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Cablegate: Japanese Morning Press Highlights 09/18/08

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UNCLAS SECTION 01 OF 12 TOKYO 002564

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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 09/18/08

Index:

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

Defense and security affairs:
4) ASDF successfully shoots down mock missile in first test of PAC-3
in U.S. (Tokyo Shimbun)
5) Defense Ministry panel meets to begin revision of National
Defense Program Outline (Mainichi)
6) Out of consideration for European and U.S. concerns over Georgia,
Japan will not carried out scheduled joint drill between MSDF and
Russian Navy (Asahi)

Political agenda:
7) LDP, New Komeito agree to hold general election on October 26
(Asahi)
8) Global financial crisis pours cold water over LDP's political
strategy (Mainichi)
9) LDP may postpone acting on supplemental budget, giving priority
to holding a general election, to which the Democratic Party of
Japan (DPJ) objects (Asahi)
10) DPJ proposes talks with LDP on timing of Diet dissolution
(Nikkei)
11) DPJ to propose to ruling camp set of measures to stabilize the
financial system (Nikkei)

12) Peoples New Party to merge with DPJ out of fear it would be
isolated (Yomiuri)
13) Japan's Business Federation in report card of parties'
accomplishments gives LDP an "A" in 10 areas, but an "F" to DPJ
across the board (Yomiuri)

14) Two former agricultural ministers - Tamazawa and Endo will
retire from politics at end of current Diet session (Nikkei)

Economy:
15) Bank of Japan governor calls FRB decision to bail out AIG
appropriate (Asahi)
16) Survey of 209 major firms finds 80 PERCENT in agreement that
economy is in recession (Tokyo Shimbun)

Articles:

1) TOP HEADLINES

Asahi:
Ruling coalition agrees to hold general election on Oct. 26

Mainichi:
Senior Oita education official arrested over bribe

Yomiuri:
Realignment in financial circles spreads to Britain, following U.S.
decision to pour public funds into AIG

Nikkei:
U.S. to expand short-selling restriction in response to financial
crisis

Sankei:

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U.S. government to bail out AIG with 9 trillion yen loan

Tokyo Shimbun:
Poll of 209 major firms: 85 PERCENT see economy sliding into
recession

Akahata:
Average hourly wage of rice farmers in 2007 drops 77 yen to 179 yen


2) EDITORIALS

Asahi:
(1) Academic ability survey: Analysis, countermeasures needed
(2) Administrative litigation: Quick rulings sought in remaining
cases

Mainichi:
(1) U.S. financial crisis: Don't be relaxed with AIG bailout
(2) U.S. financial crisis: Japan urged to review emergency measures

Yomiuri:
(1) U.S. uses public funds for AIG
(2) Blame for rice scandal also rests with Agricultural Ministry

Nikkei:
(1) BOJ expected to take proper countermeasures to U.S. financial
crisis
(2) Agreement on anti-postal privatization policy between opposition
parties unreasonable

Sankei:
(1) AIG bailout: Plunge scalpel into structure of financial crisis
(2) Consumers urged to composedly respond to problem of tainted
rice

Tokyo Shimbun:
(1) Continue to be alert, though AIG is bailed out
(2) Review privatized postal services before users

Akahata:
(1) Uncover details of radiation leak from U.S. submarine

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, September 17

NIKKEI (Page 2) (Full)
September 18, 2008

10:15
Met Deputy Chief Cabinet Secretary Futahashi at the Kantei.

11:08
Met Assistant Chief Cabinet Secretary Saka and Cabinet Office policy
directors-general Matsumoto and Yamazaki.

12:16
Met Futahashi and assistant chief cabinet secretaries Saka, Kawai
and Yanagisawa. Futahashi stayed on.

14:33

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Met Prime Minister Wickremanayake of Sri Lanka.

15:14
Met Administrative Reform Minister Motegi, administrative
streamlining blue-ribbon panel chairman Mogi and his deputy
Asakura.

16:01
Met Saka, Deputy Chief Cabinet Secretary for Crisis Management Ito,
and MHLW Health Bureau Director-General Ueda, followed by advisor
Ito.

