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Cablegate: Japanese Morning Press Highlights 06/12/08

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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;
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SECDEF FOR JCS-J-5/JAPAN,
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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 06/12/08


Index:

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

North Korea problem:
4) North Korea nuclear facility used Japanese pumps obtained
illegally via Taiwan, IAEA discloses (Yomiuri)
5) In first day of formal talks with DPRK, Japanese delegate asks
for return of JAL highjackers (Asahi)
6) Japan-North Korea talks to focus on abduction issue today (Tokyo
Shimbun)
7) - North Korea could be readying a reply on the abductions, aimed
at removing its name from U.S. terror-sponsoring list (Tokyo
Shimbun)

Diet turmoil:
8) For the first time, the opposition-controlled Upper House passes
a censure motion against a prime minister, bring Diet business to a
sudden halt (Mainichi)
9) Prime Minister Fukuda after censure vote says that he and the
Japanese people are the "biggest victims" (Yomiuri)
10) Text of the Upper House censure motion against the prime
minister (Yomiuri)
11) DPJ head Ozawa's tactic of using censure motion to force Diet
dissolution fizzles, although it deals a heavy body blow to the
ruling party (Tokyo Shimbun)

12) Japanese Communist Party (JCP), which opposed the censure
motion, pursues the Democratic Party of Japan for passing it "at an
inappropriate time" (Asahi)
13) Only one party-heads debate occurred in this Diet session, with
Ozawa refusing to engage Fukuda on the 11th, the day his party filed
censure motion (Yomiuri)
14) Next Diet session to start in state of turmoil (Asahi)

15) Private panel to the government reports that Japan should
welcome foreign investment by introducing a sovereign wealth fund
(Nikkei)

Articles:

1) TOP HEADLINES

Asahi, Mainichi, Yomiuri, Nikkei, Sankei, Tokyo Shimbun & Akahata:
Censure motion against Fukuda approved for the first time

Nikkei:
Japan Post to commission management of postal offices to private
firm Secom

2) EDITORIALS

Asahi:
(1) Censure motion against prime minister: Parties need to be ready
for the day to elicit the will of the public
(2) Court's ruling against loan sharks: Cut off financial sources
for crime syndicates

Mainichi:
(1) DPJ should not fetter itself by censure motion

TOKYO 00001600 002 OF 013


(2) Supreme Court's ruling can be used as weapon to eliminate loan
sharks

Yomiuri:
(1) For what purpose was the censure motion approved?
(2) Risks underlying international division of labor

Nikkei:
(1) How do we take the first approved censure motion against the
prime minister?
(2) FRB officials' move to defend dollars will be put to the test

Sankei:
(1) Unproductive DPJ's confrontational stance
(2) DPRK's anti-terrorism statement: It's dangerous to hurriedly
delist it as state sponsor of terrorism

Tokyo Shimbun:
(1) Significance of censure motion
(2) Daily part-timers should be banned

Akahata:
(1) Censure motion against Fukuda approved: Drive the prime minister
into tight spot with debate and public opinion

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, June 11

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

09:20
Arrived at the Kantei.

10:01
Upper House plenary session.

10:17
Met with Vice Health, Labor and Welfare Minister Erikawa at the
Kantei.

11:13
Met with LDP Reform Implementation Headquarters chief Takebe,
followed by former Secretary General Nakagawa.

12:08
Party State Strategy Headquarters debrief session.

13:39
Met with former General Council Chairman Horiuchi.

14:14
Party Reform Implementation Headquarters plenary session.

15:04
Met with Nobuo Tanaka, director general of the IEA Secretariat.
Then videotaped a message for the East Asia Conference under the
World Economic Forum.

16:01
Upper House plenary session.

TOKYO 00001600 003 OF 013

17:19
IT Strategic Headquarters meeting at the Kantei.

18:26
Dined with former U.S. Ambassador to Japan Baker and former Finance
Minister Shiokawa at French restaurant in Ginza. Tokyo Stock
Exchange Chairman Taizo Nishimuro was present.

20:47
Met with members of "group of junior, mid-ranking and like-minded
lawmakers who support Prime Minister Fukuda," including Lower House
members Chuko Hayakawa and Satsuki Katayama, at Toranomon Pastoral
Hotel.

