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Cablegate: Japanese Morning Press Highlights 05/21/08

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UNCLAS SECTION 01 OF 12 TOKYO 001386

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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: JAPANESE MORNING PRESS HIGHLIGHTS 05/21/08


Index:

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

Defense and security affairs:
4) Ambassador Schieffer in a speech calls on Japan to increase
defense spending (Mainichi)
5) Japanese government picking up the tab for highway tolls used by
U.S. military personnel driving base rental cars (Tokyo Shimbun)
6) Bill allowing defense use of outer space will be enacted today
with little debate (Asahi)
7) LDP project team plans to submit permanent SDF overseas-dispatch
legislation to Diet in fall (Nikkei)

Africa aid:
8) Japan plans to provide $2.5 billion in financial assistance over
next five years to Japanese firms investing in Africa (Asahi)
9) Japan's commitment to double aid to Africa over five years
already hitting a snag in internal coordination (Sankei)
10) Foreign and finance ministries at odds over African aid budget
(Yomiuri)
11) Japan to provide Africa with technical cooperation to ensure
pure water supply (Sankei)
12) Government to dispatch several SDF officers to serve at African
Union (AU) headquarters in Addis Ababa (Mainichi)

Burma aid:
13) Meeting planned at cabinet level on aid to cyclone-ravaged Burma
(Myanmar) (Nikkei)
14) Burma accepts dispatch of Japanese aid personnel (Mainichi)
15) Prime Minister Fukuda to travel to Germany, England, and Italy
in early June (Asahi)
16) Secretary Rice, Foreign Minister Koumura discuss North Korean
nuclear records in telephone conversation (Yomiuri)

Political agenda:
17) Three-hour meeting between Prime Minister Fukuda and New Komeito
head Ota prompts speculation they discussed cabinet shuffle or Diet
dissolution (Tokyo Shimbun)
18) Democratic Party of Japan (DPJ) head Ozawa says there definitely
will be Diet dissolution and a snap election sometime between
September and December (Yomiuri)
19) LDP starts working on plan to raise consumption tax (Asahi)
20) Despite its importance, the civil service reform bill will not
be passed by the Diet this session (Asahi)

Articles:

1) TOP HEADLINES

Asahi:
Sichuan quake: 9,000 evacuate homes due to cracks in mountain

Mainichi:
Drawings of autopsied bodies may be shown to lay judges instead of
photos with consideration given to their psychological burden

Yomiuri:
Five local bar associations voice difficulty in dealing with lay
judge system: One year to go until the system begins: Issue is

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securing personnel

Nikkei:
Sumitomo Metal to Invest 200 billion yen in nickel mine development
on Solomon Islands

Sankei: Tokyo Shimbun
Top six banks' subprime-linked losses reach 940 billion yen in
fiscal 2007, three times higher than estimated

Akahata:
Something wrong about consumption tax-centered discussions of fiscal
resources for pension payouts, which do not seek burden-sharing from
major companies

2) EDITORIALS

Asahi:
(1) Reform of public servant system lacks enthusiasm
(2) New Taiwan president: Maintaining status quo is wise selection

Mainichi:
(1) Estimate for pension reform: Time for political parties to come
up with specific plan
(2) Children's dependence of cell phones: Problem cannot be solved,
just by taking handsets from them

Yomiuri:
(1) We hope to see Japan-U.S.-South Korea talks lead to progress on
abduction issue
(2) Account settlement of top six banks: How will they recover from
major decline in profits?

Nikkei:
(1) Deepen discussions of pension system, based on government
estimates
(2) Taiwan President Ma should urge China to promote
democratization

Sankei:
(1) Estimate of tax-funded pension system: Discussion including
medical service and nursing care needed
(2) Ma sworn in as Taiwan president: We want to closely watch his
policy of attaching importance to Taiwan

Tokyo Shimbun:
(1) Ma sworn in as Taiwan president: Make utmost effort to stabilize
Taiwan Strait
(2) Children and cell phones: Do not allow them to enter danger
zone

Akahata:
(1) Three social education-related bills: Do not deprive social
education of freedom

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, May 20

NIKKEI (Page 2) (Full)
May 21, 2008


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08:25
Attended a meeting of the Overseas Economic Cooperation Conference
in the Diet Building.

