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Cablegate: Japanese Morning Press Highlights 09/22/08

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UNCLAS SECTION 01 OF 09 TOKYO 002601

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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 09/22/08

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Index:

Defense and security affairs:
1) No prospects in sight for Japan extending its MSDF oil-refueling
mission in the Indian Ocean (Yomiuri)
2) Ruling parties to attack the DPJ in the general election campaign
for its blocking of the MSDF refueling issue (Asahi)
3) No prospects in sight for Japan to send peacekeeping troops to
Sudan (Asahi)

LDP election season:
4) Taro Aso to be elected LDP president today; Oshima reportedly
picked as his chief cabinet secretary (Asahi)
5) LDP secretary general's post under Aso administration likely to
be awarded to Hosoda, former chief cabinet secretary (Sankei)
6) What was Prime Minister Fukuda's real intention behind his
resignation? (Tokyo Shimbun)

DPJ election fever:
7) Ichiro Ozawa reelected president of the Democratic Party of
Japan, promises three-step implementation of his campaign promises
(Asahi)
8) Foreign and security affairs get only slight mention in the
campaign material of the DPJ (Mainichi)
9) DPJ wants early deliberation and Diet action on the supplementary
budget bill (Tokyo Shimbun)

U.S. tackles financial crisis:
10) Secretary Paulsen urges Japan, Europe to cooperate in
non-performing loan buy ups under Treasury-Fed rescue scheme
(Nikkei)
11) State Minister for Financial Services Motegi welcomes swift U.S.
response to deal with financial crisis (Asahi)
12) Financial Services Agency says not asked by U.S. government yet
to buy up some of the U.S.' bad assets (Nikkei)

Articles:

1) No prospects for continuing MSDF refueling mission

YOMIURI (Page 4) (Abridged)
September 20, 2008

The government made a cabinet decision yesterday on a bill amending
the new Antiterrorism Special Measures Law to extend the Maritime
Self-Defense Force's current refueling activities in the Indian
Ocean for another year. However, the bill will likely be scrapped in
this fall's extraordinary Diet session when the House of
Representatives is dissolved. As it stands, there are no prospects
for continuing the MSDF's refueling mission. The government is now
making a strong appeal to the public on the necessity of continuing
the MSDF's refueling activities in the Indian Ocean, maintaining
that Japan's withdrawal from activities backing up multinational
naval forces operating at sea to block terrorists from Afghanistan
and other countries may adversely affect Japan's place in the
international community and its alliance with the United States.

"Japan will play a responsible role, and it's important to secure
sea-lanes. This will not change under any political situation." With
this, Defense Minister Hayashi stressed his view to the press
yesterday.


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In June, Japan sent a fact-finding team to Afghanistan in order for
the government to explore what Japan can do in its personnel
contributions to that country. However, the government deemed it
difficult to pass necessary legislation since the Diet is currently
divided. In the end, the government gave up on its dispatch plan.
Japan's aid through its official development assistance (ODA) is
also less than that announced by the United States (approximately 32
billion dollars) and of Britain (approximately 3.3 billion dollars).
Japan is on a par with Canada (about 1.9 billion dollars).
Meanwhile, the Air Self-Defense Force, which has been tasked with
airlift assistance activities in Iraq, will be recalled within the
year. The MSDF's refueling mission in the Indian Ocean is therefore
Japan's most visible contribution in the war on terror.

There are also some people who are playing up the MSDF's activities
in the Indian Ocean while noting that the presence of multinational
naval forces in the Indian Ocean is helpful in securing oil
shipments from the Middle East to Japan. Liberal Democratic Party
Secretary General Aso, now the leading candidate in the LDP's race
for its presidency, has proposed having MSDF vessels escort Japanese
tankers in the Indian Ocean.