21:39
Arrived at the official residence.

4) Japanese parts used at N. Korean nuclear facility: IAEA

YOMIURI (Page 1) (Full)
June 12, 2008

Vacuum pumps made in Japan were discovered at a nuclear-related
facility in North Korea when the International Atomic Energy Agency
inspected the facility in 2007, the Yomiuri Shimbun has found. The
vacuum pumps in question were used for the uranium enrichment
devices at the facility. The IAEA reported this discovery to the
Japanese government. Early this month, police in Kanagawa Prefecture
investigated five localities, including Tokyo Vacuum, the maker of
the vacuum pumps and a manufacturer of machinery and equipment based
in the Kanagawa prefectural city of Sagamihara, and the head office
of Nakano Corporation, an export and import agent located in Tokyo's
Minato Ward, on the charge of violating the Foreign Exchange and
Foreign Trade Control Law (export without permission). Police
authorities sent investigators to Taiwan, where the vacuum pumps
were exported, to clear up the North Korea route. This is the first
time that the IAEA has discovered Japanese-made parts in its
inspection of nuclear facilities in North Korea.

The vacuum pumps were discovered by a team of IAEA inspectors that
entered Yongbyon and other nuclear facilities in North Korea in July
last year, investigative authorities said. The IAEA team inspected
those nuclear facilities in order to verify whether North Korea
implemented its initial steps, such as suspending and sealing the
nuclear facilities, in accordance with an agreement reached at the
six-party talks over North Korea's nuclear programs.

Police authorities, with cooperation obtained from Taiwan's
investigative authorities, looked into the records of exports in the
past and other documentations. As a result, they judged that the
pumps are strongly suspected of having been exported from Taiwan to
North Korea.

According to investigative authorities, the two companies are
suspected of having exported the vacuum pumps without permission
from the Ministry of Economy, Trade and Industry, which lists vacuum
pumps as materials restricted under the Export Trade Control
Ordinance as they could be used for weapons of mass destruction like
nuclear weapons. A vacuum pump can be used to vacuum a centrifugal
separator to improve the efficiency of enrichment, so it is on the
list of restricted items.

TOKYO 00001600 004 OF 013

Nakano Corp., according to its account, exported 10 vacuum pumps to
a Taipei-based trading firm in the summer of 2003 for a total of
about 500,000 yen.

Both Tokyo Vacuum and Nakano Corp., when questioned by the
prefectural police, explained that they did not know that the pumps
would be used at a nuclear facility.

"Our president is in bad health, so we can't answer," a Tokyo Vacuum
official told the Yomiuri Shimbun. "It's true that we were
investigated," a Nakano Corp. official said, adding: "The maker
explained to us that the pumps were not restricted under the forex
law. We've never done business and have nothing to do with North
Korea."

5) Japan asks N. Korea to turn over JAL hijackers

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

BEIJING-Japan and North Korea kicked off a formal meeting of
working-level officials from their foreign ministries in Beijing
yesterday. In the meeting, Japan sought progress on the pending
issue of Japanese abductees. In addition, Japan called for North
Korea again to turn over Japan Airlines hijackers. North Korea
answered that it would formally clarify its position in a meeting to
be held this morning.

The meeting was held at the North Korean embassy in Beijing for
about two and a half hours with the participation of the Foreign
Ministry's Asian and Pacific Affairs Bureau Director General Akitaka
Saiki from Japan and Song Il Ho, ambassador for negotiations over
the normalization of diplomatic relations between North Korea and
Japan, from North Korea.

"The North Koreans were very serious," Saiki told reporters after
the meeting, "and we frankly stated our views to each other."

Yesterday's meeting focused on the abduction issue as proposed by
Japan. Saiki explained Japan's position in detail, calling for North
Korea to let all survivors return to Japan, clear up the facts about
the abductions, and turn over those responsible for the abductions.

Japan and North Korea reaffirmed that the two countries would hold
negotiations in conformity with a bilateral declaration issued in
Pyongyang in September 2002. The two countries also agreed to take
up the question of how to clear past issues as a matter of concern
to North Korea in today's meeting.

