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Cablegate: Japanese Morning Press Highlights 08/29/08

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UNCLAS SECTION 01 OF 10 TOKYO 002369

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DEPT FOR E, P, EB, EAP/J, EAP/P, EAP/PD, PA;
WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST DIVISION;
TREASURY/OASIA/IMI/JAPAN; DEPT PASS USTR/PUBLIC AFFAIRS OFFICE;
SECDEF FOR JCS-J-5/JAPAN,
DASD/ISA/EAPR/JAPAN; DEPT PASS ELECTRONICALLY TO USDA
FAS/ITP FOR SCHROETER; PACOM HONOLULU FOR PUBLIC DIPLOMACY ADVISOR;
CINCPAC FLT/PA/ COMNAVFORJAPAN/PA.

E.O. 12958: N/A
TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA

SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 08/29/08

Index:

1) Top headlines
2) Editorials

Afghan assistance:
3) -- Foreign Minister Koumura expresses intention to continue MSDF
refueling mission in the Indian Ocean (Nikkei)
4) -- LDP, New Komeito will start full-scale coordination next week
on bill extending the MSDF refueling mission in the Indian Ocean
(Nikkei)
5) -- Government gives up on plan to send SDF to mainland
Afghanistan and may even shrink current human contributions (Tokyo
Shimbun)
6) -- Government determined to continue Afghan assistance despite
slaying of NGO worker (Sankei)
7) -- Taliban intends to drive all foreign aid workers out of
Afghanistan, says spokesman (Mainichi)
8) -- Japanese NGO bringing back most aid workers following slaying
of Kazuyo Ito (Nikkei)

9) Defense Minister Hayashi to visit Washington early next month
(Nikkei)

Political scene:
10) -- Ozawa states intention of running again for DPJ presidential
seat (Mainichi)
11) -- Three Upper House DPJ lawmakers bolt party to form "Reform
Club" group with two other lawmakers (Yomiuri) 8
12) -- DPJ suffers blow with loss of three Upper House lawmakers
(Tokyo Shimbun)
13) -- New splinter party to link up policy-wise with LDP in the
Diet (Sankei)

Economic agenda:
14) -- Comprehensive economic package will be finalized today,
containing projects on a 10-trillion yen scale (Nikkei)
15) -- Government plans supplementary budget worth 1.7 trillion yen,
but will not issue deficit bonds to fund it (Sankei)

There will be no Morning Highlights on September 1 - an American
holiday.

Articles:

1) TOP HEADLINES

Asahi:
Torrential rain hits Kanto, Tokai regions

Mainichi:
Ruling parties agree on 50 PERCENT premium for overtime work
exceeding 60 hours

Yomiuri:
DPJ rebels, others form new party named "Kaikaku Kurabu" headed by
Hideo Watanabe

Nikkei:
Economic stimulus package totals 10 trillion yen

Sankei:

TOKYO 00002369 002 OF 010


Government to set supplementary budget at 1.7 trillion yen with no
deficit-covering bonds

Tokyo Shimbun:
FY2009 state budget set to hit 86.13 trillion yen

Akahata:
METI, FSA eye making corporate overseas gains tax-free

2) EDITORIALS

Asahi:
(1) Lower House Speaker Kono's candid remarks impressive
(2) New eco-cars packed with high technology

Mainichi:
(1) Shortage of doctors requires thorough discussion
(2) Sluggish real estate market: Questions raised about financial
institutions

Yomiuri:
(1) DPJ leadership race: Ozawa must present responsible policy
(2) Japan needs to keep up efforts on Afghan stability

Nikkei:
(1) Death of Kazuya Ito regrettable
(2) Sound ASEAN policy essential

Sankei:
(1) Look squarely at reality of terrorism
(2) Gas prices: Wholesale system needs more transparency

Tokyo Shimbun:
(1) No concession allowed on North Korean nuclear verification
(2) Employment and Human Resources Development Organization must not
be disbanded

Akahata:
(1) New antiterrorism law must not be extended despite U.S.
pressure

3) Japan willing to continue refueling: Koumura

NIKKEI (Page 2) (Full)
August 29, 2008

Foreign Minister Masahiko Koumura held a telephone conversation with
Afghan Foreign Minister Sepanta yesterday afternoon, during which
Koumura indicated that Japan strongly intends to continue the
Maritime Self-Defense Force's current refueling activities in the
Indian Ocean. "We will have to continue our efforts as far as we can
for Afghanistan's peace and reconstruction," Koumura told Sepanta.

