top executives at leading regional
companies, business establishments and groups.

In the survey of 100 top executives, 23.8 PERCENT of respondents
chose one of the following views: "The economy has taken a turn for
the worse," "The economy is slowly deteriorating" or "The economy is
rapidly deteriorating." A total of 7.5 PERCENT in the survey
conducted in December last year replied that the economy was
deteriorating. The outcome of the survey this time indicates that
corporate managers' feelings about the state of the economy have
rapidly cooled down. The number of those who replied, "The economy
is expanding" has dropped from the 64.2 PERCENT in the previous
survey to 27 PERCENT .

The diffusion index (DI) for current economic conditions, calculated

TOKYO 00000707 002 OF 009

by subtracting the percentage of those who replied that the economy
is deteriorating from the percentage of those who said that the
economy is expanding, has plummeted from the 56.7 PERCENT recorded
in the previous survey to 3.8 PERCENT . The figure is well below
45.5 PERCENT posted in February 2005, which also saw a drop in the
DI due to inventory adjustment in the information and technology
(IT) sector. Top executives are most concerned about the movements
of the U.S. economy. As the country or region facing the biggest
threat of an economic slowdown, a total of 94.9 PERCENT cited the
U.S. The number of those who replied that the U.S. economy is
deteriorating came to 76.9 PERCENT .

Following the dollar's brief fall to the 99 yen level on March 13,
100 top executives were asked additional questions, of whom 73
responded. Asked about the currency's impact on operations in the
event the yen appreciation trend that has exceeded the 100 to the
dollar level continues, many respondents felt a strong sense of
crisis, with 26 PERCENT replying that the dollar below 100 yen
would hurt earnings as a result of declining exports, with 52.5
PERCENT saying that corporate performances would deteriorate as a
result of a domestic economic slowdown. It has been anticipated that
the high-yen trend would ease high prices in raw materials. However,
the number of those who replied, "Advantage of importing raw
materials and finished products is greater (than the negative impact
of the strong yen)," was no more than 12.3 PERCENT .

Compared with the survey of 100 top executives, the survey of 500
regional companies, of whom many are small businesses found 32.2
PERCENT who felt the economy is deteriorating, and 28.2 PERCENT
seeing the economy as expanding. DI dropped to negative 4. DI in the
previous poll, carried out in August 2007, stood at 52.9.

According to region, DIs of all blocs thought the nation were in the
plus column. However, those of six blocs excluding the Tokai,
Kinki, Chugoku and Shikoku blocs moved into the minus column. The
drop in the DIs of the Hokkaido and Koshinetsu blocs were pronounced
due to a strong impact of high prices of raw materials.

(2) G-20 ends; New framework proposed for global warming dialogue;
Idea of setting targets draws fire from developing countries; Japan
expected to run into difficulties in handling matter

NIKKEI (Page 3) (Abridged slightly)
March 17, 2008

Cabinet ministers of the Group of 20 (G-20) wound up their three-day
meeting on global warming on March 16, after discussing a new
framework to succeed the Kyoto Protocol, which is to expire in 2012.
In the meeting, the last of its kind, the member countries shared
the need to establish a new arena for dialogue and discussion
between industrialized and developing countries, such as China and

Greenhouse gas emissions by the G-20 account for 80 PERCENT of the
global total. The participating countries agreed on the need to
continue discussing the matter at the same table. As the chair of
this year's G-8 Lake Toya Summit, Japan before long will make a
proposal to relevant countries on establishing a new venue for
dialogue with the aim of reaching an agreement at the Summit in

Economy, Trade and Industry Minister Akira Amari, co-chair of the

TOKYO 00000707 003 OF 009

meeting, summed up the meeting, saying: "Firm unity has been
confirmed between the industrialized and developing countries to
work together to contribute to the global environment." Environment
Minister Ichiro Kamoshita made a speech yesterday in which he
announced a plan to hold an international meeting in May to study
the sector-specific approach to set a common target for each
industry, such as steel and cement, and for each field, such as
office and household, to help reduce greenhouse gas emissions.

