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Cablegate: Japanese Morning Press Highlights 06/19/06

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UNCLAS SECTION 01 OF 13 TOKYO 003368

SIPDIS

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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 06/19/06

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Index:

1) Top headlines
2) Editorials
Prime Minister's weekend schedule: None

Opinion polls:
3) Koizumi Cabinet support rate plunges 9 points to 41% in
Mainichi poll
4) Abe support for next prime minister is up 4 points to 42% in
Mainichi poll, with rival Fukuda losing ground at 19%
5) Abe pulling ahead of Fukuda even more in Nikkei poll
6) Abe the leading candidate for next premier in poll of LDP
lawmakers but half remain undecided
7) 60% of the public positive about the achievements of the
Koizumi Cabinet
8) 90% of local LDP party chiefs want to revise the Koizumi
reform line

North Korea threat:
9) Foreign Minister Aso, Ambassador Schieffer meet to discuss
mutual concern over possible North Korea missile launch
10) US, Japan strengthen cooperation to constrain North Korea
from launching Taepodong 2 missile
11) If North Korea launches missile, Japan will take issue to
the United Nations Security Council
12) Government continues alert status about North Korea missile
launch
13) US, Japan concerns about North Korea will be mentioned in
joint statement at end of upcoming summit meeting

Iraq reconstruction:
14) Government likely to announce on June 21 the pullout of the
GSDF from Samawah, Iraq
15) Cabinet ministers to meet today on the Iraq withdrawal issue

Defense issues:
16) US, Japan to announce shared values in summit statement but
avoid mentioning revision of defense guidelines
17) US military excluded MSDF from communication net during
Hawaii-based MD test
18) US, Japan to sign note that MD missile parts will be banned
from being used for any other purpose

Ozawa power:
19) Minshuto President Ichiro Ozawa to issue policy vision in
August
20) Ozawa almost certain to be re-elected Minshuto president,
while Komeito likely to choose Ota to replace Kanzaki as party
head

Articles:

1) TOP HEADLINES

Asahi, Mainichi, Yomiuri, Sankei, and Tokyo Shimbun:
Japan draws with Croatia 0-0 in World Cup Sunday; Advancing to
the final round difficult

Nihon Keizai:
Survey: 97% of listed companies to change corporate charters
under Corporate Law to open door to email-based board meetings

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and flexible dividend policy

2) EDITORIALS

Asahi:
(1) North Korea must heed warning
(2) Solid medical reform necessary

Mainichi:
(1) Eliminating gray zone the first step to normalizing money-
lending industry
(2) Cancer registration system deserved further Diet
deliberations

Yomiuri:
(1) Redouble efforts to solve cancer crisis
(2) Shanghai Cooperation Organization a power game in Central
Asia

Nihon Keizai:
(1) Yokosuka's decision to accept nuclear-powered aircraft
carrier commendable
(2) Shanghai Cooperation Organization: Japan must be prepared
against change in power balance

Sankei:
(1) North Korea must not launch Taepodong missile
(2) Workplace must be free from indirect discrimination

Tokyo Shimbun:
(1) Shanghai Cooperation Organization must not be anti-US
alliance
(2) Science and Technology White Paper needs specific plans

3) Mainichi poll: Cabinet support rate plummets 9 points to 41%,
with few expectations of Koizumi until September, when he steps
down

MAINICHI (Page 2) (Full)
June 19, 2006

In a nationwide opinion poll carried out by this newspaper June
17-18, the support rate for the Koizumi Cabinet plummeted nine
points to 41%, compared to the previous survey in May. The non-
support rate increased two points to 38%, but those who answered
they "had no interest" rose seven points to 20%. The results
seemed to indicate that the public has little expectation of
Prime Minister Junichiro Koizumi, who has indicated he will step
down at the end of his term in September.

The most often chosen reason for supporting the Cabinet was as
before, "The way politics is being carried out seems to be
changing," with a six point increase to 53%. There was an eight-
point drop to 9% in those who chose, "I have expectations for new
policies," the rating is now half of what it was before. The main
reason for not supporting the Cabinet, with 57% choosing it, was,
"I cannot feel that the economy has recovered."