09:01
Attended a cabinet meeting. Health, Labor and Welfare Minister
Masuzoe and Chief Cabinet Secretary Machimura stayed behind.

09:34
Met Internal Affairs Minister Masuda and Assistant Deputy Chief
Cabinet Secretary Saka at the Kantei. Followed by State Minister of
Consumer Affairs Kishida, joined by Machimura.

11:30
Met at his official residence with New Komeito President Ota,
Secretary General Kitagawa, Diet Affairs Committee Chairman
Urushibara, and others, with Machimura, deputy chief cabinet
secretaries Ono and Iwaki.

14:34
Met Deputy Chief Cabinet Secretary Futahashi at the Kantei.
15:26 Met Lower House members Seiken Sugiura, Taku Yamamoto, and
Ichiro Miyashita.

16:03
Met METI Vice Minister Kitabata, Industrial Technology and
Environment Policy Bureau Director General Ishida, and Natural
Resources and Energy Agency Director General Mochizuki. Later, met
Nitori Co. President Akio Nitori, with Executive Council Chairman
Nikai and LDP Reform Implementation Headquarters chief Takebe, and
others present.

17:15
Attended a meeting of the Council on Economic and Fiscal Policy.
19:02 Met JICA President Sadako Ogata and actress Mayu Tsuruta.

19:22
Met at his official residence with Secretary General Ibuki, Policy
Research Council Chairman Tanigaki, and other LDP executive members,
with Machimura present. Joined by Election Committee Chairman Koga
and Nikai.

21:15
Met Machimura.

4) U.S. Ambassador to Japan Schieffer calls on Japan to expand
defense spending

MAINICHI (Page 3) (Full)
May 21, 2008

In a speech yesterday to the Foreign Correspondents Club of Japan,
U.S. Ambassador to Japan Schieffer called on Japan to increase its
defense spending, as well as to strengthen cooperation with the
United States in the area of weapons procurement. The Ambassador
pointed out that while such countries in Northeast Asia as China and
Russia are expanding defense spending, Japan's expenditures "have
hardly changed since 1998, and are shrinking in terms of GDP." He
said: "It should consider a larger contribution for national
security."

5) U.S. soldiers' use of rental cars for leisure purpose: Japan

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bears highway tolls; USFJ issues toll free passes; SOFA violation
likely

TOKYO SHIMBUN (Page 27) (Full)
May 21, 2008

Shigeru Handa, senior writer

U.S. military bases in Japan give a "certificate for transit of toll
roads by military vehicles"-or a highway toll free pass-to U.S.
military personnel and their families when renting out military
vehicles, the Tokyo Shimbun has found. The Japanese government
shoulders highway tolls for U.S. military personnel using highways
for official business. However, it means that the Japanese
government has been made to foot the bill even for U.S. soldiers'
leisure. The Defense Ministry has inquired of U.S. Forces Japan
headquarters about the facts, suspecting that it is a violation of
the Japan-U.S. Status of Forces Agreement.

The 374th Airlift Wing, which controls the U.S. Yokota Air Base, has
its own website, Yokota AB Services. This website used to upload an
advertisement of rental car services to look around in Japan. It had
a description, saying: "Rent-a-car rates include tolls for most
highways."

This wording can be taken as indicating USFJ's handout of the
certificate to U.S. military personnel using rental cars. This
phrase, however, has now been erased.

USFJ, under SOFA's Article 5-2, is exempted from highway tolls if
its SOFA personnel hand in a U.S. military pass at a toll gate when
using a highway for official business. These toll free certificates
are sent in to the Defense Ministry's nine local defense bureaus
across the nation, and the Defense Ministry foots the bill.

In fiscal 2007, the Defense Ministry paid 884 million yen for a
total of 995,000 cars. Even in the case of U.S. military vehicles,
the Defense Ministry does not shoulder highway tolls for leisure or
any other purposes outside official business. The U.S. military
seems to understand that U.S. military personnel's use of rental
cars falls under welfare for official business.

The Defense Ministry's Compensation Division has inquired of USFJ
headquarters about the facts-such as what the now-erased webpage
phrase meant-in order to check if U.S. military personnel's use of
the toll free certificate was not a violation of SOFA. In addition,
the Defense Ministry has also asked USFJ to submit a list of its
rental cars' license plate numbers. In this regard, the Defense
Ministry is planning to check through its local defense bureaus to
see if the toll free certificate was used for rental cars.

