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Cablegate: Daily Summary of Japanese Press 05/15/08

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ZNR UUUUU ZZH
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INFO RUEKJCS/SECDEF WASHDC PRIORITY
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RHHMUNA/HQ USPACOM HONOLULU HI
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RHMFIUU/HQ PACAF HICKAM AFB HI//CC/PA//
RHMFIUU/USFJ //J5/JO21//
RUYNAAC/COMNAVFORJAPAN YOKOSUKA JA
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RUEHKSO/AMCONSUL SAPPORO 8398
RUEHBJ/AMEMBASSY BEIJING 3346
RUEHUL/AMEMBASSY SEOUL 9361
RUCNDT/USMISSION USUN NEW YORK 9826

UNCLAS SECTION 01 OF 13 TOKYO 001335

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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 05/15/08

INDEX:

(1) Japan chosen by China as the first country to send rescuers for
victims of Sichuan earthquake (Mainichi)

(2) Government coordinating dispatch of SDF to Sudan for PKO, with
survey team traveling there possibly next month (Asahi)

(3) U.S. Assistant Secretary of State Sullivan: Agreement on a
long-term target for reducing emissions of greenhouse gases at an
expanded summit meeting (Nikkei)

(4) Government to offer low-interest yen loans totaling up to 500
billion yen to developing countries over five years to cut
greenhouse gas emissions (Nikkei)

(5) Japan to set up new framework for dialogue with Africa with eye
on China's rapid approach to Africa (Nikkei)

(6) Association of governors hosting U.S. bases to ask government to
review SOFA today (Ryukyu Shimpo)

(7) Government informally decides to offer 1.3 billion yen in
first-portion realignment subsidy to five municipalities (in
Okinawa) in fiscal 2008 (Okinawa Times)

(8) Interview with Masaaki Gabe, professor at University of the
Ryukyus: No possibility of Marines coping with emergency (in and
around Japan) (Ryukyu Shimpo)

(9) U.S. military's leisure-purpose rental cars also toll free
(Akahata)

(10) Counting chickens, government agencies engaged in road revenue
battle; Prime minister eyes improving national livelihood (Asahi)

(11) Security and foreign investment restrictions: J-Power incident
questions: Rise of protectionism in Europe, U.S.; Japan caught on
horns of dilemma, intertwined with internationalization (Nikkei)

(12) Review of new elderly healthcare system: High wall for securing
fiscal resources to reduce burden on elderly (Tokyo Shimbun)

ARTICLES:

(1) Japan chosen by China as the first country to send rescuers for
victims of Sichuan earthquake

MAINICHI ONLINE NEWS (Full)
May 15, 2008, 12:57

Seiji Nishioka, Beijing

The Chinese Foreign Ministry this morning announced that it would
"accept emergency rescuers from Japan," although China until then
had shown reluctance to accept foreign rescuers, for instance, from
an international relief team, on the grounds of road conditions due
to the recent powerful Sichuan earthquake. Countries around the
world had offered assistance to China, but Japan has now chosen by
China as the first country to send a disaster relief unit to that
country.


TOKYO 00001335 002 OF 013


Given Chinese President Hu Jintao's visit to Japan early this month,
Beijing's choice of Japan as the first country to send rescuers
would be taken to mean that China not only has recognized Japan's
broad experience in disaster relief activities but it also has
attached importance to relations with Japan.

According to the Chinese Foreign Ministry, China will announce in
the days ahead that it will accept rescuers from other countries in
addition to Japan.

(2) Government coordinating dispatch of SDF to Sudan for PKO, with
survey team traveling there possibly next month (Asahi)

ASAHI (Page 1) (Excerpts)
Eve., May 15, 2008

The government has started coordinating the sending, possibly in
June, a site survey team to the southern part of Sudan to determine
the feasibility of dispatching Self-Defense Forces personnel there
for United Nations peacekeeping operations (PKO). Following the end
of over 20 years of hostilities there, the public security of the
southern portion of the country is relatively stable. After
determining whether the five principles of participating in PKO,
such as the agreement of the country to accept the troops, the
government will begin considering a specific plan. This was revealed
by several government sources. The policy direction was reportedly
set on May 13 at a meeting of three cabinet ministers: the chief
cabinet secretary, foreign minister, and defense minister.