According to sources familiar with Japan-North Korea relations,
Pyongyang wants to reach an agreement in the meeting this time to
repatriate the JAL hijackers, since the United States cites this
issue as one of its reasons for listing North Korea as a state
sponsor of terrorism. Furthermore, North Korea is expected to urge
Japan to call off its sanctions on North Korea while implying that
it will look again into the issue of Japanese abductees. North Korea
is also considering documenting an agreement if there is progress to
a certain extent in the meeting this time.

However, Japan takes the position that the JAL hijackers'
repatriation has nothing to do directly with the abduction issue.

TOKYO 00001600 005 OF 013

6) North Korea to explain its position on abduction issue today in
official talks

TOKYO SHIMBUN (Page 1) (Full)
June 12, 2008

(Yuji Nishikawa, Beijing)

Working-level officials from the governments of Japan and North
Korea met for formal talks at the North Korean Embassy in Beijing on
the afternoon of June 11. A Japanese representative demanded that
North Korea take specific action to solve a dispute over the
abductions of Japanese nationals by North Korean agents. In
response, a North Korean representative said he would explain his
government's position on the issue in the second-day meeting on the
morning of the 12th. Both sides confirmed the need for the two
countries to promote bilateral ties based on the Pyongyang
Declaration issued in 2002.

The meeting lasted for about two and a half hours between Akitaka
Saiki, director general of the Foreign Ministry's Asian and Oceanian
Affairs Bureau, and Song Il Ho, North Korea's ambassador for
normalization talks with Japan.

On the abduction issue, Saiki renewed the Japanese government's
calls for North Korea to (1) return the abduction victims to Japan
for reunion with their families at an early date; (2) clear up the
truth of the issue; and (3) hand over the perpetrators.

Saiki also demanded that the Japanese radicals who hijacked a Japan
Airlines plane to North Korea in 1970 be handed over to the Japanese
side.

Song made no specific reference to the abduction issue, just saying:
"I will explain our government's position in details in the meeting
tomorrow morning."

In the second-day talks, which will be held at the Japanese Embassy,
both sides are expected to discuss such disputes as Japan's
colonization of the Korean Peninsula, following North Korea's
expression of its position on the abduction issue.

Saiki told reporters after the meeting: "I expect North Korea will
make a sincere, concrete response.

7) North Korea might be preparing specific reply in response to
Japan's request on abduction issue

TOKYO SHIMBUN (Page 2) (Excerpts)
June 12, 2008

From the very outset of the resumed official working-level talks
that started on the 11th, the Japanese side urged North Korea to
resolve the dispute over the abductions of Japanese nationals by
North Korean agents, Japan's top priority issue. The focus of
attention is on what response North Korea will make in the
second-day meeting on the 12th.

The Japanese side has repeatedly demanded that Pyongyang take
specific action on the abduction issue. Akitaka Saiki, director
general of the Foreign Ministry's Asian and Oceanian Affairs Bureau,

TOKYO 00001600 006 OF 013


said last night after the first day of meetings: "I said what Japan
should say."

The Japanese government has continuously applied pressure to the
North with its own economic sanctions and other means, but the
government began recently to indicate the possibility of easing the
sanctions in an attempt to urge the North to take positive action.
Foreign Minister Masahiko Koumura noted: "Should the other side move
a step forward and take specific action, our side will also take one
step toward specific action."

Even so, the precondition for what the foreign minister said is that
North Korea should take action first. Asked if North Korea will
change its usual assertion that the abduction issue has already
settle, Saiki just replied: "I cannot say anything before I hear the
other side's official view."

8) Upper House approves censure motion against Fukuda for the first
time; Diet to essentially go into recess

MAINICHI (Top play) (Full)
June 12, 2008

Nakae Ueno

A censure motion against Prime Minister Yasuo Fukuda was approved
yesterday evening at an Upper House plenary session by a majority of
votes from four opposition parties, the Democratic Party of Japan
(DPJ), the Japanese Communist Party (JCP), the Social Democratic
Party (SDP), and the People's New Party (PNP). This is the first
time for the censure motion to be approved in the Diet. The
opposition bloc calls on the prime minister to dissolve the Lower
House for a snap election or resign en masse, but the censure motion
has no legal binding force. So, the prime minister has assumed a
stance of ignoring it. Meanwhile, the ruling bloc, in an effort to
counter the opposition bloc's move, submitted a confidence motion
toward the prime minister to the Lower House. It intends to get it
approved at today's Lower House plenary session.

