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Cablegate: Japanese Morning Press Highlights 07/23/08

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UNCLAS SECTION 01 OF 10 TOKYO 002021

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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,
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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 07/23/08

Index:

ASEAN meeting:
1) Foreign ministers of ASEAN plus 3 agree to fund to deal with
disasters, cope with terrorism, share long-term goal of reducing
greenhouse gases (Nikkei)
2) ASEAN plus 3 express support for Six-Party Talks (Mainichi)
3) Meeting at ASEAN meeting sidelines, Japan, ROK foreign ministers
unable to fill wide gap over Takeshima isles issue (Tokyo Shimbun)

4) Japanese, Chinese foreign ministers agree to speed up talks on
gas-field development (Asahi)

Political agenda:
5) Returning to work after vacation, Prime Minister Fukuda is mum
about possibility of shuffling his cabinet (Sankei)
6) Fukuda to meet Komeito's Ota to discuss timing of next Diet
session and possibility of cabinet reshuffle (Nikkei)
7) Big gap in ruling camp over taking a Lower House revote on the
extension of the anti-terror law that allows MSDF refueling service
in the Indian Ocean (Mainichi)
8) Machimura: Serving in a post for long time is important; Masuzoe:
I will do my best; Ishiba: Prime Minister should pick cabinet
members for smooth management (Mainichi)

Government finances:
9) Primary balance deficit has expanded and will soon reach 3.9
trillion yen (Tokyo Shimbun)
10) LDP's Taku Yamasaki: Age of Koizumi has passed, for the economy
cannot get by just by structural reform (Asahi)

11) WTO agricultural talks: Japan focusing its efforts on important
farm products (Mainichi)

Defense affairs:
12) Defense Ministry's counselor (sanjikan) position to be scrapped
next year (Yomiuri)
13) Defense Ministry proposes unifying defense buildup areas by 2010
(Nikkei)

Articles:

1) ASEAN, Japan, China, S. Korea agree to fund disaster prevention,
counterterrorism

NIKKEI (Page 2) (Abridged)
July 23, 2008

SINGAPORE-Japan, China, South Korea, and the Association of
Southeast Asian Nations (ASEAN) held a meeting of their foreign
ministers in Singapore yesterday afternoon and agreed to set up a
fund to cooperate in disaster prevention and counterterrorism.
Meanwhile, the recent Group of Eight (G-8) summit held at Lake Toya
in Hokkaido agreed to share a long-term global goal of halving
greenhouse gas emissions by 2050. In this connection, Foreign
Minister Masahiko Koumura called on ASEAN members to share the
goal.

Last November, Japan, China, South Korea, and ASEAN members held a
summit of their leaders and adopted a joint statement regarding
future cooperation in East Asia. The fund to be established this
time is based on that statement for regional cooperation in specific

TOKYO 00002021 002 OF 010


areas. The fund amounts to 3 million dollars (approximately 300
million yen). The 10 ASEAN members will shoulder 10 PERCENT of the
fund, and the rest will be equally shared by Japan, China, and South
Korea.

Members of the East Asia Summit also held an informal meeting of
their foreign ministers from a total of 16 countries-Japan, China,
South Korea, 10 ASEAN members, India, Australia, and New Zealand.
The current food crisis was on the agenda, and they shared a sense
of crisis about the possibility of social unrest. They also
concurred on the importance of technological research to produce
more grain.

In the series of meetings, Koumura stressed the importance of
resolving the issue of Japanese nationals abducted to North Korea
along with the North Korean nuclear issue. "I have obtained their
understanding," he told reporters after the meetings.

2) ASEAN-plus-3 supports six-party talks, agrees on early
denuclearization of North Korea

MAINICHI (Page 2) (Abridged slightly)
July 23, 2008

An ASEAN-plus-3 foreign ministerial meeting was held in Singapore on
July 22. As a result, the members agreed on the need to support the
six-party talks and to bring about North Korea's early
denuclearization through the verification of its nuclear
declaration. They also welcomed the North's nuclear declaration and
the disablement of its nuclear facilities as a positive move toward
nuclear abandonment.

