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Cablegate: Japanese Morning Press Highlights 07/17/08

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ZNR UUUUU ZZH
P 170111Z JUL 08
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INFO RUEKJCS/SECDEF WASHDC PRIORITY
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RHMFIUU/HQ PACAF HICKAM AFB HI//CC/PA//
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RUYNAAC/COMNAVFORJAPAN YOKOSUKA JA
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RUEHOK/AMCONSUL OSAKA KOBE 2622
RUEHNAG/AMCONSUL NAGOYA 7109
RUEHKSO/AMCONSUL SAPPORO 9476
RUEHBJ/AMEMBASSY BEIJING 4406
RUEHUL/AMEMBASSY SEOUL 0396
RUCNDT/USMISSION USUN NEW YORK 0801

UNCLAS SECTION 01 OF 11 TOKYO 001978

SIPDIS

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 07/17/08

Index:

1) Top headlines
2) Editorials
Prime Minister's daily schedule: At home on vacation

Diplomatic scene:
3) 62 separate talks held between top leaders from 22 countries in
the four days of the G-8 summit (Yomiuri)
4) ROK spokesperson denies Yomiuri press report about President Lee
warning Prime Minister Fukuda not to let Takeshima issue into
teacher's manual (Yomiuri)
5) Japanese, South Korean academics to debate Takeshima isles issue
(Asahi)
6) Mainichi poll finds almost half the public pessimistic about
resolving abduction issue once U.S. removes North Korea from the
list of terrorist-sponsoring states (Mainichi)
7) LDP's Taku Yamasaki wants Japan to propose method for
reinvestigation of abduction issue in DPRK (Tokyo Shimbun)
8) Yamasaki is negative about new Afghan dispatch by SDF, saying
that ruling camp has not lined up yet behind the plan (Asahi)
9) NATO welcomes Japan dispatch of SDF to Afghanistan (Mainichi)
10) Foreign Ministry appoints academic to serve as UN Headquarters
official in charge of PKO policy (Nikkei)
11) Finance Minister Nukaga meets UAE counterpart on providing
increased capital investment to boost oil production, invites
oil-money investment in Japan (Nikkei)

12) Cabinet Office's computer simulation predicts fiscal 2011
primary-balance deficit will rise to 2 trillion yen (Mainichi)

DPJ in action:
13) Group of junior DPJ lawmakers propose to party head Ozawa the
goal of creating an international cooperation corps for UN PKO and
humanitarian aid (Tokyo Shimbun)
14) Junior DPJ lawmakers will not run a candidate against Ozawa in
the upcoming party presidential election (Sankei)
15) DPJ election campaign promise to review privatization of postal
services (Yomiuri)
16) DPJ's Maehara and LDP's Yosano becoming politically close these
days (Yomiuri)

Political agenda:
17) LDP hard at work preparing for possible cabinet shuffle, while
Fukuda silently vacations at home (Nikkei)
18) LDP hopeful Tanigaki trying to demonstrate his political
presence in order to run in party presidential race (Mainichi)
19) LDP Secretary General Ibuki drives a nail in the coffin of the
idea in the party to talk about raising taxes prior to a possible
national election (Sankei)
20) All LDP eyes on faction leader Machimura, currently chief
cabinet secretary, to see how he comes out in possible cabinet
shuffle by the prime minister (Tokyo Shimbun)

Articles:

1) TOP HEADLINES

Asahi:
Oita bribery scandal prompts 14 prefectures to review recruitment
exams for teachers


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Mainichi:
Country's FY 2007 medical expenditures estimated at 33.4 trillion
yen; People over 70 account for record 43 PERCENT of expenditures

Yomiuri:
Cellphone service providers to enhance measures against bank
transfer scams using cellphones; Police to respond to inquiries from
service providers

Nikkei:
Tax burden on Japanese manufacturers falls to record low in FY 2007

Sankei:
Teacher selection criteria not made public by 44 local governments

Tokyo Shimbun:
14-year-old boy hijacks bus

2) EDITORIALS

Asahi:
(1) Fisheries industry needs new system that can fight soaring fuel
cots
(2) Fresh breeze for Akutagawa Prize