17:28
Met METI Minister Nikai joined by New Komeito leader Ota.

18:00
Attended a meeting of the Council on Economic and Fiscal Policy.

19:14
Met CEFP members at his official residence.

4) ASDF shoots down mock missile in 1st PAC-3 test in U.S.

TOKYO SHIMBUN (Page 3) (Full)
September 18, 2008

Japan tested the Air Self-Defense Force's Patriot Advanced
Capability-3 (PAC-3), a ground-to-air missile making up Japan's
missile defense (MD) systems designed to intercept ballistic
missiles, at the White Sands Missile Range in New Mexico in the
United States late at night on Sept. 17. According to the Defense
Ministry, the ASDF fired two PAC-3 interceptors and shot down a mock
missile launched by U.S. forces.

Japan's MD systems are two-tiered with the Standard Missile-3
(SM-3), a surface-to-air missile mounted on Aegis-equipped
destroyers, and the PAC-3. The sea-based SM-3 system intercepts
ballistic missiles, and the land-based PAC-3 system is to back up
and shoot down missed ones. The ASDF has deployed the PAC-3 at four
air defense missile units in the metropolitan area since March.

In the PAC-3 intercept test, a PAC-2 ground-to-air missile, which is
designed to intercept aircraft, was used as a mock missile. The
PAC-2 ranges approximately 100 kilometers. Its falling speed is a
far cry from that of North Korea's Rodong ballistic missile, which
reportedly has a range of 1,300 kilometers. The Rodong, in its
terminal phase, falls at Mach 2.
"The test this time was intended to check the system's
functionality," said an official of the Defense Ministry's
Communication Systems and Guided Missile Systems Division. With
this, the Defense Ministry does not seem to be particular about
hitting accuracy.

The PAC-3 test cost about 2.5 billion yen, including payments to the
U.S. government for on-site services and those for PAC-3
acquisition. The ASDF has annually test-fired PAC-2 missiles at the
missile range. However, the PAC-3 costs so much that the ASDF will
carry out only one more test next year and will not conduct any more
live-fire practice.

The Defense Ministry began in fiscal 2004 to introduce the MD
systems and made an investment of 676.5 billion yen for four years

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up until last fiscal year. The MD systems are said to total 1
trillion yen, and their deployment is well under way with defense
spending. Japan is the only country that has introduced the
U.S.-developed MD systems. The United States currently deploys the
PAC-3 at its bases in foreign countries but does not use it for its
homeland defense.

5) Defense Ministry meets to overhaul defense program

MAINICHI (Page 2) (Full)
September 18, 2008

The Defense Ministry has set up an in-house board, headed by Defense
Minister Yoshimasa Hayashi, to review Japan's defense capability,
and held its first meeting yesterday of senior officials from its
internal bureaus and brass officers from the Ground, Maritime, and
Air Self-Defense Forces to go over the National Defense Program
Guidelines (NDPG) (formerly known as the National Defense Program
Outline or NDPO for short). The board will wrap up its views next
summer. After the next prime minister is elected, a private advisory
panel for the prime minister will also enter into full-fledged
discussion. The guidelines will be revised by the end of next year.

This time around, the board will base its discussions on a report
submitted by the government's Defense Ministry reform panel. It will
focus mainly on reorganizing the Defense Ministry through such
measures as integrating its bureaucracy and the SDF's uniformed
staff for Japan's defense buildup. In addition, it is also expected
to discuss changes in the international situation, such as the
realignment of U.S. forces in Japan and North Korea's nuclear
testing.

6) Japan-Russia ties in Georgia aftermath

ASAHI (Page 4) (Abridged)
September 18, 2008

Japan and Russia have annually conducted joint seaborne search and
rescue drills. This year, however, the Maritime Self-Defense Force's
annual training exercises with the Russian navy cannot be expected
to take place. The United States and Russia have been at odds over
the Georgian situation, so the Japanese government deems it
unavoidable to forgo bilateral cooperation between Japan and Russia
in the security area for the time being.