The censure motion was jointly submitted yesterday afternoon by the
DPJ, the SDP, and the PNP.

The current Diet session has now been extended until June 21, but
those three opposition parties intend to boycott deliberations in
both houses of the Diet as the censure motion has been approved. The
JCP intends to attend Diet deliberations without interruption, but
the Diet is likely to go essentially into recess on June 12 or
later. A battle between the ruling and opposition parties will be
carried over to the next extraordinary Diet session to be convened
in August.

In the Upper House plenary session yesterday evening, the DPJ's
Upper House Caucus Chairman Azuma Koshiishi gave an account of the
reasons for the submission of the censure motion against the prime
minister. Speaking of the medical system for the elderly, Koshiishi
noted: "The prime minister lacks both resolve and enthusiasm to deal
with the 'negative legacy' from the Koizumi and Abe cabinets."
Koshiishi also criticized the government for its restoration of the
provisional tax rate for gasoline.

After that, the censure motion was put to the vote after affirmative
views by a DPJ representative and opposing views by representatives

TOKYO 00001600 007 OF 013


from the ruling Liberal Democratic Party (LDP) and its junior
coalition partner New Komeito were both voiced. Yasuhiro Oe and
Yoshitake Kimata of the DPJ were absent from voting for poor health
conditions and Yasuo Yamashita of the same party was also absent
from voting in order to attend a memorial ceremony for a relative.

With the submission of the censure motion against the prime
minister, a debate of party leaders between the prime minister and
DPJ President Ichiro Ozawa slated for yesterday afternoon was
cancelled.

After the censure motion was approved, Ozawa met the press and
explained: "We submitted a censure motion in order to make the
public aware that 'the prime minister is not qualified for the
position.'" Ozawa also stressed, "A general election will be the
only solution to the current situation," and added, "We will set in
motion our preparations for a snap election once the Diet closes."

LDP Secretary General Bunmei Ibuki criticized the DPJ at a press
briefing: "They submitted it at this point in time when even though
they will boycott Diet deliberations, the period of boycotting
deliberations is limited and the shortest. Their intention is thus
clear and obvious."

9) Upper House adopts censure motion against prime minister

YOMIURI (Page 4) (Excerpts)
June 12, 2008

The government and the ruling bloc are reacting furiously to the
adoption of a censure motion by the House of Councillors by a
majority of vote by the Democratic Party of Japan and other
opposition parties. But given the divided Diet, they need to explore
ways to hold talks with the DPJ for the next extraordinary Diet
session, expected to open in late August.

"It's like bullying"

Prime Minister Fukuda delivering a speech at yesterday's LDP Reform
Headquarters general meeting lamented the current situation of the
Diet:

"I am a victim. The general public is the main victim. Necessary
legislation has not passed the Diet, yet unnecessary revisions must
be made. I have been forced to be patient in managing Diet
affairs."

In a bid to find a way out of the current deadlock in the divided
Diet, the prime minister has explored ways to form a grand coalition
between the LDP and the DPJ, showing eagerness to build a line of
talks with the DPJ. The adoption of the censure motion against the
prime minister by the Upper House, the first in post-war history,
was particularly painful for Fukuda as it signified an end to his
line of talks with the DPJ.

The ruling parties, too, criticized the Upper House's adoption of
the censure motion.

LDP Secretary General Ibuki yesterday said to reporters: "The
censure motion has no binding legal grounds. If there is criticism
of the Fukuda cabinet, a no-confidence motion should be submitted to
the House of Representatives." New Komeito Secretary General

TOKYO 00001600 008 OF 013


Kitagawa, too, slammed the DPJ, saying, "The only explanation I can
think of is that the DPJ introduced the motion in order to play up
its confrontational stance at the last phase of the current Diet
session."

Former Prime Minister Koizumi also remarked in a speech in Yokohama,
"The censure motion does not mean much. It's tantamount to
bullying."

Nevertheless, given the fact that the DPJ holds control over the
Upper House, generating a confrontational mood with the DPJ is not
desirable for the government and ruling bloc.