Kazuya Ito, a nongovernmental organization member, was recently
abducted and killed in Afghanistan. In the wake of this incident,
Koumura asked Sepanta to cooperate on the security of Japanese
nationals working in Afghanistan to assist with its reconstruction.
"Taking this opportunity," Koumura said, "we condemn such mean
criminal acts as kidnapping and killing as well as all sorts of
terrorism. He added, "We're determined anew to fight against
terrorism."


TOKYO 00002369 003 OF 010


Sepanta told Koumura, "The biggest answer to the incident is to push
for cooperation between our two countries and reduce the occurrence
of terrorism." He added, "We want to continue our cooperation."

4) Ruling coalition to begin coordination next week on MSDF bill

NIKKEI (Page 2) (Full)
August 29, 2008

Taku Yamasaki, chairman of the ruling Liberal Democratic Party's
Research Commission on Foreign Affairs, indicated yesterday that the
LDP would enter into full-fledged coordination next week with its
coalition partner, the New Komeito, over how to handle a bill
extending the Maritime Self-Defense Force's current refueling
activities in the Indian Ocean, a point of contention in the next
extraordinary Diet session. The LDP and the New Komeito will hold a
meeting of their project team to discuss the bill's contents.

Yamasaki, who is responsible on the LDP side for the ruling
coalition's project team, stressed: "This is a very important bill.
Depending on the outcome, the political situation will be greatly
affected." From the New Komeito, Policy Research Council Natsuo
Yamaguchi will attend.

The MSDF's refueling activities in the Indian Ocean have been
conducted under the new Antiterrorism Special Measures Law, which is
set to expire in January next year. In order for Japan to extend the
MSDF's refueling mission there, the MSDF bill needs to clear the
Diet in its extraordinary session to be convened Sept. 12. The
government insists on the necessity of continuing the MSDF's
refueling activities in order to back up the war on terror in
Afghanistan. Prime Minister Yasuo Fukuda told Defense Minister
Yoshimasa Hayashi to make an appeal on the importance of the MSDF's
refueling activities.

The New Komeito remains reluctant to take a second vote in the House
of Representatives to override the opposition-dominated House of
Councillors' potential rejection of the bill since such an override
could have a negative impact on the next election for the House of
Representatives. The government once considered sending the
Self-Defense Forces to Afghanistan but has now forgone this SDF
dispatch option in view of the local security situation going from
bad to worse. However, a Japanese volunteer from a nongovernmental
organization was killed recently in Afghanistan. Due to this
incident, the deteriorating security situation in Afghanistan is
again drawing public attention. "The public may strongly oppose the
refueling activities," a government source said.

The MSDF's refueling mission was once called off in November 2007
but resumed in February with a new law enacted. After that, the MSDF
provided fuel amounting to approximately 6,925 kiloliters through
the end of July.

5) Gov't gives up on SDF Afghan dispatch

TOKYO SHIMBUN (Page 2) (Full)
August 29, 2008

The government yesterday gave up on the possibility of sending the
Self-Defense Forces to Afghanistan for the purpose of assisting that
country with its reconstruction efforts. Kazuya Ito, a member of
Peshawar-kai, a nongovernmental organization, was slain by an armed

TOKYO 00002369 004 OF 010


group in Afghanistan. In response to this incident, the government
now considers the local security situation as going from bad to
worse. Meanwhile, the Japan International Cooperation Agency (JICA)
and NGOs are going to downscale their assistance activities in
Afghanistan. The killing of the Japanese NGO aid worker is forcing
the government to make a substantial review of Japan's humanitarian
and reconstruction assistance to Afghanistan.