But there still exists a wide gap in views between industrialized
and developing countries. The sector-specific approach drew
objections from developing countries, which fear that industries in
their countries would be required to achieve energy efficiency on a
par with industrialized countries and that they would be integrated
into global targets that combine each country's projected
sector-specific reduction target.

There have been strong negative reactions to setting numerical
targets from long before. In the G-20 meeting, advanced countries
argued that certain levels of targets must also be placed on
developing countries under a post-Kyoto framework, while China and
India called for common but differentiated responsibilities. Their
logic is that although they would accept certain responsibilities,
industrialized nations should first reduce emissions ahead of them.

The G-20 also exposed differences in views on financing. The clean
development mechanism (CDM), now in force based on the Kyoto
Protocol, is a system allowing industrialized countries to assist
developing countries in technologies and funds. "It is easy on
countries with large room for emission reductions," as a METI
official put it. The Japanese government envisions reviewing this
system to launch a mechanism giving assistance first to developing
countries that are actively addressing global warming with the aim
of encouraging competition among developing countries. But
developing countries are calling for the continuation of the current

The G-20 was the first international cabinet ministerial to discuss
global warming since the 13th session of the Conference of the
Parties to the United Nations Framework Convention on Climate Change
(COP13), held last December in Bali, Indonesia. Looking back on the
G-20 meeting, Environment Minister Kamoshita said: "Attendants
expressed a variety of views, making clear differences in views." As
host of this year's G-8 Summit, Japan is likely to find it difficult
to bridge gaps in views.

International standardization of EU emissions trading rules gaining
momentum; Japan under pressure for swift response

Commentary: The Tokyo metropolitan government has announced that it
would join the International Carbon Action Partnership (ICAP)
specifying a set of rules on greenhouse gas emissions trading,
adopted under the leadership of the European Union (EU). An
expansion of the ICAP membership is likely to accelerate the pace of
the growing international carbon market, effectively giving a boost
to the international standardization of the EU model. The Japanese
government, which is studying its own system, now finds itself under
pressure to respond to it speedily.

ICAP is made up of countries and regions that have implemented or
are actively pursuing the implementation of carbon markets through
mandatory cap and trade systems. Japan is now only an observer of

TOKYO 00000707 004 OF 009

ICAP due to stiff resistance from steel and other industries about
capping emissions.

Environment Minister Kamoshita in a symposium on March 16 said:
"Heavy industries will not always bring wealth to Japan. A certain
type of cap will bring about technological innovation and
competitiveness. We would like to make Japanese rules into
international standards without following the EU-model."

The Tokyo metropolitan government does not think it can immediately
implement the emission trading system, with a senior official
saying: "Joining ICAP does not mean abiding by the EU rules."
Environmental protection ordinances must be reviewed, and rules
inconsistent with those of other areas in Japan make it difficult
for enterprises to map out their business strategies.

Japan still can use the EU's know-how in designing its system.
Former British Prime Minister Tony Blair described emission trade
using the EU system as a global trend. Formally joining ICAP and
actively taking part in discussion would be a shortcut to getting
Japan's view reflected in work to establish international rules.

9 industries set independent targets

In order to meet greenhouse gas reduction targets set under the
Kyoto Protocol, nine industries, such as school and broadcasting,
have drawn up new independent action programs. Four industries,
including supermarkets and convenience stores, will reduce a total
of 300,000 tons of CO2 annually, increasing their targets from the
existing independent programs.

The programs will be announced at a joint council meeting today of
the Environment Ministry and METI.

The nine industries include private schools, commercial
broadcasters, NHK (Japan Broadcasting Corporation), and cable
television operators. Seven industries listed numerical targets,
with commercial broadcasters aiming to increase energy efficiency by
10 PERCENT in fiscal 2010 from fiscal 2004 levels.

Supermarkets and convenience stores, department stores, and
construction machinery have raised their targets.