What lies behind such a volatile situation is the Georgia issue.
Russia has been squaring off with the United States and Europe, and
the North Atlantic Treaty Organization (NATO) has announces its plan
to call off joint military training exercises with Russia. The
United States will think twice about its military cooperation with
Russia. In the economic area as well, the United States has decided
to freeze its nuclear energy deal with Russia. As it stands, Foreign
Ministry officials handling Japan-U.S. relations and security
arrangements wonder if it is appropriate for Japan to do something
military with Russia. "Japan-U.S. relations should come before
Japan-Russia relations," one official said.

Meanwhile, Foreign Minister Lavrov, Industry and Energy Minister
Khristenko, and Prime Minister Putin are scheduled to visit Japan
toward the end of the year. There are also some officials in the
Foreign Ministry who are concerned about a possible impact on
Japan-Russia relations. One of them asserted that the Georgia issue

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took place in the expansion of NATO and that Japan, which is not a
NATO member, is different. This assertion can be taken as suggesting
the need for Japan to keep away from the United States and Europe
over Georgia.

Foreign Minister Koumura said: "We will work on Russia for what we
should do, while maintaining our bilateral reciprocal relationship.
Regarding the joint training exercises as well, the government will
likely make a careful judgment while watching the future course of
Russia's talks with the United States and Europe.

7) LDP, New Komeito agree to dissolve Lower House Oct. 3 and hold
general election Oct. 26

ASAHI (Top play) (Abridged slightly)
September 18, 2008

The Liberal Democratic Party and the New Komeito have agreed to
dissolve the Lower House on Oct. 3 and kick off the official
campaign on Oct. 14 for a general election on Oct. 26, ruling party
executives said. The New Komeito and its support base Soka Gakkai
had tried to arrange the schedule to hold the election on Nov. 9,
but the LDP decided that the election should be held while the next
prime minister is still highly popular. The New Komeito accepted the
LDP plan.

A final decision is likely to be made by Secretary General Taro Aso,
who is enjoying a dominant lead in the LDP presidential race, after
becoming the new LDP president on Sept. 22.

In a bid to carry the momentum of the LDP presidential race over to
the next election, the LDP considered three possible election dates:
Oct. 26, Nov. 2 and Nov. 9. Meanwhile, the New Komeito envisioned
starting the official campaign on Oct. 28 for a Nov. 9 general
election in order to secure a sufficient preparatory period to let
the election sink in among its supporters.

The collapse of the U.S. major securities house Lehman Brothers also
triggered strong financial concerns, and some LDP lawmakers called
for postponing Lower House dissolution in order to have the fiscal
2008 supplementary budget enacted in the next extraordinary Diet
session as a top priority. But the party leaned toward an early
date, concluding that a late election would dampen the
"congratulatory effects" of the new administration and that the
economy would become worse sooner or later.

LDP Election Strategy Council Chairman Makoto Koga met Soka Gakkai
officials in Osaka on Sept. 16 and obtained their informal consent
to hold the election on Oct. 26. The New Komeito is likely to
endorse the plan, and Soka Gakkai intends to inform its supporters
of the decision later this week.

Koga met with Aso on Sept. 17 and briefed him on such developments.
Koga also dined with Koga faction executives later in the day and
confirmed the policy direction to make preparations for the Oct. 26
election.

The ruling bloc wants to ask the opposition camp for deliberations
on important bills, including the supplementary budget bill, during
the extraordinary Diet session. But given poor prospects for finding
a settlement line on the timetable and other factors, the ruling
coalition has decided to dissolve the Lower House on Oct. 3, the

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final day of the representative interpellations. The ruling bloc
intends to have the supplementary budget enacted before the end of
the year after the Lower House election.

