Cablegate: Japanese Morning Press Highlights 12/05/08

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P 050123Z DEC 08




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1) Foreign Ministry to halt yen loans to Vietnam following scandal

2) Government, responding to criticism, decides to open the
"secretive" process of screening school textbooks to public scrutiny

Aso on the move:
3) Prime Minister Aso suddenly changes demeanor and is all smiles
toward the press (Asahi)
4) Again the prime minister takes back previous words and delays
moves on pension issue (Mainichi)

Job crisis:
5) Manufacturers hurt by slowdown: Survey of 30 companies finds
21,000 workers already dropped from payrolls (Nikkei)
6) Aso meets the Rengo chief, who strongly urges government to set
emergency employment measures (Nikkei)
7) Ruling parties agree to 2-trillion yen labor package over three
years (Nikkei)

Economy in trouble:
8) Tax revenues shortfall of 6.5 trillion yen expected, requiring
government to go over the 30 trillion yen limit of issuing deficit
bonds (Nikkei)
9) Ruling camp agrees to 1-trillion yen grant transfer to local
governments but in a watered-down version (Nikkei)

Political rumblings:
10) Former Foreign Minister Komura seems to be setting self up as a
candidate to replace Aso as LDP president and prime minister
11) Former LDP Secretary General Hidenao Nakagawa blasts new
nationality law, but comes out strong for MSDF dispatch to
pirate-infested waters off Somalia (Sankei)
12) DPJ head Ozawa cancels gala New Year's party in order to keep
preparation momentum going for possible Lower House election


1) Gov't stops yen loans to Vietnam

YOMIURI (Page 4) (Full)
December 5, 2008

The Foreign Ministry has completely halted yen loans for Vietnam in
the wake of official corruption over Japan's official development
assistance (ODA) project in Vietnam, sources said yesterday. The
ministry will suspend the yen loans until the Vietnamese government
works out a recurrence prevention plan and punishes officeholders
alleged to have been bribed.

2) Ministry to screen school textbooks with open doors

ASAHI (Top play) (Abridged)
Eve., December 4, 2008

The Ministry of Education, Culture, Sports, Science and Technology
(MEXT), which has been strongly criticized for its closed-door and

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pre-authorization process of screening and examining textbooks for
school use, released an improvement plan today for transparency.
MEXT's textbook examiners are in a position to affect its textbook
authorization but have not been out in public. MEXT will disclose
their statements after screening. In addition, MEXT will also
disclose their names and professional experiences as well as
subjects they examined. The Textbook Commission, an advisory panel
for MEXT, will also release its members' coverage of subjects and
outline their discussions in their textbook screening so that MEXT
can check to see if there was something unfair in the process of
producing textbooks.

In the fiscal 2006 screening of high school textbooks on the history
of Japan, MEXT modified all those textbooks for they described that
Okinawa residents "were forced by the military into committing mass
suicide" during the Battle of Okinawa. MEXT struck out this wording,
and this later became a problem. The nontransparent textbook
screening system was under fire. Last year, then MEXT Minister Tokai
announced a reform plan.

In the process of screening textbooks for school use, companies
publishing school textbooks come up with their textbooks for
authorization. MEXT textbook examiners, who are appointed from among
college associate professors and high school teachers, screen and
examine the textbooks and make their statements on them. Based on
their statements, the Textbook Commission will reach a conclusion.
However, the commission has to check a colossal amount of examined
textbooks. MEXT textbook examiners therefore have a substantial role
for authorization. The commission was therefore said to be a rubber
stamp that signs off on their statements.

MEXT's textbook examiners can be called "leading players behind the
scenes." However, their guidelines and roles have been intangible
and ambiguous. Meanwhile, their statements have not been unveiled,
either. As it stands, they have been believed to be amenable to the
government. MEXT also plans to disclose its textbook examiners'
names and professional experiences. Their existence has been dubbed
a "black box." MEXT explains that the planned disclosure of
information about them is intended to answer that criticism.

3) Why is Prime Minister Aso approaching reporters all smiles?