Until now, although the Foreign Ministry has been positive about
participation, some officials in the Defense Ministry have been
reluctant to go along, expressing concerns about public security and
the like. As a result of coordination within the government, it was
judged necessary to have a stance of being directly involved in the
peace building process prior to the Hokkaido Lake Toya G-8 Summit
conference in July. The Defense Minister, as well, has concurred
with the sending of a survey team.

According to a concerned source, the survey team of approximately 20
participants will consist of personnel from the Foreign Ministry,
Defense Ministry, and International Peace Cooperation Headquarters
secretariat in the Cabinet Agency. They will visit the UN's Sudan
dispatch headquarters in the capital city of Khartoum, and the local
headquarters in a city in the central portion of southern Sudan, as
well as observe the situation of units sent by other countries.

(3) U.S. Assistant Secretary of State Sullivan: Agreement on a
long-term target for reducing emissions of greenhouse gases at an
expanded summit meeting

NIKKEI (Page 5) (Full)
May 10, 2008

Meeting with a Nikkei reporter on May 9, U.S. Assistant Secretary of
State for Economic, Energy and Business Affairs Daniel Sullivan
said, "I hope to see an agreement on a long-term target for reducing
greenhouse-gas emissions" at a meeting on global warming that will
be held among major emitters during the G-9 Summit meeting at Lake
Toya, Hokkaido, in July. He expressed his expectations of the
leadership of Japan, the host nation. On the issue of soaring food
prices in the world, he expressed his view that mid to long range
measures should be hammered out by advanced nations at the G-8

TOKYO 00001335 003 OF 013


Summit that would lead to increased production by developing
countries.

The assistant secretary serves as the sous-sherpa, assisting the
Sherpa, who is the U.S. president's personal representative in the
run up to the Lake Toya Summit. Regarding the follow-up framework to
the Kyoto Protocol, which expires in 2012, he said, "The
participation of all major economies is essential." He thought that
such major emitters of greenhouse gases as China and India should
make steady efforts to reduce emissions. On the long-range target,
as well, he stated: "The United States is placing importance on a
target that would have the participation of all major economies."

However, based on the history of advanced industrialized countries
having emitted most of the global-warming gases, he said that the
principle should be respected of them taking more responsibility.
The responsibility, he said, was something "held in common but
distinct for each country." He mentioned that the U.S. is prepared
to provide developing countries with financial and technical
assistance for reducing emissions. He positively evaluated the
"sector-specific approach," which promotes emission reduction based
on industry and area. He said, "It is an extremely important means
for reduction to be promoted in accordance with each country's
situation."

Regarding President Bush's target announced in April that would
reduce growth of domestic emissions to zero by 2025, he called it a
"pragmatic figure." But there has been a critical rebuttal from the
EU and some countries that the target being set is too lax.

Turning to the issue of soaring food prices, Assistant Secretary
Sullivan asserted, "We should send a strong message to developing
countries," by such means as assistance that disseminates technology
to increase food production in developing countries and to improve
crop varieties. He also made an appeal about the importance of
reaching agreement in the Doha Round of the World Trade Organization
(WTO).

(4) Government to offer low-interest yen loans totaling up to 500
billion yen to developing countries over five years to cut
greenhouse gas emissions

NIKKEI (Top Play) (Full)
May 15, 2008

The government has decided to launch a new yen-loan program to
assist developing countries in Africa and Asia in fighting global
warming. In the new program, yen loans will be offered at about half
the rates of conventional aid loans normally given to developing
countries. The government will provide up to 500 billion yen in
total over the next five years as loans to countries actively taking
steps to curb global warming. Japan will announce this plan at the
Group of Eight (G-8) Summit (the Lake Toya Summit) in July in a
drive to underscore its eagerness to support other countries'
efforts to fight global warming.

Typical 40-year yen loans have annual interest rates of 1 to 1.2
PERCENT , depending on the recipient country. The new yen loans,
however, are to have rates of 0.4 to 0.5 PERCENT . By lowering
interest rates, Japan will reduce the burden on developing countries
and urge them to proactively address the task of cutting greenhouse
gas emissions.