Mainichi:
(1) U.S. financial crisis needs fundamental measures
(2) Country needs sound FY2009 budget

Yomiuri:
(1) Defense Ministry reform must forge strong body
(2) Kanezo Muraoka found guilty by top court: Nagatacho's common
sense rejected

Nikkei:
(1) Nuclear power plants must be quake resistant
(2) Anheuser-Busch agrees to InBev buyout

Sankei:
(1) Fisheries industry needs structural reform
(2) Chinese author wins Akutagawa Prize

Tokyo Shimbun:
(1) New Akutagawa Prize story begins
(2) Do away with organizational logic in reforming MOD

3) 62 separate talks held between top leaders from 22 countries in
the four days of the G-8 summit

YOMIURI (Page 2) (Full)
July 17, 2008

It has been learned that a total of 62 separate talks were held in
four days between top leaders of 22 countries, who took part in the
Group of Eight summit in Hokkaido. The 62 separate summit meetings
were held at The Windsor Hotel from July 6, the day before the
opening of the G-8 summit, through the 9th, the closing day of the
summit. According to the Ministry of Foreign Affairs, the number is
the largest ever compared with that held at the past G-8 summits.

Prime Minister Yasuo Fukuda had 15 meetings, the largest number,
followed by the ten meetings by Russian President Dmitry Medvedev,

TOKYO 00001978 003 OF 011


and by the eight sessions by U.S. President George W. Bush.

In the G-8 outreach session, newly developing countries called
"BRICs" demonstrated their solidarity. A senior MOFA official said:
"Countries other than the G-8 nations have now taken advantage of
the G-8 summit to play up their presence."

Since the G-8 Hokkaido Summit took up such global issues as climate
change and food crisis, as well as African development, a record
high of 22 countries, including the G-8 members, participated in the
summit.

4) Seoul denies Yomiuri report on Takeshima

YOMIURI (Page 2) (Full)
July 17, 2008

SEOUL-Lee Dong Kwan, a spokesman for South Korean President Lee
Myung Bak, met domestic media reporters on July 15 and denied a
Yomiuri Shimbun report on the president's remarks over the
advisability of describing the issue of Takeshima, a group of
disputed islets in the Sea of Japan, in an education ministry manual
explaining new middle school curriculum guidelines for social
studies. The Yomiuri Shimbun reported that President Lee told Prime
Minister Fukuda: "Don't do that right now. I want you to wait." The
spokesman, however, said the president "never said anything like
that." "That's groundless," the spokesman added.

The spokesman, meeting the press yesterday, said the South Korean
government was studying what to do next.

5) South Korea to urge Japan to allow school textbook sub-panel to
discuss Takeshima issue

ASAHI (Page 4) (Abridged slightly)
July 17, 2008

Seoul

The South Korean government intends to urge Japan to let the
Japan-South Korea joint history research committee's school textbook
sub-committee composed of scholars of the two countries to handle
the Takeshima/Dokdo issue. The step follows President Lee Myung
Bak's instruction yesterday to consider having both countries
produce joint history textbooks. The step seemingly aims at renewing
Seoul's assertion that Takeshima is South Korea's territory through
the envisaged subcommittee discussions.

The governments of Japan and South Korea agreed at the October 2006
bilateral summit to set up a history textbook subcommittee under the
joint history research committee composed of scholars of the two
countries. Although the committee's second-term plenary meeting has
been underway since June 2007, how much it can affect the
government's basic policy is unclear.

Japan thinks South Korea's response to the Takeshima issue is calmer
than the previous Roh Moo Hyun administration's that immediately
escalated into changes to the diplomatic timetable. The government
is also watching closely whether South Korea will respond to Japan's
call for a Japan-ROK foreign ministerial on the sidelines of an
international conference in Singapore next week.


TOKYO 00001978 004 OF 011


Japan has informally requested the bilateral foreign ministerial,
but South Korea replied that the matter is under consideration,
according to an informed source.

