Cablegate: Daily Summary of Japanese Press 06/12/08

DE RUEHKO #1609/01 1640808
P 120808Z JUN 08




E.O. 12958: N/A



(1) Fierce battle over mounting priority policy issues in next
extraordinary Diet session inevitable with eye on Lower House
election (Nikkei)

(2) Legislative branch of government: Weakening power of strongest
trump card (Yomiuri)

(3) In G-8 finance ministerial starting tomorrow, focus of attention
is on whether Japan, U.S.; Europe can take joint steps in fighting
inflation (Nikkei)

(4) Interview with JETRO Chairman Yasuo Hayashi: Urges banks to
inject capital for building of infrastructure in developing
countries (Tokyo Shimbun)

(5) METI urges firms not to adopt self-serving takeover defense
measures, giving consideration to criticism for "lack of openness"

(6) Gap seen on base noise readouts (Ryukyu Shimpo)

(7) LDP, Agriculture Ministry decide on additional 70 billion yen in
aid for livestock, cattle farmers, given soaring feed prices


(1) Fierce battle over mounting priority policy issues in next
extraordinary Diet session inevitable with eye on Lower House

NIKKEI (Page 2) (Abridged slightly)
June 12, 2008

In the wake of the adoption by the Upper House of a censure motion
against Prime Minister Yasuo Fukuda, the confrontational mood
between the ruling and opposition blocs has now become even clearer.
With an eye on the next Lower House election, the two camps are
expected to lock horns from the beginning of the next extraordinary
Diet session, possibly convened in late August. Discussions on a
plethora of priority policy issues, such as an extension of the law
governing the refueling operation in the Indian Ocean, which is to
expire in January 2009, a bill establishing a consumer affairs
agency, and sweeping tax reform, are certain to bog down.

Members of the shadow cabinet of the Democratic Party of Japan met
in the Diet building yesterday afternoon, about the same time the
censure motion against the prime minister was submitted to the Upper
House. The members discussed a consumer affairs agency-related bill,
which the government is preparing for the next extra Diet session
under the initiative of the prime minister. The meeting decided to
speedily come up with a counterproposal. The DPJ is now set to take
a clear adversarial stance against the government and the ruling

DPJ Diet Affairs Committee Chairman Kenji Yamaoka said: "Once the
ongoing Diet session is over, we will shift into election mode in
accordance with President Ichiro Ozawa's order."

The Indian Ocean refueling law, which was readopted in the Lower

TOKYO 00001609 002 OF 009

House in January this year, is expected to take center stage first
in the next Diet session. The DPJ, which rejected the legislation in
the Upper House, plans to oppose another extension.

The government and the ruling coalition envisage using once again
the constitutional rule allowing the Lower House to readopt the same
bill 60 days after its first approval. In order to settle the
refueling legislation before the budget compilation at the end of
the year, the bill must pass the Lower House in early October.

The opposition bloc is also set to object to a number of bills to be
carried over, including one amending the government health insurance
support special provisions law.

There is some skepticism about how far the DPJ can uphold its
hard-line stance after the current Diet session is over. Former
Prime Minister Junichiro Koizumi predicted in a speech in Yokohama:
"The ruling bloc will regret its presentation of the censure motion.
The prime minister will neither dissolve the Lower House nor opt for
resignation en masse."

Taxation and fiscal reforms will be the biggest bones of contention
before the compilation of the fiscal 2009 budget. The government and
the ruling coalition have vowed to raise the government's
contribution to the basic pension in fiscal 2009. This requires 2.3
trillion yen. Hiking the consumption and cigarette taxes is being

Given the likelihood that the next Lower House election will take
place before the term of the chamber expires in September 2009, the
ruling camp is bound to become evasive regarding tax hikes. In
yesterday's LDP fiscal reform council meeting, even Yuji Tsushima,
who is relatively positive about tax hikes, asked the words "this
fall" be removed from the party's plan for sweeping taxation

In the LDP, former Secretary General Hidenao Nakagawa's policy
course is vying with former Chief Cabinet Secretary Kaoru Yosano's
policy line. The prime minister's target of curbing the growth of
social security spending by 220 billion yen is also drawing fire
from within the LDP. Some LDP members are calling for altering the
government's policy of cutting spending on education, as well.