TOKYO 00001335 004 OF 013

The government plans to offer the new loans for such alternative
energy projects as wind and solar power generation, as well as for
the installation of energy-saving equipment at power plants and
forestation projects. It also intends to cover reservoir
construction projects.

Japan and Indonesia have already started discussing specific
projects and loan amounts for the first offering. Japan has invited
Indonesia to attend the Lake Toya Summit. It hopes to reach an
agreement on providing loans when the leaders of the two countries
meet on that occasion. The government expects to offer 20 to 30
billion yen in loans for projects to construct geothermal power
plants and to improve the energy efficiency of thermal power
plants.

Japan hopes to increase the number of countries eligible for the
loans through talks with countries in Asia, Africa, and Latin
America. It believes there is much potential demand for such
projects. Nigeria and Guyana in South America are now among
potential recipients for the yen loans.

In the World Economic Forum in Davos in late January, Prime Minister
Yasuo Fukuda proposed the initiative called the "Cool Earth
Partnership," a fund mechanism worth 10 billion dollars to fight
global warming. The yen-loan program is the first step of this
mechanism.

In negotiations on forming a new international framework following
the 2012 expiration of the Kyoto Protocol, a leadership struggle is
intensifying among major gas emitters, such as Japan, the United
States, Europe, China, and India. The Japanese government hopes to
turn the tide of international negotiations in its favor by making
use of the new yen-loan program and increasing the number of
countries supportive of Japan's plan. Japan's yen loans have so far
been given mainly to Asia, but Japan wants to also extend loans to
Africa and South America.

As financial aid in combating global warming, Britain announced last
year plans to provide developing countries with 800 million pounds
(approximately 163 billion yen) over the next three years, and the
U.S. government announced this January that it would disburse 2
billion dollars (21 billion yen). Japan, the U.S. and Britain are
planning to establish an environmental fund. The industrialized
countries are thus aiming to display leadership while cooperating
with each other.

The government intends to boost yen loans, given that the nation's
official development assistance (ODA) disbursements have been on the
decrease. Owing to their booming economies, such main recipient
countries as China, India, and Vietnam have smoothly paid back
loans, so the outstanding balance of offered yen loans have been
flat over the past several years. In part because it is possible to
procure low-interest funds in Japan, the government thinks it
unnecessary to take new budgetary steps.

(5) Japan to set up new framework for dialogue with Africa with eye
on China's rapid approach to Africa

NIKKEI (Page 2) (Full)
May 15, 2008


TOKYO 00001335 005 OF 013


The government will embark on creating a new framework for policy
dialogue with African countries in order to strengthen relations
with them. Japan will do so with an eye on rapid approaches by China
and India to Africa. Those two countries apparently aim to obtain
ample natural resources, including rare metals, from Africa. Japan
will formally adopt the new framework at the upcoming session of the
Tokyo International Conference on African Development (TICAD) in
Yokohama City, which is to kick off on May 28.

TICAD is an international conference co-sponsored by Japan, the
United Nations and other organizations in order to support economic
growth in Africa. It has been held once every five years since 1993.
The upcoming conference will be the fourth.

The new framework for dialogue with Africa that Japan will shortly
set up is intended for working-level officials to check on a regular
basis progress in Japan's aid policy toward Africa, as well as for
Japan and Africa to have dialogue in a multilevel fashion.

Japan plans to hold dialogue with Africa once a year, assuming that
the African Union (AU) will participate in the dialogue. Japan
intends to improve its assistance measures to Africa in line with
requests from African countries by having more opportunities for
dialogue with African countries, besides the forum of TICAD, which
is held once every five years.

The reason why Japan has now decided to step up its engagement in
Africa is because of Africa's potential for economic growth and also
because other countries of the world are paying attention to Africa
for its abundant natural resources. Reportedly, China allocates 40
PERCENT or more of its economic aid budget to Africa and is rapidly
increasing its influence there. China also has held once every three
years an international conference of top leaders from African
countries since 2000.

The European Union (EU) and India also are doing the same. This past
April, India hosted the first India-Africa summit, in which top
leaders from 14 African countries took part.

