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Cablegate: Daily Summary of Japanese Press 10/03/08

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RUYNAAC/COMNAVFORJAPAN YOKOSUKA JA
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RUEHBJ/AMEMBASSY BEIJING 5668
RUEHUL/AMEMBASSY SEOUL 1663
RUCNDT/USMISSION USUN NEW YORK 1936

UNCLAS SECTION 01 OF 09 TOKYO 002771

SIPDIS

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: DAILY SUMMARY OF JAPANESE PRESS 10/03/08

INDEX:

(1) DPJ in dilemma over deliberations on extra budget bill; Strategy
of protraction could evoke public criticism (Yomiuri)

(2) How will the 81 "Koizumi children" fare in next Lower House
election? (Yomiuri)

(3) Editorial: Prime minister must make decision on Lower House
dissolution (Asahi)

(4) With inauguration of Aso cabinet, Image of Japan being police
state growing (Sentaku)

(5) What is the scandal involving the DPJ that LDP has wind of?
(Sentaku)

(6) Okinawa governor to visit U.S., call for nuke sub safety (Ryukyu
Shimpo)

(7) SDF should be dispatched for monitoring ceasefire in Georgia
(Asahi)

(8) Business confidence drops to five-year low: Total decline in
demand in both domestic and external areas; Manufacturers cutting
back on output in succession (Asahi)

ARTICLES:

(1) DPJ in dilemma over deliberations on extra budget bill; Strategy
of protraction could evoke public criticism

YOMIURI (Page 4) (Full)
October 3, 2008

In deliberations on the budget bill to start on Oct. 6, the
Democratic Party of Japan (DPJ) plans to take a confrontational
stance against Prime Minister Aso, who is eager to enact the fiscal
2008 supplementary budget bill. The DPJ will try to press Aso to
dissolve the House of Representatives at an early date for a snap
election. If the main opposition prolongs deliberations, however,
the party could be hit with public criticism for that tactic and
find itself eventually placed at a disadvantage in the election
campaign when it comes. The DPJ is trying to undermine the unity of
the ruling coalition by hinting at the possibility of summoning a
former New Komeito chairman (who has challenged his party's
connection to the religious sect Soka Gakkai) to the Diet as an
unsworn witness, which that party really wants to avoid, the.

DPJ President Ozawa in a meeting last night of the Isshinkai, a
group of junior party members supporting him, said in frustration:

"I think the government will dissolve the Lower House by the end of
this year. The public will not tolerate the current situation. It is
irrational for the government to even talk about a second
supplementary budget. ... Our side is distressed, but the other side
must also be distressed. Interpret this as meaning the campaign
period will be prolonged and campaign in your electoral districts."

On the condition that the Lower House would be dissolved early, the
DPJ planned to agree to a ruling camp request to vote on the extra
budget bill after deliberations are held for two days in both

TOKYO 00002771 002 OF 009


Houses. But Prime Minister Aso, taking seriously the financial
crisis triggered by the U.S., has begun to stress the need to buoy
up the economy in earnest. Given this, the DPJ is being pressed to
rewrite its strategy.

The DPJ is poised to pursue the government in deliberations on the
budget bill over its response to the financial crisis and its
handling of the tainted rice scandal. But a mid-ranking DPJ official
said: "If we try to prolong or boycott deliberations, we may be
criticized as turning our backs on the economy. If public support
for the cabinet drops as a result of the prime minister having been
driven into a corner, the government may find it difficult to
dissolve the Lower House."

Some DPJ members are suggesting that the party should mention the
possibility of summoning of former New Komeito official Yano, who
has filed a lawsuit against the Soka Gakkai, to the Diet as an
unsworn witness as another means to force the government into early
dissolution. They expect that the New Komeito, which wants to avoid
such a summoning, would press the prime minister to dissolve the
Lower House.

Appearing on a TBS program yesterday, Ozawa emphasized this
regarding the issue of Yano: "That is an issue involving politics
and religion. It is a constitutional issue and is a serious theme in
the House of Councillors (controlled by the opposition camp)."

In the representatives interpellation session in the Upper House
plenary session yesterday, Azuma Koshiishi, leader of the DPJ's
Upper House caucus, stated: "A religious group being given favorable
tax treatment reportedly has played more of a major role than the
party itself as the base for the election campaign." The DPJ is
preparing to gradually apply pressure on the ruling bloc, as seen
from an agreement reached ahead of the Diet interpellations among
Koshiishi, Secretary General, Diet Affairs Committee Chairman Kenji
Yamaoka, and others to take up the issue as a general argument,
without citing the name of the Soka Gakkai.