ASAHI (Page 4) (Abridged)
December 5, 2008

Prime Minister Taro Aso has begun to behave in a friendly manner
toward reporters covering him at the Prime Minister's Official
Residence (Kantei). Altering the firm expression he had usually kept
since he made a series of slips of the tongue, Aso now has turned
his friendly side toward reporters he meets.

Taking a reporter's cell-phone in his hand, Aso noted: "It's red."
When a reporter called out to him, "The prime minister, what about
cluster bombs?" Aso looked back, although he was about to return to
his office after the press briefing, and closely watching the
reporter's face, he said with a smile: "I wish you had asked that
question at first."

Immediately after taking office, Aso fired back questions toward
reporters with a firm expression. He once aggressively told one,
"Answer my question!" Even after that, he kept a firmer expression
as he often made changes in his remarks and committed gaffes. He

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then replied to questions from reporters, reading from memos
prepared by his secretaries. The reporters are now befuddled by the
sudden change in the prime minister's attitude.

Some observers think that the change in the prime minister's
behavior was triggered by his having lunch with reporters on Dec. 1
at the Kantei. An acquaintance of Aso made this comment:

"The prime minister is actually shy of people. He gets nervous when
he meets someone for the first time. In order to hide the tension,
he usually takes a coercive attitude. I think he has begun taking a
friendly attitude after he had lunch with the reporters."

However, Aso's aide said: "I want the prime minister to be aware of
the public when he stands before cameras rather than catering to the
reporters before him."

4) Prime minister again retracts a policy statement

MAINICHI (Page 2) (Abridged slightly)
December 5, 2008

Tamotsu Takatsuka

Prime Minister Taro Aso has decided to delay the timeframe for
raising the government's contribution to the basic pension scheme
from "next April" to "within next fiscal year." The reason is to
allow time to secure sufficient fiscal resources to implement
large-scale economic and employment measures in the fiscal 2009
budget. The latest retraction has come after repeated flip-flops by
the premier on the flat-sum cash handout plan and the allocation of
1 trillion yen to local governments. The decision is certain to
raise questions about Aso's qualifications as prime minister.

In a press conference on Oct. 30, the prime minister indicated that
the timing of the government/ruling coalition's plan to raise the
consumption tax to finance the government's greater contribution to
the pension scheme would be three years, conditioned on a full
economic recovery. This caused the view to spread that it thus would
be difficult to raise the government's contribution to the basic
pension scheme starting in April 2009.

It has generally been decided to fund the government's greater
contribution to the pension scheme with surplus funds generally
dubbed "buried treasure." Given this, the prime minister seems to
intend to raise the government's contribution late in fiscal 2009.
The prime minister is expected to seek understanding by playing up
his policy to boost the economy. Nevertheless, he has given the
opposition camp new ammunition to grill him in today's intensive
deliberations at the Lower House Budget Committee and other venues.

5) Employment adjustment accelerates: 38 major companies to slash
21,000 nonpermanent workers in total

NIKKEI (Page 1) (Abridged slightly)
December 5, 2008

Employment adjustment in the manufacturing industry has begun
spreading from the auto sector to other sectors. Komatsu will slash
about 400 contract employees at its Oyama plant in Oyama City,
Tochigi Prefecture by the end of March next year. It will also
reduce operating days by two to four days a month at all plants

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throughout the nation, starting in December. Toshiba and Fujitsu
will slash nonpermanent workers in the semi-conductor sector. The
number of reductions in dispatched and contract workers by 38 major
manufacturing firms reached approximately 21,000, according to a
tally made by the Nihon Keizai Shimbun by December 4.

Komatsu will terminate all contracts with 400 nonpermanent workers
at its Oyama plant, where engines for construction machinery are
being manufactured. The company employs approximately 2,000 contract
workers. It plans to gradually reduce such workers at other plants
as well. A total of 500 to 1,000 such workers will likely be
eliminated. It will also reduce the operating days of assembly lines
by about 2-4 days a month at all of its 10 plants throughout the
nation. Stopping production lines at domestic plants is the first in
about six years. Employees will receive training when production
lines are not operating.

