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Cablegate: Japanese Morning Press Highlights 09/19/08

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UNCLAS SECTION 01 OF 10 TOKYO 002581

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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 09/19/08

Index:

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

Election politics:
4) With 70 PERCENT of local LDP chapters now backing him, Taro Aso
is certain now to win the LDP presidential race (Nikkei)
5) Aso Cabinet to last only nine days, if he dissolves Diet as
predicted, making it the shortest in postwar period (Mainichi)
6) Democratic Party of Japan (DPJ) wants toe-to-toe Aso vs. Ozawa
challenge in a Tokyo election district (Sankei)
7) DPJ sending "assassin candidate" to take down former defense
chief Kyuma in Nagasaki 2 district (Sankei)
8) DPJ and People's New Party heads to meet today, but some in the
PNP have cold feet about a merger of the two parties (Nikkei)
9) Diet has shifted into an election mode, lawmakers readying to run
in the Lower House race on Oct. 26 (Yomiuri)
10) Lower House Speaker Yohei Kono gives his last press interview
before retiring from politics (Asahi)

11) Massive U.S., Japanese, European currency swap in order to prop
up dollar, alleviate global market tremors (Asahi)

12) Agricultural Ministry plans to temporarily halt minimum-access
rice imports as means of stopping tainted rice from entering Japan's
distribution network (Asahi)

13) USTR, METI object to China's requirement of foreign companies to
reveal secret source codes on electronic products - a violation of
intellectual property rights (Yomiuri)

14) Next prime minister will attend UNGA (Asahi)

Articles:

1) TOP HEADLINES

Asahi, Yomiuri, Nikkei & Tokyo Shimbun:
BOJ, jointly with U.S., Europe, to pump 180 billion dollars into
global money markets to ease credit crunch

Mainichi:
Vice agriculture minister decides to resign, taking responsibility
for rice scandal

Sankei:
Article by Yukio Okamoto: Don't run away from Afghanistan

Akahata:
Double responsibility for illegal rice sales lies with LDP farm
policy

2) EDITORIALS

Asahi:
(1) Take every possible measure to stabilize global financial
markets
(2) Tampered 69,000 pension records must be checked urgently

Mainichi:

TOKYO 00002581 002 OF 010


(1) Financial crisis enters new phase
(2) Promptly clarify online pension entries were tempered with by
SIA and rescue victims

Yomiuri:
(1) Land price mini bubble beginning to burst
(2) Though new Thai prime minister elected, political turmoil still
continuing

Nikkei:
(1) Joint steps by Japan, U.S., Europe reflect expansion of
financial crisis
(2) Land prices dropping as money flows from overseas decline

Sankei:
(1) LDP presidential candidates expected to conduct heated debate to
erase public distrust
(2) Nationwide academic examination results should be publicized to
improve children's academic abilities

Tokyo Shimbun:
(1) Farm Ministry must deal with tainted rice scandal with proper
measures
(2) Land price decline: Work out ways to resuscitate real estate
investment

Akahata:
(1) Stop reforming day-care system

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, September 18

NIKKEI (Page 2) (Full)
September 19, 2008

09:46
Met Vice MEXT Minister Zeniya at the Kantei.

11:51
Met Chief Cabinet Secretary Machimura.

13:05
Met Deputy Chief Cabinet Secretary Futahashi.

14:21
Met Japan-ROK Friendship Association Central Committee Chairman Kim
Su Han in the presence of Michio Ochi, the association's chief
director.

15:47
Met China State Administration of Foreign Experts Affairs Director
General Ji YunShi, Ambassador Cui Tiankai and others at the
Keidanren Kaikan Hall at Otemachi, joined in by Keidanren Chairman
Mitarai and METI Minister Nikai.

16:05
Attended a Japan-China business leaders' exchanges executive
committee reception.

16:57
Met Cabinet Intelligence Director Mitani at the Kantei.