DPJ Vice President Hajime Ishii, People's New Party Vice President
Shozaburo JImi, and others met in the Diet Building yesterday and
agreed to pursue the government and the ruling camp over the Yano
issue. New Komeito President Ota criticized the DPJ's stance,
claiming: "The issue that is pending in court should not be taken up
in the Diet."

(2) How will the 81 "Koizumi children" fare in next Lower House
election?

YOMIURI (Page 4) (Abridged slightly)
October 2, 2008

All eyes are now focused on how the so-called "Koizumi children,"
Liberal Democratic Party (LDP) first-term lawmakers who were elected
in the 2005 House of Representatives election, will fight to hold
their seats in the next Lower House election. The number of such
lawmakers has decreased from the 83 to 81 because two have already
resigned, although the 83 contributed to the LDP holding a
two-thirds majority with its coalition partner, New Komeito, in the
Lower House. How many of those freshman lawmakers can be reelected
could determine the results of the battle between the LDP led by
Taro Aso and the Democratic Party of Japan (DPJ) headed by Ichiro
Ozawa.

TOKYO 00002771 003 OF 009

The 81 lawmakers include: 34 who were elected in single-seat
constituencies; 33, elected under the proportional representation
segment after being defeated in the single-seat district contest;
and 14 who ran only in the proportional representation race and won
seats. The possibility is strong that those 14 lawmakers will face
uphill battles.

Of those 14 lawmakers, only two -- Taku Otsuka (representing the
Tokyo proportional representation bloc) and Keisuke Suzuki
(South-Kanto proportional representation bloc) -- have been endorsed
by the LDP to run respectively in the Saitama-9 district and
Kanagawa-7 district. Otsuka is taking over the home turf of
Matsushige Ono, a Machimura faction member and former deputy chief
cabinet secretary, who will retire from politics. Although Otsuka
wanted to run in the Tokyo-5 district, the LDP picked Yukari Sato,
who once competed with Consumer Administration Minister Seiko Noda
in the Gifu-1 district, as its candidate for the Tokyo-5 district.

Taizo Sugiura, who was elected in the Hokkaido-1 district, intends
to run in the next Lower House election as an independent candidate,
because he failed to obtain the party's endorsement.

Kuniko Inoguchi (representing the proportional representation Tokyo
bloc) and Mitsue Kondo (proportional representation Kinki bloc) ran
in the 2005 Lower House at the request of then Prime Minister
Junichiro Koizumi. However, since Koizumi has announced his
retirement, they appear to have lost his support.

Of the Koizumi children who won single-seat contests, Yasuhiro
Nakagawa (Kyoto-4 district) and Satsuki Katayama (Shizuoka-7
district) will have to compete head on with DPJ candidates. Some
other freshman lawmakers will be forced to go up against LDP
candidates who were against postal privatization. In Osaka and Kyoto
prefectures, there are moves opposing the party's endorsement of the
Koizumi children.

Coordination between Koizumi children who secured their seats under
the proportional representation segment after being defeated in
single-seat constituency elections, and "postal rebels" has become a
major internal issue. Kotaro Nagasaki (representing the proportional
representation South-Kanto bloc) plans to run in the election as an
independent, since former General Council Chairman Mitsuo Horiuchi,
a postal rebel, has been endorsed as LDP candidate for the
Yamanashi-2 district. Jiro Ono (proportional representation
South-Kanto) will likely secure the party's official support in the
Yamanashi-3 district, since Takeshi Hosaka has decided to run for
the Kai mayoral election. However, Hosaka has yet to clarify whether
he supports Ono.

(3) Editorial: Prime minister must make decision on Lower House
dissolution

ASAHI (Page 3) (Full)
October 3, 2008

Prime Minister Taro Aso has repeatedly made statements dismissive of
early Lower House dissolution for a snap general election.

On Oct. 1, the prime minister underlined the need for additional
fiscal disbursements by citing the U.S. financial crisis, saying:
"There are mounting challenges, such as bills to establish a

TOKYO 00002771 004 OF 009


consumer affairs agency, Indian Ocean refueling legislation, in
addition to a supplementary budget bill. I would like to prioritize
implementing policies over Lower House dissolution. The extra budget
is within the range of expectations. There might be calls for
additional steps."

A tug-of-war is underway between the ruling and opposition camps
over the timing for the next general election. The prime minister's
true intention remains unclear. But as far as his comments are
concerned, he seems to be willing to dissolve the Lower House after
the bills to establish the consumer affairs agency and to extend the
refueling mission, possibly a second supplementary budget as well,
are all enacted.