6) Poll: 47 PERCENT pessimistic about abduction issue due to N.
Korea's delisting

MAINICHI (Page 2) (Abridged)
July 17, 2008

In the wake of North Korea's nuclear declaration, the United States
is now in the process of delisting North Korea as a state sponsor of
terrorism. The Mainichi Shimbun, in its recent telephone-based
nationwide public opinion survey conducted July 12-13, asked
respondents about the possible impact on the issue of Japanese
nationals abducted to North Korea. In response to this question, 47
PERCENT answered that the issue is now far off from a solution,
with 42 PERCENT saying the delisting and the abductions are
different issues and 2 PERCENT saying the issue is now nearing a
resolution.

Meanwhile, the Japanese government welcomed the U.S. government's
decision to remove North Korea from its terrorism blacklist in
response to its nuclear declaration, taking the position that it
will help resolve the North Korean nuclear issue. In the survey,
respondents were asked if they supported this move. To this
question, 66 PERCENT answered "no," with 19 PERCENT saying "yes."
The government expected its response to the North Korea problem to
score points on the diplomatic front. Its stance, however, did not
necessarily obtain public understanding, as is evident from the
survey.

7) LDP Yamasaki urges government to present method for
reinvestigation of Japanese abductees in North Korea

TOKYO SHIMBUN (Page 2) (Full)
July 17, 2008

(Kyodo News, Beijing)

Former Liberal Democratic Party Vice President Taku Yamasaki, now
visiting China, told Japanese reporters in Beijing on July 16 this
about the reinvestigation of Japanese abduction victims: "It is
necessary for Japan to present an investigation method. I say the
sooner, the better." The reinvestigation was agreed on in recent
working-level talks between Japan and North Korea.

Yamasaki said: "It would be better for Japan to join the
reinvestigation," but he added: "Since there are opposing views,
coordination in the government is necessary."

Yamasaki ruled out the possibility of his contacting North Korean
officials who are involved in the abduction issue.

In reference to a cabinet shuffle, Yamasaki emphasized that if Prime
Minister Fukuda decided to shuffle the cabinet, he should respect
opinions in LDP factions. Regarding dissolution of the House of
Representatives for a snap election, he remarked: "If the cabinet is
shuffled, the Lower House will not be dissolved at least for six
months. But a general election at the outset of the ordinary Diet
session next year is fully conceivable."


TOKYO 00001978 005 OF 011


8) Yamasaki dismissive of sending SDF to Afghanistan

ASAHI (Page 4) (Abridged slightly)
July 17, 2008

Beijing

LDP Foreign Affairs Research Council Chairman Taku Yamasaki speaking
to the press on July 16 in Beijing expressed a negative view about
the government and ruling camp's plan to send the Self-Defense Force
to Afghanistan as the next step after the refueling assistance
special measures law expires in January. He said: "It is difficult
to make a political decision on ground-based assistance along with
(activities) in the Indian Ocean."

In response to expectations of Western countries, the government
sent a fact-finding team to Afghanistan and its neighboring
countries. The government is searching for the possibility of the
SDF's airlift support for the multinational forces and other
options. But there are no prospects for obtaining the understanding
of the major opposition Democratic Party of Japan under the divided
Diet, in addition to resistance by the LDP's coalition partner of
the New Komeito. Yamasaki said: "Politically there are too many
obstacles to enact new legislation, and the ruling bloc would not be
able to come up with a unified view." Yamasaki also made this
comment about North Korea's pledge to reinvestigate the abduction
issue: "There is a need to present methods, including whether or not
Japan will join the reinvestigation; the earlier the better."

Yamasaki also called for an early cabinet shuffle, saying that such
would be helpful to shore up support ratings. He also indicated that
factions should refrain from recommending any candidates for cabinet
posts, saying: "Although I would like to see the prime minister
listens to factional views rather than acting like former Prime
Minister Koizumi, who decided matters arbitrarily, Prime Minister
Fukuda should pick the new members from a broad range of people in
order to generate his own policy imprint."