TOKYO 00002581 003 OF 010

17:55
Met Machimura.

18:16
Returned to his official residence.

4) Aso certain to win LDP race, having racked up 70 PERCENT of
local chapter vote

NIKKEI (Page 1) (Abridged)
September 19, 2008

In the run-up to the ruling Liberal Democratic Party's presidential
election, LDP Secretary General Taro Aso is now certain to win the
race and become the successor to Prime Minister Yasuo Fukuda. Aso
has now secured more than 60 PERCENT of the votes allocated to the
LDP's lawmakers in both houses of the Diet. In addition, he will
also likely garner more than 70 PERCENT of the votes from the LDP's
local leaders. The LDP will hold a meeting of all its Diet members
on Sept. 22 instead of holding a party convention to elect its new
leader, where Aso will likely win more than half of their votes in
the first ballot and is expected to be newly elected LDP president.

In the LDP's presidential election, its lawmakers from the Diet's
lower and upper chambers will cast their votes (386 as of Sept. 22)
and its 47 prefectural federations across the nation will also cast
their votes (141), totaling 527 votes. The LDP allocates three votes
to each of its prefectural federations. Each LDP prefectural
federation will hold a preliminary polling of party members and
fraternity members to decide for which candidate it will cast its
three votes.

5) Diet dissolution possibly 9 days after cabinet formation:
Shortest administration in postwar history

MAINICHI (Page 3) (Full)
September 19, 2008

In considering how many days each newly inaugurated cabinet in the
past was in office before the Diet was dissolved, the shortest was
the first Hatoyama cabinet which lasted in 1954 for 45 days. This
time, the Diet is expected to designate the prime minister on Sept.
24. If the House of Representatives is dissolved on Oct. 3, nine
days later, the shortest record will be broken.

Against the backdrop of his popularity, Prime Minister Ichiro
Hatoyama dissolved the House of Representatives for a general
election, which was held in February 1955. His Democratic Party
increased its seats from 124 to 185 and became the leading party.
The second shortest was the first Mori cabinet that lasted 58 days.
Prime Minister Yoshiro Mori, who took over after Prime Minister
Keizo Obuchi passed away, dissolved the House of Representatives in
June 2000 before the Kyushu-Okinawa summit. However, the ruling
Liberal Democratic Party lost a substantial number of seats due to
Mori's gaffes. Both cabinets were rather intended to manage an
election from the start. LDP Secretary General Aso, who is now seen
as the likely winner of the LDP's presidential election this time,
is also expected to be the LDP's face for a general election.

6) Notion being floated of "Aso vs. Ozawa" race in Tokyo district in
Lower House election

TOKYO 00002581 004 OF 010

SANKEI (Page 5) (Abridged slightly)
September 19, 2008

Yoshihide Suga, deputy chairman of the Liberal Democratic Party
(LDP) Election Strategy Council, delivered a speech yesterday in
Yokohama. Referring in it to a rumor that Democratic Party of Japan
(DPJ) President Ichiro Ozawa is now looking into the possibility of
shifting to another electoral district (from his home constituency
in Iwate Prefecture) when he runs in the next House of
Representatives election, Suga said: "If Mr. Ozawa runs from Tokyo,
we will have our new president contest with him in Tokyo. The
Election Strategy Council is now considering it in a serious
manner." All the more because Suga is a close aide to Secretary
General Taro Aso, who is the strongest LDP presidential candidate,
his remarks about a possible "Aso vs. Ozawa" contest will likely
create a commotion.

The largest opposition party revealed on Sept. 12 a list of its
official candidates as the first batch for the Lower House election.
The DPJ, however, forwent including Ozawa's name in the list as a
candidate to run from the Iwate No. 4 constituency, from which he
always has run. Secretary General Yukio Hatoyama, on a TV talk show
on Sept. 14, said: "(Ozawa) will not run from Iwate." He implied the
possibility of Ozawa running from the Tokyo No. 12 constituency,
which is New Komeito leader Akihiro Ota's home constituency, saying:
"It's one of the most likely options."