The ruling parties had initially planned to enter into deliberations
with the Japanese Communist Party and in a June 12 Lower House
plenary session to criticize the DPJ for rejecting deliberations on
the bills, including one to abolish the healthcare system for people
aged 75 and over, presented by the DPJ itself. But the ruling bloc
is now set to forgo any deliberations so as not to further irk the
DPJ.

As priority legislation in the extraordinary Diet session in the
fall, the government and the ruling parties are considering
extending the Antiterrorism Special Measures Law beyond the January
2009 expiry. They also aim to enact a bill amending the Health
Insurance Government Subsidy Special Measures Law and a bill
establishing a consumer affairs agency. The government and ruling
coalition therefore wish to avoid the upcoming Diet session falling
into a stalemate from the start.

10) Full text of censure motion against Prime Minister Fukuda

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

The following is the full text of and reason for the censure motion
against Prime Minister Yasuo Fukuda, adopted by the House of
Councillors in its plenary session on June 11:

(Body)
The chamber shall censure Prime Minister Yasuo Fukuda. The chamber
shall adopt the motion below.

(Reason)
It has been two months since the medical insurance system for people
75 and older was introduced. There are calls across Japan for the
abolition of the system. Despite that, Prime Minister Fukuda has
continued to reject abolishing the system and only agreed to make
minor changes to it. A bill designed to abolish the medical
insurance system for the elderly, sent to the House of
Representatives after being adopted by the House of Councillors, has
not been discussed due to the ruling bloc's numerical superiority in
the Lower House.

That is not the only reason for censuring the prime minister. Lower
gasoline prices from April 1 were the only bright news for the
general public in the spring, a season of price hikes. Unaware of
the national pain, Prime Minister Fukuda, putting the interests of
ruling party lawmakers and bureaucrats first, took measures that
ignored calls for protecting the people's livelihood from soaring
crude oil prices. It was a policy mistake that cannot be
overlooked.

TOKYO 00001600 009 OF 013

The government and ruling parties had the Lower House readopt a bill
reinstating the provisional tax rate on gasoline by abusing their
two-thirds majority under Article 59-2 of the Constitution before
the Upper House reached its conclusion. It was an absolute insult to
the Upper House, a chamber under the bicameral system that reflects
the popular will expressed in the latest election. Our failure to
introduce a censure motion against the prime minister at this stage
would have undermined the authority of the Upper House.

In the previous Upper House election, the LDP promised to resolve
the issue of 50 million unidentified pension payment records. Less
than 10 PERCENT of those records were identified by March 31, the
deadline. The LDP also consistently offered an explanation implying
that the public was to blame for viewing (what the LDP promised) as
a public pledge. The violation of such a public pledge deserves a
censure motion. Further, confusion and anxiety are spreading under
the government policy, including the issue of missing records of
paid premiums.

It has been over nine months since the prime minister assumed
office. In the initial stage, his approval rating exceeded 60
PERCENT but it is now low, below 20 PERCENT . The general public,
which does not know what Prime Minister Fukuda wants to do, has
turned its back on the prime minister.

Coming this far, the prime minister must choose between cabinet
resignation en masse and dissolving (the Lower House) for a snap
general election to ask for a public vote of confidence. We hereby
submit a censure motion against Prime Minister Fukuda.

11) DPJ has no next hand of cards to play, its tactic of forcing
Diet dissolution having fizzled, although the ruling camp has been
shaken in its deliberations

TOKYO SHIMBUN (Page 2) (Excerpts)
June 12, 2008

The Democratic Party of Japan (DPJ) together with other opposition
parties passed a motion in the Upper House plenary on June 11
censuring Prime Minister Fukuda. There is no doubt that it has
struck a blow against the Prime Minister using the "family sword"
that it had previously kept in reserve, but there is yet no prospect
in sight of it leading to dissolution of the Diet and a general
election.

After the motion was passed yesterday, DPJ President Ichiro Ozawa
stressed at a press conference: "The Prime Minister himself must now
take this as an extremely serious development. If he takes this as
the will of the people, it would be better that he win by dissolving
the Diet and calling a general election."

Although the DPJ took the stance that with the passage of a censure
motion against the Prime Minister, their pressure on the ruling camp
would heighten all the more, instead, the Prime Minister, whose
cabinet support rate has continued to fall due to public reaction
against the medical system for the elderly, has only reaffirmed his
stance of avoiding Diet dissolution for the time being.