After the meeting, Foreign Minister Masahiko Koumura said: "It is
important to bring progress to Japan-North Korea relations through
the North's complete denuclearization and nuclear abandonment and
the abduction issue." Koumura also asked for support for the
settlement of the abduction issue based on the fact that a
reinvestigation into the issue has not realized as was agreed upon
with Pyongyang. With informal six-party talks scheduled to take
place on July 23, Koumura intended to give a boost to the upcoming
meeting by seeking the understanding of the ASEAN nations.

The members also discussed soaring food and oil prices that are
seriously affecting each country and agreed to combine efforts in
addressing the issue. An accord was also reached to establish a fund
to support ASEAN's activities in a wide range of areas, such as
measures against poverty and food security. The size of the fund
will be about 300 million yen. Ten percent will be covered by ASEAN
members and the remaining amount will be evenly split by Japan,
China and South Korea. Although a Japan-ROK foreign ministerial has
been dropped due to the reference of the Takeshima/Dokdo issue in a
new Japanese teacher manual, the foreign ministers of Japan and
South Korea met each other in person for the first time yesterday
after the territorial issue cropped up.

Koumura said after the meeting, "We were able to exchange views on
matters (including the Takeshima issue) extremely significantly
though for a short period of time." The Foreign Ministry did not
reveal the contents of the meeting.

3) Gulf expanding between Japan and South Korea over Takeshima
issue

TOKYO 00002021 003 OF 010

TOKYO SHIMBUN (Page 2) (Abridged slightly)
July 23, 2008

The gulf between Japan and South Korea is growing due to the
Japanese government's decision to refer to Japan's sovereignty over
the Takeshima group of islets (known as Dokdo in South Korea) in the
new social studies guidelines for middle schools. The foreign
ministers of Japan and South Korea came in contact with each other
briefly at an ASEAN-plus-Three foreign ministerial held on July 22.
But their meeting was short, without pursuing a way out of the
current deadlock.

Foreign Minister Masahiko Koumura and his South Korean counterpart
Yu Myung Hwan sat next to each other in the ASEAN-plus-3 foreign
ministerial.

Seoul's strong reaction to Tokyo was evident, with a South Korean
negotiations source describing the atmosphere of the meeting as
businesslike.

With informal six-party foreign ministerial talks scheduled to take
place on July 23, Japan actively conducted prior consultations
yesterday, with Foreign Ministry Asian and Oceanian Affairs Bureau
Director-General Akitaka Saiki exchanging views with U.S. Assistant
Secretary of State Christopher Hill.

But due to Takeshima issue, Japan was not able to hold a meeting
with the South Korean chief delegate, with whom Saiki has worked
closely. The informal six-party foreign ministerial meeting is about
to take place without prior consultations among the chief delegates
of Japan, China, and South Korea.

U.S. chief delegate Hill in his meeting with his South Korean
counterpart Kim Sook indicated that a lack of dialogue between Japan
and South Korea must not hinder the six-party talks.

Japan's call on South Korea for a settlement of the Takeshima issue
might end up augmenting Seoul's outcry. Japan intends to closely
watch South Korea's response for the time without bringing up the
territorial issue.

4) Foreign ministers of Japan, China agree on acceleration of gas
field talks; Prime Minister Fukuda to attend ASEM

ASAHI (Page 4) (Abridged)
July 23, 2008

Foreign Minister Masahiko Koumura, now visiting Singapore, held a
meeting with his Chinese counterpart Yang Jiechi on July 22. As a
result, the two leaders agreed to accelerate talks on such matters
as concluding a treaty on the joint development of gas fields in the
East China Sea. Koumura also told Yang that Prime Minister Fukuda is
planning to attend the Asia-Europe Meeting (ASEM) to be held in
Beijing in October.

After the meeting, Koumura indicated to the press that an agreement
was reached to strengthen Japan-China relations through post-Sichuan
earthquake reconstruction assistance, the development of gas fields,
and youth exchanges, saying, "In order to advance strategically and
mutually beneficial relations, we will actively use high-level
contacts (such as summit meetings)."