On Sept. 15 Ozawa, however, tricked everyone by saying: "I have not
made up my mind yet." If Ozawa runs from the Tokyo No. 12 electoral
district, many conservative votes will go to him. As a result, Ota
will inevitably face an uphill battle.

Suga's remarks appear to be aimed at seeking to constrain the DPJ,
which is now rocking the ruling coalition. However, the prevailing
view in the LDP is that Suga must have received Aso's concurrence. A
senior LDP member said: "The next Lower House election will become a
decisive tattle between the LDP-New Komeito coalition and the DPJ"
if both Aso and Ozawa run from the Tokyo No. 12 constituency.

Chances are strong that should Aso run from the Tokyo No. 12
constituency, Ota would be filed as a candidate for the proportional
representation segment or the LDP would give him another electoral
district and give him full support. If that happens, electoral
cooperation between the LDP and its coalition partner New Komeito
will be promoted in every constituency. An LDP source said: "Mr.
Suga seems to have carefully calculated the various ripple
effects."

7) DPJ to file Fukuda as "assassin" candidate against Kyuma

SANKEI (Page 5) (Full)
September 19, 2008

Ichiro Ozawa, president of the main opposition Democratic Party of
Japan (DPJ), has continued to travel across the nation to gather
candidates to file in the next House of Representatives election.

Yesterday in Nagasaki City, Ozawa asked Eriko Fukuda, 27, a
hepatitis C infected plaintiff, to run from the Nagasaki No. 2
constituency as a candidate on the DPJ ticket and he received her
consent. The Nagasaki No. 2 electoral district is the home

TOKYO 00002581 005 OF 010


constituency of former Defense Minister Fumio Kyuma, 67, who has
close ties to Liberal Democratic Party (LDP) Secretary General Taro
Aso. Ozawa appears to have filed Fukuda as an "assassin" candidate
against Kyuma.

Ozawa, who attended a press conference at which Fukuda announced her
candidacy, stressed:

"Drug-induced diseases are a symbolic problem caused by politics
today. Ms. Fukuda must tell about her experience and background so
that the public will understand the need for political change."

Ozawa is expected to announce today that the DPJ will field Kazumi
Ota, 27, an incumbent Lower House member, as its candidate for the
Fukushima No. 2 constituency in the next general election.

8) DPJ-PNP merger: Party head talks today; Coordination of views on
what form merger should take likely to become difficult

NIKKEI (Page 2) (Abridged slightly)
September 19, 2008

The Democratic Party of Japan (DPJ or Minshuto) at its executive
board meeting on September 18 formally decided to move ahead with a
merger with the People's New Party (PNP or Kokumin Shinto).
President Ichiro Ozawa will meet with PNP President Tamisuke
Watanuki today to formally propose a merger between the two parties
and confer on the matter in concrete terms. Both parties want to
reach a basic agreement by early next week. However, with some PNP
members still remaining cautious about the proposal, coordination of
views on the merger plan could encounter complications, if the DPJ
insists on the form of the merger and keeping their party name.

Secretary General Yukio Hatoyama at the DPJ executive board meeting
asked participants: "We would like to make a merger proposal. Please
leave talks with the PNP to the three executives." Vice President
Katsuya Okada asked whether the party name will change. Hatoyama
replied, "Basically, no." According to one participant, Hatoyama
hinted that the planned merger will be a consolidation takeover with
the PNP disbanding itself and being merged into the DPJ.

Deputy President Naoto Kan after the meeting proposed holding a
party head talks on the 19th to Deputy PNP President Shizuka Kamei
on the phone. Kamei agreed. The DPJ will hold a general assembly of
its lawmakers from both Diet chambers after the party head talks and
discuss how to deal with the issue.