Regarding party support, the Liberal Democratic Party had 28% (3-
point drop), and Minshuto (Democratic Party of Japan) had 21% (up
a point). The New Komeito had 5% (down a point), the Japanese
Communist Party, 3% (up a point), and the Social Democratic

TOKYO 00003368 003 OF 013


Party, 1% (down a point). Those who supported no party rose three
points to 38%.

4) Abe rises 4 points to 42% as popular favorite for next prime
minister widening gap with Fukuda, who has 19% in Mainichi poll

MAINICHI (Page 1) (Excerpts)
June 19, 2006

The Mainichi Shimbun carried out a national opinion survey (by
telephone) carried out on June 17-18, querying the public about
which of the six Liberal Democratic Party (LDP) candidates they
favored as the next prime minister. The top favorite was Chief
Cabinet Secretary Shinzo Abe with 42%, up four points from the
previous poll in May. The next favorite was former Chief Cabinet
Secretary Yasuo Fukuda with 19% (down a point since the last

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time). The gap between the two has widened to 23 points. One
factor influencing the number apparently is Fukuda's stance of
not making it clear whether he will run in the race or not. Those
in the party urging him to declare his candidacy can be expected
to strengthen their calls.

Other than those two, Foreign Minister Aso received 4% (up one
point) and Finance Minister Tanigaki, 2% (down a point), neither
changing their rating very much. Among LDP supporters, Abe had
61% support, up 7 points, and Fukuda 15%, down a point. As for
the priority policy of the next prime minister, the most chosen
answer was "dealing with the low birth rate/aging population
crisis," with 25%, followed by "dealing with the social disparity
issue," with 17%.

5) Poll: Abe support up to 41% in post-Koizumi race, Fukuda at
17%; Cabinet support slightly down to 47%

NIHON KEIZAI (Page 1) (Full)
June 19, 2006

Chief Cabinet Secretary Shinzo Abe has risen to 41% as the
popular favorite to become the next prime minister, the Nihon
Keizai Shimbun found from a public opinion survey conducted June
16-18. The figure is up 8 percentage points from the last survey
in May. Yasuo Fukuda, one of Abe's predecessors, ranked second at
17%, down 4 points. The gap between the two post-Koizumi
candidates has widened from 12 points to 24 points.

Abe has gained more support in the post-Koizumi race. He has now
clarified his de facto candidacy for the ruling Liberal
Democratic Party's presidential election scheduled for this
September and is now coming out with his own policy stance. This
appears to have reflected the rise in popularity rating. Foreign
Minister Taro Aso was at 3%. Three others-Finance Minister
Sadakazu Tanigaki, Economic and Fiscal Policy Minister Kaoru
Yosano, and Taro Kono were all at 1%, leveling off from the last
survey. There is no change in the trend of public support
centering on Abe and Fukuda.

The approval rating for the Koizumi cabinet was 47%, down 2
points from the last survey. The disapproval rating rose 2 points
to 41%. In the breakdown of public support for political parties,
the LDP stood at 42%, down 2 points from the last survey. The
leading opposition Democratic Party (DPJ or Minshuto) was at 25%,
up 1 point. The DPJ has risen in public support since Ichiro

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Ozawa became DPJ president.

In the survey, 54% answered "yes," with 32% saying "no," when
asked if they would like to see a change of government between
the ruling and opposition parties.

The survey was taken by Nikkei Research Inc. over the telephone
on a random digit dialing (RDD) basis. For the survey, samples
were chosen from among males and females, aged 20 and over,
across the nation. A total of 1,505 households with one or more
voters were sampled, and answers were obtained from 889 persons
(59.1%).

6) Poll of LDP lawmakers; Abe takes lead over Fukuda in
presidential race; Half the members have yet to decide who to
support

SANKEI (Page 4) (Full)
June 17, 2006

Kyodo News Agency as of June 16 surveyed the current situation of
the Liberal Democratic Party (LDP) regarding post-Koizumi
contenders. The survey directly interviewed 403 LDP members of
both Diet chambers and found that Chief Cabinet Secretary Shinzo
Abe has taken the lead, garnering support of nearly 130 members
from the Mori faction, to which he belongs, and from among those
who are affiliated with no factions, followed by former Chief
Cabinet Secretary Yasuo Fukuda, who has support from about 40
members, although he has not yet declared his candidacy.