TOKYO 00002021 004 OF 010

October also marks the 30th anniversary of the exchange of documents
for the ratification of the Japan-China Peace and Amity Treaty by
former Prime Minister Takeo Fukuda, the prime minister's father.
Yang indicated that Beijing is considering a commemorative event
timed with Fukuda's visit to China to attend the ASEM.

The two leaders also agreed on continued efforts for the settlement
of the frozen dumpling food-poisoning dispute and on continued human
rights talks that resumed between the two countries after a hiatus
of eight years.

5) Prime Minister Fukuda ends summer vacation, but remains mum about
reshuffling his cabinet

SANKEI (Page 5) (Excerpt)
July 23, 2008

Although Prime Minister Fukuda has ended his six-day vacation and
returned yesterday to his official duties, he continues to avoid
making any statements about whether he will shuffle his cabinet or
not. His plan was to first carry out such tasks as obtaining cabinet
approval at the end of the month for the budget request ceilings for
fiscal 2009 and announce a five-point plan related to health and
labor issues. However, because differences of views have surfaced
within the ruling parties about the timing for convening the
extraordinary Diet session, he has decided to meet soon with New
Komeito President Ota to analyze the political situation from now.
His position seems to be to wait until the last minute to announce
whether he had decided to shuffle his cabinet or not.

6) Ruling party heads to meet soon to discuss cabinet shuffle, extra
Diet session convocation

NIKKEI (Page 2) (Excerpts)
July 23, 2008

Prime Minister Yasuo Fukuda revealed yesterday to the press corps
his intention to make a decision on when to convene the next
extraordinary session of the Diet after consulting soon with Akihiro
Ota, president of the New Komeito, the junior coalition partner of
the ruling Liberal Democratic Party (LDP), which Fukuda heads.
Fukuda said: "I have to make a decision quickly." He is expected to
discuss with Ota also whether to shuffle the cabinet. Ota has been
calling for the government to change its structural reform policy,
including broad-based reforms, advocating adopting his own party's
reform policy that is aimed at encouraging the public.

When asked by the press about whether he would convene the extra
session in late August as scheduled or in September, Fukuda
responded: "I want to make a proper decision after hearing various
views (in the ruling parties)."

The prevailing view in the ruling coalition is that the cabinet
should be shuffled at the end of July or early August. Asked by the
reporters about whether he considered a cabinet shuffle during his
vacation, Fukuda evaded the question, only saying: "I just rested. I
did nothing. This means I goofed off. Sorry about that."

LDP Upper House Caucus Chairman told reporters yesterday: "Now is
time to think comprehensively about various matters." He explained
that he understood that Fukuda had indicated in his remarks in an

TOKYO 00002021 005 OF 010


executive meeting that there would be a cabinet shuffle. Secretary
General Bunmei Ibuki met yesterday with Fukuda at the Prime
Minister's Office. After the meeting he told reporters: "I assume if
the cabinet is shuffled, the Prime Minister will do so quickly."

Referring to a cabinet shuffle and the timing for opening of the
extra Diet session, Ota stressed: "It is important to carry out
politics that gives consideration to the socially weak." He urged
Fukuda to put an end to the reform policy that has made people
suffer.

Ota took a cautious stance toward taking a revote at the House of
Representatives on a bill extending Japan's refueling mission in the
Indian Ocean, which will become a major issue at the extra session.
He said: "It is important for the ruling and opposition camps to
discuss the issue well." The New Komeito appears to have shifted its
policy to one allowing it to show its own policy imprint. It prefers
the option of a Lower House dissolution and general election around
next January.

The New Komeito and the LDP Upper House executives have shared the
view that they should avoid confrontation with the main opposition
Democratic Party (DPJ) at the extra Diet session. Otsuji showed the
perception that there would be no problem to convene the extra
session in September in a bid to extend the new Antiterrorism
Special Measures Law.

Ibuki, however, stressed yesterday the need for opening the Diet
session in late August as planned with an eye on an extension of the
refueling law and the handling of other bills. After the meeting
with Fukuda, he expressed with a confident air: "The Prime Minister
will probably do what is necessary without hesitation."