Major challenges for the Fukuda administration

Road policy
? Freeing up road-related revenues for general spending
? Reviewing the road construction program

Social security
? Raising the government's contribution to the basic pension to 50
PERCENT of the total
? Reviewing the medical insurance system for people aged 75 and

Taxation system
? Sweeping reform of the taxation system, including the creation of
an environmental tax and hiking the consumption tax

? Extension of the Indian Ocean refueling law
? Enacting a permanent law governing the overseas dispatch of the

TOKYO 00001609 003 OF 009


Consumer policy
? Enacting a consumer affairs agency establishment law

Major bills to be carried over to the next extraordinary Diet
? Regional power revitalization corporation legislation
? Bill amending the General Law of Independent Administrative
? Government health insurance support special provisions bill
? Bill amending the Organ Transplant Law
? Bill amending the Antimonopoly Law
? High quality durable housing dissemination and promotion

(2) Legislative branch of government: Weakening power of strongest
trump card

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

In a plenary session yesterday afternoon of the House of
Councillors, Democratic Party of Japan (DPJ) Diet Affairs Committee
Chairman Susumu Yanase failed to wrap up the last passage of a

His draft went:

"Mr. Prime Minister, are you going to remain in office with an
attitude of unconcern without dissolving the House of
Representatives and resigning en masse? That would be enough.
Because half of the Diet expressed its view that you are not
suitable for the prime minister's job and that will remain

The DPJ has insisted that a censure motion against the prime
minister would lead to a Lower House dissolution and snap election
since the politically divided Diet situation appeared due to the
result of last year's House of Councillors election last July. The
DPJ, the largest force in the Upper House, appears to have regarded
a censure motion against Fukuda as the strongest trump card, but
other opposition parties had their own motives.

In a meeting yesterday of the secretaries general of four opposition
parties, the Japanese Communist Party's Tadayoshi Ichida said:

"The present situation is that we cannot expect the resignation of
the cabinet and dissolution of the Lower House. By submitting a
motion even though there will be no effect, we will lose an
important means to attack the ruling camp."

In a meeting yesterday of the Social Democratic Party, which has
consistently argued the need for submission, Chairperson Mizuho
Fukushima in high spirits said: "We will thrust the public's anger
at the government." A People's New Party member stated: "I want the
DPJ to disagree with the government's nomination for a Bank of Japan
policy board member," using its cooperation for a censure motion as
a bargaining tool.

There has been a shift in the DPJ members' thinking of a censure
motion. The reason is that Fukuda made clear his stance of ignoring

TOKYO 00001609 004 OF 009

the motion.

This year, the ruling camp has resorted to its two-third majority in
the Lower House to enact three bills extending the Maritime
Self-Defense Force's refueling mission in the Indian Ocean,
reinstating the provisional gasoline tax, and maintaining the tax
revenues earmarked for road construction and maintenance. The DPJ
looked into the possibility of submitting a censure motion against
Fukuda on the grounds that he had ignored the Upper House and
hesitated to submit the motion.

Ozawa's aides discussed Diet strategies on April 28, a day after the
DPJ's candidate had won the Lower House by-election to fill the
Yamaguchi No. 2 constituency seat backed by public criticism of the
new health insurance system for those aged 75 and older. At the
time, one participant posed a question about the "idea of a censure
motion having power," saying:

"The reason for then Defense Agency Director General Fukushiro
Nukaga having resigned his post (after he was censured in 1998) was
not the power of the censure motion, but it was then Chief Cabinet
Secretary Hiromu Nonaka's overreaction to try to protect Nukaga, who
was a promising candidate from their faction."

In a meeting on May 21 of a DPJ group to study of how the Upper
House should be, former Upper House member Sadao Hirano pointed out:
"Depending on a reason and purpose, the prime minister will have no
choice but to resign. If (the DPJ) fails to give full consideration
when submitting (a censurer motion), (public support) will go to the
other side."

As a result, the DPJ's choice was to submit a motion at the end of
the current session, which gives the party minimum time to boycott
Diet deliberations, which will keep a negative impact to minimum.