8) Worldwide financial crisis dampens LDP's dissolution strategy

MAINICHI (Page 5) (Abridged slightly)
September 18, 2008

By Takuji Tanaka

The worldwide financial shock resulting from the collapse of the
U.S. major securities house Lehman Brothers has dampened the ruling
coalition's strategy of carrying out an early Lower House
dissolution and snap general election by taking advantage of the
momentum of the upcoming LDP presidential election even by
postponing the supplementary budget. The LDP remains unable to find
any effective countermeasures, with one member saying, "The
optimistic mood has disappeared." Meanwhile, the major opposition
Democratic Party of Japan has proposed Diet deliberations on the
supplementary budget and its adoption. Taking an aggressive
approach, the DPJ is set to pursue the political vacuum resulting
from the imminent changeover of the prime minister and the ruling
coalition's lack of solid economic policy.

LDP Policy Research Council Chairman Kosuke Hori on Sept. 16 called
the representatives of the camps of the five LDP presidential
candidates to the party headquarters and urged them to touch on the
Lehman issue in their ongoing campaign tours. Amid growing concerns
that the U.S. financial turmoil might spill over to the Japanese
economy, the LDP presidential candidates must play up their
proactive responses to the matter so as not to draw national
criticism.

Momentum was gaining strength in the ruling camp to dissolve the
Lower House at an early date without waiting for the enactment of
the fiscal 2008 supplementary budget backing the government's
package of economic stimulus measures. But in the wake of the Lehman
shock, a joint council, including the LDP Finance and Banking
Systems Research Council, presented to the government and the Bank
of Japan on Sept. 17 a proposal calling for early enactment of a
supplementary budget.

Economic and Fiscal Policy Minister Kaoru Yosano said to reporters:
"It is lawmakers' responsibility to deliberate on the supplementary
budget and obtain Diet approval for it at an early date to help
small and medium-sized businesses." An aide to Secretary General
Taro Aso also discouraged talk of an early Lower House dissolution,
saying: "Mr. Aso will generate his policy imprint by beefing up the
economic stimulus package. There will be no dissolution without
it."

Once the next extraordinary Diet session opens, the opposition bloc
is certain to pursue the tainted rice issue and other matters. The
Democratic Party of Japan is waiting for a delayed Lower House
election, thinking it will befit the party. The LDP is increasingly
jittery, but without anyone in control, the party remains unable to
make decisions.

Representative Akihiro Ota of the New Komeito, which is united for
an early dissolution, asked Prime Minister Yasuo Fukuda on Sept. 17
for speedy responses to the Lehman and tainted rice issues. The

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prevailing view in the party is that those issues must not be linked
to the dissolution.

9) LDP decides to hold general election on Oct. 26, putting extra
budget bill on backburner

ASAHI (Page 4) (Excerpts)
September 18, 2008

The Liberal Democratic Party (LDP) has decided to hold the next
general election on Oct. 26. When concerns about the nation's
economy is growing in the wake of the U.S. financial crisis, the
Democratic Party of Japan (DPJ) unofficially proposed a plan to
dissolve the House of Representatives through talks after the
supplementary budget bill clears the Diet, but the LDP declined it,
seeing the proposal as intended to delay Lower House dissolution.
The New Komeito also accepted the LDP's new plan.

LDP Diet Affairs Committee Chairman Tadamori Oshima and his DPJ
counterpart Kenji Yamaoka met in the Diet Building yesterday.

Yamaoka: "How about considering a plan to dissolve the Lower House
through talks after the two parties make as many concessions as
possible on the supplementary budget bill."

Oshima: "The bill includes expenses to finance highway construction
and maintenance. Will you support the bill that includes the measure
you opposed?"

Yamaoka proposed that the ruling and opposition parties in
cooperation should first dispose of key bills through negotiations
and then dissolve the Lower House. Yamaoka also suggested that party
head talks be held after the new administration is inaugurated. But
Oshima retorted: "Although Secretary General Hatoyama has said over
the past year that the prime minister who has yet to seek the
people's confidence should seek the judgment of the people at an
early date after the Lower House is dissolved. Did he change his
mind?"

In the politically divided Diet situation, the LDP has been stabbed
in the back by the DPJ over bills related to tax reform, the
selection of new Bank of Japan chief, and other issues. The
supplementary budget bill for fiscal 2008 appropriates 66 billion
yen to cover the loss accrued from the one-month invalidation of the
provisional high rates of the gasoline and other road-related taxes.
Because the rates lost effect due to the DPJ's opposition, Oshima
declined the proposal made by the DPJ while remaining noncommittal
about the extra budget bill.