Tokyo is looking for ways to join hands with China on Africa. It is
planning to hold working-level policy talks with China and South
Africa on Africa.

For Japan, political power of 53 African countries is also
attractive. Given Japan's bid for a permanent seat on the United
Nations Security Council, it is essential for it to garner votes
favoring its bid from African countries. Lying behind Japan's
ongoing efforts to build a continuing relationship with Africa are
those elements.

The upcoming TICAD is expected to have the participation of the
heads of state from 45 countries, a figure double the number of
those who came to the previous TICAD in 2003. Prime Minister Yasuo
Fukuda is going to spare at least 20 minutes for talks with each
leader.

Japan also plans to chart an action plan that will list specific
assistance measures. Included in the plan will be (1) doubling the
production of rice in sub-Saharan African countries in 2018; and (2)
building 1,000 elementary schools in five years.

As to how much money Japan will use for assistance measures to

TOKYO 00001335 006 OF 013


Africa, coordination is underway. One idea floating in the
government is to vastly increase the official development assistance
(ODA), but a cautious view is still deep-seated in government
officials, particularly in the Ministry of Finance.

Policies toward Africa by Japan and China

Japan China
Economic cooperation 10.5 PERCENT directed for Africa (in 2005)
Reportedly, 44 PERCENT directed for Africa.
Dispatch of personnel to PKOs No dispatch 1,273 personnel
dispatched
International conferences TICAD held once every five years since
1993. The Forum on China-Africa Cooperation held once every three
years since 2000.
Number of embassies Have embassies in 24 countries Have embassies in
47 countries
VIPs' visits to Africa (within the past two years) In 2006, then
Prime Minister Junichiro Koizumi visited Ethiopia and Ghana.
President Hu Jintao visited three African countries in 2006, and
eight countries in 2007. Premier Wen Jiabao visited Africa in 2006.

(6) Association of governors hosting U.S. bases to ask government to
review SOFA today

RYUKYU SHIMPO (Page 2) (Full)
May 15, 2008

Kanagawa Governor Shigefumi Matsuzawa, chairman of the association
of the governors of 14 municipalities hosting U.S. military bases,
and Okinawa Governor Hirokazu Nakaima, vice chairman, will visit the
Prime Minister's Official Residence this afternoon to deliver a
letter calling for reviewing the Status of Forces Agreement (SOFA).

The letter also calls for establishing a regional special committee
composed of representatives from the 14 municipalities in the
Japan-U.S. Joint Committee.

On April 4, in reaction to a taxi driver killed by a U.S. Navy
seaman in Yokosuka City, Kanagawa Prefecture, Chairman Matsuzawa and
other representatives of the association urgently asked the
government verbally to review the SOFA.

Today, the association will ask the government in a written form to
review the SOFA and to establish a regional special committee,
reacting to a series of incidents involving U.S. soldiers, such as
the rape of a schoolgirl in Okinawa and the case in Yokosuka,. But
the government has continued to say that the way the SOFA is applied
should be improved.

(7) Government informally decides to offer 1.3 billion yen in
first-portion realignment subsidy to five municipalities (in
Okinawa) in fiscal 2008

OKINAWA TIMES (Page 2) (Full)
May 15, 2008

Tokyo

Informally outlining the first portion of fiscal 2008 subsidies to
be offered to affected municipalities in accordance with their level
of cooperation on the realignment of U.S. forces in Japan, the

TOKYO 00001335 007 OF 013


government decided by May 14 to inform the affected municipalities
of its decision. Specifically, the government has informally decided
to provide 6.168 billion yen to 38 municipalities across Japan. As
for Okinawa, the government will offer a total of 1.295 billion yen
to five municipalities for the planned relocation of Futenma Air
Station, the joint use of Camp Hansen with the Ground Self-Defense
Force, and the relocation of Naha Naval Port facilities.

The amount includes 970 million yen to the city of Nago, the Futenma
relocation site, and 160 million yen to the village of Ginoza.
Following the start of an environmental impact assessment, the
government has decided to offer 25 PERCENT of the maximum amount to
be paid when the replacement facility is completed. Additional
amounts are expected to be paid in the informal second portion.