The MSDF refueled foreign naval vessels from a total of 11 countries
with approximately 490,000 kiloliters from December 2001 through the
end of August this year. The MSDF's fuel supply to U.S. naval
vessels once came to about 40,000 kiloliters per month. In November
last year, however, the law for the MSDF's refueling mission in the
Indian Ocean ended due to opposition from the Democratic Party of
Japan (Minshuto). In February this year, the MSDF resumed its
refueling activities there. Since then in the seven months through
the end of August, the MSDF's fuel supply to U.S. vessels was down
to a total of about 800 kiloliters.

On Sept. 8, former U.S. Deputy Assistant Secretary of Defense Kurt
Campbell and former National Security Council Senior Director for
Asian Affairs Michael Green met with Administrative Vice Foreign
Minister Mitoji Yabunaka at the Foreign Ministry. In that meeting,
they told Yabunaka that Afghanistan will be important for the next
U.S. administration, adding that Japan will be in trouble if it does
nothing.

Campbell will reportedly have a lot of clout on the new U.S.
administration's policy toward Japan if the Democratic Party's
candidate wins the U.S. presidential election, and Green is also
expected to be influential if the Republican Party's candidate wins.
The future course of Japan's refueling activities is likely to
affect the Japan-U.S. alliance.

2) Ruling coalition in general election campaign to attack DPJ for
blocking MSDF refueling

ASAHI (Page 4) (Abridged)
September 20, 2008

The government made a cabinet decision yesterday adopting
legislation amending the Antiterrorism Special Measures Law to
extend the Maritime Self-Defense Force's current refueling
activities in the Indian Ocean for another year. The decision shows
that Prime Minister Fukuda wants to pave the way for the bill before
leaving office. However, the legislation cannot be expected to clear
the Diet since the Lower House will likely be dissolved soon for a
general election. The ruling coalition wants to take the offensive

TOKYO 00002601 003 OF 009


against the leading opposition Democratic Party of Japan (Minshuto)
by focusing on the issue of continuing the MSDF's refueling mission
in the election campaign.

All the five candidates running in the ruling Liberal Democratic
Party's presidential election are referring to the necessity of
continuing the MSDF's refueling activities. LDP Secretary General
Taro Aso, now leading the other candidates, has also declared that
it is inconceivable that only Japan will pull out.

The New Komeito, which was reluctant to pass the MSDF extension bill
at this fall's extraordinary Diet session, has also apparently
changed its attitude since Fukuda's announcement of his
resignation.

"We should seek the people's judgment on what role Japan should
fulfill against terrorism," New Komeito Secretary General Kazuo
Kitagawa said in a press conference on Sept. 18, indicating that the
MSDF bill should be a campaign issue in the general election. This
is not only because the ruling coalition wants to impress the public
with an image of "the DPJ as a party reluctant to fight terrorism."
If the MSDF's refueling mission is kept before the public eye, the
ruling coalition, should it remain in office with a majority of the
seats in the House of Representatives after the election, can press
the DPJ to take a flexible response on the strength of the public
having reached a consensus.

However, the DPJ has proposed discontinuing the MSDF's refueling
activities, while laying emphasis on its standpoint of sending
personnel to Afghanistan to assist with its reconstruction. DPJ
President Ozawa has indicated his intention to send the Self-Defense
Forces to Afghanistan after taking office. However, the security
situation in Afghanistan has been deteriorating. As it stands, it is
difficult to expand Japan's civilian assistance in Afghanistan as
well as send SDF troops to that country.

3) No prospects for PKO participation in Sudan

ASAHI (Page 4) (Full)
September 20, 2008

Prime Minister Fukuda can no longer translate into action his avowed
plan to dispatch the Self-Defense Forces to Sudan for United Nations
peacekeeping operations in that country's southern region.
Government officials are preparing an implementing plan so the
government can make a cabinet decision on it by early October.
However, the PKO plan is not feasible since the Diet will likely be
dissolved.

When Fukuda met with U.N. Secretary General Ban Ki Moon in late
June, he told Ban that Japan would send SDF personnel to Sudan. The
government deemed it difficult to send SDF troops to Afghanistan for
assistance. Under such a situation, the government sent a
fact-finding survey team to Sudan in late July for Japan's role in
international peace cooperation. Although the government cannot move
on the implementing plan under Fukuda, it is still coordinating to
send two SDF officers to the headquarters of the United Nations
Mission in Sudan (UNMIS) for database construction and supply
management.