After meeting Yamaoka, Oshima emphasized: "Considering what the DPJ
has done over the past year, we cannot easily accept the proposal."

10) DPJ proposes plan to dissolve Lower House through discussion,
seeking to constrain LDP from doing so at beginning of extra Diet
session

NIKKEI (Page 2) (Slightly abridged)
September 18, 2008

Democratic Party of Japan (DPJ) Diet Affairs Committee Chairman
Kenji Yamaoka, in his meeting yesterday with Liberal Democratic
Party (LDP) Diet Affairs Committee Chairman Tadamori Oshima,

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proposed a plan to dissolve the House of Representatives through
discussions, which means that the DPJ would cooperate with the LDP
to pass a supplementary budget for fiscal 2008 through the Diet
during the upcoming extraordinary Diet session on the condition that
the Lower House would be dissolved during the extra Diet session.
Oshima, however, avoided giving an answer, just saying: "That's
something the new prime minister will consider." The ruling
coalition is mulling Lower House dissolution at the outset of the
extra Diet session.

In their meeting yesterday, Yamaoka and Oshima attempted to probe
the intentions of each other.

Yamaoka: "Don't you think the Lower House should be dissolved after
holding deliberations at least two days in both chambers of the
Diet?"

Oshima: "Unless the DPJ makes its position clear on the
supplementary budget, we won't be able to tell the next prime
minister."

Yamaoka suggested setting four days for deliberations on the
supplementary budget on Oct. 6-9 and modifying the contents of the
supplementary budget. Yamaoka also told Oshima: "We will not
unnecessary delay deliberations." Oshima, however, expressed his
distrust of the DPJ, saying: "When thinking about the last one year
of our dealings with the DPJ, I cannot easily accept your proposal."


The LDP's basic strategy is to dissolve the Lower House at the
outset of the extra Diet session immediately after receiving
attentions from voters through its presidential election. The ruling
coalition has focused on a schedule -- kicking off the official
campaign of a general election on Oct. 14 and setting the voting
date for Oct. 26, after the Lower House is dissolved on Oct. 3,
after ending each party's representative interpellations in both
Diet houses.

Many in the ruling coalition have become doubtful and suspicious
about the DPJ because they have been badly let down many times since
last July when the divided Diet was created through the Upper House
election. The dominant view in the ruling coalition is that the DPJ
aims to tarnish the image of the new government through
deliberations at the Diet."

The ruling camp has a weak point, as well. It describes its
comprehensive economic stimulus package as "emergency" measures.
There are many issue to address, including the U.S. Lehman Brothers
bankruptcy and the illegal resale of tainted rice. If the ruling
camp dissolves the Lower House unilaterally, the opposition bloc
would criticize it for giving priority to the political situation
rather than the daily lives of people.

Meanwhile, the opposition camp, which has called for an early Lower
House dissolution, wants to avoid holding a general election soon
after the new prime minister is inaugurated. In order also to pursue
the responsibilities of the government for the illegal resale of
tainted rice and the pension-record mess, they strongly want to
secure enough time for deliberations.

The DPJ predicts that even if it suggestion is turned down, it would
be able to fend off criticism that the it killed an emergency

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economic stimulus package. Yamaoka indicated yesterday that the DPJ
would accept a party-heads meeting for an agreement between the
ruling and opposition camps.

11) LDP makes recommendations for financial stabilization

NIKKEI (Page 2) (Full)
September 18, 2008

All ruling and opposition parties yesterday played up the need for a
strong response to financial uncertainty, following the failure of
the U.S. major securities firm Lehman Brothers Holding Inc. The
ruling Liberal Democratic Party (LDP), in a joint meeting of its
Research Commission on the Finance and Banking Systems and other
commissions, came up with a set of recommendations, which include 1)
securing the stability of financial markets through cooperation with
other countries, and 2) compiling a package of emergency economic
measures, including a supplementary budget, by the government. The
LDP submitted it to the Bank of Japan and the Financial Services
Agency.