(3) Last-ditch battle over nomination for BOJ governorship to avoid
creating vacancy

NIKKEI (Page 2) (Full)
March 17, 2008

The government made every possible effort to break the impasse over
the issue of nominating a successor to Bank of Japan Governor
Toshihiko Fukui, whose term of office expires on March 17. The
Democratic Party of Japan (DPJ) and other opposition parties are
adamantly opposed to the government's plan to promote BOJ Deputy
Governor Toshiro Muto to become governor. Even if the government
proposes an alternative to Muto, however, it will not be easy to
gain approval from the opposition bloc. To break the impasse, some
suggest having Kyoto University Professor Masaaki Shirakawa, whose
nomination as BOJ deputy governor was approved in the two Diet
chambers, serve as acting governor. Others propose extending the
term of the incumbent governor for the time being, without
presenting another nominee.

TOKYO 00000707 005 OF 009

(1) Possibility of submitting another nomination upon ascertaining
DPJ response

An increasing number of ruling party members have begun to say that
the government may have to propose an alternative to Muto for the
BOJ governorship, given the Democratic Party of Japan's (DPJ) tough
stance. Opposition parties, which control the House of Councillors,
have declared that they would not agree if the government resubmits
the Muto plan. Prime Minister Fukuda has also begun to consider that
it will be unavoidable to nominate another candidate.

Appearing on a TV program yesterday, Liberal Democratic Party member
Kaoru Yosano indicated a negative view about resubmitting the Muto
plan, saying: "It is reckless to resubmit a plan that was once
rejected in the Upper House." He also stressed the need for prior
talks to be held with the opposition bloc, remarking: "We must hold
negotiations with each party before coming up with a specific

DPJ Secretary General Yukio Hatoyama hinted that the party might
agree if the government nominated Asian Development Bank President
Haruhiko Kuroda or Hiroshi Watanabe, an advisor to the Japan center
for International Finance, both former vice finance ministers for
international affairs. But it is difficult to judge whether this is
Hatoyama's personal view or the party's collective opinion. If the
prime minister easily gives consent on the DPJ proposal, he could
give the impression that he is under the control of the DPJ and lose
his grip on the party, as a result.

It will not be easy for Prime Minister Fukuda, who has continued to
say that Muto is the best choice to find another candidate at this
stage. It has been reported that although Fukuda unofficially asked
a person outside the bureaucracy to assume the governorship, the
person declined the offer, citing the reason that a high decree of
specialization is required for monetary policy. Aides to the prime
minister reportedly were busily engaged in selecting a new candidate
last night, too.

(2) Possibility of Shirakawa serving as acting governor, with no
alternative presented

A close aide to Prime Minister Fukuda said: "The prime minister
cannot easily give up on the plan. Since there was no other proper
candidate, he nominated Mr. Muto." Government officers also said
yesterday that the prime minister has not changed his mind. Even so,
the DPJ, the largest party in the Upper House, remains tough in
opposition to the Muto plan.

A senior LDP member said last night: "There is the possibility that
the Prime Minister's Office will not be able to nominate a new
candidate for the governorship today." This remark is based on a
scenario in which the government asks the ruling and opposition
camps to take more time for the selection process to set a
cooling-off period. In this case, it will become necessary to take
some measures to avoid creating a vacancy in the governor's post
after Fukui's term of office expires.

To avoid creating a vacancy, some suggest revising the Bank of Japan
Law to enable Fukui to continue to perform his duties until his
successor is appointed.

TOKYO 00000707 006 OF 009

As the condition for allowing the incumbent governor to perform his
duties even after the expiration of his term, the DPJ is expected to
thrust before the government a pledge not to re-nominate Muto in the
future. Even if a bill amending the said law is voted down in the
Upper House, the government will be able to readopt the bill in the
House of Representatives, based on the relevant provision in the

Some persons suggest the idea of letting Shirakawa serve as acting
governor for the time being. In this case, too, the vacant post must
be filled at least by the next monetary policymaking meeting
scheduled for April 8.