In 1993, copies of the highway toll free certificate, signed by a
U.S. military officer for transport affairs, were used at highways
across the nation. There were also scams with such copies being
floated to discount ticket stores. The U.S. military currently
numbers the certificate serially for appropriate use.

USFJ still issues certificate

The Tokyo Shimbun asked USFJ about the highway toll free certificate
for its personnel's use of rental cars. In response, USFJ's press
office at its headquarters answered that USFJ "still issues the

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certificate even now." With this, USFJ owned up to the fact that
U.S. military bases in Japan have handed out the certificate to U.S.
military personnel and their families renting cars.

The 374th Airlift Wing's website had a description saying the
rent-a-car rates include highway tolls, but this phrase has now been
erased from its webpage. Asked why, the USFJ press office explained:
"That is because Japan and the United States will discuss this
matter."

6) Basic space law to clear Diet today, with scant debate by DPJ on
defense purposes

ASAHI (Page 4) (Abridged slightly)
May 21, 2008

Basic space legislation opening the door to the use of space for
military purposes is expected to clear the Diet today with the
Liberal Democratic Party, Democratic Party of Japan, and New Komeito
casting a majority of votes in an Upper House plenary session. The
contents of the law change the country's basic policy of using space
only for peaceful purposes in principle. Because the DPJ responded
to ruling camp calls for talks on bill revisions, the legislation
will now be enacted only after a only four hours of deliberations in
the Diet. The stance of the DPJ, which has failed to thorough debate
the bill, is likely to draw criticism.

In yesterday's Upper House Cabinet Committee session, which endorsed
the bill, some proponents played up the legislation's significance:

LDP member and former education, science and technology minister
Takeo Kawamura said: "The nation will pursue space development in
line with its exclusively defense-oriented policy."

DPJ Upper House member Goshi Hosono noted: "The legislation can be
used in removing disaster risks and exploring resources."

Opening the door to defense purposes has long been called for by LDP
lawmakers connected to space projects and some economic circles
eager to revitalize the space industry. The major obstacle has been
the 1969 Diet resolution limiting the use of space to peaceful
purposes only. The government has interpreted "peaceful use" as
"nonmilitary purposes." But adding the new phrase "to contribute to
the security of Japan" to the objectives of the legislation, the
government has effectively altered its interpretation.

The ruling parties submitted last June a bill removing the ban on
defense purposes. Many members of the DPJ's space legislation
project team (PT) also regarded the ban on defense purposes as a
major obstacle to revitalizing the space industry. The three parties
jointly re-submitted the legislation in May following the ruling
bloc's acceptance of the DPJ's counterproposal.

The DPJ has not conducted in-depth discussions on the legislation
that concerns the foundation of the nation's security policy. There
is a wide-range of views in the party on the Constitution and
security. Conducting thorough discussions to narrow down differences
in views might delay reaching a conclusion. For this reason, the PT
has continued leaving security outside the focus, reporting to the
defense and foreign affairs department retroactively.

The legislation includes the phrase "based on the principle of

TOKYO 00001386 006 OF 012


pacifism found in our Constitution." The Cabinet Committee also
passed an additional resolution specifying the need to ensure
transparency in information on space development and to make efforts
to improve the law governing space activities within two years of
the legislation's enforcement.

Asked about the possibility that the legislation will pave the way
for deploying early warning satellites, which will play a central
role in a missile defense system, the LDP's Kawamura said, "Such
will be possible in relation to the law." Although the DPJ's PT
Secretary General Masamitsu Naito said, "The legislation is not
designed to allow the government to sign a blank check," the party
has yet to discuss specific ways to apply brakes to using space for
military purposes.

7) SDF dispatch permanent law: Ruling bloc's project team to hold
inaugural meeting on May 23

NIKKEI (Page 2) (Abridged slightly)
May 21, 2008

LDP Foreign Affairs Commission Chairman Taku Yamasaki and his New
Komeito counterpart Natsuo Yamaguchi held a meeting within the Diet
building yesterday. As a result, the two reached an agreement to
hold the inaugural meeting on May 23 of the ruling bloc's project
team on a permanent law governing the overseas dispatch of the
Self-Defense Forces. Although the team will forgo a plan to submit a
bill to the current Diet session, it will conduct discussion with
the aim of submitting legislation to the next extraordinary Diet
session in the fall.

