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Cablegate: Japanese Morning Press Highlights 12/30/08

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PP RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #3521/01 3650112
ZNR UUUUU ZZH
P 300112Z DEC 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 9720
INFO RUEKJCS/SECDEF WASHDC PRIORITY
RHEHAAA/THE WHITE HOUSE WASHINGTON DC PRIORITY
RUEAWJA/USDOJ WASHDC PRIORITY
RULSDMK/USDOT WASHDC PRIORITY
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RUEAIIA/CIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC//J5//
RHHMUNA/HQ USPACOM HONOLULU HI
RHHMHBA/COMPACFLT PEARL HARBOR HI
RHMFIUU/HQ PACAF HICKAM AFB HI//CC/PA//
RHMFIUU/USFJ //J5/JO21//
RUYNAAC/COMNAVFORJAPAN YOKOSUKA JA
RUAYJAA/CTF 72
RUEHNH/AMCONSUL NAHA 3976
RUEHFK/AMCONSUL FUKUOKA 1623
RUEHOK/AMCONSUL OSAKA KOBE 5410
RUEHNAG/AMCONSUL NAGOYA 9557
RUEHKSO/AMCONSUL SAPPORO 2185
RUEHBJ/AMEMBASSY BEIJING 6992
RUEHUL/AMEMBASSY SEOUL 3011
RUCNDT/USMISSION USUN NEW YORK 3074

UNCLAS SECTION 01 OF 06 TOKYO 003521

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: JAPANESE MORNING PRESS HIGHLIGHTS 12/30/08

Index:

Defense and security affairs:
1) Government plans to dispatch several MSDF officers to work at
U.S. led piracy mop-up command to be established next spring
(Sankei)
2) China to start building two aircraft carriers next year; Seen as
the start of its expansion of sea power in the region (Asahi)

3) LDP's Koichi Kato, Taku Yamasaki may bolt LDP to form new party,
with formation of study group as initial stage next month (Yomiuri)


Economy in trouble:
4) Direct foreign investment in Japan plunged 40 PERCENT during
April-October period as overseas investors turned inward, hurt by
the financial crisis (Nikkei)
5) Government, Bank of Japan considering restarting the purchasing
of non-performing loans from hard-pressed financial institutions
(Sankei)
6) Government planning IT strategy to create jobs, focusing on
emergency 3-year plan that will start next month (Nikkei)

7) Japan's diplomacy to be tested as it seeks to capture lead in
post-Kyoto Protocol agreement to reduce global warming (Tokyo
Shimbun)

8) Japan does not intend to join IRENA, new renewable energy agency,
judging that it overlaps with the IEA (Yomiuri)

Articles:

1) Gov't to send MSDF officers to antipiracy command

SANKEI (Page 1) (Abridged)
December 30, 2008

The government decided yesterday to participate in a contact group
(CG) that will serve as an anti-piracy headquarters, which will be
set up as early as next spring under the United States' initiative
against pirates who are rampant off the coast of Somalia in Africa.
The CG is expected to locate its office in Bahrain, where the U.S.
Navy's 5th Fleet is headquartered. The government is considering
sending several Maritime Self-Defense Force officers to the CG
office. The sea off the Somalia coast is a hot spot for piracy, and
the security of sea lanes there is critical for Japan's imports of
crude oil. The government therefore judged that Japan should take a
proactive role in operations to mop up the pirates there.

The CG will serve as an international cooperation mechanism for
multilateral naval forces and international organizations, including
the United States and Britain, to share intelligence and coordinate
activities. Prime Minister Taro Aso will meet with U.S. Secretary of
State Rice, who is scheduled to visit Japan early in January next
year, and in their meeting, Aso will tell Rice that Japan will send
MSDF destroyers and will also participate in the CG from the start.