9) SDF dispatch welcome in Afghanistan: NATO spokesman

MAINICHI (Page 2) (Full)
July 17, 2008

BRUSSELS-The North Atlantic Treaty Organization (NATO) appreciates
Japan for its financial aid to Afghanistan's reconstruction, a NATO
spokesman said while referring to the fact that the Japanese
government is now considering sending troops from the Self-Defense
Forces to Afghanistan. "If Japan hopes to do more, we will welcome
it," the spokesman said, adding that it is for the Japanese
government to decide where to send SDF troops and what to do there.

10) Hitotsubashi University visiting professor picked as UN Policy
Evaluation and Training Division director

ASAHI (Page 4) (Full)
July 17, 2008

The Ministry of Foreign Affairs announced yesterday that
Hitotsubashi University Professor Izumi Nakamitsu, 45, had been
hired as director of the United Nations' Secretariat's PKO
(peacekeeping operations) Division in charge of policy evaluation
and training. According to the ministry, Nakamitsu is the second

TOKYO 00001978 006 OF 011


Japanese to serve in such a management post in UN Headquarters,
followed by Kiyotaka Akasaka, deputy secretary general responsible
for public relations. Nakamitsu is expected to arrive at the post in
early August.

Nakamitsu served in such posts as head of UNHCR Mostar office in
Sarajevo, and the former Yugoslavia UN secretary general's special
senior assistant officer. As a specialist to resolve disputes and
building peace, he has been a visiting professor at the Hitotsubashi
University since 2007, after serving as a professor at the
Hitotsubashi University graduate school since 2005.

Foreign Ministry Press Secretary Kazuo Kodama stated yesterday at a
press conference: "I think his appointment is extremely significant
for Japan as part of efforts to become a peace cooperation
country."

11) Finance minister visits UAE: Calls on oil-producing countries to
improve production facilities; Asks for cooperation on crude oil
prices; Also meets with senior official of government-affiliated
investment fund with aim of luring investment to Japan

NIKKEI (Page 5) (Excerpts)
July 17, 2008

Abu Dhabi, Manabu Morimoto

Finance Minister Fukushiro Nukaga, now visiting the United Arab
Emirates (UAE), on July 16 met with his counterpart Al-Tayer. In an
effort to address the steep rise in crude oil prices, he sought
cooperation from the UAE. He asked the nation to increase its oil
production capacity and help constrain speculative transactions by
improving information disclosure. He also met with a senior official
of the government-affiliated investment fund SWF with the aim of
luring oil money to Japan. He will then visit Kuwait on July 17. He
is expected to call for cooperation from other countries in the
region, explaining measures to deal with surging crude oil prices
that industrialized countries agreed on at the G-8 summit in
Hokkaido.

Participants in the G-8 summit and other related meetings agreed
that oil consumer countries, such as Japan, the U.S. and European
countries, should step up energy-conservation efforts. In the
meantime, they sought cooperation from oil-producing countries,
including boosting production volume and refining capacity,
improving the transparency of market data on crude oil, such as
stockpiles and production capacity, and analyzing the impact of
demand and speculative movements on the high crude oil prices.

Though demand for crude oil in China and India is continuing to
increase, the outlook for oil-producing countries' future supply
capability is unclear. It is believed that outdated production and
refining facilities are contributing to the steep rise in crude oil
prices. Nukaga during the meeting asked the UAE to boost capital
spending, which would lead to an increase in mid- to long-term oil
supplies. He stressed Japan's stance that it is ready to help the
nation on the technological front.

In response, Al-Tayer indicated a stance of basically cooperating
for the G-8 agreement to constrain the high crude oil prices.
However, he underscored that it was impossible to boost production
immediately, citing labor and facility shortages. He also called for

TOKYO 00001978 007 OF 011


a swift analysis by the International Monetary Fund (IMF) or other
international agency of the impact of speculative investment on
crude oil prices, pointing out, "The supply-demand issue may not be
the only factor contributing to the steep rise in crude oil prices.
Speculative money may be another factor."

