Cablegate: Daily Summary of Japanese Press 09/18/08

DE RUEHKO #2576/01 2620759
P 180759Z SEP 08




E.O. 12958: N/A



(1) LDP eyes Lower House election on Oct. 26, based on need for
early economic package after shock of Lehman Bros. collapse (Sankei)

(2) Global warming gas emissions rights trading: Trading houses to
be allowed to serve as brokers; Each company to set its own
reduction goal, according to outline of domestic experiment (Nikkei)

(3) Government, industry circles split on application of rules on
carbon emissions rights trading system; Plan to launch system next
spring will likely face complications (Yomiuri)

(4) Former LDP Secretary General Nonaka has doubts about Aso's
qualifications to be LDP president and prime minister (Mainichi)

(5) Interview with former Finance Minister Masajuro Shiokawa on LDP
presidential race: I can sense a psychological distance from the
general public (Mainichi)

(6) Bargaining underway between DPJ and LDP over handling of
supplementary budget, with former demanding settlement through talks
and latter dismissive of talks (Tokyo Shimbun)


(1) LDP eyes Lower House election on Oct. 26, based on need for
early economic package after shock of Lehman Bros. collapse

SANKEI (Page 35) (Full)
September 18, 2008

The Liberal Democratic Party started coordination yesterday to set
the day of official announcement at Oct. 14 and the voting day at
Oct. 26 for the next House of Representatives election. It is now
necessary to dispel growing fears of a global financial crisis
triggered by the demise of the leading U.S. securities house Lehman
Brothers Holdings Inc. To this end, the LDP judged it necessary to
"dissolve the Lower House at an early date and for the new prime
minister, having obtained the public's vote of confidence in the
general election, to swiftly come up with an economic package," as a
party executive said. It is now highly likely that the Lower House
will be dissolved on Oct. 3.

According to several ruling party sources, the new LDP president
will be elected in a joint plenary meeting of party members of both
Houses of the Diet on Sept. 22. An extraordinary Diet session will
be convened on the 24th, when an election will be carried out to
designate the new prime minister and the selection of a new cabinet
will be made. The new prime minister will leave for the U.S. on the
25th and deliver a speech at the United Nations' annual assembly on
the evening of Sept. 25, local time. After returning to Japan on the
28th, the prime minister will deliver speeches at plenary sessions
of both Lower and Upper House on the 29th. On Oct. 1-3, a
representative interpellation session will take place at both
chambers of the Diet.

Over the timing of the next Lower House election, the following two
options had been viewed as likely as a result of consideration given
to the state of preparations by local electoral management

TOKYO 00002576 002 OF 007

committees: (1) announcement on October 14 and election on Oct. 26;
and (2) announcement on Oct. 28 and election on Nov. 9. But
objections to the second option erupted in the LDP. The members
feared that if the LDP presidential election came after the U.S.
presidential election on Nov. 4 and if Democrat Barack Obama were
elected, calls would grow for a change of government in Japan.

The plan for official announcement on Oct. 14 and election on the
26th is now the most likely option. But this plan also contains
problems. The 2008 Asia-Europe Meeting (ASEM) Summit will take place
in Beijing on Oct. 24-25, so the new prime minister will have to
leave Japan just before the election. It will also become necessary
to dissolve the Lower House on Oct. 3, the final day of the
representative interpellation session, when considering the
preparatory period needed until the official announcement. In this
case, therefore, it will become impossible to start deliberations on
the supplementary budget bill before the election.

In the LDP presidential race, Secretary General Taro Aso is the
frontrunner, as surveys show. Aso enjoys a majority of supporters
among lawmakers and local chapter heads. Aso has declined to say
when the Lower House should be dissolved, but a senior member of the
Aso camp said: "Mr. Aso is determined to dissolve the Lower House at
an early date in order to break the impasse in the Diet in the
politically divided Diet situation." Many think that if Aso assumes
the party presidency, he will dissolve the Lower House at an early
date to seek the judgment of the public.

However, if the Lower House is dissolved before deliberations start
on the supplemental budget bill, objections will certainly come from
the Democratic Party of Japan (DPJ) and other opposition parties.
The new administration is expected to make a final judgment, taking
into consideration the results of various opinion polls to be
conducted just after it is launched.