The United Nations Security Council met on Dec. 16 and unanimously
adopted Resolution 1851 to allow military operations in Somalia and
in its territorial airspace. The UNSC resolution proposes setting up
an international cooperation mechanism among various countries and
relevant organizations for every aspect of antipiracy measures. The

TOKYO 00003521 002 OF 006


U.S. government intends to weigh coordination in the CG for naval
operations and is seeking participation from merchant shipping and
insurance companies that have information about shipping services.

In the international community's antipiracy efforts off Somalia, a
total of 15 countries have already dispatched naval vessels. In
addition to the United States, Russia is also conducting naval
activities there to watch out for pirates. A European Union fleet is
also on a mission, following the North Atlantic Treaty Organization
(NATO). China has also sent three naval vessels.

In this connection, the government will send personnel from the
Foreign Ministry and the Land, Infrastructure and Transport Ministry
to an international conference of the International Maritime
Organization (IMO), which will be held in Djibouti, Africa, from
Jan. 26 next year. On that occasion, Japan will announce its plan to
cooperate with a piracy intelligence sharing center, which is being
planned by 21 countries around Somalia. The center is modeled after
a multilateral mechanism under the Asia Antipiracy Regional
Cooperation Agreement, which came into effect in 2006 under Japan's
initiative against pirates in the Straits of Malacca. It is for
neighboring countries to share information about suspicious ships
and pirate attacks.

2) China to build flattops for 1st time

ASAHI (Top play) (Abridged)
December 30, 2008

BEIJING-The Chinese military will begin in 2009 to build aircraft
carriers in Shanghai for the first time and will complete two
midsize carriers weighing 50,000-60,000 tons by 2015, according to
military and shipbuilding company sources. In addition, the Varyag,
a Soviet-made 60,000-ton aircraft carrier, which is currently moored
in the port of Dalian, Liaoning, will shortly complete its
renovation and is expected to be recommissioned for training
purposes. Carrier-borne aircraft pilot training has also begun.

Recently, Huang Xueping, a spokesman for the Chinese Defense
Ministry, referred to the possibility of building aircraft carriers.
His positive remarks drew various countries' attention. However,
this is the first time that the plan has been unveiled. China's
flattop deployment will enhance its naval power projection. In that
case, it will likely affect the military balance in East Asia.

A step to swing strategy for sea interests

Takushoku University Professor Ikuo Kayahara, former chief
researcher at the National Institute for Defense Studies (NIDS),
says: "Aircraft carriers are the pillars for the Chinese military to
reinforce its naval forces. To begin with, it strongly means that
China will try to expand the buffer zone in order to protect its
coastal areas from the threat of the United States and secure its
sea interests. This is the first step of a strategy for China to
become a seafaring power swinging into the West Pacific."

3) LDP's Kato, Yamasaki may form new party, splitting the party;
Study group to be launched next month

YOMIURI (Page 1) (Excerpts)
December 30, 2008


TOKYO 00003521 003 OF 006


The Liberal Democratic Party (LDP) is being wracked by moves within
the party that could lead to a split after New Year's, with some
leaving the party and others possibly forming a new party. It is
possible that former LDP Secretary General Yoichi Kato, former LDP
Vice President Taku Yamasaki and others may form a new party prior
to the next Lower House election, starting with the launching of a
new study group possibly in January. In addition, some junior to
mid-level LDP lawmakers, reacting sharply to the government's
handling of the issue of turning highway-related revenues into
general funds, are considering defying their party when relevant
bills come up for a vote. On the Democratic Party of Japan (DPJ)
side, as well, a stance has been taken to strengthen moves to
encourage rebellion and defection from the LDP. Tension is expected
to build in the regular Diet session that opens January 5 which
could lead to political realignment.

The study group that Kato, Yamasaki and others plan to form is
expected to have five to ten members, including LDP lawmakers,
scholars, and academics. Its main theme will be, "What form Japan
the state should take and what choices it should consider?" It aims
to consolidate forces with those who take a stance critical of the
structural reform line, having raised the slogan, "Correct market
fundamentalism that has gone too far." It is expected that some DPJ
lawmakers will link up with the group, and that even the New Komeito
may possibly seek to cooperate with it.