Ozawa, who is taking the initiative on the issue, intends to make
sure that the DPJ garners anti-postal privatization votes without
fail. He appears to be motivated by the desire to expand the party
to become the largest single party (in the Lower House). The PNP
wants to avoid being shunted into the background. Kamei during a
press conference stressed, "We must accept the proposal, even if
there are some drawbacks in it." Watanuki hinted at his stance of
accepting the merger proposal, if party members agree. He said, "I
would like to consolidate the opinions of party members."

9) Nagatacho moves into Lower House election mode

YOMIURI (Page 4) (Excerpts)
September 19, 2008


TOKYO 00002581 006 OF 010


The ruling and opposition parties have been actively readying
themselves for an Oct. 26 Lower House election. Confrontation
between the two camps is also intensifying over the fiscal 2008
supplementary budget bill to be submitted to the next extraordinary
Diet session that will open on Sept. 24. The capitol district of
Nagatacho has fully shifted to a Lower House election mode.

In a meeting of the LDP's Yamasaki faction yesterday, former LDP
Vice President Taku Yamasaki said: "Let's make thorough preparations
so that all of us can win seats in the upcoming election."

The ruling bloc's strategy is to win the Lower House election by
taking advantage of the momentum of the LDP presidential election.
But some in the ruling bloc fear an early election, in part due to
economic uncertainty in the country resulting from the collapse of a
major U.S. securities house, Lehman Brothers. In fact, some
lawmakers at the Yamasaki faction meeting were vocally pessimistic,
one saying: "There are no winning factors. Dissolving the Lower
House would be suicidal."

Every lawmaker has begun making preparations for the next Lower
House election, which seems certain to take place on Oct. 26. An LDP
Tsushima faction executive said: "No one can stop this trend. Logic
doesn't work in this world."

LDP Election Strategy Council Chairman Makoto Koga yesterday met
with Fukushima prefectural chapter executives at the party
headquarters and told them that the party would no longer use the
Costa Rica method in Fukushima constituencies No. 1 and No. 5. The
LDP plans to field Yoshitami Kameoka, who won the previous election,
in Constituency No. 1. The party also intends to undertake
coordination for fielding Goji Sakamoto, who was on the proportional
representation list in the previous race, in Constituency No. 5 and
transferring Masayoshi Yoshino, who won Constituency No. 5, to
Constituency No. 3.

10) Yohei Kono holds retirement press conference

ASAHI (Page 4) (Abridged slightly)
September 19, 2008

Lower House Speaker Yohei Kono, 71, held a press conference last
night at a hotel in Hakone Town, Kanagawa Prefecture. In the
meeting, Kono announced that he would retire from politics and not
run in the next Lower House election. Kono, dubbed the last "dovish
heavyweight" in the Liberal Democratic Party, made this request to
junior lawmakers: "Although Hiroshima was a victim (of the atomic
bombings), I want (young politicians) to also study the fact that
Japan was an aggressor. I would like your to think earnestly about
Japan's diplomacy toward South Korea and China, and when you face
those countries, to see them with a correct attitude."

In 1993, Kono issued a statement as chief cabinet secretary under
the then Miyazawa cabinet expressing an apology and remorse by
officially admitting that the military had forced the so-called
"comfort women" into sexual slavery (during WWII). Looking back at
the event, Kono said, "It was an extremely vital statement."
Referring to moves to deny the statement that resulted from then
Prime Minister Shinzo Abe's comment, "It is a fact that there was no
evidence of the Japanese military forcing (comfort women) into
(sexual slavery)," Kono said: "The denial of the statement created
trouble for Japan in the United States, and it was taken up in Asia

TOKYO 00002581 007 OF 010


and the Netherlands, as well. It was regrettable that doubts were
raised about Japanese politics each time."