In the process of the "strongest trump card" losing its power, it
gave the impression that the power of the trump card would
completely change depending on the political situation.

(3) In G-8 finance ministerial starting tomorrow, focus of attention
is on whether Japan, U.S.; Europe can take joint steps in fighting

NIKKEI (Page 5) (Full)
June 12, 2008

Finance chiefs from the Group of Eight (G-8) will discuss how to
cope with the risk in world inflation triggered by soaring oil
prices and the depreciation of the dollar. But it is difficult for
Japan and the U.S., both of which are strongly concerned about
recession, to fall in step with Europe, which wants to give priority
to commodity price stabilization by raising the interest rate. If
Japan, the U.S., and Europe fail to come up with an effective
message about their policy coordination, market players may point
out a lack of unity among them.

Japan, U.S. unlikely to fall in step with Europe eager to raise
interest rates

There is an increasing possibility that a period of inflation
combined with stagnation - the so-called stagflation - may be set
in. The European Central Bank (ECB) is now eager to raise interest

TOKYO 00001609 005 OF 009

rates, while the U.S. has hinted a policy switch, as seen from its
verbal intervention in the market with the aim of pushing up the
value of the dollar. Many observers however see it difficult for
Japan, the U.S., and Europe to come up with concerned anti-inflation

The greatest cause for concern in the Eurozone is the problem of
skyrocketing commodity prices. The rate of increase in consumer
prices in May, compared with the same month a year ago, reached 3.6
PERCENT , marking the highest level since the debut of the Euro.
Working out anti-inflation measures is thus becoming a major
political challenge. Under such a situation, ECB President
Jean-Claude Trichet announced in a press conference on June 5 that
his bank would raise the interest rate. His remark, however, drew
little criticism from the governments in the Eurozone. In the
upcoming G-8 finance ministerial, as well, Europe is expected to
insist on the need for anti-inflation measures.

The U.S. Federal Reserve Bank (FRB) also began to take
anti-inflation measures. Given growing concern that the weak dollar
and high oil prices could incur inflation around the world, the U.S.
has judged it necessary to approach the ECB, which prioritizes price
stabilization. But the unemployment rate remains high, and the
housing market is still stagnant in the U.S.

It will be difficult to raise the interest rate unless the domestic
economy and financial market remain firm. Even so, if it fails to
take some measures, an expanded difference in interest rates between
the U.S. and Europe may push down the dollar's value further.

Although the Bush administration has made a "strong dollar"
commitment, it has tolerated the weak dollar. The weak dollar has
contributed to increasing exports and underpinning its economy. The
funds that have nowhere to go began to be poured into the oil
market, resulting in shooting up its prices. There is now an
increasing fear that inflation may hit the heart of the global
economy. Alarmed at the current situation, the Department of the
Treasury and the FRB are ready to unprecedentedly step into the
market to prevent a further weakening of the dollar.

Also in Japan, the Cabinet Office indicated the possibility that the
economy has started on a downward slope. The Domestic Corporate
Goods Price Index in May posted its highest record in about 27
years. Although the effect of rising oil prices has been gradually
spreading, the Bank of Japan finds it difficult to take action.

On the occasion of Black Monday in 1987, West Germany raised the
interest rate to tame inflation despite growing concerns about a
weaker dollar. The retrenched gap in interest rates between the U.S.
and Germany led to growing concern about a plunge in the dollar,
resulting in confusing the market and shedding a huge value in a
short period. As it stands, a lack of unity among major
industrialized countries caused the havoc. Some observers point out
the "point in common" between the current situation and that at the
time of Black Monday.

(4) Interview with JETRO Chairman Yasuo Hayashi: Urges banks to
inject capital for building of infrastructure in developing

TOKYO SHIMBUN (Page 9) (Full)
June 12, 2008

TOKYO 00001609 006 OF 009

Finance ministers from Group of Eight (G-8) Nations will discuss on
June 13-14 the impact of the steep rise in crude oil and food prices
on the global economy. The Tokyo Shimbun asked Yasuo Hayashi,
chairman of the Japan External Trade Organization (JETRO), a former
director general of the Small and Medium Enterprise Agency who has
many contacts in oil-producing Middle East nations, about the
backdrop of the steep rise in resources prices and discussion themes
that should be pursued at the G-8 financial ministerial.