Chief Cabinet Secretary Nobutaka Machimura, meeting the press
yesterday, said the government had not decided to take up the option
of sending SDF troops to Afghanistan. Machimura also referred to the
possibility of downscaling JICA activities in Afghanistan. Machimura
stated, "We will discuss what to do from now on, while watching the
local situation, and then the government will make a judgment."

Meanwhile, Machimura also declared that the government would present
a bill to the Diet at its forthcoming extraordinary session, seeking
to extend the new Antiterrorism Special Measures Law, which will
expire in January next year, in order to continue the Maritime
Self-Defense Force's refueling activities in the Indian Ocean. "If
we drop out from the line of battle in the war on terror, it would
run counter to the international community's efforts," he stressed.

In June this year, the government sent a fact-finding survey to
Afghanistan for the purpose of looking into the feasibility of
sending SDF troops there. The government was exploring the
possibility of engaging heavy-lift helicopters and C-130 transport
planes in airlift services. However, this SDF Afghan dispatch was
deemed to be difficult from the first, because the New Komeito, the
ruling Liberal Democratic Party's coalition partner, has been
extremely reluctant to consider it.

6) Government determined to continue aid for Afghanistan in fighting
terrorism, despite slaying of aid worker

SANKEI (Page 3) (Full)
August 29, 2008

Chief Cabinet Secretary Nobutaka Machimura told reporters in
connection with the slaying of kidnapped aid worker Kazuya Ito in
Afghanistan: "A precious sacrifice was made, but the incident might
have the people feel strongly that Japan's continued proactive
involvement in the war on terror is important." He indicated that it
has become more necessary to continue the Maritime Self-Defense
Force's refueling mission in the Indian Ocean.

Machimura also referred to a bill extending the New Antiterrorism
Special Measures Law beyond its Jan. 15 expiration: "We will welcome
amendments to the bill if they are constructive and acceptable for
both ruling and opposition parties."

Prime Minister Yasuo Fukuda also emphasized in the Kantei's email
magazine dated yesterday: "Conflicts are going on in various areas
across the world right now, and many people are suffering from
poverty. Japan should offer a helping hand to such areas and people.
That is to respond to Mr. Ito's wishes and is the role Japan should
play as a peace-cooperation nation.

Foreign Minister Masahiko Koumura held a teleconference with his
Afghan counterpart yesterday. He said: "We are determined to
continue to oppose all terrorist activities and fight terrorism."
Asked about Afghan reconstruction assistance, Koumura said: "Japan

TOKYO 00002369 005 OF 010


must continue to make utmost efforts."

7) Taliban spokesman denounces NGO reconstruction projects, saying
that the kidnapping was carried out to halt them

MAINICHI (Page 2) (Abridged slightly)
August 29, 2008

Shinichi Kurita, Kabul

In the wake of the discovery in eastern Afghanistan of the body of
Kazuya Ito, 31, of the Japanese nongovernmental organization
Peshawar-kai, a Taliban spokesman told the Mainichi Shimbun on Aug.
28: "The group of kidnappers abducted him at the order of the
Taliban. They initially did not know that he was Japanese."

He also indicated that after Ito was identified as Japanese, the
Taliban intended to make the Japanese government suspend its all
assistance for the reconstruction of Afghanistan, adding that the
Taliban did not order the group to kill him. The spokesperson is one
of the Taliban's public relations officers. He has handled media
inquiries about fighting with the U.S. military in the eastern part
of the country and other events. On Aug. 26, he told the Mainichi
Shimbun and other local news organizations that his group had killed
a Japanese national.

As the reason why the Taliban ordered the kidnapping, he said: "We
intended to force the dam construction project to be halted, and we
demand foreign governments stop providing assistance to the Afghan
government and the United States." The spokesperson also condemned
the Peshawar-kai's reconstruction assistance projects, saying: "We
know the organization. We endorse food assistance, such as rice,
wheat and cooking oil, but not structures like roads, schools and
dams that alter land features and culture."

8) Peshawar-kai considering recalling all Japanese aid workers

NIKKEI (Page 43) (Excerpts)
August 29, 2008

In the wake of the kidnapping and slaying of Kazuya Ito, the
Fukuoka-based NGO Peshawar-kai, to which Ito belonged, announced in
a press conference in the city yesterday afternoon that it will
recall eight Japanese aid workers to Japan from Afghanistan. The
group will consider recalling its five aid workers in Pakistan as
well.