Chances are that this situation could change with about half the
members or about 200 members of both the Upper and Lower House
members undecided about which candidate to support. The view is
strong that the Tsushima faction (35 members) led by Upper House
LDP Caucus chairman Mikio Aoki and the Nikai Group led by
Minister of Economy, Trade and Industry (METI) Toshihiro Nikai
will act as a body. Their move will, therefore, come into the
focus in the later stage of the election race.

Among 86 Mori-faction members, to which both Abe and Fukuda
belong, more than 40 categorically replied or hinted that they
support Abe. The number of those who support Fukuda stood at
below 10. About 30 members did not clarify which candidate they
support.

Among 74 non-faction-affiliated members, mainly those who were
first elected in last year's Lower House election, about 40
revealed their support of Abe, while about 30 remain undecided.
Only a few cited support of Fukuda.

Most of the members of the Tsushima faction and Yamasaki faction
in the Lower House have yet to clarify their voting behavior, but
among those who have decided whom to support, those who support
Abe exceeded those who were in favor of Fukuda. A majority of the
Ibuki faction members have yet to decide whom to support, but
about 10 declared their support of Abe. There are both Abe and
Fukuda supporters in the Komura faction, but the number of those
who support Abe topped those who support Fukuda. Supporters of
Foreign Minister Taro Aso from the Kono faction, and Sadakazu
Tanigaki of the Tanigaki faction, who have expressed their
intention to run in the race, numbered less 20, respectively.


TOKYO 00003368 005 OF 013


7) Poll: 60% give positive response to Koizumi government's
achievements

NIHON KEIZAI (Page 2) (Full)
June 19, 2006

According to the result of an opinion poll on the achievements of
the government of Prime Minister Junichiro Koizumi, 15% "highly
valued," and 45% "appreciated to a certain extent." A total of
60% gave positive responses. Twenty-two% said that they did not
appreciate to a certain extent and 11% said they did not
appreciate the achievements at all.

Compared to the outcome of a poll conducted in May, the positive
response decreased by 5%age points, while the negative response
increased by 9 percentage points. The reason is because the
scandal involving the Social Insurance Agency and the Bank of
Japan Governor's investment in the scandal-tainted Murakami Fund
came to light at the end of the regular session of the Diet.

8) LDP presidential election: Officers of local chapters expect
successor to Koizumi to revise his reform policy

ASAHI (Top Play) (Excerpts)
June 18, 2006

The Asahi Shinbun's interviews with senior officials of local
chapters of the Liberal Democratic Party (LDP) found that most of
them are calling for the successor to Prime Minister Koizumi to
revise his structural reform policy. More than 90% of the
surveyed members are calling for a correction of the present
reform policy in some form or other. With the Upper House
election and simultaneous local elections close at hand in 2007,
local LDP members have a strong sense of alarm that it will be
difficult for them to win unless the LDP under its new president
deals with the gap between urban and regional districts. To a
question as to whom they support, 23 chapters cited Chief Cabinet
Secretary Abe.

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In the survey, the Asahi Shimbun directly interviewed secretaries
general and other senior officials of 47 prefectures who are
regarded as properly representing local LDP members. The daily
carried out similar interviews this March, but there have been
changes in the members of local chapter officers due to
reelections.

Regarding a four-option question on what the next LDP president
should do about Prime Minister Koizumi's structural reform
policy, no pollees replied that it should be continued and
expanded. A total of more than 90% sought a revision, with 32
calling for a slight revision in consideration of the situation
in regional districts and 12 noting that the policy should be
revised extensively.

9) US would impose additional sanctions on North Korea; Foreign
Minister Aso, US Ambassador to Japan Schieffer warn Pyongyang to
immediately stop preparations for missile launch

SANKEI (Top play) (Excerpts)
June 18, 2006

Foreign Minister Taro Aso and US Ambassador to Japan Thomas

TOKYO 00003368 006 OF 013


Schieffer on the evening of June 17 met at the Foreign Ministry
to discuss North Korea's move to test-fire a Taepodong-2 long-
range missile, and they confirmed a policy of urging North Korea
to immediately put a stop to its preparations for a missile
launch and quickly return to the six-party talks. They also
revealed that they are warning North Korea against a missile
test, noting it will be a grave issue for the international
community, and Ambassador Schieffer indicated that the US is
ready to impose additional sanctions on Pyongyang. Japanese and
US authorities remain on high alert, taking into account the
possibility that a serious situation could take place on the
afternoon of June 18 or afterwards, as North Korea seems to have
completed its preparations for a test launch.