The government in March lifted the freeze on subsidies to Nago and
Ginoza saying, "We have been able to obtain their understanding and
cooperation." The government is also expected to pay 460 million yen
(397 million yen to Nago and 67 million yen to Ginoza) for fiscal
2007 that have yet to be implemented.

Regarding the GSDF's joint use of Camp Hansen, the government has
also informally decided to offer 85 million yen to the village of
Kin, 33 million yen to the village of Onna, and 20 million yen to
Ginoza. Joint use of and drills at (Camp Hansen) started in March.
Regarding this as the "completion of the realignment," the
government is expected to pay the maximum amounts. The subsidies to
the three municipalities are expected to total 200 million yen for
fiscal 2008 in the end.

Additionally, the government has informally decided to extend 26
million yen to the city of Urasoe which has announced to accept the
Naha Naval Port replacement facilities. In the end, the amount is
expected to be 37 million yen, the same as that of the previous
year.

(8) Interview with Masaaki Gabe, professor at University of the
Ryukyus: No possibility of Marines coping with emergency (in and
around Japan)

RYUKYU SHIMPO (Page 3) (Full)
May 15, 2008

Interviewer: Takumi Takimoto

Even after the reversion of Okinawa to Japan, U.S. bases have
remained in Okinawa on the grounds of the Japan-U.S. Security
Treaty. The Ryukyu Shimpo interviewed University of the Ryukyus
Prof. Masaaki Gabe of international politics about prospects for the
Japan-U.S. Special Action Committee on Okinawa (SACO) and the U.S.
military transformation centering on the return of the site of the
Futenma Air Station to Okinawa.

-- (The Japanese and United States governments) have continued to
emphasize the military importance of the U.S. bases in Okinawa in
terms of dealing with a threat of North Korea.

Gabe: Speaking of examples in the Korean War, the importance of the
bases in Okinawa was found not in ground troops but in air bases. Of
the 12,000 ground U.S. troops in Okinawa at the time, 3,000 were
sent to the Korean Peninsula. The full number of the Marines
stationed in Okinawa is supposed to be 18,000 but the actual number

TOKYO 00001335 008 OF 013


is some 12,000. Should the Marines be sent (to the peninsula), the
number would be 3,000 or so. Such a number could be transported
directly from Guam or Hawaii (to the peninsula). Given this, I think
it is improper to say that U.S. bases in Okinawa will play an
important role, should war break out on the Korean Peninsula.

-- Has the focus shifted from SACO to the U.S. military
transformation?

Gabe: Linked to America's policies toward Iraq and Afghanistan, the
way troops are trained and deployed has now been significantly
changed. Reflecting this change, the U.S. military transformation is
going on and in that process, a plan to transfer (the Marines in
Okinawa) to Guam has emerged. In Guam, a facility that can
accommodate all functions of the Yokosuka, Sasebo, and Okinawa bases
will be constructed. The U.S. forces' operations seem to be
changing.

-- What do you think the U.S. bases in Okinawa mean to both the
Japanese and U.S. governments?

Gabe: For the U.S., its bases (in Okinawa) have served as an
important device to put the Japanese government under its control.
Meanwhile, the Japanese government appeared at the beginning to be
placating Okinawa under the strength of money in dealing with the
base issue, but in the process, money has become the only means to
maintain the bases in Okinawa. In order to get out of this
situation, (the Japanese government) is spending money in a more
business-like manner, as seen in providing Okinawa with subsidies in
return for cooperation on the U.S. force realignment plans.

-- What do you think will happen to the presence of the U.S. Marines
in Okinawa?

Gabe: Since the 1996 SACO agreement, the U.S. forces have decided to
trim its Marine Corps' bases in Okinawa. The planned runways of an
alternative facility for the Futenma Air Station will be short and
their area will be half the current area. The necessary facilities
have been downsized. This move perhaps reflects the U.S. thinking
that keeping helicopters in Okinawa would be enough since the
Marines in Okinawa no longer engage in strategic transport. The
Marines in Okinawa are moving in the direction of downsizing. This
means that in Okinawa, the Marine Corps will no longer deal with
emergencies.