President Ozawa himself recognized that the resolution has no
binding force, so the passage of the censure motion was meant to
emphasize the confrontational stance against the government and

TOKYO 00001600 010 OF 013


ruling coalition. A veteran lawmaker also said, "The censure motion
was no more than a bamboo sword."

That being said, with the Prime Minister's decision to ignore the
motion, the DPJ has lost completely any leverage to force Diet
dissolution. If there is not going to be an early general election,
Ozawa, who has been touted a change in government through the next
Lower House election, can only lose his lock on the party.

12) JCP tells DPJ before censure motion submitted: Timing of
submission not good

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

In a meeting yesterday of the secretaries general of four opposition
parties, in which the opposition camp finalized a policy of
submitting a censure motion against Prime Minister Yasuo Fukuda (to
the House of Councillors), the Japanese Communist Party's Tadayoshi
Ichida told his Democratic Party of Japan (DPJ) counterpart Yukio
Hatoyama, arguing: "Now is not right timing to submit the motion."

Ichida said:

"A censure motion should be submitted when we force (Prime Minister
Fukuda) to a situation in which he cannot avoid resigning with his
cabinet and calling a snap election. Do you think he will do so?"

Hatoyama then explained:

"Such may not happen soon, but if we continue fighting in a tense
atmosphere even after the Diet is closed, such efforts will lead
into the extra Diet session. Should the current session end without
the submission of a censure motion, all eyes will be focused on the
Group of Eight summit and the Olympic Games."

Ichida also posed a question about the cancellation of a party-heads
debate (between Fukuda and DPJ President Ichiro Ozawa), noting: "Why
was the party-heads debate cancelled? (Ozawa) should have grilled
(Fukuda) in a Diet debate." When Hatoyama told Ichida his party's
policy of boycotting deliberations in the next extraordinary
session, Ichida said: "That means abandonment of debate."

13) Fukuda-Ozawa debate held only once during current Diet session

YOMIURI (Page 4) (Full)
June 12, 2008

The national basic policy committees of the two Diet chambers
cancelled a debate between Prime Minister Yasuo Fukuda and
Democratic Party of Japan (DPJ) President Ichiro Ozawa planned for
the afternoon of June 11. The DPJ asked the ruling camp to cancel
the debate and the ruling camp agreed. The outlook is that there
will be no more party-heads debate other than the one held on April
9.

The party-heads debate practice was introduced in 2000. Essentially,
the party heads are supposed to hold a debate once a week. When the
practice was begun, three debates were held in a month. Because of
the agreement between the ruling and opposition parties that the
party-heads debate should not be held during the weeks when the
prime minister attends plenary sessions and budget committee

TOKYO 00001600 011 OF 013


meetings of the two Diet houses, the number of weeks in which the
debate has not been held has increased recently. Since last
September when the Fukuda government was inaugurated, only two
party-heads debates have been held.

Regarding the agreement, DPJ Secretary General Yukio Hatoyama made
this proposal in a meeting yesterday of the secretaries general of
the two Diet chambers: "Since we agree to the idea of activating the
party-heads debate, the agreement should be returned to the drawing
board and a new rule created."

14) Next extra Diet session likely to tend to be turbulent right
from beginning

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

Since opposition parties, including the Democratic Party of Japan
(DPJ), approved a censure motion against Prime Minister Yasuo Fukuda
(in the House of Councillors), an extraordinary Diet session slated
for the fall will likely be tumultuous. The reason is that there is
a possibility of the DPJ boycotting deliberations from the start,
since it has stepped up its offensive, with Secretary General Yukio
Hatoyama saying: "I don't think the significance of the censure
motion will disappear at the time when the (current regular Diet
session) closes."

In the fall extra Diet session, the ruling and opposition parties
are expected to engage in a fierce battle over many important bills.
Among those bills, the focus will be on a bill to extend the special
measures law that allows the Maritime Self-Defense Forces to
continue its refueling operation in the Indian Ocean. Although the
special law was extended in January with a two-thirds overriding
vote in the House of Representatives, it will expire in January
2009. The opposition camp is certain to oppose another extension of
the law.