4) Foreign direct investment for April-October period declines 40
PERCENT ; Inflows in fiscal 2008 to mark yearly drop first time in
five years

NIKKEI (Top Play) (Excerpts)
December 30, 2008

The global financial crisis has applied the brakes to foreign direct
investment (FDI) in Japan, including purchases and acquisitions of
Japanese firms and establishment of branches in Japan. Investment
inflows for the April-October period in 2008 plummeted 40 PERCENT
below the same period a year ago. FDI is expected to mark the first
year-on-year decline in fiscal 2008 since fiscal 2003. Foreign
companies now tend to favor inward investment, given the weakening
of their capital bases. Cases of companies withdrawing their
presence or capital from Japan are expected to increase in the
future. The reduction in capital inflows may be a further drag on
the Japanese economy.

According to statistics from the Finance Ministry and the Bank of
Japan, foreign direct investment totaled 3.42 trillion yen for the
April-October period, down 36 PERCENT from the same period a year
ago. In fiscal 2007, foreign investments came to about 9 trillion
yen, or about 700 billion yen a month. But the figure for fiscal
2008 has shrunk to about 300 to 400 billion yen a month since
August.

5) Government, BOJ eye resumption of purchase of nonperforming loans
as early as in March

SANKEI (Top Play) (Excerpts)
December 30, 2008

The government and the Bank of Japan (BOJ) are studying the
possibility of introducing a new system to purchase wide-ranging
financial assets, including nonperforming loans held by financial

TOKYO 00003521 004 OF 006


institutions, by using public funds, according to informed sources
yesterday. They intend to revive and expand the measure that the
government carried out through the Deposit Insurance Corporation
(DIC) starting in fiscal 1999. The items subject to the measure will
be expanded to cover debentures purchased by banks from customers,
commercial paper (CP), stock holdings, and derivatives. The
government intends to submit bills amending relevant laws to the
ordinary Diet session, which opens early next year, work out
details, and introduce the new system as early as late March. The
total amount of purchases is estimated to reach roughly 10 trillion
yen.

Nonperforming loans are expected to significantly increase in the
future given the rapidly worsening of the domestic economy. By
enhancing banks' power with the new system covering wide-ranging
financial assets, the government aims to ease their credit grip and
help companies in raising funds.

BOJ Governor Masaaki Shirakawa proposed the plan to resume
purchasing financial assets to Finance Minister Shoichi Nakagawa in
early December. Since then, study has been conducted behind the
scenes.

Under the measure taken since fiscal 1999, the DIC issued bonds with
the government's guaranteeing of repayments as means to procure
funds. The Resolution and Collection Corporation under the DIC
purchased bonds and collected bonds. When losses were accrued, the
losses were covered with tax money.

The government and the BOJ are planning to revive a mechanism
similar to this measure and increase items subject to the system.

In resuming the purchase of financial assets, revising the Financial
Reconstruction Law will be necessary. In the DIC, 52 trillion has
been set aside to deal with financial institutions' failures for
next fiscal year. The government will coordinate views on whether to
use the 52 trillion yen or establish a new framework.

6) IT strategy to focus on job creation

NIKKEI (Page 2) (Abridged)
December 30, 2008

The government will launch a new information technology (IT)
strategy in March next year to cope with the economic crisis. The
new strategy, called an IT 3-year emergency plan, will set forth
such measures as constructing an infrastructure for the broadband
networking of public organizations and other end users, aiming to
create new jobs and expand domestic demand. This is in response to
Prime Minister Taro Aso's scenario for economic recovery in three
years. In June next year, the government will also work out mid- and
long-term IT strategies to push for a turnaround of the economy in
full swing.

The government will set up a special study group to discuss future
IT strategies, involving local government leaders, university
professors, business community representatives, and Internet
providers. The study group will discuss the emergency plan and mid-
and long-term strategies. In addition, the group will also submit a
report of recommendations to Aso on ways to push for e-government.