The group's secretary general, Mitsuji Fukumoto, 60, said in the
press conference: "We cannot afford to lose another life." The
workers in Afghanistan are expected to return home in two to three
weeks. Although exactly when the five workers in Pakistan can leave
the country is unclear, chances are high that they, too, will return
home due to the deteriorating situation, according to Fukumoto.

Fukumoto also indicated that the group would not send its workers
back to those countries unless the security situations are confirmed
to have improved and that the group's activities will have to be
carried out mainly by local residents. Tetsu Nakamura, a doctor who
heads the projects in Afghanistan, will continue directing the
projects. A formal decision will be made in a directors' meeting.

9) Coordination underway for Defense Minister Hayashi to visit U.S.

TOKYO 00002369 006 OF 010


in early September

NIKKEI (Page 2) (Full)
August 29, 2008

Defense Minister Yoshimasa Hayashi yesterday began coordination with
the possibility of visiting the United States in early September to
meet with his U.S. counterpart Robert Gates. Hayashi is expected to
explain ahead of the opening of the extraordinary Diet session on
Sept. 12 the Japanese government's policy of continuing the Maritime
Self-Defense Force's refueling operation in the Indian Ocean and
seek understanding from the U.S. side.

10) Ozawa to run in DPJ presidential race; New DPJ leadership to
decide whether to accept three lawmakers' resignations

MAINICHI (Page 1) (Full)
August 29, 2008

Three House of Councillors members belonging to the Democratic Party
of Japan (DPJ) -- Hideo Watanabe, Yasuhiro Oe and Yumiko Himei --
yesterday afternoon submitted their resignations to DPJ Secretary
General Yukio Hatoyama. Later in the day, the three lawmakers along
with two other Upper House independent members, Hiroyuki Arai and
Shinpei Matsushita, presented a notification of creating a new
party, which they call the "Reform Club," to the Ministry of
Internal Affairs and Communications. Last night at a hotel close to
the Diet building, the five lawmakers exchanged views on a press
conference they will hold today to formally announce the creation of
the new party.

DPJ President Ichiro Ozawa and party executive members discussed
yesterday how they should respond the matter. They decided to leave
a decision on the matter to the new party leadership, which will be
inaugurated on Sept. 21, when Ozawa is reelected as president, not
accepting the resignations now.

Indicating that the party should not accept their resignations,
Deputy President Naoto Kan told the press yesterday: "If they leave
the party, they must resign as Diet members to fulfill their
obligations for the public."

In his meeting with senior party members, Ozawa revealed his
intention to run in the party leadership race, which will take place
on Sept. 21. The official campaign for the Sept. 21 election will
start on Sept. 8. Ozawa told them: "I want to announce my candidacy
before Sept. 1, when the party holds an explanatory meeting for
candidates." He then sought their cooperation to collect 20
recommendations by Diet members, the figures that are necessary for
a candidate to run in a presidential race. Hatoyama told reporters:
"We appreciate that those who wanted to run in the race will give
their recommendations to him."

Ozawa and other party executives discussed the party's response to
the upcoming extraordinary Diet session to be convened on Sept. 12.
They confirmed that the party would not basically accept the ruling
coalition's idea of holding each party's representative
interpellations in both chambers of the Diet for Sept. 16-18.

11) DPJ renegades form new party, headed by Watanabe

YOMIURI (Top Play) (Excerpts)

TOKYO 00002369 007 OF 010


August 29, 2008

Three Democratic Party of Japan (DPJ) members - Hideo Watanabe,
Yasuhiro Oe, and Yumiko Himei - submitted their resignation to
Secretary General Hatoyama yesterday. Later, they notified the
Ministry of Internal Affairs through the Tokyo Metropolitan
Electoral Management Committee of their formation of a new party
called "Reform Club." Their notice was accepted. Hiroyuki Arai and
Shinpei Matsushita have also joined the new party, and Watanabe is
expected to head the party. This new development will inevitably
affect the DPJ's party management and approach to Diet business.