(2) Global warming gas emissions rights trading: Trading houses to
be allowed to serve as brokers; Each company to set its own
reduction goal, according to outline of domestic experiment

NIKKEI (Page 1) (Full)
September 17, 2008

The outline of an experiment on the global warming gas emissions
trading system, which the government will launch in October, has
been firmed up. Under the plan, the government will allow trading
houses and banks to act as brokers for carbon emissions-rights so as
to smoothen trade in CO2 emission credits by companies. Companies
will voluntarily decide whether to take part in the experiment and
set a reduction goal. Companies that have reduced carbon emissions
more than the set goal can sell the surplus. Companies that have
missed their goals can purchase emissions credits to make up for the

The report will be presented to a meeting of the subcommittee of the
Round Table on the Global Warming Issue reporting to Prime Minister
Fukuda to be held on the 17th. The government plans to start
recruiting participating companies before the end of October after
the coordination of details. The government will aim to have as many
companies as possible take part in the project in order to make the
system effective. Companies will be urged to take part on an
individual basis. Participation by industry will not be approved.

TOKYO 00002576 003 OF 007

(3) Government, industry circles split on application of rules on
carbon emissions rights trading system; Plan to launch system next
spring will likely face complications

YOMIURI (Page 9) (Full)
September 18, 2008

The government on September 17 revealed the outline of a domestic
carbon emissions credits trading system to be tested from October.
Under the system, companies will set a carbon emissions reduction
goal on their own, the government apparently having given
consideration to industry circles, which have been cautious about
introducing such a system. However, the government and industry
circles remained split on the application of the rules. The
government will recruit companies taking part in the system starting
October, and actual emissions trading will start next spring.
However, coordination of views before launching the system will
likely be difficult.

Under the adopted system, companies that have reduced global warming
gas emissions more than the set goal can sell emissions credits.
Companies that have missed their targets must make up for the
shortages, by purchasing emissions credits. As such, the system has
the effect of urging companies to make energy-saving efforts.
Emissions reduction goals will be set, based on the voluntary action
program, which each industry set on a voluntarily basis. Japan
adopted this system, giving consideration to the fact that there is
strong opposition in Japan to the European Union (EU) system of the
government imposing reduction targets.

A method of determining whether reduction goals set by companies are
appropriate or not and verifying the implementation process has yet
to be adopted. A point has been made that since the setting of goals
will determine the efficacy of the system, it is necessary to have a
third organ check goals set by each company. There is concern that
too high barriers would bar companies from taking part in the
system. The future challenge will likely be to keep the balance of
the system.

Whether to allow participation by industry has yet to be decided. In
principle, the government calls for corporate participation on an
individual basis. However, industry circles' stance is that
corporate participation as proposed by the government would make it
difficult for each industry segment to promote its own measures to
combat greenhouse gas emissions, as the Japan Iron and Steel
Federation noted.

Another point in question is whether to allow emissions credits to
be traded as future goods, assuming that there would occur surpluses
or shortages in emissions credits. Some government officials take
the stand of allowing such a trading system, saying, "Allowing such
a trading system would activate carbon emissions trade." However,
some industry sectors are alarmed about the idea with the Federation
of Electric Power Companies of Japan noting that the introduction of
such a system could usher in a money game.

Since it was Prime Minister Fukuda that has strongly advocated the
introduction of the domestic carbon emissions credit trading, some
take the view that the mood for introducing the system would ebb
because he has announced his decision to step down, as one
government source said.

TOKYO 00002576 004 OF 007

(4) Former LDP Secretary General Nonaka has doubts about Aso's
qualifications to be LDP president and prime minister

MAINICHI (Page 5) (Full)
September 17, 2008

Question: Secretary General Taro Aso is now leading other candidates
in the Liberal Democratic Party's presidential race.

Hiromu Nonaka: Since as many as five candidates are running in the
election, there is a general lack of tense atmosphere. Although the
way Mr. Aso speaks may appeal to some people, I wonder how rank and
file LDP members think. The way the media reports the presidential
campaigns is also a problem.