7) Japan's diplomatic skills to be tested in bringing about

TOKYO 00003521 005 OF 006


agreement on post-Kyoto mechanism

TOKYO SHIMBUN (Page 2) (Full)
December 30, 2008

A decision has been made for a new international framework to be
formed in 2009 to fight global warming, following the expiration of
the Kyoto Protocol. But difficult negotiations are expected against
the backdrop of the ongoing global economic crisis. Environment
issues are within Japan's realm of expertise. Japan's diplomatic
skills will be tested in the negotiations.

Senior Foreign Ministry officials have cited the issue of climate
change, as well as U.S. policy following the inauguration of the
Obama administration, as major diplomatic tasks that Japan will face
in 2009.

Japan put forth the goal of halving global greenhouse gas emissions
by 2050, as the chair of the Hokkaido Toyako Summit. Given this,
Japan hopes to play up leadership in bringing about an agreement in
the 15th session of the Conference of the Parties to the UN
Framework Convention on Climate Change (COP15) to be held in
Copenhagen late next year.

But negotiations are unlikely to go smoothly. In the COP14 held in
Poland, no agreement was reached as industrialized and developing
countries remained at loggerheads.

Developing countries want their burden to be reduced as much as
possible, as seen from a call for 1990 to continue to be the
benchmark year for emissions cuts. Some have suggested that only
simple revisions be made to the Kyoto Protocol.

Moreover, since curbing carbon dioxide (CO2) emissions will be a
heavy burden for economically weak countries due to the ongoing
economic crisis, these countries are putting up stiffer resistance.

The Japanese government is preparing a "Cool Earth Partnership"
system worth 10 billion dollars (approximately 900 billion yen) to
offer non-reimbursable aid for developing countries' efforts to
protect the environment. While continuing to exert influence over
developing countries, the government wants to bring about a
settlement in negotiations.

Even so, one negotiator takes this view: "Although some are calling
for setting several years as the benchmark years, stormy sessions
are expected in the negotiations."

A government source has already indicated a pessimistic prospect
about an agreement in 2009, saying: "Negotiations might continue
into 2010."

8) Japan does not intend to join renewable energy agency, judging
that it duplicates the IEA

YOMIURI (Page 2) (Full)
December 30, 2008

The government yesterday decided not to join the International
Renewable Energy Agency (IRENA), which will be launched next month
with the aim of expanding the use of such energy sources as sunlight
and wind. The reasons for not joining IRENA include the judgment

TOKYO 00003521 006 OF 006


that its function duplicates that of the International Energy Agency
(IEA), in which Japan has an executive director's seat. However,
some have pointed out their concern that Japan is likely to be
criticized by the international community as turning its back on the
environment problem.

IRENA will be established with Germany as the central member. In
order to deal with global warming and the exhaustion of supplies of
fossil fuels, participating countries will promote such efforts as
technology transfers related to renewable energy, capital
procurement, and information exchanges.

Japan has been asked repeatedly by Germany to join, but it has
decided for the time being to put off joining, with one senior
Foreign Ministry official criticizing, "The IEA is already tackling
the problem of expanding the use of renewable energy, so another
agency is not needed." There is also the possibility that Japan
would be asked to provide several hundred million yen annually to
help fund the agency. Being in the midst of a severe fiscal
situation also has made Japan hesitant about joining.

However, the IEA consists of 28 members that are mainly advanced
industrial countries. In contrast, IRENA is expected to have the
participation of dozens of countries including those from the
developing world. Within the Japanese government there is the view
of actively using IRENA, citing the challenge in measures to counter
global warming of how to engage both the advanced countries and the
developing countries at the same time. Some also have pointed out
the benefits to Japanese companies that would accrue, with one
government source saying, "If we join IRENA, it would be useful for
the dissemination of Japanese technologies in such areas as solar
power.

The United States, too, has not been inclined to join IRENA, but
President-elect Obama has stressed shifting from fossil fuels to
renewable energy sources. So some Japanese officials expect that the
U.S. policy may change with the new administration.

ZUMWALT

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