Yamasaki is scheduled to head the team. Yamasaki plans to make the
team come up with the law's outline before the current Diet session
closes on June 15 to be prepared for the extra Diet session in the
fall. With many New Komeito members remaining cautious about
permanent legislation, a number of twists and turns are expected.

The two parties initially planned to launch the project team in
February. But the collision between the Maritime Self-Defense
Force's Aegis ship and a fishing boat occurred, prompting the New
Komeito to raise an objection, saying, "The environment is not right
for it." Thus the project team plan has been postponed, and the move
to explore ways to submit a bill to the Diet also ceased.

Nevertheless, the special legislation governing the MSDF's refueling
operation in the Indian Ocean is scheduled to expire on January 15,
2009. In order to extend the refueling mission, revision to the law
must be approved in the next extraordinary Diet session in the fall.
The ruling and opposition blocs are likely to clash head on over the
legislation. There is a view in the ruling bloc that a permanent law
would be easier to obtain the DPJ's understanding.

8) Government to disburse 2.5 billion dollars in financial aid to
Japanese firms planning to invest in Africa

ASAHI (Page 6) (Full)
May 21, 2008

The government yesterday unveiled its comprehensive
investment-promotion package aimed at doubling Japanese firms'
direct investment in Africa. The package includes measures to
disburse 2.5 billion dollars (approximately 260 billion yen) in

TOKYO 00001386 007 OF 012


financial aid over the coming five years starting next fiscal year
and to improve the environment for investment by making use of trade
insurance and a human resource-cultivation fund. Prime Minister
Fukuda will announce the package at the 4th Tokyo International
Conference on African Development (TICAD) to start on May 28.
Economy, Trade and Industry Minister Amari and other officials also
plan to reveal the aid package during the conference.

The Japan Bank for International Cooperation (JBIC) will take charge
of the aid plan worth 2.5 billion yen. The government plans to
establish next spring an "Africa investment facility," a system to
invest in and offer loans to Japanese companies planning to invest
in Africa. JBIC will assume some of the risk involved in investment
as measures to encourage private firms to invest in Africa. Eligible
for the aid will be plans to develop natural resources, such as
crude oil and rare metals, and to construct plants related to such
resources, as well as electricity business. Money equivalent to 10
to 20 PERCENT of the total cost will be offered per plan.
Additionally, debt guarantee will be provided for an amount about 10
times more than the total amount of investment.

Nippon Export and Investment Insurance (NEXI) has reached an
agreement with the Islamic Corporation for insurance of Investments
and Export Credits (ICIEC) - joined by 36 countries in Africa and
the Middle East and has taken out insurance on goods exported by
investing companies. Since no insurance is carried on goods traded
among African countries in many cases, trade with Africa is risky.
Given this, NEXI is aiming to reduce risk.

The Patent Agency has decided to invest 110 million yen in the World
Intellectual Property Organization this fall to create a fund to
foster human resources responsible for protecting intellectual
property rights in Africa. The Japan Oil, Gas and Metals National
Corporation will start a full-scale exploitation of underground
resources in southern Africa, such as Botswana, with an eye on
Japanese firms' participation in resource-development projects.

9) Japan decides to double ODA for Africa, but tough job remains to
secure fiscal resources

SANKEI (Page 2) (Full)
May 21, 2008

The government yesterday held a meeting of the Overseas Economic
Cooperation Council (chaired by Prime Minister Yasuo Fukuda) in the
Diet and adopted a policy of doubling the official development
assistance (ODA) budget for Africa over the next five years until
2012. Japan intends to focus its aid on constructing infrastructure,
including a network of roads. Japan also aims to double direct
investment by the private sector in Africa. The prime minister will
announce this policy at the upcoming fourth Tokyo International
Conference on African Development (TICAD) in Yokohama City starting
on May 28. With tight state finances, the government has been forced
to slice the ODA budget as a whole, but ODA projects for Africa have
now been decided to be treated as exceptions.