In the government, some propose having Shirakawa serve as acting
governor and enacting a bill amending the Bank of Japan Law by an
override vote in the Lower House, based on the 60-day rule, while he
is in office as acting governor. Since this proposal is intended to
leave the possibility of a "Governor Muto" by setting a provision
that recognizes the Lower House's superiority for the appointment.
But if this proposal is translated into action, the government and
the DPJ will unavoidably clash head-on.

(4) Interview with Kunihiko Miyake, former minister at Japanese
Embassy in Iraq: Japan benefited from SDF dispatch to Iraq; Japan
secured U.S. confidence by sharing risk with other countries

MAINICHI (Page 6) (Full)
March 16, 2008

-- How do you see the governing of postwar Iraq?

Miyake: When I went to Iraq after the war, I was surprised at what
an U.S. responsible official told me: "We succeeded in the
occupation of Germany and Japan. So, we will win here." But I
thought that the U.S. would definitely fail with such thinking. The
U.S. official, who was only in his twenties, said: "I will teach
Iraq democracy." I wondered whether proud Iraqis would welcome such
an attitude. I thought I had come to an unbelievable place.

-- International opinion was divided on the Iraq war.

Miyake: Opinion is divided on the Iraq war, depending on each
country's internal situation, as well as the international
situation. At that time, however, then Iraqi President Saddam
Hussein's defiant attitude toward the international community had
exceeded the tolerance level. The war itself was not wrong in the
sense of forcing the former president out of power. But I think the
postwar occupation of Iraq was a mistake because sufficient troops
were not sent there, and there was no plan to run the country.

-- Japan sent its Self-Defense Forces (SDF) personnel to the
southern Iraq city of Samawah.

Miyake: What Japan had to do was clear. With the economies of China
and India growing fast, all eyes have been focused on energy
security. To ensure a stable crude oil supply, it is only natural
for Japan to support Iraq in rebuilding itself. Japan's economic
assistance in the Iraq war (in 1991) was not appreciated. In that
context, Japan gained much benefit from the small investment of
dispatching SDF troops to Iraq. If Japan did not dispatch the SDF,
its status would have been downgraded in the international

TOKYO 00000707 007 OF 009

-- What was changed by the SDF deployment?

Miyake: The United States and other countries treated Japan as their
true partner and provided us with intelligence, as well. I really
felt the respect given Japan for sharing the risks with other
countries; there was a difference from the past in the international
community's treatment of Japan.

Another important factor is that all SDF personnel returned home
safely. Japan learned from the failure in World War II, during which
the Japanese military acted recklessly. It proved, too, that the SDF
is under civilian control, which led to gaining the public's
confidence in the SDF. Japan should carry out this kind of SDF
dispatch. But it will be difficult to do so due to the lack of
political leadership.

-- What is your view on the appropriateness of future dispatches of
SDF troops overseas?

Miyake: If Japan dispatches the SDF overseas, it would probably send
them during an emergency. The reason East Asia has enjoyed peace for
such a long time is that the causes of disputes were frozen because
of the legacy of ideological confrontation during the Cold War
period. In short, Japan has been in an easy situation. If tensions
grow, however, public opinion would run ahead at high speed and
mistakes would be made. In order to prevent such a situation, Japan
needs to prepare for emergencies. There is nothing wrong with having
a military capability, but how to use it is important.

Kunihiko Miyake worked at the Japanese Embassy in Iraq for about two
years since 1982. He left the Foreign Ministry in 2005 after serving
in such posts as director of the Japan-U.S. Security Treaty
Division, minister at the embassy in China, minister at the embassy
in Iraq, and director general of the Middle Eastern and African
Affairs Bureau. He is currently a visiting professor at Ritsumeikan

(5) Australian prime minister enjoying high public support for
anti-whaling posture; Makes light of Japan while placing importance
on China

YOMIURI (Page 9) (Full)
March 14, 2008

(Arai, Sydney)

Some changes have been occurring in relations between Japan and
Australia since the Labor Party assumed power in Australia last
November. Prime Minister Kevin Rudd will make a round of visits to
the U.S., European countries, and China in his first overseas trip
after coming into office. He will not visit Japan, against the
backdrop of the ongoing bilateral dispute over Japan's research
whaling in the Southern Ocean. This decision also reflects the
Australian government's new foreign policy of giving priority to

Expectations growing in business world

Rudd announced that he would visit Washington, New York, Brussels,
Bucharest, London, and Beijing from March 27 through April 13. In
China, he will meet President Hu Jintao and other Chinese officers

TOKYO 00000707 008 OF 009

in a bid to increase business chances in China for his country's
firms in cooperation with the Australian business community.