Akihiro Ota, chief representative of the New Komeito, the LDP's
coalition partner, yesterday asked Prime Minister Yasuo Fukuda to
quickly come up with measures for smaller companies experiencing
funding difficulties. Fukuda told Ota: "I will take adequate
measures."

The main opposition Democratic Party of Japan set up a financial
task team, headed by Upper House member Kohei Otsuka.

12) PNP to merge with DPJ out of worry that it might be shunted into
background in Lower House election

YOMIURI (Page 4) (Full)
September 18, 2008

The People's New Party (PNP, Kokumin Shinto led by Tamisuke
Watanuki) on September 17 decided to accept a proposal for a merger
with the Democratic Party of Japan (DPJ or Minshuto) before the
envisaged Lower House election. This is because with the approaching
dissolution of the Lower House for a snap election, the party felt a
sense of crisis that it might be shunted into the background of the
two major parties -- the Liberal Democratic Party (LDP) and the
DPJ.

The PNP has five Lower House lawmakers, of whom President Watanuki
(Toyama No. 3 constituency), Deputy President Shizuka Kamei (the
Hiroshima No. 6 constituency) and Lower House member Mikio Shimoji
(Okinawa No. 1 constituency. Unaffiliated at the time of election)
were elected from single-seat constituencies. Secretary General
Hisaoki Kamei was elected from the Chugoku proportional
representation bloc, although he also ran for a single-seat
constituency. Masaaki Itokawa, chairman of the Election Committee,
was elected from the Hokuriku proportional representation bloc. He
ran only for the proportional representation system. Candidates who
have already been endorsed informally by the PNP and the DPJ are
expected to compete in two constituencies in the next Lower House
election. There is also a possibility of the two parties competing
in five more constituencies.

Many observers say that next Lower House election would be a
decisive battle between the LDP and the DPJ, as a senior DPJ

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official said. Under such a circumstance, an increasing number of
PNP members have been strengthening their view that if the PNP
merges with the DPJ, the possibility of PNP candidates winning in
single-seat constituencies or making a come back would increase. At
such time, the DPJ has timely decided to incorporate a revision to
postal privatization, the starting line of the PNP's formation, into
its manifesto, paving the way for the party to accept the merger
proposal.

13) Policy evaluation by Nippon Keidanren: LDP receives 10 A's; DPJ
all zeros

YOMIURI (Page 2) (Abridged slightly)
September 18, 2008

Nippon Keidanren (Japan Business Federation) on September 17
released its policy evaluation for 2008, which will serve as
guidelines when its member companies and organizations donate money
to the Liberal Democratic Party or to the Democratic Party of Japan
(DPJ or Minshuto).

Regarding the LDP, the organization highly evaluated its efforts to
address the global warming issue at the Hokkaido Lake Toya Summit
(G-8) and gave a record high of 10 A's among 30 evaluation items
under the categories of "consistency," "effort" and "actual
achievement." It determined that the direction of individual
policies is consistent." However, no A's were given to items under
the "actual achievement" category.

The DPJ, which visibly took a confrontational stance in the divided
Diet, received harsh marks -- six D's -- up two from the preceding
year's evaluation, the second lowest mark, for 20 items under the
"consistency" and "effort" categories.

Nippon Keidanren member companies and organizations in 2007 donated
2.91 billion yen to the LDP and 80 million yen to the DPJ.

14) Former Agriculture Minister Tamazawa to retire from politics

NIKKEI (Page 2) (Full)
September 18, 2008

It was learned yesterday that Tokuichiro Tamazawa, a House of
Representatives member belonging to no party, 70, would not run in
the next Lower House election and retire from politics. Tamazawa,
who is now serving in his 9th term in the Diet, served as director
general of the former Defense Agency, and minister of agriculture,
forestry and fisheries. He left the Liberal Democratic Party (LDP)
last September to take responsibility for the LDP local chapter,
which he headed, having fabricated receipts included in a political
funds report.