7) Gap in ruling camp over when to open extra Diet session, as well
as over revote on extension of new refueling law

MAINICHI (Page 5) (Slightly abridged)
July 23, 2008

Wrangling has intensified in the ruling coalition over the timing of
convening the next extraordinary Diet session. The government and
ruling coalition had envisioned the convocation of the extra session
in late August. However some in the ruling camp suggested putting it
off to mid-September. A move to fight for a rollback became evident
yesterday. Behind this move, there is the issue of extending the new
Antiterrorism Special Measures Law, which will expire in January. In
order to extend the law, a revote in the House of Representatives
would inevitably be necessary. However, many in the New Komeito, the
junior coalition partner of the Liberal Democratic Party (LDP), are
cautious about a revote in consideration of pubic opinion.
Therefore, the two ruling parties have engaged in wrangling with the
next Lower House election also in mind.

LDP Secretary General Bunmei Ibuki stated in press conference
yesterday morning: "It seems to me that those who call for convening
the extra session in late September have given up on bills that need
to be dealt with."

Ibuki appears to have strongly warned against the suggestion of
putting off the convocation of the extra session, pointing out that
some may want to avoid an extension of the new Antiterrorism Special
Measures Law.

TOKYO 00002021 006 OF 010

Ibuki met with Prime Minister Yasuo Fukuda for about 40 minutes
yesterday evening. He revealed to the press that he and Fukuda
exchanged views on the timing of opening the extra session. He said:
"The question is whether management of the Diet will become tough or
whether we will not deal with necessary matters. I think the Prime
Minister will do what is needed."

Taku Yamasaki, a defense policy specialist and former LDP vice
president, yesterday underscored the need for an extension of the
new Antiterrorism Law. He said: "In order to extend the law, the
extra session must be convened by early September."

Many LDP lawmakers has called for putting off convening the extra
session on the grounds that the term of the session should be
shortened in an attempt to avoid attacks by the opposition bloc. The
New Komeito has become alarmed about taking a second vote in the
Lower House.

The New Komeito is also concerned about the possibility that Fukuda
will be forced by the opposition to dissolve the Lower House for a
snap election at the end of this year or early next year.

When asked by reporters about his party's position on the issue of
extending the new Antiterrorism Special Measures Law, New Komeito
leader Akihiro Ota said: "I want to refrain from making a comment."
His remark showed a gap with the LDP's Ibuki. A senior LDP member
said: "I cannot tell whether the New Komeito will agree to take a
revote on the refueling mission extension."

8) Machimura: Serving in a post for long time is important; Masuzoe:
I will do my best; Ishiba: Prime Minister should pick cabinet
members for smooth management

MAINICHI (Page 5) (Full)
July 23, 2008

Prime Minister Yasuo Fukuda returned to work yesterday after
finishing his summer vacation. In an executive meeting yesterday
morning of his Liberal Democratic Party (LDP), Fukuda said: "Since
now is time to consider various things comprehensively, I want to
make efforts to fully cooperate with you." The major issue for the
time being is whether he will shuffle the cabinet or not.

Chief Cabinet Secretary Nobutaka Machimura pointed out: "Generally,
it is important for cabinet ministers to serve in their posts as
long as possible," after introducing overseas views critical about
the short term of Japanese cabinet members. Attention is now on how
Fukuda will treat Machimura in shuffling the cabinet. Machimura then
expressed his enthusiasm for continuing to serve in his post.

Health, Labor and Welfare Minister Yoichi Masuzoe stressed: "Since
there are many pending issues such as the establishing of Japan
Pension Organization and a review of nursing-care benefits, I will
do my best." Defense Minister Shigeru Ishiba, who has pushed forward
with reform of his ministry, said with a confident air: "It is only
natural for the prime minister to have ministers to carry out his
job smoothly."

Administrative Reform Minister Yoshimi Watanabe, who has often
confronted with the Prime Minister's Office regarding reform of the
civil servant system, said: "I think it is a wrong way to shuffle

TOKYO 00002021 007 OF 010


the cabinet in order to boost the administration's popularity."

Asked by reporters about his holiday, Fukuda said last evening: "I
did nothing. It means I goofed off. Sorry about that." He denied the
rumor that he had considered the selection of new cabinet members.