The government and ruling coalition wish to enact in the next extra
session a government-managed health insurance special measures law,
intended to slash the payment from the national treasury to the
government-managed health insurance program and to have the health
insurance societies of major companies assume the payment for one
year. The opposition camp, however, is opposed to the legislation.

In a bid to pass the two bills through the Diet, the government and
ruling bloc have no other choice but to use a two-third overriding
vote in the Lower House. They envisage applying Article 59 of the
Constitution, the so-called 60-day rule, which allows the Lower
House to take a second vote on a bill if the Upper House fails to
vote within 60 days after it received. The government and ruling
camp intend to convene the extra session in late August earlier than
usual to secure about 100 days for the session.

However, Fukuda's stance of ignoring the censure motion and a Diet
timetable envisioned an overriding majority vote could backfire on
the opposition camp.

The government and ruling coalition also aim to enact a bill
establishing a Consumer Agency. The DPJ has come up with its own
proposals for bills which have Fukuda's strong policy image.
Therefore, the ruling and opposition camps may clash on those
bills.

TOKYO 00001600 012 OF 013

15) Draft report compiled by private round-table reporting to state
minister for financial services clarifies readiness to accept
investment in Japan by sovereign wealth funds, stressing
non-discrimination between domestic and foreign companies

NIKKEI (Page 3) (Full)
June 12, 2008

A draft report readied by a private round-table reporting to State
Minister for Financial Services Yoshimi Watanabe, which has been
looking into measures to deal with the turmoil in the financial
market triggered by the U.S. subprime mortgage crisis, has been
revealed. The draft mentions that investment in Japan by overseas
sovereign wealth funds (SWF), which have increased their presence
because of their investment in European and U.S. banks, should be
welcomed. It points out the need to set up a mechanism for investor
nations and Japan to exchange information so as to create the
environment for Japan to accept such investments. It also stresses
the importance of non-discrimination between domestic and foreign
companies for the creation of an open market.

The round-table is called the Financial Market Strategy Team,
chaired by Yoshikazu Takao, managing director and operating officer
at Asahi Life Asset Management. The report is the second step
following one on measures for securitized financial products issued
last fall. It will be released on July 12, today. The Financial
Services Agency plans to reflect proposals made in the report in its
future financial administration, though the report was not compiled
in response to its consultation for amending the related law.

The draft report underscores that it is a pressing issue to lure
funds from both within and outside the country in making Japan's
financial market attractive, although it at the same time points out
that there is concern that SWF's investment behavior may reflect the
intention of the governments of their home countries. It then
indicates the notion that non-discrimination between domestic and
foreign companies should be maintained.

Some European and U.S. banks have accepted a huge amount of capital
from SWF in order to cover heavy losses incurred due to the turmoil
in the financial market. Though Japanese banks are not suffering
from a capital shortfall, voices calling for more active use of SWF,
instead of regulating them out of caution have been growing
stronger. In response to such a call, the report stresses the stance
of welcoming investment by SWF.

Determining that that it is necessary to ensure market fairness in
order to improve foreign companies' investment environment and
remove a sense of distrust in SWF felt by the Japanese side, the
draft points out that the market monitoring system should be
improved. Japan exchanges little information with countries that
operate SWF, such as Middle East nations and China. The draft
indicates the notion that though the International Monetary Fund
(IMF) has launched discussion for the setting of guidelines, it is
also necessary for Japan to strengthen financial officials'
monitoring function, by looking into ways to collect information and
how information should be disclosed.

However, in view of Britain's The Children's Investment Fund's
recent bid to increase its stake in J-Power, the draft points out
that some areas require consideration in security terms regarding

TOKYO 00001600 013 OF 013


investment in Japan by foreign capital.

Since the report serves as guidelines for financial administration,
it will not directly affect various laws regulating investment. For
instance, The Foreign Exchange and Foreign Control Law mandates
prior notification regarding the acquisition of more than 10 PERCENT
of companies in specified industries. The Ministry of Economy,
Trade and Industry and the Finance Ministry have authority on that
area. Even so, the panel has come up with a stance of promoting
investment in Japan from the stance of supervising the financial
market. This will likely have the effect of curbing the excessive
application of such a regulation.

SCHIEFFER

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