Following the declined market condition, Toshiba plans to reduce
about 800 workers, including dispatched and contract workers, at its
plants in Kitakyushu City and Oita City, which manufacture
semi-conductors, and subsidiary in Kitayama City in Iwate
Prefecture. Fujitsu will also terminate contracts with more than 100
workers at its semi-conductor subsidiary around the same time.

According to a tally by this newspaper, 38 major manufacturing
companies will cut the number of dispatched and contract workers by
about 21,000 between April 2008 and the end of March 2009. The
largest number of 17,000 such workers will be dismissed in the auto
parts manufacturing sector. Reduction in force is accelerating among
machinery and precision instrument manufacturers (1,800) and
electronic manufacturers (1,300). Major manufacturing companies are
trying to tide over the global recession, by slashing the number of
nonpermanent workers, who have come to account for one third of all
employees in that sector due to the widespread practice of employing
dispatched workers.

6) Employment situation suddenly becoming worse; Rengo urges Aso to
compile emergency measures

NIKKEI (Page 2) (Full)
December 5, 2008

Prime Minister Taro Aso and Rengo (Japanese Trade Union
Confederation) Chairman Tsuyoshi Takagi held a meeting yesterday to
exchange views of the government and labor side at the Prime
Minister's Office. In consideration of the employment situation of
non-permanent workers and the cancellation of informal appointments
of new graduates, Takagi urged Aso to come up with emergency
employment measures. Aso then took a stance of working out emergency
measures as early as possible, saying: "I want to give considerable
thought as much as possible."

This government-labor meeting was held for the first time in seven
months since the one was held in May under the cabinet of Prime
Minister Yasuo Fukuda. Takagi emphasized that the names of companies
that cancelled their informal employment offers should be make
public, while calling for an early passage of a fiscal 2008 second
supplementary budget, which includes employment measures. Regarding
the withdrawal of employment offers, Aso said: "That's outrageous."

Takagi commented on the government's 2 trillion yen flat-sum cash
payout plan: "The economic slump this time around is serious so that

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the economy will not recover by the one-time only (flat-sum
payouts). How about large-scale tax cuts?" Aso, however, just
replied: "I want you to tell me if you have good ideas."

7) Two trillion yen over three years to be spent for employment

NIKKEI (Page 1) (Full)
December 5, 2008

The ruling parties will compile a package of new employment
measures, which will incorporate easing a condition for nonpermanent
workers to become eligible to receive unemployment benefits under
the employment insurance. The package will cover three years and
cost 2 trillion yen. The aim is to create 1.4 million jobs. The
ruling parties will present the package to Prime Minister Aso later
in the day.

It is already set based on coordination with the government that the
size of the new package will be 1 trillion yen. However, the ruling
parties will seek another 1 trillion yen. However, since funding
sources have yet to be tapped, except for 1 trillion yen to be drawn
from the special labor insurance account for reserved employment
premiums, the ruling parties will continue talks with the

Nonpermanent workers are not entitled to unemployment benefits
unless they contributed to the employment insurance scheme for 12
months in the two-year period right before they lost a job.
Employees must be supposed to work for a year or longer, when they
take out the employment insurance. The ruling parties will also
shorten this 12-month condition. Other measures include: (1)
establishing an emergency job creation project (tentative name)
aimed for temporary employment of nonpermanent workers and
middle-aged and older people; and (2) release the names of
unscrupulous companies that withdrew job offers.

8) Tax revenue shortfall an estimated 6.5 trillion yen, requiring
government deficit bond issuance to top 30 trillion yen

NIKKEI (Page 1) (Full)
December 5, 2008

Prospects have now become strong that the government will lower its
outlook for fiscal 2008 tax revenues flowing into the general
account by approximately 6.5 trillion yen, compared with the initial
prediction. This was learned from a government source on December 4.
The reason for the shortfall is a significant drop in corporate tax
revenues due to the slowdown in the global economy. This will be the
second consecutive downward revision. The issuance of government
deficit bonds in the current fiscal year will have to top 30
trillion yen, until now the goal for the government efforts to cut
such issuances.

Tax revenues for the general account in the fiscal 2008 initial
budget were estimated at approximately 53.6 trillion yen. However,
tax revenues in fiscal 2007, the basis of that estimate, fell short
of the supplementary budget by about 1.5 trillion in the
account-closing stage.