Former Agriculture Minister Endo plans to retire from politics

It has been learned that Former Agriculture, Forestry and Fisheries
Minister Takehiko Endo, a member of the ruling Liberal Democratic
Party (LDP), who represents the Yamagata No. 2 constituency, will
not run in the next House of Representatives election and retire
from politics. He is expected to formally announce his intention as
early as today. Endo is now serving in his 6th term in the Lower
House.


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15) Bailout of AIG: "FRB has made the best decision," says BOJ
governor: Bumpy road ahead for U.S. financial situtation

YOMIURI (Page 8) (Excerpts)
September 18, 2008

Bank of Japan (BOJ) Governor Masaaki Shirakawa during a press
conference held after the Policy Board meeting on monetary policy on
September 17 gave a high score to the U.S. Federal Reserve Board's
(FRB) decision to take to bail out AIG, the largest insurance
company in the U.S. He said, "The FRB has made the best decision
under the current situation." Regarding the U.S. financial
situation, which is increasingly becoming unstable in the wake of
the failure of Lehman Brothers, a leading securities firm, he said,
"There still will be a bumpy road ahead." He thus indicated his view
that the situation will require continued vigilance after the
bailout of AIG as well."

The focus of highest attention at the BOJ meeting was what impact
the financial situation in the U.S., which is moving quickly as
dictated by such incidents as the collapse of Lehman Brothers and
the bailout of AIG, would have on the global economy. Citing the
fall in housing prices and the expanding losses from securitized
products, Shirakawa expressed concern that the current financial
crisis could become protracted. He noted, "The root-cause of the
problem remains unsettled."

Comparing the difficulty of settling the problem with the financial
crisis Japan experienced in 1997, he said, "The negative synergism
of the capital shortfall that banks are now facing due to increased
non-performing loans spilling over to the real economy is still at
work."

The FRB has decided to bailout AIG the same day when the BOJ held
the meeting. Regarding this decision, a point has been made that the
extension of massive funds by the FRB to a faltering company could
damage the fiscal soundness of the central bank. Shirakawa indicated
his perception that the injection of public money should be carried
out, based on fiscal funds. He then noted, "The most important role
of the central bank is to prevent risks involving the financial
system from surfacing. The FRB's response has contributed to
stabilizing the dollar."

16) Poll of 209 major firms: 85 PERCENT see economy sliding into
recession, half of respondents expect recovery in latter half of
next year

TOKYO SHIMBUN (Top Play) (Full)
September 18, 2008

In a survey of 209 major companies across the nation (conducted from
late August through mid-September) by the Tokyo Shimbun, about 70
PERCENT of respondents replied that the Japanese economy was
moderately slipping into recession. About half said that the economy
would start on an upward slop in the latter half of the next year.
The government has already recognized that the economy has entered a
recessionary phase, given global economic slowdown and soaring raw
material prices.

In the survey, 70.7 PERCENT of respondents said that the economy
was moderately sliding into recession, up 19.2 PERCENT in the
previous survey in April. Those who said the economy was sliding

TOKYO 00002564 012 OF 012


into recession accounted for 14.4 PERCENT . The survey showed that
85.1 PERCENT recognized that the economy has been in a recessionary
phase.

In the previous poll, about 20 PERCENT said that the economy was
expanding, but this time, no optimistic reply was presented.

Asked about prospects for economic conditions in the latter half of
fiscal 2008, more than 70 PERCENT said that the economy would be on
a downward trend, with 61.5 PERCENT replying that the economy would
be moderately slipping into recession while 13.0 PERCENT saying
that the economy would be slipping into recession.

In reply to a question about the timing for recovery, 23.2 PERCENT
cited July-September in 2009, and 27.5 PERCENT predicted
October-December in 2009. The survey showed that about half of the
respondents expected that the economy would get back on its feet in
the latter half of 2009. Companies that cited the first half of 2009
accounted for 24.5 PERCENT . But 16.4 PERCENT said that the economy
would not move to a recovery track before 2010.

SCHIEFFER

© Scoop Media

 
 
 
 
 
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