12) Deficit in primary balance for fiscal 2011 to top 2 trillion
yen, according to Cabinet Office estimate; Deterioration caused by
economic slowdown

MAINICHI (Page 1) (Excerpts)
July 17, 2008

It was learned on July 16 that the Cabinet office in its latest
fiscal estimate projected that a deficit in the primary balance of
the central and local governments for fiscal 2011 would exceed 2
trillion yen. Such an estimate as of January was only about 700
billion yen. However, the fiscal outlook will significantly change
for the worse with a fall in tax revenues following the economic
slowdown.

The projection will be submitted to a meeting of the Council on
Economic and Fiscal Policy on July 22. The government incorporated
in the basic policy guidelines on economic and fiscal management and
structural reforms for the fiscal 2006 a target to move the primary
balance into the black in fiscal 2011 and lower the proportion of
government debt to the GDP by the middle of the 2010s. In order to
achieve this target it has been implementing a plan to cut spending
up to 14.3 trillion yen from fiscal 2007 through fiscal 2011.

However, the estimate revealed this time indicates that if a
temporary pause like this continues, it would be necessary to
further cut spending and boost revenues, by such means as a
consumption tax hike, in order to achieve the target. The situation
will likely affect discussions of the compilation of the fiscal 2009
budget and an amendment to the tax code.

The Cabinet Office will also extensively revise down its economic
outlook. It is now undergoing coordination with the possibility of
forecasting real growth of the GDP for fiscal 2008 at about 1.3
PERCENT and 0.3 PERCENT in nominal terms, which are far below last
year's projection -- 2.0 PERCENT in real terms and 2.1 PERCENT in
nominal terms.

The nominal growth rate continues to fall below the real growth rate
mainly due to weak domestic demand. The government will unlikely
achieve its goal of putting an end to deflation before fiscal 2009.

13) Group of junior DPJ lawmakers prepares policy proposal for
Ozawa, featuring int'l cooperation corps

TOKYO SHIMBUN (Page 2) (Full)
July 17, 2008

Hideo Hiraoka, a House of Representatives member of the leading
opposition Democratic Party of Japan (Minshuto) leads a 'liberal'
group of middle-ranking and junior lawmakers reluctant to revise
Article 9 of the Constitution. The group held a seminar yesterday in
Chitose, Hokkaido, and worked out a policy proposal for "Japan as a
thoughtful nation."

The proposal features setting up an international cooperation corps

TOKYO 00001978 008 OF 011


as a new organization apart from the Self-Defense Forces to take
over the SDF's role in international peace-keeping operations and
humanitarian assistance activities overseas. It also advocates
establishing a "peace law" stipulating that Japan will not
participate in collective self-defense and that the SDF exists for
defense only.

"We want to present our policy proposal to President Ozawa," Hiraoka
told a news conference, adding: "If there are (other) people raising
their hands to run in this September's election for our party's
presidency, we will present out policy standpoint to them as well."
With this, Hiraoka indicated that his group would see the response
to their policy proposal and then decide what to do in the party
presidential race. He did not clarify whether he himself would run
or whether his group would put up a candidate.

14) Junior pro-Constitution DPJ members give up fielding own
candidate for presidential election

SANKEI (Page 5) (Excerpts)
July 17, 2008

The Group of Liberals, composed of junior and mid-ranking Democratic
Party of Japan (DPJ) members in favor of protecting the
Constitution, compiled a set of policy proposals in a study meeting
held at a Japanese inn in Chitose City, Hokkaido, yesterday. They
decided not to field their own candidate but to back a candidate who
supports their policy proposals in the party presidential election
in September. The group will soon submit the report to President
Ichiro Ozawa. This decision has made it more likely for Ozawa to win
a third term in power in the party without a formal vote.

Hideo Hiraoka, who is the leader of the group and is said to be
eager to run in the presidential race, revealed in a press
conference after the study meeting that the group would give up
putting up its own candidates, including him. He said:

"It is undesirable to see the party split after the presidential
election. We are fully aware of calls growing for the party to
engage in a campaign for the next Lower House election under Mr.
Ozawa. We would like to discuss matters based on this assumption."