Australia and China have deepened their bilateral ties on the
economic and security fronts. For Australia, Japan had long been its
largest trade partner, but China captured the top position in 2007.
The two countries' foreign ministers held their first strategic
dialogue in February 2008, in which Australian Foreign Minister
Smith voiced opposition to an initiative for holding a strategic
dialogue among Japan, the U.S., Australia, and India, out of
consideration to China.

Prime Minister Rudd used to be a diplomat who once served in the
Australian Embassy in China. Through this experience, he has
established extensive personnel ties in China. He is also proficient
in Chinese. His daughter is married to a Chinese-Australian, and his
son studied in China. As it stands, he is closely connected with
China. The Australian business world has placed high expectations
for the prime minister's efforts to strengthen relations with

Criticism as weak-kneed stance

Prime Minister Rudd dispatched Foreign Minister Smith to Tokyo this
January. Smith and Foreign Minister Koumura agreed to do their best
to avoid the whaling issue from negatively affecting the bilateral
relationship. A source connected to Japan-Australia relations said:
"Should Prime Minister Rudd visit Japan, the whaling issue will
inevitably be brought up in a meeting between Rudd and Prime
Minister Fukuda. The two countries now share the view that they
don't want to hold a bilateral summit for the time being." The
effect of whaling issue on bilateral relations has become quite

In Australia, many people are strongly opposed to whaling
operations. The ruling and opposition parties are both against
whaling, and the former John Howard administration was no exception.
However, Prime Minister Howard, who established "a honeymoon period
with Japan," according to a Foreign Ministry source, as represented
by his signing of a joint security declaration with the then
Japanese prime minister, was labeled as "week-kneed toward Japan."
That is because he gave priority to economic and security relations
with Japan, without tackling the whaling issue head-on.

The Rudd administration absorbed the deep-seated public
dissatisfaction by dispatching vessels to watch Japan's whaling
operations in the Southern Ocean, as well as by expressing a
willingness to look into bringing the case to international court.
The prime minister offered an historic official apology to the
original inhabitants Aborigines. Dennis Shanahan, political editor
of the Australia's national daily newspaper The Australian, said:
"'The anti-whaling stance' and his 'apology' showed the effect of
the change of government to the people."

As a result, the latest public opinion survey conducted by the
Australian set a record high of public support for Prime Minister
Rudd at 73 PERCENT , while the rate of support for opposition leader
Brendan Nelson hit a record low of 7 PERCENT . Prime Minister Rudd
is now enjoying his "honeymoon with the people."

Consideration to U.S.

TOKYO 00000707 009 OF 009

Given Australia's decision to withdraw about 500 of its 1,500 troops
or so now being deployed in Iraq, there were views worrying about
its impact on relations between the U.S. and Australia

Nonetheless, in regular U.S.-Australia foreign and defense
ministerial talks held in Australia on Feb. 23, an Australian
representative emphasized that the Australia-U.S. alliance will
continue to be the cornerstone of Australia's diplomacy and
indicated that the government would dispatch more police troops to
Afghanistan. By revealing these plans, the Rudd administration
succeeded in reconstructing the relationship with the U.S., blowing
off Washington's concerns.

Australia is not a member of the North Atlantic Trade organization
(NATO), but the prime minister will attend a summit meeting of NATO
to be held in Bucharest during his visit there soon. Rudd is
expected to underscore the need for NATO member nations to
strengthen their involvement in Afghanistan. Australia has
dispatched about 1,000 troops to Afghanistan.


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