(9) U.S. military's leisure-purpose rental cars also toll free

AKAHATA (Page 15) (Full)
May 15, 2008

The U.S. military issues certificates for free use of toll highways
even for vehicles rented on base by personnel for leisure. The U.S.
Yokota Air Base last month erased its website description showing
such a fact. It was shortly after Satoshi Inoue, a legislator of the
Japanese Communist Party, took up this problem in an April 17
meeting of the House of Councillors Foreign Affairs and Defense
Committee.

The U.S. military has deleted advertisements and agreements for
rental cars, such as: "If you pay for a car you rent, you don't have
to pay tolls for almost all highways in Japan." The U.S. military
issues toll-free certificates even for leisure-purpose rental cars.

TOKYO 00001335 009 OF 013


This even goes against the purport of the Japan-U.S. Status of
Forces Agreement, under which the Japanese government shoulders
highway tolls for U.S. military vehicles for "official business"
only.

Inoue pursued this problem again before the committee in its May 13
meeting. Yoshiyuki Jibiki, director general of the Local Cooperation
Bureau at the Defense Ministry, admitted to the website description.
He stated that the Defense Ministry has inquired of U.S. Forces
Japan about whether toll-free certificates are issued for rental
cars. "If they are suspected of using the certificate against the
purport of the Japan-U.S. Status of Forces Agreement," he replied,
"we will have to respond to this matter in an appropriate manner."

Inoue stressed, "I can't say they have only to erase their website's
description so it cannot be seen in the public eye." Foreign
Minister Masahiko Koumura replied, "I will ask about the facts, and
then we will make efforts so it will be used in an appropriate
way."

Inoue asserted: "If you let them use it even for leisure-purpose
rental cars, and if there is an accident or a crime on their way,
the U.S. military may hold them because they were on duty. This is
the question of how to use the taxpayers' money, so the government
should take resolute action."

(10) Counting chickens, government agencies engaged in road revenue
battle; Prime minister eyes improving national livelihood

ASAHI (Page 4) (Excerpts)
May 15, 2008

The government has decided to free up road-related tax revenues for
general spending starting in fiscal 2009. A fierce road-revenue
battle is already underway. Prime Minister Yasuo Fukuda indicated
that road revenues would be spent for the environment, the declining
birthrate, and other areas. Government agencies involved in those
areas are busy counting their chickens before they are hatched.
Liberal Democratic Party lawmakers with vested interests in the road
industry are on the defensive. The Finance Ministry fears that the
spending-cut policy might collapse.

New Komeito Deputy Representative Toshiko Hamayotsu, calling on
Prime Minister Fukuda yesterday, present him with a set of policy
proposals, such as establishing comprehensive consultation counters
for women and a one-year preschool free education system. Hamayotsu
also asked the prime minister to spend a portion of the road
revenues on them.

It was the prime minister himself that first mentioned using the
road revenues for improving the people's livelihood.

In a press conference in late April, the prime minister said: "There
is a lack of pediatricians. The emergency medical system and higher
education must be improved. Solar energy and fuel cells must be
developed. There are a plethora of tasks. We are going to free up
the road revenues to spend them for improving the people's
livelihood." He also expressed his desire to use part of the
revenues for improving the newly introduced medical system for the
elderly, which is drawing fire from the public.

Chief Cabinet Secretary Nobutaka Machimura, too, indicated in a

TOKYO 00001335 010 OF 013


press conference in Sapporo on May 11 that the government was
searching for ways to use part of the road-related tax revenues to
build a Shinkansen bullet-train line in Hokkaido. Machimura was
asked by reporters the following day if a Shinkansen program falls
under "national livelihood."

The eagerness of Fukuda and Machimura has begun charging up the
Kasumigaseki bureaucratic district. Government agencies that are
responsible for policies with Fukuda's seals of approval are
particularly in high spirits.

A senior official of the Ministry of Economy, Trade and Industry
(METI) expressed his hope for more funds for such sectors as solar
energy and fuel battery.

The government stopped providing household solar cell subsidies in
fiscal 2005, and Japan was immediately displaced by Germany, giving
up its world's No. 1 position in photovoltaic generation. METI is
considering support measures, including the reinstatement of the
subsidies, with the road revenues in mind.