4) Aso expected to become LDP president today; Oshima may become new
chief cabinet secretary

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ASAHI (Page 1) (Excerpts)
September 22, 2008

Liberal Democratic Party Secretary General Taro Aso is expected to
become the 23rd LDP president after winning a majority of votes in
the first ballot in the LDP presidential election today. Aso intends
to determine a new lineup of the four top LDP executives later
today. Policy Research Council Chairman Kosuke Hori, General Council
Chairman Takashi Sasagawa, and Election Strategy Council Chairman
Makoto Koga are likely to stay on in their respective posts. Aso is
expected to be named as the next prime minister in an extraordinary
Diet session to be convened on Sept. 24. Final coordination is
underway to appoint Diet Affairs Committee Chairman Tadamori Oshima
as chief cabinet secretary.

Aso is expected to reappoint most of the LDP executives because he
thinks it is advisable to maintain the current system, including
election chief Koga, for the next general election, which is
expected soon. Senior Deputy Secretary-General Hiroyuki Hosoda is
being mentioned as secretary general to replace Aso. Oshima, who may
become the new chief cabinet secretary, is a member of the Koumura
faction. Oshima has faithfully backed Aso in past LDP presidential
races. Aso apparently highly values Oshima's skill at dealing with
the opposition parties in the divided Diet.

On an NHK television program yesterday, Aso indicated that he would
draw on the entire party to form his cabinet and the party executive
lineup with the next general election in mind, saying: "I think the
next election will be fought under the lineup of the next cabinet.
Forming a broad-based cabinet is important."

5) Aso to be elected as new LDP president; Sonoda likely to be
picked secretary general

SANKEI (Page 1) (Full)
September 22, 2008

The ruling Liberal Democratic Party (LDP) presidential election to
choose a successor to Prime Minister Yasuo Fukuda will take place
today at party headquarters in a general meeting of its lawmakers
from the two chambers of the Diet. It is now certain that Secretary
General Taro Aso, 68, will be elected as the 23rd LDP president in
the first round of voting, since he has garnered 60 PERCENT of the
386 Diet member votes and nearly 90 of the 141 votes allocated to
the 47 prefectural chapters. Aso has decided to appoint Hiroyuki
Hosoda, currently his deputy, as the new party secretary general.

Aso plans to retain Election Strategy Council Chairman Makoto Koga,
Policy Research Council Chairman Kosuke Hori, General Council
Chairman Takashi Sasagawa, and Diet Affairs Committee Chairman
Tadamori Oshima, in their respective posts. It is regarded as more
likely that former policy chief Nobuteru Ishihara will be picked
deputy secretary general. The expectation is that former Prime
Minister Yoshiro Mori will serve as special advisor. An idea is also
being floated that multiple faction heads will be picked to assist
the secretary general. With an eye on an early Lower House
dissolution and general election, Aso gives top priority to building
a unanimous party arrangement by minimizing the shakeup of key party
posts.

Aso will inaugurate the new party leadership soon after the general

TOKYO 00002601 005 OF 009


meeting. He will meet tomorrow with New Komeito leader Akihiro Ota
to confirm the continuation of the coalition between their parties.
On Sept. 24, when the extraordinary Diet session is convened, the
Diet vote on the prime minister will take place in both Diet
chambers and the 92nd prime minister will be named. Aso is expected
to launch his cabinet on Sept. 24. He will visit the United States
on Sept. 25. On Sept. 29 he will deliver a policy speech and each
party's representative interpellations will be held on Oct. 1-3 in
both chambers of the Diet.

Aso intends to dissolve the Lower House if he fails to negotiate
with the opposition camp on the supplementary budget. Chances are
high that the Lower House will be dissolved on Oct. 3 at the
earliest and that the official campaign will kick off on Oct. 14 for
an Oct. 26 general election.