He also indicated that he would approve an election of Ozawa for a
third term without voting, saying: "Although it is desirable that
policy debate is conducted in the election campaign, since it is
unknown when the next general election is held, it might be
necessary for the party to be united in a different way from
conducting heated debate."

Some group members were reacting to Ozawa's possible election for a
third term without a vote, one claiming: "If Ozawa became prime
minister, he could manage the government in a Liberal Democratic
Party's style. If liberal policy measures are not introduced, a
change of government will be meaningless." Another member was
insisting: "If a presidential election is carried out, the presence
of the party will be played up."

15) DPJ to make revision to postal privatization campaign pledge:
Reaches agreement with PNP, Zentoku on election

YOMIURI (Page 4) (Full)
July 17, 2008

TOKYO 00001978 009 OF 011

Democratic Party of Japan (DPJ or Minshuto) President Ozawa and
People's New Party (PNP) President Watanuki on July 16 held a
meeting with the attendance of Chairman Urano of the national
special postmasters association (Zentoku, former national
association of special postmasters). They exchanged a consensus
document noting that the DPJ will incorporate a proposal for
drastically revising the postal privatization in its manifesto for
the next Lower House election. The Postal Policy Study Group (PPSG),
a political organization consisting of special postmasters, retired
postmasters and their family members, will support PNP-recommended
candidates running in the next election on the DPJ ticket, based on
this agreement.

The agreement noted that the DPJ pledges to give full consideration
to the stance of the PNP regarding a drastic revision to the postal
privatization and realize the revision without fail once it takes
the reins of government, by mentioning it in its election pledges.
Regarding specific revisions, the participants agreed to give teeth
to revisions, based on talks between the PNP and the PPSG.

Ozawa during the meeting asked the other participants, "I would like
to have your cooperation (for the next Lower House election), as we
need to assume power in order to fulfill what has been agreed on."
Watanuki replied, "Power shift is needed in order to protect local
communities and Japan."

Postmasters can engage in political activities now that postal
services have been privatized.

16) LDP Yosano, DPJ Maehara remarkably close recently

YOMIURI (Page 4) (Full)
July 17, 2008

Former Chief Cabinet Secretary Kaoru Yosano of the Liberal
Democratic Party (LDP) and Vice President Seiji Maehara of the
Democratic Party of Japan (DPJ) attended a forum sponsored by the
Tokyo Foundation in Tokyo yesterday.

A dialogue between Yosano and Maehara was published in the July
edition of the monthly magazine Chuo Koron. The two also jointly
attended a symposium on July 9. Their close ties have been drawing
attention recently. A DPJ member was overheard saying: "Mr. Maehara
is excessively close to the LDP."

Yosano has recently criticized the DPJ's policy manifesto as
"ridiculous" and "focusing on throwing money around." Yesterday,
however, he underscored his consideration to Maehara yesterday,
saying: "I do not use rude words before Mr. Maehara," though he
commented: "(The manifesto) is financially inconsistent." Meanwhile,
Maehara protected the DPJ's manifesto, saying: "We worked out it on
the premise of the party assuming power at least for three years
after a change of government. Our financial measures include those
that will be able to be dealt with in three years time, but they are
not slipshod."

17) With prime minister silent, LDP working to prepare for cabinet
shuffle, with each faction readying list of recommended candidates

NIKKEI (Page 2) (Excerpt)
July 17, 2008

TOKYO 00001978 010 OF 011

The growing outlook in the Liberal Democratic Party (LDP) is that
Prime Minister Fukuda in late July at the earliest will shuffle his
cabinet, and moves in the party have begun to actively push certain
candidates. Each faction has begun to draw up a list of recommended
candidates, and senior faction members are informally investigating
the candidates. The Prime Minister, who started his vacation on the
16th, has avoided contact with the party side, and remains hold up
in his residence, maintaining his silence about whether or not he
will shuffle the cabinet or not.