As the main reason for their departure from the main opposition
party, the three cited President Ozawa's party management. They are
expected to lean toward the government and the ruling camp. Oe told
reporters yesterday afternoon: "I harbored doubt over the party's
policy stance that since the DPJ is in the opposition, it naturally
opposes things. Many in the DPJ still take such a view." He thus
indicated the new party will call on DPJ members to join the party.

The party leadership, including Ozawa, Deputy President Kan, and
Secretary General Hatoyama, met at party headquarters yesterday and
decided not to accept their resignations for the time being, leaving
the decision to the new management to be launched after an
extraordinary party convention on Sept. 21.

12) Secession of three DPJ members to affect party's approach to
Lower House election, Upper House management

TOKYO SHIMBUN (Page 2) (Excerpts)
August 29, 2008

Three House of Councillors members of the Democratic Party of Japan
(DPJ) have bolted to form a new party, throwing cold water on the
President Ozawa and other party leaders. Now that it is certain for
Ozawa to win a third term without a formal vote in the September
presidential election, party leaders are gearing up for the next
House of Representatives election. Although there will be no change
in the current state of the reversal of strengths between the Lower
and Upper House, the secession of three members is likely to cast a
pall over the DPJ's approach to the management of the
opposition-controlled Upper House.

Deputy President Naoto Kan stressed in a press conference yesterday
that Hideo Watanabe and Yasuhiro Oe, both of whom presented their
resignation, were among those elected with a smaller number of votes
in the proportional-representation constituencies. He criticized
them: "Resignation as lawmakers should be the proper way for them to
assume responsibility and fulfill their obligation as a
politician."

In part because they had repeatedly taken rebellious acts in voting,
many party members say that they had already anticipated their
departure. Even so, there might be some effect on its approach to
the management of the Diet in the Upper House.

The DPJ caucus in the Upper House now holds 120 seats by joining
hands with the People's New Party. If the party accepts the three's
resignation, the number will drop to 117. In order for the DPJ to
secure 121 seats needed for a majority, cooperation from the
Japanese Communist Party (JCP) or the Social Democratic Party is
indispensable.

TOKYO 00002369 008 OF 010

In the earlier ordinary Diet session, there were scenes in which the
DPJ fell out of step not only with the JCP but even with the
People's New Party. Unless the DPJ keeps close cooperation with
other opposition parties, it will become difficult to have
government-presented bills rejected or its bills adopted.

Hiroyuki Arai, who has joined the new party, belongs to the LDP
caucus. If the new party cooperates with the ruling camp, 12 more
seats will be needed for the ruling side to secure a majority. If
six more members secede from the DPJ, the ruling camp will be able
to regain a majority.

As a senior Upper House member said, it is true that their secession
gives a bad image for the DPJ, with an eye on the next Lower House
election. Expressing his intention to run in the presidential race
yesterday, Ozawa began to accelerate forming a policy manifesto for
the Lower House election and preparing for announcement of
party-endorsed candidates for the election. The secession drama at
such a time might give the people the impression that the party
lacks unity.

13) New party to cooperate with ruling camp at extra Diet session

SANKEI (Page 5) (Full)
August 29, 2008

A new party to be created by former postal minister Hideo Watanabe
and four other lawmakers is expected to become in effect part of the
ruling camp. The lawmakers plan to cooperate with the government and
ruling parties during the extraordinary Diet session to be convened
on Sept. 12.

One of the members indicated that the new party would take a
concerted action with the government and ruling coalition regarding
the issue of extending the New Antiterrorism Special Measures Law,
one of the agenda items at the upcoming extra Diet session. The
lawmaker said, "I would like to take an appropriate stand."

Another member also implied the cooperation with the government and
ruling bloc, noting: "I think it would be good for the Democratic
Party of Japan (DPJ) that a person like me, who has been a problem
for it, should leave."

Watanabe has often criticized Ozawa's management of the party,
saying to his aides: "He links everything to politics. He has
neither a guiding philosophy nor a policy."

A DPJ official, however, made this comment: "The new party is made
up of those who cannot read future politics." A conservative DPJ
lawmaker reacted coolly, saying: "It is unbelievable that they will
go over to the ruling camp, which is sinking ship, before the DPJ
grabs the reins of power in the next House of Representatives
election."