Rank and file LDP members in 32 prefectural chapters (96votes) cast
their vote as of Sept. 21. Aso has garnered 90 votes -- three votes
from 28 prefectures and two votes from Nara, Shimane and Tokushima
prefectures. He appears to have obtained more than 230 votes from
the Diet members.

6) Reporter's notebook: Was prime minister's sudden resignation an
act of stupidity or a bold decision?

TOKYO SHIMBUN (Page 2) (Full)
September 22, 2008

Taro Aso today will be elected as the 23rd president of the ruling
Liberal Democratic Party (LDP), succeeding Prime Minister Yasuo
Fukuda, who announced his resignation on Sept. 1.

Many observers believe that Fukuda suddenly decided to abandon his
administration in despair after a run-in with the New Komeito, the
LDP's junior coalition partner, as well as due to the gridlock in
the Diet with the Democratic Party of Japan (DPJ), the largest
opposition party. Others, however, think that it was a calculated
move by Fukuda.

On Aug. 22, DPJ President Ichiro Ozawa already was reassured
reelection for a third term. On Aug. 29, the Fukuda administration
drafted a package of economic stimulus measures. Fukuda had planned
to decide in a cabinet meeting on Sept. 2 to convene the next
extraordinary Diet session on Sept. 12.

Many LDP lawmakers believe that Fukuda had his own plan, namely,
that the LDP would be able to win the next House of Representatives
election by playing up the economic stimulus package and enjoying a
boost in popularity under a new prime minister and cabinet.
Moreover, if the opening of the extra session was delayed, Fukuda
felt dissolution of the Lower House during the session could be
avoided. And finally, if the LDP leadership race featured several
contending candidates, his party would be able to attack the DPJ as
having a closed nature (for reelecting Ozawa without a rival
candidate).

In fact, the LDP's support rates increased after Fukuda's
announcement of his resignation. The DPJ then felt strongly that it
might be shunted into the background by the LDP. Some LDP members
even said that Fukuda's decision to resign saved their party.

Although the LDP presidential race at first appeared to have

TOKYO 00002601 006 OF 009


gathered momentum, it suffered a setback after Aso's massive lead in
the race was learned. The DPJ is now strongly criticizing the LDP
for creating a political vacuum amid the growing financial crisis
and the tainted rice problem.

Whether Fukuda's resignation announcement was a stupid or wise
decision will be decided by the voters in the general election that
is still looming ahead.

7) Ozawa, winning third term as DPJ president, says party will
implement campaign pledges in three stages

ASAHI (Top play) (Excerpts)
September 22, 2008

The major opposition Democratic Party of Japan held a special party
convention at a Tokyo hotel yesterday and formally elected Ichiro
Ozawa as party president unopposed, giving him a third two-year
term. Ozawa then delivered an acceptance speech defined as his
"policy speech" in which he explained that the party would
dramatically change its budget for financing its policies. He also
announced that the procedures for implementing his party's policies
will be shown in three stages in its manifesto (set of campaign
pledges) to be compiled later this month.

Ozawa's term will run through the end of September 2010. Giving top
priority to measures for the next general election, Ozawa indicated
that he would keep all the party executives in principle. At the
same time, he said regarding the shadow cabinet: "National interest
in and expectations for a DPJ administration are growing. I want to
present the public at the earliest possible time with a lineup of
major members who will be the core of the next cabinet and to face
the next general election with it."

He also expressed his determination to take over the reins of
government, saying: "As a politician looking to lead state affairs,
(the next general election) will be the last big event both mentally
and physically. A politician must have firm resolve to undertake
state affairs." He thus revealed his determination to become prime
minister. Regarding the next general election, Ozawa said: "Staking
my political life, I will giVQQdRuilding a
Japanese-style safety net. He said: "We will drastically reform the
bureaucracy-led governing structure that has existed since the Meiji
era. That reform will provide us with sufficient financial sources
to create a safety net."