The Ministry of Health, Labor and Welfare (MHLW), which is
responsible for healthcare and the declining birthrate, is also
highly responsive to the government's policy to free up road-related
taxes. MHLW is hoping to use extra funds for increasing the number
of medical students, an effective and expanded use of nurses and
midwives, and improving treatment of female doctors.

The size of funds that can actually be used for improving the
everyday lives of the people is not known. On May 13, the government
adopted a cabinet decision that incorporated its policy of building
highways as necessary. The size of funds for improving national
livelihood depends on how far the road budget can be curbed.

According to the government's basic policy guidelines for fiscal
2006, public works spending must be reduced 1 PERCENT -3 PERCENT in
a five-year period from fiscal 2007. The spending was slashed 3
PERCENT in 2007 and 2008. In order to squeeze out funds for
improving the national livelihood, the spending must be slashed over
3 PERCENT .

The dominant view in the government and ruling parties is that of
the road-related revenues, only the "portion for expanded use" that
covers road projects other than road construction can be used for
improving national livelihood.

In the fiscal 2008 state budget, the road construction budget
amounts to 3.3 trillion yen, including 400 billion yen in the
portion for expanded use to cover lowering expressway tolls and
interest-free loans. A fierce battle is expected in fiscal 2008
among government agencies over the expanded-use portion and some 500
billion yen in the general account.

(11) Security and foreign investment restrictions: J-Power incident
questions: Rise of protectionism in Europe, U.S.; Japan caught on
horns of dilemma, intertwined with internationalization

NIKKEI (Page 5) (Full)
May 15, 2008

A British hedge fund's bid to increase its stake in J-Power has
caused a tough issue of how to strike a balance between promotion of

TOKYO 00001335 011 OF 013


foreign investment and foreign investment restrictions for security
reasons. Promoting inward foreign direct investment is one of the
pillars for Japan's growth strategy. However, guidelines for to what
extent the door to foreign companies can be open in areas involving
national interests are not clear. There are signs of protectionist
moves aimed at defending domestic companies from takeover bids
spreading in Europe and the U.S. The way regulations should be
introduced in the age of globalization is being questioned.

In Washington, the Committee on Foreign Investment in the United
States (CFIUS), chaired by the secretary of the treasury, in late
April released new screening guidelines targeting foreign companies
planning to acquire U.S. firms, based on the notion that there is a
possibility of screening even a takeover bid involving a 10 PERCENT
stake after acquisition.

Seeking to check oil-producing countries

The previous guide for examining takeover bids was that such
involving a stock-holding ratio of 10 PERCENT should be subject to
screening from the perspective of security. However, the guideline
the U.S. has introduced this time is so severe that it covers
takeover bids involving stakes below 10 PERCENT , as well. Many
market insiders conjecture that the new U.S. guidelines were
intended to check China and oil-producing countries, which are
increasing their presence.

The CFIUS in 1988 began screening foreign companies' plans to
acquire U.S. firms, based on the Exon-Florio Provision, which was
added to the Defense Production Act. The Provision is feared as
"super power," because it targets all industries.

It is said that the only takeover bid that was banned in compliance
with the Provision was a Chinese company's bid to acquire an
aircraft parts manufacturer in 1990. One government source said,
"There have been many cases in which foreign companies gave up on
their plan to acquire U.S. companies in advance with the Provision
serving as a major deterrence."

The true motive of the U.S. strengthening its screening guidelines
is not known. It is ironical that even the U.S., which is going
ahead of Japan in terms of the solidness of its M&A market, are
trying to refine the last resort to close the country.

In Europe, border-crossing corporate reorganization moves are under
way in the energy field. The representative case is seen in Spain.
German and Italian companies joined in a race to buy out Endesa, a
leading energy company in that nation, in a bid to grab an
opportunity for growth.

When Gas Natural, a leading Spanish gas company, launched a TOB, E.
ON AG, a leading German energy company, also proposed a take-over
bid. Furthermore, Enel, a leading Italian energy company, also took
part in the acquisition race in alliance with a Spanish company.