As the reason for his retirement, Kono cited the fact that he had
chaired the G-8 Lower House Speakers' summit held earlier this month
in Hiroshima. He said: "It was my long-cherished dream. After
hosting the event, I felt a great sense of accomplishment. My health
is not necessarily in a perfect condition, either." In 2002, Kono
received part of the liver of his son, Taro Kono, also a Lower House
lawmaker, to treat liver cirrhosis because his hepatitis C had
worsened. Kono also said: "I feel that I was given a new life. I
cannot waste this life. With that in mind, I have served as Lower
House speaker over the last six years and have done my very best in
performing my job."

In winding up his press conference, he touched on the divided Diet
and emphatically said: "Japan must not lose its international
credibility because of the divided Diet."

11) Wise decision by Japan, U.S., Europe to jointly pump dollars
into global money markets

ASAHI (Page 2) (Excerpts)
September 19, 2008

The central banks of Japan, the U.S., and Europe have decided to
pump dollars into global money markets in a joint effort to ease the
credit crunch triggered by the upheaval on Wall Street. They made
the decision, seeing desperate efforts by banks across the world to
secure dollars amid growing fears of a global financial crisis due
to major U.S. financial institutions having reached a deadlock.
Views are divided on whether the new mechanism would be able to end
the ongoing turmoil.

Japan now lender

The U.S. Federal Reserve Board (FRB) asked the Japan of Japan (BOJ)
on Sept. 17 to join forces with other central banks to boost
supplies of dollars in global financial markets. The request came
just after a meeting to determine monetary policies was over.

On the European market, which opened on the evening of Sept. 17,
Japan time, dollar trading was quite thin, given the increasing
financial instability in the U.S.. A sharp rise in interest rates
has made some financial institutions unable to procure necessary
dollars. Alarmed at the situation, the European Central Bank (ECB)
urgently worked on the FRB to provide more dollar funds.

A change has also been appearing on the Japanese short-term money
market. Foreign financial institutions that remain unable to procure
dollars in the U.S. and Europe have aggressively bought yen and
changed the yen into dollars since the summer of last year. A senior
BOJ officer said: "Japanese financial institutions are now valuable
capital suppliers."

The demise of Lehman Brothers has multiplied yen-dollar swap deals.
Foreign financial institutions have begun to procure yen funds on
the Tokyo market despite high interest rates. Even Japanese
financial institutions now find it difficult to procure short-term
funds.

The BOJ has started open-market operations to specially provide huge

TOKYO 00002581 008 OF 010


funds since Sept. 16. Funds offered during the three days total 8
trillion yen, the largest scale ever since the money supply was
eased in March 2006. Despite this effort, the average short-term
interest rate is 0.70 PERCENT , higher than the target rate of 0.5
PERCENT set by the BOJ in implementing monetary policies.

BOJ Governor Masaaki Shirakawa decided to take joint steps with the
central banks of the U.S. and Europe, saying: "If it becomes
impossible to procure capital in dollar markets, a further burden
will be imposed on yen markets." BOJ members hurriedly drew up an
accord with the FRB and announced it in an extraordinary monetary
policymaking meeting that started at 15:00 yesterday.

12) Imports of minimum-access rice to be halted for time being as
measure to address incident involving pesticide-contaminated rice

ASAHI (Page 7) (Excerpts)
September 19, 2008

Following the revelation that rice contaminated with such substances
as pesticide has been used for human consumption, the Ministry of
Agriculture, Forestry and Fisheries (MAFF) has decided to suspend
for the time being imports of minimum-access (MA) rice, which had
become a supply source for the tainted rice. This is because the
government has yet to coordinate views on what measures to take to
prevent a recurrence. The decision could affect Japan being able to
meet its obligation to import a certain amount of MA rice.

Vice Agricultural Minister Shirasu revealed the decision at a press
conference on September 18. Public bidding for 2.5 tons of
minimum-access rice targeting trading houses, which handles imports
of such rice, was planned for the 17th. However, the bidding has
been postponed. Whether such bidding will be resumed has yet to be
decided.