14) Government to set today 10 trillion yen economic stimulus
package: Coordination still under way on inclusion of fixed rate tax
cuts; Some highway tolls to be halved

NIKKEI (Top Play) (Excerpts)
August 29, 2008


TOKYO 00002369 009 OF 010


The government and the ruling parties on August 28 firmed up the
outline of a comprehensive economic stimulus package designed to
address the steep rise in crude oil and food prices. A decision on
how to handle fixed-rate tax cuts for reducing a designated amount
from the income tax will be postponed. A formal announcement on the
package will be made after details are boiled down on the morning of
the 29th. The size of the aid package excluding items under
coordination will reach about 1 trillion yen. The amount of real
spending, which necessitates fiscal disbursements, will likely
exceed 1 trillion yen. The package will also list a measure to cut
portions of expressway tolls by 50 PERCENT possibly in October.

Key points of economic stimulus package

Items that have already been adopted
? Lower expressway tolls
? Financial support for trucking, domestic shipping and construction
industries
? Introduce new credit guarantee system for small- and medium-size
businesses
? Improve measures for smoother management of the medical service
system for the elderly.
? Extend and improve housing loan cuts
? Speed up the introduction of energy-conserving facilities and
facilities using new energy
? Build authorized day nurseries and kindergartens urgently.
? Expand loans to low-income earners and single-mother families

Items under coordination
? Fixed-rate tax cuts for low-income earners
? Consumer price adjustment to be applied to pensions
? Revise the reduced pension payout system for working elderly
people.

15) Government plans 1.7 trillion yen supplementary budget: No
issuance of deficit-covering government bonds

SANKEI (Top Play) (Full)
August 29, 2008

The government on August 28 decided to compile a supplementary
budget for fiscal 2008 totaling approximately 1.7 trillion yen and
to submit it to the extraordinary Diet session to be convened on
September 12. It has also decided not to issue deficit-covering
government bonds to fund the budget. It intends to finance the
second budget with unobligated reserve funds with variable interest
rates in the fiscal loan fund's special account, which is used for
redeeming government bonds. The decision is in line with the wishes
of Prime Minister Yasuo Fukuda, who is opposed to the issuance of
deficit bonds.

The prime minister on the 22nd indicated a negative stance to the
issuance of deficit-covering government bonds to finance a
supplementary budget, saying, "Future generations will have to repay
that. I would like to avoid issuing such bonds, if possible." Former
Liberal Democratic Party (LDP) Secretary General Hidenao Nakagawa on
the 24th echoed this view, saying, "The size of a supplementary
budget must be such that will not necessitate the issuance of
deficit bonds."

However, LDP Election Committee Chairman Makoto Koga on the 23rd
insisted that a large scale second budget should be compiled, even

TOKYO 00002369 010 OF 010


if it meant delaying the government goal of moving the primary
balance into the black by fiscal 2011. He said, "The primary balance
is important. However, we should be prepared to make a major
decision regarding a fiscal issue." Concerning the size of the
proposed second budget, he said, "We can use our resourcefulness, if
the size is up to 2 to 3 trillion yen." The New Komeito also takes
the position that reasonable fiscal resources must be secured for
emergency measures to defend the daily life of the public against
soaring prices, such as the price of crude oil, as President Akihiro
Ota put it.

The government has eventually decided to finance the second budget
with funds drawing from a so-called hidden slush fund in the special
account - a reserve fund with variable interest rates. One
government source said that funding a supplementary budget with such
a fund would require an amendment to related laws.

For this reason, if all opposition parties in the Upper House oppose
the idea of issuing a supplementary budget, it would be difficult
for a supplementary budget bill to secure Upper House approval. In
that case, the government might have to resort to a revote on the
bill in the Lower House.

Some ruling party members are opposing the proposed size of the
second budget with one official who once served as cabinet minister
saying, "This would never satisfy the public." This is because they
had been calling for a large scale with the issuance of
deficit-covering government bonds in mind. The Fukuda cabinet will
likely find it difficult to run the government.

ZUMWALT

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