According to a government official, the North Korean leadership
has instructed its people to fly the national flag at 2:00 p.m.
on June 18 and watch a message on TV or other media in the
evening. Taking this move as hinting at a possible test-launch of
a missile, the government is keeping a close eye on Pyongyang's
movements.

Foreign Minister Aso in his talks with Ambassador Schieffer
expressed concern: "Should North Korea test-fire a missile, that
would threaten the peace and stability of our country as well as
the international community and would be of grave concern in
terms of nonproliferation of weapons of mass destruction." Aso
revealed that on June 16, Japan urged North Korea through its
embassy in Beijing not to proceed with plans for a missile
launch. Schieffer explained that the US had directly conveyed its
concern through the United Nations office in New York to North
Korea.

Both Aso and Schieffer shared the perception that test-firing a
missile is an act that would violate the Japan-North Korea
Pyongyang Declaration that stipulates a moratorium on missile
launches and the Joint Statement of the six-party talks that
specifies efforts to contribute to peace and stability in the
East Asian region. They also discussed what action should be
taken should the North fire a missile.

After the meeting, Schieffer criticized North Korea's move,
telling reporters: "It's a very provocative act and will isolate
it from the international community further." "If the missile is
fired, we'll take every possible action," he added, hinting that
even UN sanctions are being considered.

10) Japan, US give stronger warning to North Korea for its
preparations for missile test; SDF, USFJ now on high alert

NIHON KEIZAI (Page 2) (Full)
June 18, 2006

The Japanese government is now working in much closer cooperation
with the United States on the diplomatic front against North
Korea as there is a growing probability that Pyongyang will test-
fire a long-range ballistic missile thought to be a Taepodong-2.
Meanwhile, the Self-Defense Forces (SDF) and US Forces Japan
(USFJ) are on high alert, mobilizing such patrol units as Aegis
ships and patrol planes to the Sea of Japan.

The meeting on the evening of June 19 between Foreign Minister
Taro Aso and US Ambassador to Japan Thomas Schieffer took place

TOKYO 00003368 007 OF 013


in response to America's sudden request for a high-level
dialogue. Aso, who was outside of Tokyo, quickly returned to meet
with the ambassador. Holding this sort of meeting itself can send
a political message to North Korea.

A careful analysis of North Korea's moves is being made in the
government under the leadership of the Ministry of Foreign
Affairs (MOFA), the Defense Agency (JDA), and the Cabinet
Secretariat. Tokyo will "continue its efforts to urge North Korea

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to exercise self-restraint," a senior MOFA official said, but the
official added there has been no other response than this: "We
will convey your request to our home country."

Considering this situation, the USFJ has strengthened its
monitoring system by putting the observation vessel Observation
Island at its Sasebo Base and also deploying the Cobra Ball RC-
135 aircraft to Kadena Air Base from the US mainland. In
addition, there is information that Aegis ships have been
deployed in the Sea of Japan.

In line with these US moves, the SDF dispatched its Chokai Aegis
ship based in Sasebo to the Sea of Japan and it also has
mobilized the EP-3 multipurpose aircraft for electronic warfare
and the reconnaissance aircraft to gather information.

On June 17, a senior JDA official pointed out: "We are readying
ourselves for a worst-case scenario of a missile launch." A
senior Maritime Self-Defense Force official also indicated that
the probability of a missile launch is mounting, noting: "We must
stay alert."

11) If North Korea fires Taepodong-2 missile, Japan will ask UNSC
to discuss sanctions

YOMIURI (Page 1) (Excerpts)
June 19, 2006

The government decided yesterday that if North Korea test-fired a
long-range ballistic missile "Taepodong 2," Japan would ask the
United Nations Security Council (UNSC) to convene to discuss
economic sanctions against that country, in cooperation with the
US and other major powers. Japan will also consider taking its
own sanction measures, such as halting the remittance of money
from Japan to North Korea, suspending trade activities, and
prohibiting North Korean ships from entering Japanese ports.

In a TV Asahi news program yesterday, Foreign Minister Aso said
that if Pyongyang fires a Taepodong-2 missile, "Japan will
strongly protest against the country and apply pressure on it
under a UNSC resolution. The US is of the same view." The foreign
minister also indicated an intention to discuss the issue at the
G-8 foreign ministerial meeting in Moscow on June 29.