In the meeting yesterday, Fukuda told relevant cabinet members: "I
will announce a strong initiative that will help develop Africa. I
want you and each government ministry and agency to address this so
that it will be realized."

In order to help Africa, Japan intends to gradually increase its

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average ODA budget of some 100 billion yen for Africa for the past
five years up to 200 billion yen in 2012. The increased portion of
the ODA budget for Africa will come to some 300 billion yen during a
five-year timeframe. Japan also aims to double direct investment by
the private sector in Arica from the currently approximately 170
billion yen to some 340 billion yen by making the better use of
trade insurance. Under the increased ODA budget, Japan plans to
expand cooperation on maternal and child health and tackle the issue
of improving agricultural productivity.

Standing in the way of this policy is a set of policy guidelines for
economic and fiscal management and structural reform issued in 2004.
The guidelines instruct that the ODA budget as a whole be reduced
2-4 PERCENT every year in order to move the primary balance into
the black in fiscal 2011. In this connection, Chief Cabinet
Secretary Nobutaka Machimura said at a press conference yesterday:
"We need to discuss the matter separately as to how we will handle
it in the process of making the next fiscal year's budget and in a
new set of policy guidelines for economic and fiscal management and
structural reform to be prepared by the end of June."

The ODA budget for Africa will be excepted from other budgets
subject to reduction, but coordination between the Ministry of
Foreign Affairs (MOFA) and the Ministry of Finance (MOF) has been
hard going. On May 19, the Council on the Fiscal System, Etc., an
advisory panel to the finance minister, gave a warning against the
move to increase the ODA budget and incurred MOFA's objection. A tug
of war between the two ministries is likely to continue before a new
set of policy guidelines for economic and fiscal management and
structural reform is prepared.

10) Foreign Ministry, Finance Ministry to clash over ODA to Africa

YOMIURI (Page 2) (Full)
May 21, 2008

Prime Minister Fukuda yesterday announced plans to double Japan's
official development assistance (ODA) disbursements to Africa and
Japanese firms' investment in the continent over the next five years
through 2012. But the government's annual economic and fiscal policy
guidelines for 2006 came up with the policy of slashing the ODA
budget. How to coordinate this policy and the new plan will be the
focus of attention in future negotiations.

The 2006 guidelines specified an annual 2-4 PERCENT cut in the
nation's ODA budget until FY2011. The Finance Ministry and the
Foreign Ministry will inevitably crash head-on in negotiations on
the guidelines for FY2008, which the government will finalize by the
end of June.

11) Japan to offer 1 billion yen in technical cooperation for Africa
to secure safe water supply

SANKEI (Page 2) (Full)
May 21, 2008

The government yesterday decided to establish a "water defense unit"
that will work to secure drinking water by digging wells and to send
the unit to African countries with the aim of raising the living
standards of the poor people in Africa. This technical cooperation
will be on the budgetary scale of 500 million yen to one billion yen
per year, and Japan will announce it at the upcoming fourth Tokyo

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International Conference on African Development (TICAD).

Regarding the issue of improving the water-related environment in
developing countries, the United Nations declared in its Millennium
Development Goals (MDGs) that specify the goals to attain by the
year 2015 that the percentage of people who are unable to use safety
water should be halved. Among a set of assistance measures for
Africa Japan decided at a meeting yesterday of the government's
Overseas Economic Cooperation Council, extending assistance for
improvement in the water-related environment is one of the key
elements in the assistance measures.

The water defense unit will consist of some 20 experts from the
waterworks department and former waterworks department officials.
Based on Japan's know-how, they will instruct local people how to
dig wells and how to maintain waterworks by preventing water leakage
with the aim of providing safety water to local people. The
government plans to the water defense unit to four to five countries
every year.

12) Government decides to dispatch several SDF personnel to AU
headquarters to assist standby force

MAINICHI (Page 1) (Full)
May 21, 2008

The government yesterday firmed up its policy intention of
dispatching Self-Defense Forces (SDF) personnel to African Union
(AU) Headquarters in Addis Ababa, Ethiopia, to assist the African
Standby Force (ASF) that the AU has created. The government's
thinking is to showcase this as part of the major theme,
consolidation of peace, of TICAD4, the African development
conference that will open in Yokohama on May 28.