MAFF Minister Ota on the 16th came up with a policy of returning or
discarding tainted rice that has been determined in inspection
carried out at ports as problematical in accordance with the Food
Hygiene Law. This is a measure to prevent such rice from being
allowed into the country. Japan has thus far imported tainted rice
not for human consumption but for industrial use, such as for making
glue. This rice was misused this time.

However, specifics, such as who should shoulder the cost of
returning or discarding such rice, have yet to be worked out. MAFF
said that imports would be suspended until such concrete measures
are adopted.

How to address the issue of the cost of returning polluted rice
topped the agenda of a meeting of the Upper House Agriculture,
Forestry and Fisheries Committee held on the 18th. MAFF General Food
Policy Bureau Director General Machida said, "Principally, importers
would have to bear the cost. However, in order to prevent such, we
will work on exporting countries to, for instance, strengthen
hygienic efforts."

Trading companies are increasingly becoming dismayed at the
situation. An executive of a certain leading trading house said, "If
we are forced to pick up the bill, no companies would take part in
public bidding for minimum-access rice." There is no guarantee that
exporting countries will agree to shoulder the cost without putting
up resistance.

TOKYO 00002581 009 OF 010

13) China: Open IT product source code

YOMIURI (Page 1) (Abridged)
September 19, 2008

The Chinese government has plans to introduce a new requirement in
May 2009, under which foreign businesses will be ordered to disclose
information to Chinese authorities about the core of digital
appliances and other products, sources revealed yesterday. The
subject products could include IC cards, digital copying machines,
and flat-screen television. If foreign firms refuse to disclose the
information, they would be banned from exporting any of their
products to China and also prohibited from manufacturing and
marketing their products in China. If that is the case, corporate
intellectual properties may flow to Chinese firms. In addition,
cryptographic technologies used for digital equipment would leak out
to China. There are also such concerns for security reasons. The
Ministry of Economy, Trade and Industry and the Office of the U.S.
Trade Representative will strongly call for China to retract the
planned system. This could develop into a serious trade issue.

China says the newly planned protocol is "for the mandatory
authorization of IT security products." Regarding the subject
products, the new system will mandate foreign firms to open source
code that is a design of software controlling digital appliances and
other products. These products must pass a test based on their
disclosed source code and must also pass a certification authority's
inspection, or they cannot be marketed in China. The new system is
internationally unprecedented.

The new system is likely to target encrypted products, such as
FeliCa, the contactless IC card technology developed by Sony
Corporation. Among other likely targets are digital copying machines
and computer servers.

According to the Chinese government's account, the purpose of
mandating foreign companies to open the source code of their
products is to block computer viruses, which target software
defects, and is also to prevent hackers.

But there is no denying that disclosed information could leak out to
Chinese firms through the Chinese government. Moreover, it is also
easy to find out Japanese-made digital equipment's coding
information. One says it may be exploited by China's espionage, for
example.

14) Machimura: Next prime minister will attend UNGA

ASAHI (Page 4) (Full)
September 19, 2008

Chief Cabinet Secretary Nobutaka Machimura infirmed yesterday the
Rules and Administration Committees of the two Diet chambers that
the next prime minister to be elected on Sept. 24 would visit New
York on Sept. 25-27 to attend the UN General Assembly. The Japanese
prime minister skipped UNGA for the two consecutive years since then
Prime Minister Junichiro Koizumi addressed UNGA in 2005.

There is criticism in the Democratic Party of Japan that it is
strange for the next prime minister to address the UN before
delivering a policy speech before Japan's Diet. Machimura, touching

TOKYO 00002581 010 OF 010


on it in a press conference held later on, said: "Japan hosted this
year's G-8 summit. DPJ President (Ozawa) has repeatedly indicated
that the United Nations is important. I cannot understand why the
DPJ is opposing it despite that."

SCHIEFFER

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