The Japanese and US governments interpret a Taepodong-2 missile
test as a violation of the 2002 Japan-North Korea Pyongyang
Declaration, which specifies the freeze of Pyongyang's long-range
missile tests, and a 1999 North Korea-US agreement. The two
governments have already asked North Korea through diplomatic
channels to refrain from test-firing and have also agreed that if
Pyongyang ignores their demand, they will have to take a tough
stance against that nation.


TOKYO 00003368 008 OF 013


12) High alert against Taepodong 2 launch, government making
every effort to analyze North Korea's moves

YOMIURI (Page 2) (Excerpts)
June 19, 2006

On high alert due to North Korea's preparations to launch a
Taepodong 2 long-range ballistic missile, senior government
officials continued analyzing intelligence yesterday.

Assembled at the Defense Agency yesterday afternoon, such key
defense officials as Defense Agency Director-General Fukushiro
Nukaga, his deputy Taro Kimura, Vice Defense Minister Takemasa
Moriya, and SDF Joint Staff Chief Staff Hajime Massaki analyzed
North Korea's moves based on intelligence from US Navy and
Maritime Self-Defense Force's Aegis vessels. As a result, they
agreed to remain on high alert, although chances were slim that
the North would fire the missile yesterday.

Nukaga told a press conference yesterday evening: "There haven't
seen any change in particular. I instructed other members to do
their best to gather intelligence."

The dominant view in the government is that the North's move is
aimed at securing a chance for direct talks with the United
States and convince Washington to remove its financial sanctions
against Pyongyang, which have been in place since last September.
But views are split on whether the North will actually launch the
missile.

13) Japanese, US leaders in joint statement to express concern
about North Korea's moves over nuclear, missile issues

NIHON KEIZAI (Page 1) (Excerpts)
June 19, 2006

Hiroshi Maruya, Washington

North Korea appears to have completed pumping liquid fuel into a
Taepodong-2 missile, according to reports. In reaction, the
Japanese and US governments have started coordination to express
concern about the moves in a joint statement to be issued when
their leaders meet later this month. They plan to specify that if
Pyongyang test-fires a long-range ballistic missile ahead of the
summit, the two countries will jointly take sanctions,
interpreting it as a provocative act against the international
community.

Prime Minister Junichiro Koizumi and US President Bush are
scheduled to meet in Washington on June 29. As the top priority
theme for the summit, North Korea's nuclear and missile issues
are suddenly coming up. In the event that Pyongyang test-fires a
missile, the two leaders will likely discuss such possibilities
as referring the problem to the United Nations Security Council
and sanctions by Japan, the US, and other countries concerned.

Japan and the US have taken it seriously that North Korea,
without returning to the six-party talks on its nuclear
development programs, is making preparations to test-fire a
missile. The two countries have judged it necessary for their
leaders to call on North to cooperate with the international
community for the sake of peace and stability in the Asia-Pacific

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region.

14) GSDF mission to Samawah; Government coordinating announcement
on June 21 of date of withdrawal

YOMIURI (Page 2) (Full)
June 19, 2006

The government is now coordinating the date of announcing the
withdrawal of Ground Self-Defense troops, which are now engaged
in reconstruction assistance in Samawah, Iraq. Prime Minister
Koizumi will likely announce the decision on June 21 at a press
conference. A government source on the 16th revealed this.

The transfer of security and administrative authority over
Muthana Province, which includes Samawah, from multi-national
forces to the new Iraqi government is expected to be formally
agreed on as early as the 20th after a decision by the new
government. The GOJ has determined that it should announce the
withdrawal of GSDF troops as soon as possible and start
withdrawal operations. The prime minister's announcement will
likely come either on the 20th or the 21st, with the 21st viewed
as more likely due to such factors as the time difference with
Iraq.

Prior to holding that press conference, the prime minister will
meet with New Komeito leader Kanzaki to convey the government's
decision to pull out GSDF troops from Iraq. He also plans to hold
a security meeting to order Defense Agency Director-General
Nukaga and Foreign Minister Taro Aso to ensure safety during
withdrawal operations.