A major cause of the delay in Africa's development is considered to
be the disputes that have broken out one after another in each part
of the continent. The purpose of ASF is to allow Africa to deal with
such problems on its own as the first stage of dispute resolution
prior to United Nations peace-keeping operations (PKO). The plan is
to establish such by 2010.

Being considered as the destinations of the SDF dispatch are AU
Headquarters, where several personnel would be sent, and the PKO
centers (in five locations including Kenya), where ASF personnel
will be trained. The assistance would involve providing know-how on
PKO dispatches, as well as such non-military assistance as guidance
in removal of landmines.

13) Government to send cabinet-level member to Burma aid conference

NIKKEI (Page 2) (Abridged slightly)
May 21, 2008

A senior Foreign Ministry official indicated yesterday that the
government would send a cabinet-level member to the post-cyclone aid
conference, to be held on May 25 in Burma's Yangon by the United
Nations and the Association of Southeast Asian Nations (ASEAN).

Meanwhile, Foreign Minister Masahiko Koumura held talks with Burmese
Ambassador to Japan Hla Myint at his ministry. Koumura again urged
Burma to speedily accept a Japanese emergency medial team by telling
the ambassador, "Although we have already provided supplies to your

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country, we are also ready to extend human aid." In response, the
ambassador simply said that he would convey Japan's offer to his
home government.

14) Burma accepts Japan's human assistance

MAINICHI (Page 3) (Full)
May 21, 2008

Yoso Furumoto

In order to restore Yangon Port -- where ships cannot now navigate
because a large number of ships that sank in the recent cyclone
Nargis -- the government has decided to send three experts to survey
the situation. Japan is the first country Burma (Myanmar) has
allowed to provide human assistance in the aftermath of the
cyclone.

Japan decided to dispatch the experts in response to the Burmese
government's request. Foreign Minister Masahiko Koumura yesterday
revealed the decision to dispatch experts to Burma to the Burmese
ambassador to Japan.

The Japanese experts to be sent are officials from an independent
administrative agency under the control of the Ministry of Land,
Infrastructure and Transport. They are expected to arrive in Burma
on May 25. Koumura also conveyed to the Burmese ambassador Japan's
willingness to send a medical team, if requested.

15) Prime Minister Fukuda likely to visit Germany, Italy, Britain in
early June

ASAHI (Page 4) (Full)
May 21, 2008

The government has begun coordination on a schedule for a three-day
trip for Prime Minister Yasuo Fukuda to Germany, Britain and Italy
starting on June 1. Fukuda will likely attend a food security
summit, which will start on June 3 in Rome. He intends to play up
his positive stance of tackling with the food issue before Japan
hosts the Group of Eight summit in July in Hokkaido.

According to government officials, Fukuda plans to meet on June 1 in
Germany with Chancellor Angela Merkel and on June 2 in Britain with
Prime Minister Gordon Brown. In Italy, after delivering a speech in
the food security summit the Food and Agriculture Organization of
the United Nations will hold starting on June 3, Fukuda plans to
meet in Rome with French President Nicolas Sarkozy and with Italian
Prime Minister Silvio Berlusconi. In an attempt to meet with the
leaders of major European countries prior to the G8 summit, Fukuda
had looked into the possibility of making a trip to Europe during
the Golden Week holidays from late April to early May, but he had to
give it up due to a tight Diet schedule. He only visited Russia in
late April.

16) Machimura-Rice telephone talks on North Korea

YOMIURI (Page 4) (Full)
May 21, 2008

U.S. Secretary of State Condoleezza Rice last night telephoned Chief
Cabinet Secretary Nobutaka Machimura. In their 30-minute

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conversation, Machimura and Rice appear to have exchanged views on
the North Korean nuclear programs such as the operational records of
nuclear power reactors North Korea has presented to the United
States.

17) Three-hour meeting between Prime Minister Fukuda, New Komeito
head Ota giving rise to much speculation

TOKYO SHIMBUN (Page 2) (Full)
May 21, 2008

A three-hour meeting yesterday between Prime Minister Yasuo Fukuda
and New Komeito Akihiro Ota is prompting all sort of conjectures.

After the meeting, Ota told the press: "We had a talk so that we
could come up with policy measures for the elderly people."