18) Tanigaki celebrates 25th anniversary as a Diet member; Challenge
is to demonstrate his political presence

MAINICHI (Page 5) (Abridged)
July 17, 2008

Liberal Democratic Party (LDP) Policy Research Council Chairman
Sadakazu Tanigaki celebrated his 25th anniversary July 16 as a
politician with a party held at a Tokyo hotel. The late Prime
Minister Kiichi Miyazawa had high hopes for his future, and when the
Koga faction of the party and the Tanigaki faction, both of which
came from the former Miyazawa faction, merged in May, Tanigaki was
appointed to the second spot in the new faction. However, although
he secretly is burning with desire to run in the next LDP
presidential race, his challenge is that he must remove the image
that his political presence in the party is weak.

The party was attended by approximately 30 lawmakers, and LDP
Election Committee Chairman Makoto Koga gave words of encouragement
in a speech. It has been about two years since the last party
presidential election in 2006. Can Tanigaki display leadership in
such critical policy areas as turning road-tax revenues into general
funds? He will soon reach a defining moment in his career.

19) Ibuki ends debate about consumption tax hike, saying:
"Deflecting voters' attention is needed to win election"

SANKEI (Page 5) (Full)
July 17, 2008

Liberal Democratic Party's Secretary General Bunmei Ibuki said in a
speech in Kyoto yesterday: "A hike in the consumption tax before a
general election will cause us serious trouble," indicating that
talk about the consumption tax should not be raised before the
election.

He also said: "To win a victory (in the election), we will have to
deflect (voters') attention from the issue." Criticism might crop up
against the remark implying that the government should come up with
a policy that would delay a hike in the consumption tax and have the
voters look away from this issue. Ibuki further said of an election
strategy: "We would like to cope with a difficult situation while
asking the prime minister for a dazzler, in a good sense, and a
performance."

Upon saying: "In public surveys, about half of the public said they
support a consumption tax increase aimed to finance social security
spending," Ibuki expressed his view that he cannot believe the
survey result at face value.

20) Attention now on how Chief Cabinet Secretary Machimura will be

TOKYO 00001978 011 OF 011


treated in cabinet shuffle

TOKYO SHIMBUN (Page 2) (Full)
July 17, 2008

Since Prime Minister Yasuo Fukuda started his summer vacation
yesterday, Chief Cabinet Secretary Nobutaka Machimura, Fukuda's
chief aide, was busy yesterday with managing the Prime Minister's
Official Residence (Kantei). As calls rise in the ruling parties for
Fukuda to shuffle his cabinet, how Machimura will be treated is now
drawing widespread attention in the ruling coalition.

Referring to the scandal involving the Oita Prefecture board of
education, Machimura, a former education minister, stated at a press
conference yesterday: "Improving the quality of teachers is an old
but new issue."

Ruling camp members appreciate Machimura's capabilities as a person
who is well versed in a wide range of policies from foreign affairs
to tax and fiscal areas. Despite that, ruling coalition members are
paying close attention to how he will be treated because many
believe that he is unable to communicate with Fukuda, even though he
is in a key position supporting the prime minister.

Machimura's remarks in May about the need for a review of the
government's reduced-rice-acreage policy encountered a barrage of
objections in his Liberal Democratic Party (LDP). However, since he
has made no major mistakes in his duties, there are two views in the
ruling bloc -- one being that he would be removed in a shuffle and
the other being that he would be retained in his current post.

Another reason for the strong interest in the treatment of Machimura
is speculation that if he is removed from the cabinet, the rivalry
between former Secretary General Hidenao Nakagawa and Machimura will
emerge in the Machimura faction, the largest in the LDP, over who
will lead the faction.

Machimura is a political highbred. His father served as Hokkaido
governor and in both Diet houses. Since he was first elected to the
Diet in 1983, he has climbed the political career ladder smoothly.
He strongly hoped to assume the chief cabinet secretary post, with
the aim of becoming a prime ministerial candidate in the future. But
he is now facing a career challenge this summer.

ZUMWALT

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