9) Primary balance nowhere near surplus in fiscal 2011: Deficit
likely to expand to 3.9 trillion yen, according to Cabinet Office
projection; Outlook likely affect tax hike debate

TOKYO SHIMBUN (Top Play) (Full)
July 23, 2008

The Cabinet Office on July 22 projected the primary balance of the
central and local governments and submitted the results to the
government's Council on Economic and Fiscal Policy. According to the
estimate, the primary balance in fiscal 2011 would fall into a state
of showing a deficit of approximately 3.9 trillion yen, even if
spending is reduced steadily and the highest possible economic
growth within the scope of the assumption is achieved. The number is
0.7 PERCENT of the gross domestic product. The projection indicates
that it would become more difficult to move the primary balance into
the black in that fiscal year, the immediate target year for the
government's fiscal reconstruction effort. The bleak outcome will
likely affect discussions of drastic reform of the tax code,
including the consumption tax, this fall.

The Cabinet Office projected in January this year that the amount of
deficit would be about 700 billion yen (0.1 PERCENT of the GDP).
The latest estimate of a deficit has significantly increased. This
is due to the downward revision of the nominal growth of the GDP
from 3.3 PERCENT a year to 3.0 PERCENT a year in the wake of the
steep rise in crude oil prices and the slowdown of the global
economy, and a fall in projected tax revenues from the estimate made
in January.

The projection was made, based on the precondition that expenditures
worth 14.3 trillion yen could be slashed over five years between
fiscal 2007 and fiscal 2011. The amount of deficit in the event of
the estimated nominal growth rate dropping from the projected level
and remaining at 1.4 PERCENT a year would be approximately 5.8
trillion yen (1.1 PERCENT of GDP).

If the amount of spending cuts remains at 11.4 trillion yen over the
five years, the amount of deficit would be 6 trillion yen (1.1
PERCENT ), provided that high economic growth has been achieved, but
if the economic growth remains sluggish, the amount of deficit would
swell to about 7.9 trillion yen.

State Minister for Economic and Fiscal Policy Hiroko Ota during a
press briefing after the panel's meeting said, "The government will
achieve its target of moving the primary balance into the black
without fail. There are only three ways to achieve this end --
spending cuts, increasing tax revenues through strengthened growth
potential, and a tax hike, if those two measures do not suffice."

10) Yamasaki bids farewell to Koizumi era

ASAHI (Page 4) (Abridged slightly)
July 23, 2008

"The Koizumi era is over. Japan will not be able to survive just by

TOKYO 00002021 008 OF 010


advocating structural reforms."

Former LDP Secretary General Taku Yamasaki in a lecture meeting in
the city of Otsu on July 21 bid farewell to the structural reform
policy course of former Prime Minister Koizumi, his close friend.
Yamasaki, Koizumi, and former LDP Secretary General Koichi Kato were
known as the YKK trio.

Yamasaki, who was serving as secretary general when Koizumi was
pushing ahead with structural reforms, positively evaluated the
Koizumi era, saying, "If it had not been for the Koizumi
administration, the LDP would have become weak much earlier. But it
has regained strength."

At the same time, Yamasaki expressed his support for Prime Minister
Fukuda's policy course of reducing disparities between Tokyo and
local districts, saying: "We are now in the post-Koizumi era. Unless
local regions are revitalized, the country will not grow with the
Tokyo-centered approach alone."

11) WTO Doha Round of talks on global trade: Japan focusing on how
many farm products will be categorized as key items

MAINICHI (Page 3) (Excerpts)
July 23, 2008

A cabinet-level meeting of the multilateral trade liberalization
talks (Doha Round) sponsored by the World Trade Organization (WTO)
that was held in Geneva, Switzerland, on July 21, was the scene of
fierce clashes by countries with different interests. Can the Doha
Round reach a settlement seven years since the talks started? The
climax is expected to come this week. If the talks fall apart, a
long extension of the negotiations would be inevitable.

Japan is on the offensive over mined and manufactured products and
on the defensive on farm products.