The Democratic Party of Japan is opposed to the plans to establish
the consumer affairs agency and to extend the refueling mission. If
the ruling bloc aims to readopt them by using its two-thirds
overriding vote in the Lower House, chances are high that Lower
House dissolution will not occur until the end of this year, or
possibly not until early next year.

We cannot support such a scenario. In order to deal with the
financial crisis properly, the next general election must be held
much earlier.

The prime minister might say that there is no guarantee that the
divided Diet will end with the general election and that a political
vacuum must not be created as a result of the election.

The perception that a political vacuum does not exist now is not
correct. Since last summer's Upper House election, the nation's
politics was repeatedly thrown into turmoil and forced to stall
under prime ministers Shinzo Abe and Yasuo Fukuda. This very
situation constitutes a political vacuum. One must not forget that
the nation's politics has been like this for over one year now.

The ruling camp is to blame for that. But the DPJ is no less
responsible. In order to break the gridlock in this situation and
put an end to this vacuum, there is no other option but to carry out
a general election to seek the people's judgment.

As a result of the election, the Ozawa-led DPJ might take over the
reins of government. Conversely, if the ruling camp wins, it would
be difficult for the DPJ to put up resistance on the strength of
popular will. The stage might be finally set for positive political
compromises.

The environment surrounding the prime minister is gloomy.

His cabinet's support ratings have been lower than those of the
former Abe and Fukuda cabinets. The resignation of Land and
Transport Minister Nariaki Nakayama over his controversial remarks
has also dealt a blow to his cabinet. The LDP is leaning toward
postponing the election in the judgment that if the nation goes to
the polls now, the party would suffer a devastating setback.

The country cannot afford to delay the election endlessly and allow
the economy to slip into recession. Once the Diet ends deliberating
on the supplementary budget, a solid administration backed by
popular will must be installed to implement powerful and flexible
economic stimulus measures.


TOKYO 00002771 005 OF 009


In his policy speech, the prime minister said: "I will never flinch
from the challenges before me." If he takes political responsibility
seriously, he can no longer flinch from calling a general election.

(4) With inauguration of Aso cabinet, Image of Japan being police
state growing

SENTAKU (Page 45) (Full)
October 2008

With the appointment of former National Police Agency Director
General Iwao Urushibara as deputy chief cabinet secretary, the
highest post in the bureaucracy, the image of Japan being a police
state is growing. Under the situation that former NPA's Foreign
Affairs and Intelligence Department chief Hideshi Mitani and former
Tokyo Metropolitan Police Commissioner Tetsuro Ito have been serving
respectively as cabinet intelligence director and deputy chief
cabinet secretary for crisis management, a former NPA officer was
named deputy chief cabinet secretary for the first time in 32 years.
While Shinzo Abe was prime minister, there was a rumor that
Urushibara would be named as deputy chief cabinet secretary, but
such was not realized due to Abe's sudden resignation. Some
political observers predict that persons close to Abe, who is a
friend of Aso, might have suggested the appointment. Aso also picked
such conservative politicians as Hirofumi Nakasone, Yasukazu Hamada
and Shoichi Nakagawa respectively as foreign, defense and finance
ministers.

Regarding the important posts given to former senior officials,
there appear mixed motives in the NPA. Since other ministries and
agencies are unhappy with the situation, the possibility is strong
that there will be a strong backlash from other agencies. Some in
the NPA are concerned about the closeness of the police and
politics. With an eye on the forthcoming House of Representatives
election, in which a fierce battle for taking the reins of
government is expected to take place, police authorities that
strictly monitor election irregularities, have said: "It will be
troublesome if the opposition throws doubt on us."

(5) What is the scandal involving the DPJ that LDP has wind of?

SENTAKU (Page 45) (Full)
October 2008

It seems that the ruling Liberal Democratic Party (LDP) has got hold
of a scandal involving the main opposition Democratic Party (DPJ).
Senior LDP Election Strategy Council members reportedly are filled
with confidence that even if a DPJ-controlled government is
inaugurated, the LDP will be able to topple it. According to sources
familiar with the LDP, the scandal is that the DPJ received support
from a gangster organization in a Lower House by-election for the
Fukuoka No. 2 district in April 2005.

The by-election was held to fill a Lower House seat that had fallen
vacant after DPJ member Junichiro Koga quit his seat to take
responsibility for his fake college degree. The DPJ filed as a
candidate in the by-election lawyer Masanori Hirata, who was a
student in the political training seminar held by (then DPJ Vice
President) Ichiro Ozawa, but the DPJ candidate was defeated by
former LDP Vice President Taku Yamasaki.