Discussing financial resources, Ozawa said: "How taxes are used must
be fundamentally revised, and the fiscal structure must be changed
drastically. Based on the idea of drastically changing the budgets
and of compiling budgets by the hand of the general public, we will
gradually shift 22 trillion yen, or about 10 PERCENT of the 212
trillion yen of the government's spending in the combined general
and special account budgets, for gradually implementing major
policies."

Ozawa explained that the party's manifesto will spell out the
implementation procedures in three stages: (1) those that will be

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implemented in the fiscal 2009 budget; (2) related bills that will
be enacted in the next regular Diet session to be implemented within
two years; and (3) those that will be implemented before the term
(of the Lower House lawmakers) ends four years from now.

8) DPJ vision for its administration

MAINICHI (Page 3) (Excerpts)
September 22, 2008

By Tanaka, Nobuchi, Koyama

Democratic Party of Japan President Ichiro Ozawa, after winning his
third term, delivered a policy speech yesterday in which he set
forth the party's nine-item vision for his administration. He also
expressed his determination to take over the reins of government,
describing the next Lower House election as a showdown and his last
chance. In his speech, Ozawa highlighted the need to create a
Japanese-style safety net, while promising to change the
bureaucracy-led system of governance. At the same time, where he
would squeeze out the 22 trillion yen necessary for his diplomatic
and securities polities remained unclear. The party needs to spell
out specifics to implement its policies.

Only international contributions mentioned

Foreign and security policies

In his policy speech, Ozawa hardly touched on foreign and security
policies. He simply said: "Japan will make efforts to enhance peace
in the international community." Foreign policy also came in last in
the DPJ's basic policy plan, presented on Sept. 8. In the basic
policy plan, foreign policy is discussed abstractly: "The party will
establish firm Japan-U.S. relations based on equality and relations
of trust with other Asian countries. (Japan) will actively join UN
peace-building activities and promote UN reform."

If the DPJ takes the reins of government before the end of the year,
the party would be pressed immediately to deal with the question of
extending the New Antiterrorism Special Measures Law, scheduled to
expire in January 2009. Although the party is still committed to
oppose it, the matter is expected to ignite fiercer controversy than
last year in view of the expected impact on Japan-U.S. relations.

Based on his UN-centered thinking, Ozawa would rule out the use of
force since it is not allowed under the government's interpretation
of the Constitution -- unless there were an UN resolution. Last
October, Ozawa even said: "Once we take the reins of government, I
would like to realize Japan's participation in the International
Security Assistance Force (ISAF) in Afghanistan." But his view
opposing the refueling mission (in the Indian Ocean) while approving
the use of force (in Afghanistan) was criticized as absurd.

As a counter proposal, Ozawa called for assistance to the civilian
sector, but that option has become difficult, given the
deteriorating security situation in the country. Vice President
Seiji Maehara has called for making changes to the counter proposal:
"A political decision must not be made to provide assistance to the
civilian sector."

Regarding assistance for Afghanistan, Ozawa said in a press
conference on Sept. 1: "How should world peace be maintained? There

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shouldn't be any discrepancy with our basic vision." But discussion
still continues in the party.

9) DPJ will not delay deliberations on supplementary budget: DPJ
deputy head Kan

TOKYO SHIMBUN (Page 1) (Full)
September 22, 2008

When asked on an NHK talk show yesterday how his party would respond
to Liberal Democratic Party (LDP) Secretary General Taro Aso's plan
to pass the supplementary budget through the Diet as quickly as
possible, Naoto Kan, deputy president of the main opposition
Democratic Party of Japan (DPJ), stated: "I can promise that our
party will not to use the budget as a tool to delay (deliberations)
and conclude the deliberations for a certain period of time."

In order to secure enough time to pursue the government and ruling
coalition prior to the next Lower House election, Kan took a
positive stance for cooperation with the ruling camp in adopting the
budget at an early date, not delaying deliberations.