Question: You have been harsh on Mr. Aso since you were an LDP

Nonaka: From the viewpoint of human rights, he lacks awareness of
treating everybody equally, even though he comes from a high
respectable family. I have doubts about his qualifications to be the
nation's top leader.

Although he was previously told by former Prime Minister Shinzo Abe
and former Prime Minister Yasuo Fukuda that they wanted to step
down, he did not consider how to deal with these situations.
Instead, he announced his candidacy for the races to elect a
successor to Abe and now Fukuda. He does not know how to carry out
the duties of secretary general.

Question: How about his policy?

Nonaka: I wonder how a person who used to advocate a structural
reform policy will come up with a specific package of economic
stimulus measures. It is not enough for him to just say that he will
implement economic stimulus measures. A supplementary budget for
fiscal 2008 must be adopted by the end of the year so that local
governments will be able to use it for their people. If he dissolves
the Lower House at the outset of the extraordinary Diet session, his
lack of capability will be revealed. As a result, he will suffer
considerable damage.

Question: Do you think the presidential election will give an
advantage to the LDP in the Lower House election?

Nonaka: If the DPJ does what it should do, such as enacting the
supplementary budget, it will gain a majority of the Lower House
seats. However, I think there is a chance that the LDP will hand
over the reins of government to the Democratic Party of Japan (DPJ).
I want to see political realignment after the Lower House election.
Seeing the divided Diet and the LDP's situation, I think issues will
not be resolved without political realignment.

Question: Do you think it is possible for the LDP and DPJ to form a
grand coalition?

Nonaka: With both the ruling and opposition parties moving to the
right, there is a chance now to form a pivotal group of lawmakers
who would make sure that Japan would never wage another war. I think
political realignment should take place.

Question: Do you think there are such persons among the presidential

TOKYO 00002576 005 OF 007


Nonaka: If I may venture to say, Nobuteru Ishihara is the only

Question: How about Economic and Fiscal Policy Minister Kaoru

Nonaka: His policy is first rate I want him to win the race. But he
lacks punch in his voice. I'm concerned about his health. With the
prime minister after the next prime minister in mind, I think LDP
members should bear in mind Ishihara as a potential prime
ministerial candidate.

Question: What are your assessments of former defense ministers --
Yuriko Koike and Shigeru Ishiba?

Nonaka: Ms. Koike must be a smart person, but I cannot entrust our
country to a person who has followed the powers-that-be. There might
be a scenario in which (former Prime Minister Junichiro) Koizumi
will come forward again.

Mr. Ishiba is an expert in defense policy, but I don't know what
kind of a politician he is.

(5) Interview with former Finance Minister Masajuro Shiokawa on LDP
presidential race: I can sense a psychological distance from the
general public

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

-- What is your view of the ongoing LDP presidential race?

Shiokawa: The race is centered on slogans. None of the five
candidates has gone beneath the surface. I can sense a psychological
distance from the general public.

-- What is beneath the surface?

Shiokawa: The people have come to realize that the divided Diet is
blocking politics from moving forward. Some even think that the
reins of government should be handed over for a time to the
Democratic Party of Japan. I think the people have gradually come to
understand what is wrong with politics. The LDP must present ways to
fix the problem. I am afraid that the five candidates are unaware of
that reality.

-- Are you saying that the presidential race is going on without
anyone having a clue about that point?

Shiokawa: That's right. The election is for the LDP alone. They are
saying things as if they are still conducting politics. They have
not discussed specially how to bring stability to politics and what
to do about the divided Diet. They are thinking only of themselves.

-- Concretely, how should matters be discussed?

Shiokawa: Being members of the party in power, they should discuss
the issues thoroughly with others, including the opposition parties,
and what was discussed there should be made public. If (the
opposition parties) still do not listen, the Diet should be

TOKYO 00002576 006 OF 007

dissolved as a crucial state matter. Politics should be conducted in
line with the popular will. I want to see the candidates face the
election with such resolution.

-- Their policies, especially economic and fiscal policies, seem
quite distinctive.