Since a bill amending the Road Construction Revenues Special
Exemption Law was enacted by a two-thirds overriding vote in the
House of Representatives, the government and ruling parties have
overcome a critical point in the current Diet session. Since the two
party leaders chose this time to hold a tte-`-tte, speculation
broke out that Fukuda and Ota discussed a cabinet shuffle or Lower
House dissolution.

A senior Liberal Democratic Party (LDP) member pointed out: "I think
they did not talk about only policy for three hours. They might have
discussed such thorny issues as the timing for dissolving the Lower
House."

One of the senior New Komeito members briefed by Ota on May 19,
wondered aloud: "Considering the contents of his meeting as Mr. Ota
explained, it would have been difficult for them to spend three
hours discussing such in their meeting."

18) Ozawa: Lower House dissolution will definitely occur during
September-December period

YOMIURI (Page 4) (Full)
May 21, 2008

Democratic Party of Japan (DPJ) President Ichiro Ozawa dined last
night at a Chinese restaurant in Tokyo with about 30 DPJ House of
Representatives members now serving in their 3rd and 4th terms.
Referring to the possibility of dissolution of the Lower House,
Ozawa said: "I'm sure that the Lower House will be dissolved
sometime in the period between September and December."

Ozawa then added: "I want you to do your best during the hot summer
season so that you will have a fruitful fall."

Ozawa denies rumor of his changing electoral district

When asked by reporters about a rumor that he would change his
electoral district from the present Iwate No. 4 constituency to the
Tokyo 12, DPJ Ichiro Ozawa rejected the possibility, saying: "I
don't have any such intention now."

19) LDP start looking into consumption tax increase, speeding up
timetable with eye on pension

ASAHI (Page 1) (Full)

TOKYO 00001386 012 OF 012


May 21, 2008

The Liberal Democratic Party (LDP) yesterday started looking into
raising the consumption tax rate with the aim of securing funding
resources for the planned increase in the share of tax revenues in
the basic pension and covering the growing medical expenses for
elderly people in a stable manner. Senior members of the party's Tax
System Research Commission, chaired by former Welfare Minister Yuji
Tsushima, conferred on the matter and decided to speed up a
timetable for discussion of drastic reform of the tax code,
including the consumption tax.

Though a consumption tax hike issue has been cropped up for the past
several years, an actual hike has been forgone. However, with the
time to raise the share of tax revenues in the basic pension close
at hand, a view calling for hiking the rate is gaining ground as one
senior LDP official noted, "There is no other way than to resort to
the consumption tax." Concerning the criticism of the new medical
service system of elderly peopled aged 75 and older, Secretary
General Bunmei Ibuki pointed out, "If pension contributors become
unable to cope with a rise in the pension premium, then the matter
comes to discussion of the tax issue." The judgment is that since
efforts to constrain social security expenses have their own limits,
it is necessary to resort to consumption tax revenues.

Senior members' meeting joined by Chairman Tsushima and subcommittee
chairman Kaoru Yosano took place about five months earlier than last
year. The LDP wants to take time on discussions of its plan so that
it can obtain the public's understanding, thereby involving
opposition parties.

The government's Tax Research Commission, which usually starts
discussion on a tax code revising in the fall, will speed up the
timetable and hold a meeting shortly at the order of Prime Minister
Fukuda.

20) Passage of public servant bill seems difficult

ASAHI (Page 1) (Full)
May 21, 2008

Prime Minister Fukuda has ordered the ruling parties secure Diet
approval for a basic bill reforming the national governments
employee system. However, such a possibility now appears slim. That
is because while the Democratic Party of Japan (DPJ) has decided to
oppose the bill unless their request for a revision of the bill
regarding a ban on the golden parachute practice and expansion of
the basic labor right is met, there is a slim possibility of the
ruling parties complying with such a request. DPJ President Ozawa
during a press conference yesterday explained, "The bill has a
problem of institutionalizing the golden parachute practice."
Secretary General Yukio Hatoyama met with Diet Affairs Committee
Chairman Kenji Yamaoka. Based on the wishes of the Japanese Trade
Union Confederation (Rengo), both agreed to oppose the government's
plan unless expansion of the basic labor right is approved.

SCHIEFFER

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