In addition, the soaring raw material prices, the strong yen-weak
dollar trend and the global economic recession put a dent in

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export-oriented companies' profits. As such, corporate tax revenues
will likely fall significantly. A significant increase in revenues
from the income tax revenues, a major tax revenue source along with
the corporate tax, cannot be expected. The Finance Ministry will
reach a final decision on the amount of a revision to its estimate
for tax revenues, after determining the government's economic
outlook, which will become the basis for fiscal management.

9) Ruling parties agree on 1 trillion yen in subsidies to local
governments; General account plan might be watered down

SANKEI (Page 5) (Abridged slightly)
December 5, 2008

Based on the plan to free up road-related revenues for general
spending starting in fiscal 2009, the Liberal Democratic Party and
New Komeito agreed yesterday to establish a subsidy fund worth 1
trillion yen or so for revitalizing local economies that must be
used strictly for public works projects, including road-improvement
projects. The ruling bloc eyes a final decision after discussing the
matter with the government on Dec. 8. Receiving a report from the
ruling camp, Prime Minister Taro Aso simply said: "I just received a
progress report."

The new subsidy system, which is an expanded version of the existing
regional road-improvement special subsidy fund, is designed to cover
public works projects such as improving roads. Given certain
restrictions, some are concerned that the general account plan might
become toothless.

The two parties agreed to consider the automobile-related taxes,
including the prevocational tax rates, at the time of comprehensive
tax reform and to maintain the current tax levels up until that
time. They also decided to reduce the burden of automobile-related
taxes for a limited period of time. The New Komeito, though, is
calling for a bold review, such as simplifying the automobile weight
tax and the automobile acquisition tax.

10) Koumura most fit to replace Aso

SANKEI (Page 5) (Full)
December 5, 2008

LDP Secretary General Hiroyuki Hosoda attended a fund-raising party
held yesterday in Tokyo by former Foreign Minister Masahiko Koumura.
In it, touching on the subject of who should become Prime Minister
Aso's successor, Hosoda said: "Mr. Koumura is the best candidate."
This came after the preface: "Prime Minister Taro Aso is most fit to
guide the country climb out of this recession."

11) Nakagawa expresses view critical of Nationality Law but positive
about sending MSDF to waters off Somalia

SANKEI (Page 5) (Abridged slightly)
December 5, 2008

Former LDP Secretary General Hidenao Nakagawa in yesterday's
Machimura faction meeting expressed a positive view about sending
Maritime Self-Defense Force vessels to waters off Somalia to deal
with piracy there. However, he took a critical view about amending
the Nationality Law.

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Regarding a bill amending the Nationality Law, Nakagawa said:
"Consideration of DNA analysis would be an additional resolution.
Confirmation (under a resolution) would not be enough." Nakagawa
also said: "The UN Security Council has adopted a resolution urging
each country to dispatch vessels to deal with piracy in waters off
Somalia. Maritime security operations are specified in the SDF Law."
Nakagawa thus expressed a positive view about MSDF dispatch under
existing legislation.

Nakagawa was planning to launch on Dec. 5 a parliamentary league
connected with social security. There is speculation that it could
be an anti-Aso group. Nakagawa, as a result, has postponed the
establishment until mid-next week so as not to cause any
misunderstanding, according to a source connected with the league.
Nakagawa has been regarded as a leading liberal. His comments
yesterday have resulted in speculation that he is trying to increase
his influence over conservatives.

12) Ozawa calls off New Year party, preparing for possible Diet

YOMIURI (Page 4) (Full)
December 5, 2008

Democratic Party of Japan (Minshuto) President Ozawa yesterday met a
group of former lawmakers who support him and new candidates who are
expected to run in the next election for the House of
Representatives. In the meeting, Ozawa told them that he would not
hold the gala party he annually hosts at his private residence in
Tokyo on New Year's Day. This is because Ozawa presumes that the
House of Representatives might be dissolved at the beginning of the
ordinary Diet session to be convened in January next year. One of
those at the meeting quoted Ozawa as saying, "Prime Minister Aso can
no longer hold out, so let me tell you to be on your toes around the
turn of the year."


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