Shiokawa: There is no move to build a society that is more generous
and forgiving. That would be effective in the next Lower House
election, as well. Why is the Japanese economy at an impasse, and
what is the cause of it? I want to see the candidates address such
points rather than advocating aggressive fiscal disbursements, or
other means, for that matter.

-- Secretary General Taro Aso is way ahead of the other candidates.

Shiokawa: He has been referred to as the white knight coming to save
the day after the Abe and Fukuda administrations. Once he wins the
LDP presidency, he is certain to become the next prime minister. But
he has to remain in the post for some time. To do so, he needs to
know what the public wants.

-- What about other candidates?

Shiokawa: (Former Defense Minister Yuriko) Koike is a female
candidate, and that's her strength. Her campaign pledges are
concrete, and that's good, too. (Economic and Fiscal Policy Minister
Kaoru) Yosano is an orthodox politician. (Former Policy Research
Council Chairman Nobuteru) Ishihara and (former Defense Minister
Shigeru) Ishiba are vibrant and promising.

-- Primary elections will be held by local party members and
fraternity members across the country.

Shiokawa: The presidential election has become open substantially,
but I still think the local votes -- 141 in all -- are still too
small. Local party members and fraternity members deserve better
treatment. The party should give 6 to 10 votes to each prefectural
chapter. Hearing the people's views requires something that is not
superficial. The LDP's approach is still half-baked.

(6) Bargaining underway between DPJ and LDP over handling of
supplementary budget, with former demanding settlement through talks
and latter dismissive of talks

TOKYO SHIMBUN (Page 2) (Abridged slightly)
September 18, 2008

By Goto, Soka

Political maneuvering began yesterday between the Liberal Democratic
Party and the Democratic Party of Japan over the handling of the
fiscal 2008 supplementary budget in the next extraordinary Diet
session. In a Diet affairs chiefs' meeting, the DPJ demanded a
settlement through talks in return for extending cooperation for the
enactment of the supplementary budget in a bid to apply pressure on
the LDP, which wants to swiftly implement a package of economic
stimulus measures in the face of the financial turmoil originated in
the Untied States. But given growing calls in the party for
dissolving the Lower House at the outset of the next extraordinary
Diet session, the LDP cannot easily respond to the DPJ's demand. The
two parties' Lower House dissolution strategies are clashing with

TOKYO 00002576 007 OF 007

each other.

In yesterday's meeting, DPJ Diet Affairs Committee Chairman Kenji
Yamaoka said to his LDP counterpart Tadamori Oshima: "It is
conceivable for us to make maximum compromises regarding the
supplementary budget, enact it, and then dissolve the Lower House
through talks." The proposal was based on the Budget Committee of
each Diet chamber holding a session for at least two days.

Although the proposal appears to be a compromise at a glance, it is
actually intended to prevent the next prime minister from dissolving
the Lower House at an early date, to severely blame the government
regarding the tainted rice issue and other matters, and to dampen
the next cabinet's support ratings.

Aware of such intent, the LDP is dismissive of the DPJ proposal,
with Oshima commenting, "It is not a proposal we can give
constructive thought to."

The prevailing view in the LDP is that the Lower House must be
dissolved at an early stage of the upcoming extraordinary Diet
session so that the political parties will be able to kick off their
official campaigns on Oct. 28 for a general election on Nov. 9 after
the Budget Committee in each chamber meeting possibly for one day.

If the ruling bloc opts to enact the supplementary budged
independency without the cooperation of the opposition camp, it
would have to wait for the bill to clear the Diet automatically
about 30 days after Lower House approval. This might end up delaying
the Lower House dissolution until November or beyond.

Economic and Fiscal Policy Minister Kaoru Yosano, an LDP
presidential candidate, and others are still calling for the
budget's enactment before the dissolution. But a senior New Komeito
lawmaker said: "The Lower House should be dissolved while the next
cabinet is enjoying high support ratings. (The enactment of the
supplementary budget) can wait until after the Lower House

Echoing this view, Secretary General Taro Aso, who is far ahead of
other presidential candidates, predicted that in order to take
countermeasures early, the Lower House would be dissolved (sooner
rather than later)."


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