-- What impact will the sharp rise in crude oil and food prices have
on the global economy?

"Famine is spreading in developing countries. It will become more
serious than the income disparity issue. Industrialized countries'
economies are slowing due to the subprime mortgage crisis. In the
meantime, if the current pace of price hikes accelerates,
stagflation could occur. Measures to deal with inflation are needed.
At the same time, it is also necessary to firmly support economic
growth. Monetary policy steering will be very difficult."

-- What do you think are the causes of the high crude oil and food

"The impact of the demand side on the current prices rise is great.
Demand for crude oil among emerging countries, such as China and
India, is increasing due to rapid economic development. The
increasing meat consumption is significantly pushing up demand for
grain. That is because raising farm animals for human consumption
requires feed grains four to five times greater than the amount
needed when eaten as is by humans.

"However, Middle East countries say that demand for crude oil has
not increased in proportion to the price rise. It may be true in a
way. It is certain that speculative funds are pushing up prices more
than demand is."

-- What makes speculators able to continue invest a great amount of

"That is because there is a glut of money throughout the world due
to industrialized countries' low-interest rate policy. It cannot be
helped to some extent that market players pursue short-term
benefits. However, it is not good for them to do so excessively.
The five-nation energy ministerial on June 7 issued an unusual joint
statement, determining that the current high crude oil prices are
abnormal. It may be difficult to curb market movements, but I would
like the finance ministerial to issue a message seeking restraint
from the market."

-- What would be the desired form of fiscal and financial polices?

"The role of financial services is to inject money into the real
economy. There are many countries in the world that need roads,
railways, ports and harbors. Investment in energy-saving areas is
also sought due to the global warming issue. If there is a glut of
money, banks should use more capital for such projects.

"Some African countries have achieved high economic growth. If
developing countries' economies grow, the global economy would
develop more. I want policy officials of industrialized countries to
back banks so that they invest capital in those areas."

TOKYO 00001609 007 OF 009

(5) METI urges firms not to adopt self-serving takeover defense
measures, giving consideration to criticism for "lack of openness"

NIKKEI (Page 2) (Excerpts)
June 11, 2008

A study group of the Ministry of Economy, Trade and Industry (METI)
has produced a report specifying under what conditions companies are
allowed to adopt anti-takeover measures. The report urges corporate
managers to make an appropriate response, defining the current
formula of entrusting a judgment on the propriety of taking
preventive measures to a vote by shareholders as "aimed to avoid
responsibility." It also says that hostile takeover bids could
generate positive effects in some cases as they may lead to an
improvement in corporate governance, noting that anti-takeover
measures aimed at trying to protect management's own interests
should not be allowed.

The study group on corporate values will finalize its report today.
The group, chaired by Tokyo University Graduate School Professor
Hideki Kanda, is composed of academics, institutional investors, and
legal experts. The members has produced the report, based on a
recent change in legal judgments, as seen from the case of a U.S.
investment fund's takeover bid for Bulldog Sauce. Although the
report has no binding power, the report will serve as a guideline
for corporate managers in adopting anti-takeover measures.

In 2005, the study group produced its initial report. Based on the
report, METI and the Justice Ministry presented guidelines, and
about 500 companies have adopted anti-takeover measures in
accordance with the guidelines. However, in order to adopt
self-serving protective measures, some companies have stretched the
expression that "shareholders' interests will be apparently
undermined" inserted in the guidelines. Investors often criticize
increasing cases of Japanese companies adopting anti-takeover
measures as aimed to exclude institutional investors from the
Japanese market and showing its closed nature. Keeping such
criticism in mind, the panel inserted in the latest report stricter
conditions for adopting preventive measures.

The report specifies that hostile takeovers may (1) correct the
discipline in companies; and (2) improve shareholders' interests. It
also says that anti-takeover measures may lead to depriving
shareholders of a chance to sell their shocks.