In contrast, European countries are increasingly alert to foreign
access from outside the region. The European Commission last fall
toughened regulations on the entries of companies from outside the
region in the electric power and gas fields. Kunihiro Tokai?a fellow
at the Japan Electric Power Information Center (JEPIC), said,
"European countries, which are aiming to form an integrated market,
have adopted moderate regulations within the region. They have now

TOKYO 00001335 012 OF 013


begun taking into consideration foreign companies outside the
region, such as Gazprom of Russia."

Drifting principle

The principles of European countries and the U.S. are drifting, as
they are taking pains in balancing market opening with imposing
regulations for the sake of security. Behind the move is that the
state-run companies of emerging and resource-rich countries are
increasing their presence in the M&A market on the strength of ample
funds. As the economy further globalizes, each country has to become
aware of its national interest.

However, the Children's Investment Fund (TCI), which was made the
target of Japan's investment restriction, is a British investment
fund. Japan's ratio of inward direct investment to GDP is the lowest
among leading countries. Under such a circumstance, is it possible
to discuss such on the same plane as the situation in Europe and the
U.S.?

Commissioner Mandelson of the European Commissioner (EC) responsible
for trade affairs met with Economic, Trade and Industry Minister
Amari in late April. He said that he had no intention of bringing up
the case this time as a diplomatic issue. However, he drove the
point home, saying, "I hope Japan's investment environment will
improve."

(12) Review of new elderly healthcare system: High wall for securing
fiscal resources to reduce burden on elderly

TOKYO SHIMBUN (Page 2) (Full)
May 15, 2008

The government and ruling parties are now been seriously reviewing
the newly introduced medical service system to which 13 million
people aged 75 and older contribute. Opposition parties plan to
submit to the Diet a bill abolishing this healthcare system this
month. The government and ruling coalition have no plan to change
the system but instead intend to appease the criticism being leveled
by the elderly population by improving the system to reduce their
burden.

One of the measures being considered is to continue a system to
reduce and exempt insurance premiums of approximately 2 million
elderly persons who joined corporate health insurance societies
supported by their children. Under the current medical system, the 2
million people are exempted from paying their insurance premiums
until September but then, from October, they will have to pay 10
PERCENT of the original premiums for about six months. So, the
government and ruling camp will look into the possibility of
extending the reduction and exemption program.

Another issue up for consideration is to improve burden-reduction
measures for low-income elderly persons. Although the Ministry of
Health, Labor and Welfare (MHLW) explained that the burden on the
low-income elderly would be lowered, there are many low-income
persons whose insurance premiums were raised. So, the public's
backlash against the medical service system has grown fierce.

Insurance premiums consist of an income levy and a per capita levy.
Under the present system, an income levy and a per capita levy on
the annual income by a husband are as follows:

TOKYO 00001335 013 OF 013

Annual income earned by husband Income levy Per capita levy
Up to 1.53 million yen None 30 PERCENT
Up to 1.68 million yen Based on income 30 PERCENT
Up to 1.925 million yen Based on income 50 PERCENT
Up to 2.38 million yen Based on income 80 PERCENT

The idea that has been floated involves increasing the number of
people whose burden would be reduced by raising the threshold of
annual income.

Some in the ruling camp have called for entrusting the unpopular
withholding of medical insurance premiums from the pension benefits
to municipalities. However, since the local government's side is
reluctant, it will likely be difficult to realize that idea.

It is certain that calls will grow for re-freezing a hike in medical
fees paid by people aged 70-74 at medical institutions. An increase
of the medical fees from 10 PERCENT to 20 PERCENT , which had been
scheduled to be implemented in April, was suspended for one year.
The government and ruling bloc will look for the possibility of
extending the suspension for another one year.

However, it is difficult to secure fiscal resources for lightening
both burdens on those 75 and over and on those 70-74. In a
supplementary budget for fiscal 2007, a total of 172 billion yen was
earmarked: 45 billion yen for reducing and exempting insurance
premiums of about 2 million people, who previously joined corporate
health insurance societies, and 127 billion yen for freezing the
raise in medical fees paid by those 70-74 at hospitals.

In addition to those extensions, should burden-reduction measures be
expanded to low-income earners, it remains to be seen whether
effective measures can be set forth to quite down criticism given
the limited fiscal resources.

DONOVAN

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