10) Bad loan purchases: U.S. treasury secretary presents measure on
financial crisis to Congress: Will also seek cooperation from Japan,
Europe to set up similar system

NIKKEI (Page 1) (Full)
September 22, 2008

The U.S. Department of the Treasury on September 20 announced that
it presented a bill proposing purchases of bad mortgage-related
assets with public money. The planned purchasing amount is up to 700
billion dollars or approximately 75 trillion yen. This will serve as
a pillar in the government effort to stabilize the financial system.
Treasury Secretary Paulson on the 21st revealed a policy of calling
on Japan and European countries to set up a similar system. The U.S.
government aims at getting the bill done before the end of the week.
Calls for expanding assistance to strapped borrowers have also
surfaced in Congress.

The Treasury Department has amended the original bill, which limited
banks eligible for the government's bad loan purchasing plan to
domestic institutions. The amended bill has extended the targets,
including banks that are operating in the U.S. to a considerable
degree. Paulson on an ABC TV program explained, "Foreign banks
operating in the U.S. will have an impact on U.S. citizens similar
to that of domestic banks."

According to the Treasury Department's proposal, the purchasing
period will be two years. The target items include housing loans and
related securitized products. Asset purchasing prices will be
determined based not on book value but on public bidding. Bad loans
will be purchased from banks in order of lowest price offerers
regarding designated assets. Seven hundred billion dollars is
equivalent to 5 PERCENT of the U.S. GDP.

Congress is likely to approve the plan, giving consideration to the
impact of the financial crisis gripping the U.S.

11) State Minister for Financial Policy Motegi welcomes U.S.
financial bailout


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ASAHI (Page 5) (Full)
September 22, 2008

Referring to the U.S. government's measures to head off the
financial crisis that nation is facing, State Minister for Financial
Policy Motegi during a TV talks show on September 21 welcomed the
U.S. government's decision. He said, "Moves to remove the root cause
of the problem are now under way." He also pointed out, "The U.S.
government may find it necessary to inject taxpayers' money" because
there is a strong possibility of banks' net worth shrinking,
depending on the bad-loan purchasing prices.

Motegi pointed out that the injection of massive funds by central
banks of various countries and the bailout of individual beleaguered
banks would only serve as a stopgap measure. He noted that behind
the protracted financial crisis is the fact that no offers have been
made for related securitized products due to the sluggish U.S. real
estate market." He then gave high marks to the steps the U.S.
government has just adopted, noting, "I would like to welcome the
measures, since they are intended to dig into the very essence of
the problem."

Concerning the criticism of the credit crunch of domestic banks
linked to the U.S. financial crisis, Motegi called for a smooth
money supply. He also pledged to take a second look at the bank
inspection system, saying, "I will press home to inspectors that
they should not prevent banks from extending proper loans."

12) Purchases of bad loans: We have not received such a request,
says Financial Services Agency

NIKKEI (Page 3) (Full)
September 22, 2008

U.S. Treasury Secretary Paulson on September 21 indicated a policy
of asking Japan and European countries to set up a bad-loan
purchasing system. Commenting on this, the Financial Services Agency
(FSA) said that it had not received any specific request for such.
The FSA thus stands firm on its posture that since the blow Japanese
banks have suffered from the subprime mortgage crisis is less
serious compared with U.S. and European financial institutions, each
bank should move ahead with the disposal of nonperforming loans
within the scope of its net worth and profits on its own. Its stance
is that there is no need for Japan to take measures designed to
restore fiscal health using public money even if it receives a
request from the U.S. government.

The FSA believes that it would be difficult for the Japanese
government to extend fund assistance for the U.S. government's
bad-loan purchasing plan. Its judgment is that the present financial
crisis mainly originated in the U.S., and it would be difficult to
have Japanese taxpayers bear the burden. The government has,
however, confirmed at such venues as the Council of Economic and
Fiscal Policy its stance of closely cooperating with the governments
of various countries in order to prevent the U.S.-induced financial
crisis from spilling over to other countries. The FSA intends to
continue to closely share information with monetary officials of
other countries.

SCHIEFFER

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