The report also stresses the importance of the role to be played by
boards of directors and protection of shareholder interests. It
calls on corporate managers not to adopt self-serving protective
measures by citing interests of persons concerned other than
shareholders, such as employees or clients, as well as not to
prolong the period of studying buyout plans. The report also
requires a judgment on the propriety of anti-takeover measures to be
made at a board of directors meeting. This measure is based on the
view that companies should not pay compensation to takeover planners
when the companies adopt protective measures.

(6) Gap seen on base noise readouts

RYUKYU SHIMPO (Page 27) (Abridged)
June 12, 2008

TOKYO 00001609 008 OF 009

The Defense Ministry Okinawa Defense Bureau's readouts of noise
levels are lower than the Okinawa prefectural government's readouts
in their monitoring of aircraft noise around the Kadena base and
Futenma airfield, the Ryukyu Shimpo has found. Except some
monitoring spots, the weighted equivalent continuous perceived noise
level (WECPNL), as well as the frequency of noise, is low in the
government's monitoring. In some areas, the frequency of noise
marked a fivefold difference. The government's readouts of noise
levels are used as noise data for its environmental assessment of an
alternative facility for Futenma airfield. Kozo Hiramatsu, a
professor of acoustic environmentology at Kyoto University and an
expert on noise problems, notes: "The Okinawa prefectural
government's monitor proves to be more efficient in noise
monitoring, so I think that's why there is a difference in the
frequency of noise." The actual levels of noise around the two bases
could be taken as lower.

The Defense Ministry's Okinawa bureau and the Okinawa prefectural
government monitor noise at three spots near Kadena Air Base and at
four spots near Futenma Air Station, and their monitoring spots are
closely situated. To compare their data over the past three years,
the prefectural government's WECPNL readouts were higher than the
government's readouts, except in some areas. Fiscal 2006's data
shows that the WECPNL at Sunabe in the town of Chatan was 79.8 in
the government's monitoring and 90.5 in the prefectural government's
monitoring, leaving a difference of 10.7 points. In areas near the
southern end of Futenma airfield's runway, the government's WECPNL
readout was 75.8 at Ojana, and the prefectural government's readout
was 80.7 at Ueojana, showing a difference of 4.9 points.

In the frequency of noise as well, the Okinawa prefectural
government's average readout was 1.9 times higher than the Defense
Ministry's at spots near the Kadena base and 2.2 times higher at
spots near Futenma airfield. There was a difference of up to 5 times
at Chibana in the city of Okinawa. The government's monitoring
benchmark is over 70 decibels, so noise levels lower than that,
particularly the low-pitched sounds of Futenma-based choppers, can
hardly be monitored.

Furthermore, in the Okinawa prefectural government's noise
monitoring, the annual frequency of noise totals more than 30,000
times in Kadena Town's Yara area. This frequency of noise is harder
than that at all other monitoring spots. Ginowan City's Nodake area,
which is near the northern end of Futenma airfield's runway, shows
the third hardest frequency of noise in the city. These two areas,
however, are not included in the government's monitoring spots.

Numerical data from the government's noise monitoring in the Ojana
area of Ginowan City is used in the government's aircraft noise
forecast report that was presented in an environmental survey of the
Futenma replacement facility's site. The assessment report is based
on data that is lower than the Okinawa prefectural government's

(7) LDP, Agriculture Ministry decide on additional 70 billion yen in
aid for livestock, cattle farmers, given soaring feed prices

NIKKEI (Page 5) (Full)
June 12, 2008

In response to skyrocketing feed prices due to the worldwide steep
rise in grain prices, the Liberal Democratic Party (LDP) and the

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Ministry of Agriculture, Forestry and Fisheries (MAFF) decided
yesterday to implement a package of emergency measures worth 70
billion yen for livestock and cattle farmers. The necessary money
will be doled out of the funds possessed by Agriculture & Livestock
Industries Corporation, an independent administrative corporation
under the jurisdiction of MAFF. The package includes a measure to
raise the amount of subsidies for finished milk producers. MAFF will
present the package in deliberations to be held today by external
knowledgeable persons.

The government decided this February to provide cattle farmers
suffering from business slump affected by soaring feed prices with
aid totaling 187.1 billion yen. Given skyrocketing corn prices due
to an increase in demand for the product to be used to make biofuel,
the government has decided to implement additional measures.


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