As reasons for withdrawing GSDF troops from Iraq, the prime
minister is expected to cite: (1) progress of the political
process with the launch of a permanent Iraqi government; (2)
stable security in Muthana Province, where GSDF troops are
deployed; (3) multinational forces, such as British and
Australian troops, engaging in security-keeping operations in
Muthana, will end their missions. The prime minister will also
stress the continuation of Air Self-Defense Force's Kuwait-based
operations to transport supplies to Iraq even after the
withdrawal of GSDF troops. Following a request from the UN, the
government intends to expand the coverage of transportation to
Baghdad.

Following the prime minister's announcement of the GSDF
withdrawal, Defense Agency Director-General Nukaga will
immediately order the withdrawal of the 10th GSDF Iraq
reconstruction dispatch group operating in Iraq. He will also
order the dispatch of a withdrawal assistance troop consisting of
about 100 supply and transport experts.

15) Three cabinet members to discuss GSDF pullout today

TOKYO SHIMBUN (Page 2) (Full)
June 19, 2006

Foreign Minister Taro Aso revealed on a TV Asahi program
yesterday that he would meet with Chief Cabinet Secretary Shinzo
Abe and Defense Agency (JDA) Director-General Fukushiro Nukaga at
the Prime Minister's Official Residence this morning to discuss
when to pull out Ground Self-Defense Force (GSDF) troops from

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Iraq's southern city of Samawah.

Samawa is the capital of Muthanna Province. British troops are
likely to announce plans for a pullout from the province as early
as tomorrow after transferring security control to Iraq. Japan is
making arrangements to announce a plan for a pullout of GSDF
troops possibly on June 21.

When asked whether the pullout would begin by the time of Prime
Minister Koizumi's visit to the United States slated for late
this month, Aso said: "It may occur if things go smoothly."

16) In summit statement, Japan and US likely to specify shared
values but stop short of referring to revision of defense
guidelines

ASAHI (Page 1) (Excerpts)
June 17, 2006

The governments of Japan and the United States have begun
arrangements to issue in a meeting between Prime Minister Koizumi
and President Bush set for June 29 a joint statement underscoring
the importance of the "Japan-US alliance in a global context" to
deal with terrorism and other global issues. With an emerging
China in mind, the statement will stress that the two countries
share a set of values, such as freedom and democracy. The
statement is likely to stop short of mentioning the Defense
Agency-proposed revision of the guidelines on Japan-US defense
cooperation and instead confirm the implementation of the plan
for US force realignment in Japan compiled this May.

Chief Cabinet Secretary Abe called the last meeting with
President Bush for Koizumi, whose term of office as prime
minister is to expire late in September, "a wrap-up summit." The
statement is likely to highlight the importance of the Japan-US
alliance in wide-ranging areas, including security, diplomacy,
and economics.

17) MSDF left out of US info loop in missile defense testing off
Hawaii; Close cooperation dead

TOKYO SHIMBUN (Top play) (Full)
June 18, 2006

Japan and the United States have now released a final report of
their talks over the realignment of US forces in Japan,
incorporating their agreement to "cooperate closely" with each
other in missile defense (MD). Nevertheless, the United States
does not allow Japan to use its military communication
satellites, according to informed sources. North Korea is now
preparing to launch a Taepodong-2 ballistic missile. Meanwhile,
the US Navy plans to test its sea-based SM-3 intercept missiles
late this month with Japan's Maritime Self-Defense Force Aegis-
equipped destroyer participating. The MD test, however, will end
up with the MSDF being unable to exchange information with its US
counterpart.

The missile intercept test will be conducted off Hawaii. In this
intercept test, the USS Lake Erie, an Aegis cruiser, is to detect
an intermediate range ballistic missile mockup to be launched
from Kauai, and the USS Shiloh, another Aegis cruiser, is to
intercept that projectile with an SM-3 missile. The US Navy will

TOKYO 00003368 011 OF 013


share its data with the MSDF about the flight path of a detected
ballistic missile through a US military satellite communication
system, or MilSat for short. However, the Kirishima, an MSDF
Aegis destroyer, will be left out of the US Navy's communication
network and will track the missile's path.

Japanese and US Aegis ships are loaded with a large-capacity
tactical information exchange system called Link 16, which
enables them to exchange information online. The US Navy,
however, has decided to employ the MilSat system for MD. The
Kirishima, for its MilSat exploitation, needs the US Navy's
permission. In addition, the MSDF Aegis ship will also have to be
loaded with a decoder and a new communication system. However,
the US Navy is not expected at all to let the MSDF use the MilSat
system. The MSDF Aegis destroyer also cannot expect to mount
these new systems on it.