A source familiar with the LDP said:

TOKYO 00002771 006 OF 009

"At that time, it was revealed that the Hirata camp had not paid a
rent for three months of the campaign office in Fukuoka City. The
building was owned by a gangster-related company. Public security
authorities are aware of it."

A senior LDP Election Strategy Council member as if sharpened his
claws said: "If we reveal the cozy ties between the DPJ and a
gangster organization, the DPJ will collapse before taking the
political helm." However, no one knows how the situation will turn
out.

(6) Okinawa governor to visit U.S., call for nuke sub safety

RYUKYU SHIMPO (Page 2) (Abridged)
October 3, 2008

The Okinawa prefectural assembly met yesterday for the last day of
question-and-answer sessions, with Zenshin Takamine presiding as
speaker. Representing the ruling parties, eight assembly members
took the floor to ask questions. Concerning the recent discovery of
U.S. nuclear-powered submarines' leakage of cooling water containing
radiation, Akira Uehara, chief of the governor's office, revealed
the governor's plan to visit the United States to make a direct
appeal to the U.S. government for a solution to Okinawa's base
issues. Uehara stated that the governor would call on the U.S.
government to prevent U.S. military incidents and accidents. He
added, "We want to make a strong request to the U.S. government for
the U.S. military to take thorough safeguards." He was replying to a
question asked by Moriyuki Teruya.

(7) SDF should be dispatched for monitoring ceasefire in Georgia

ASAHI (Page 16) (Abridged slightly)
October 3, 2008

By Kazuhiko Togo, former Foreign Ministry European Affairs Bureau
director general and Temple University Japan visiting professor

The conflict between Russia and Western countries over Georgia,
which is often referred to as the "new Cold War," is a pressing
international issue. Immersed in its own affairs, Japan, the host of
this year's G-8 summit, has not made any contributions to the
Georgia conflict. Such is truly regrettable.

It is important for the government to make it clear that Japan is
ready to send Self-Defense Force troops to Georgia to monitor the
ceasefire there and to make every effort for the UN Security Council
to adopt a resolution for that.

The European Union (EU) is already monitoring the ceasefire in
Georgia. The EU has been calling for the adoption of the UNSC
resolution. With the resolution, the SDF can join the UN
peacekeeping operations (PKO), thereby allowing Japan to play a role
in the ceasefire monitoring effort along with the EU.

Why does Japan have to go such lengths?

The answer to this question is closely associated with how to define
Russia in international politics. Russia is an important neighbor
that shares a territorial issue with Japan. Joining this crucial
effort serves Japan's national interests.

TOKYO 00002771 007 OF 009

After experiencing humiliation and defeat over the last 20 years or
so, Russia has now restored its influence, owing to soaring oil
prices and the strong leadership of former President Vladimir Putin.
Behind Russia's conflict with Georgia lies Moscow's defiant message
not to ignore it, amid the declining international position of the
United States.

Russia no longer hesitates to raise tensions with European countries
and the United States. At the same time, it is aiming to grow into a
value-added economy by reducing its dependence on oil. In that
respect, keeping harmony with Western countries is essential for
Russia. Japan should join the ceasefire monitoring operation so as
not to let Russia slip into deep international isolation. Such a
step may be thanked by Russia, but it cannot oppose it.

Georgia is also expected to welcome the Japanese troops' hard work
for the maintenance of peace. During my service for the Foreign
Ministry, I was assigned to the embassy in Moscow three times, and I
visited Georgia on each tour. Georgia is a country that truly loves
Japan's martial arts, culture, and language.

Georgia and its surrounding region called the Caucasus are a
geopolitical pivot bordering on Russia, Western Europe, the Middle
East, and Central Asia. The repercussion of any even that occurs
there always reaches Japan via Russia, China, and Central Asia.
Further, the region is important as a route to convey Caspian Sea
oil and natural gas.

Japan can still act. The SDF dispatch to Georgia seems good for
Prime Minister Taro Aso, who paid attention to this region's
strategic importance as seen in his advocate of the "Arc of Freedom
and Prosperity" during his tenure as foreign minister, as well as
for Democratic Party of Japan President Ichiro Ozawa, who puts UN
cooperation at the center of his diplomacy.