Since Japan's tariffs on mined and manufactured products are the
lowest among industrialized countries, there is a slim chance of
such foreign products surging into the Japanese market as a result
of a consensus being reached on the chairman's proposal as is. On
the contrary, such an agreement would work favorably for Japan's
exporting industries, because the markets of developing countries,
which now impose high tariffs on those products, would become open.


However, Japan is worried that if it is pressed to open its
agricultural market, the result would hurt domestic agriculture and
further diminish the food self-sufficiency ratio, which has already
dropped to 39 PERCENT on a calorie basis, according to a senior
agriculture ministry official.

One hundred-and thirty-four farm products will become subject to 66
PERCENT -73 PERCENT tariff reductions as required in the chairman's
proposal. However, the imposition of only 22 PERCENT -49 PERCENT
tariff cuts is allowed for key items. How many key items Japan can
secure will be the central issue. According to the chairman's
proposal, 4 PERCENT -6 PERCENT of all farm products can be, in
principle, categorized as key items. If an agreement reached on 6
PERCENT , about 80 items would become eligible. Tariffs on the
remaining 50 items or so will have to be significantly reduced.


TOKYO 00002021 009 OF 010


As such, Japan has been insisting that 10 PERCENT -15 PERCENT of
all farm products (approximately 130-200 items) should be
categorized as key items. However, Agriculture Minister Wakabayashi
lowered this number in Geneva, saying, "I want to secure at least 8
PERCENT ."

His statement is presumably aimed at advancing the talks by
indicating a stance of making a certain level of concessions.
However, views opposing Wakabayashi's statement are already growing
strong among agricultural organizations.

The chairman's proposal also seeks an expansion of a framework that
requires a certain set amount of key farm items with low tariffs.

Concerning rice, Japan is at present obligated to import 770,000
tons a year (minimum-access quota). It could be required to expand
that framework by up to 500,000 tons. Should that occur, rice
growers, who have been forced to reduce rice cultivation, could be
affected.

12) Defense Ministry to abolish counselor posts next year

YOMIURI (Page 2) (Abridged)
July 23, 2008

The Defense Ministry decided yesterday to abolish its defense
counselors system, under which its bureaucrats have assisted the
minister. Instead, the ministry will set up advisory posts (for
political appointees) to assist the defense minister. In addition,
the Defense Ministry will set up a defense council, which will be
made up of the defense minister, senior officials from the
ministry's bureaucracy, and staff officers from the Self-Defense
Forces. The ministry will carry out these action plans in fiscal
2009. The decision is based on a report of recommendations worked
out by a government advisory panel to reform the ministry.
Administrative Vice Defense Minister Kohei Masuda revealed this
course of action in a national meeting of senior officials held
yesterday.

The Defense Ministry will earmark relevant costs in its budget
request for next fiscal year and will present a package of
legislative measures-including a bill to revise the Defense Ministry
Establishment Law-to the Diet at its ordinary session next year. The
Defense Ministry currently has a bureau in charge of planning
Japan's defense buildup. In addition, each of the Ground, Maritime,
and Air Self-Defense Forces' respective staff offices also has a
defense buildup section. The Defense Ministry will unify these
defense buildup planning offices into one, and it will also abolish
the Operational Policy Bureau to integrate its SDF operational
functions into the SDF Joint Staff Office. This restructuring will
be carried out in fiscal 2010. "It will take time for coordination,"
a senior official of the Defense Ministry explained.

13) Defense Ministry eyes unifying defense buildup sections in 2010

NIKKEI (Page 2) (Full)
July 23, 2008

The Defense Ministry yesterday held a national meeting of senior
officials following a government advisory panel's recent submission
of a report of recommendations to reform the ministry. In the
meeting, the Defense Ministry confirmed that it would present a

TOKYO 00002021 010 OF 010


package of legislative measures to the Diet at its ordinary session
in 2010, including a bill to revise the Defense Ministry
Establishment Law. The Defense Ministry currently has several
sections to work out defense buildup plans and operational plans for
the Self-Defense Forces. The legislation is intended to unify these
defense buildup planning sections and integrate the Defense
Ministry's SDF operational functions into the SDF Joint Staff
Office. The ministry will work out an action plan in August as a
roadmap for its restructuring.

ZUMWALT

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