(8) Business confidence drops to five-year low: Total decline in
demand in both domestic and external areas; Manufacturers cutting
back on output in succession

ASAHI (Page 11) (Excerpts)
October 2, 2008

The BOJ's "Tankan," a survey of business confidence for September,
released on October 1, showed that business confidence among the
nation's leading companies and major manufacturers fell into
negative territory for the first time in five years, confirming that
the economy has taken a downward turn. There are no signs of the
global financial crisis abating. A number of Japanese companies have
drastically cut production. With the termination of the expansionary
economic trend driven by exports, which has lasted for six years,
there is a growing worried view that the business slump could be
protracted.

Both the domestic and overseas supply and demand conditions for
products and services indexes have significantly deteriorated. Those
indexes remained unchanged in the previous survey carried out in
June. However, the slowdown in the global economy has clearly
affected both domestic and overseas supply and demand conditions.

Outline of BOJ Tankan survey


TOKYO 00002771 008 OF 009


? The diffusion index (DI) of business sentiment among leading
companies and manufacturers stood at minus 3, down 8 points from the
previous survey. The fall of the business sentiment into negative
territory is the first since June 2003.
? The DI of leading companies and non-manufacturing companies marked
plus 1, down 9 points. Deterioration was marked for five quarters in
a row.
? Regarding the DI of small- and medium-size companies, that of the
manufacturing companies stood at minus 17, down 7 points. That of
nonmanufacturers marked minus 24, down 4 points.
? Capital investment plans of leading companies in all industries, a
leading economic indicator, increased 1.7 PERCENT , compared with
the previous year. However, the outcome was revised down by 0.7
PERCENT .
? The expected exchange rate for the second half of fiscal 2008 is
102.48 against the dollar.

Economic downturn likely to become drawn out

Several economists were asked for comments about the BOJ's Tankan.
Nissei Research Institute Economic Research Department Manager
Koichi Haji said, "It has been thought that unlike the 1990s, the
economic downturn this time would not last long. However, the
situation does not allow such an optimistic view." Totan Research's
chief economist Izuru Kato pointed out, "If the U.S. fails to deal
with its financial crisis, the risk of a delay in the recovery of
the Japanese economy would increase."

The BOJ, which is responsible for steering monetary policy, has
envisaged a scenario of the economy remaining stagnant for the time
being, but the Bank predicts it will gradually return to a modest
growth track. The major reason for the projection is the extent of
three excessivenesses -- facilities, employment and debts -- is
small this time.

However, a slight derailment of this scenario can be envisioned. In
the Tankan survey, the index determined by subtracting the capacity
index, which indicates a sense of surplus in facilities, from
shortages in such and equipment was plus 2 for leading companies and
manufacturers, up 2 points from the previous survey. Leading
companies' and all industries' capital spending plans for fiscal
2008 have also been revised down 0.7 points from the figure as of
June. Mitsubishi UFJ Securities Research Center senior economist
Tatsushi said, "The downward revision of capital investment plans
reflects that companies are becoming cautious about the future of
the economy."

The employment conditions DI came to minus 2, up 3 points for
leading companies and manufacturing companies. That of small- and
medium-sized companies stood at plus 6, up 3 points. There is a
gradual feeling that surplus labor is building up.

The future of the economy does not allow optimism. Some BOJ
officials take the view that the protraction of the financial crisis
could accelerate a drop in exports. The situation concerning
domestic demand is that it had never been expected that domestic
demand for the nonmanufacturing sector would drop to this degree, as
Hideo Kumano, an economist at the Daiichi Life Research Institute
said.

The government and the ruling camp intend to pass before the Lower
House is dissolved a supplementary budget, which includes a package

TOKYO 00002771 009 OF 009


of comprehensive economic stimulus measures. However, some have
raised doubts about the efficacy of such an economic stimulus
package with one analyst at a leading securities house noting,
"Foreign factors have triggered Japan's economic slump. Economic
stimulus measures will not settle the problem fundamentally."

There has been a growing speculation in the market since September
29, when U.S. stock prices plunged, that the central banks of
various countries would lower interest rates in concert. Many
economists take the view that it is important to maintain the
liquidity of funds, by such means as dollar supplying and that it is
impossible to adopt a policy interest rate, noted Akiyoshi Takumori,
a chief economist at Sumitomo Mitsui Asset Management. Others hope
to see the monetary supply eased, because it is difficult for small-
and medium-sized businesses to manage their capital.

The BOJ stands firm on its policy stance that there are downward
risks about the economy and upward risks about prices, and the
situation now requires attention on both risks, as BOJ Governor
Masaaki Shirakawa said.

SCHIEFFER

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