In 1998, North Korea launched a Taepodong missile that flew over
Japan and landed in waters off Sanriku. At the time, an MSDF
Aegis ship detected the projectile. The Kirishima is certain to
detect a ballistic missile mockup in the SM-3 test. The MSDF has
been participating in a series of US missile intercept tests.
However, MD introduction is costly. Other countries therefore
remain reluctant to take part in the US MD initiative. So the
United States is apparently aiming to play up the MSDF's
participation in MD testing.

The Kirishima will be staged in waters near the US cruisers but
will be left out of the US Navy's information loop. As it stands,
the Kirishima's participation in the missile intercept test is a
far cry from the "close cooperation" reaffirmed in the final
report on the planned realignment of US forces in Japan.

When Japan built its Aegis destroyers, the United States provided
an Aegis system that excels in fleet air defense. However, the
United States banned Japan from joining the integrated broadcast
system (IBS) of the US Army, Navy, Air Force, and Marine Corps.
In point of fact, the United States restricts its information to
Japan in spite of their favorable relations.

In the meantime, the United States also has plans to install an X-
band radar system at the Air Self-Defense Force's Shariki
Detachment base in Aomori Prefecture by this summer, among MD-
related equipment and systems incorporated in the final report on
the US military realignment. However, there is no knowing how the
United States will provide Japan with intelligence detected by
the X-band radar. The United States may only use Japan as an
outpost convenient to defend the US mainland.

18) Japan, US to exchange notes on MD parts

ASAHI (Page 4) (Full)
June 17, 2006

The governments of Japan and the United States will exchange
notes as early as next week allowing Japan to export missile
defense system (MD) interceptor parts to be jointly developed by
the two countries. Although the Japanese government regards
missile parts as weapons, it defines the joint development and
production of the MD system as an exception to its three
principles banning weapons exports. The notes prohibit Japan and
the US from using MD parts for purposes other than the original

TOKYO 00003368 012 OF 013


purposes without each other's prior agreement and shifting them
to a third country.

The Japanese government plans to make a cabinet decision on the
notes next week for Foreign Minister Taro Aso and US Ambassador
to Japan Thomas Schieffer to sign them to make them official.
Following this process, Japan and the United States will embark
on MD development later this month.

19) Minshuto head Ozawa to formulate policy vision possibly in
August, focusing on agricultural and employment issues

NIHON KEIZAI (Page 2) (Excerpts)
June 18, 2006

Minshuto (Democratic Party of Japan) President Ichiro Ozawa plans
to compile his own basic policy -- the "Ozawa Vision" -- as early
as August. The vision will include measures to improve a safety
net for agricultural and employment policies, in addition to
steps to promote administrative efficiency by deregulation and
decentralization. Ozawa, known as a deregulation advocate,
intends to highlight differences with the Koizumi reform policy,
stressing a stance of correcting distortion created by the
Koizumi policy, including the widening income gap.

Taking particular note of the negative effects of the reform
drive by Prime Minister Junichiro Koizumi, Ozawa's policy vision
will focus on measures for regional revitalization and job
security.

Ozawa advocated the need for drafting policies without relying on
bureaucrats, decentralization and deregulation in his book titled
Plan to Remodel Japan, which was published in 1993. Many have
noted, however, that it is difficult to see differences in
policies between Ozawa and Koizumi, since Koizumi has pushed
forward with similar reforms. Ozawa, therefore, aims to dig into
supporters of the Liberal Democratic Party (LDP) in regional
areas, as well as to gain support from unaffiliated voters.

Ozawa's main basic policies

Agriculture
Liberalize agriculture. Introduce a new system to compensate
farmers growing key agricultural products. Create a system
supported by farmers and consumers.

Employment
Create stable employment system under which workers can enjoy
both their jobs and private lives.

Tax administration
Basic part of the social security should be covered by
consumption tax revenue. Cut the income tax rate. Abolish the tax
reduction system and increase benefits. Slash the administrative
expenditures and keep the consumption tax rate at the present 5%
for the time being.

Decentralization
Abolish all subsidies from the central government offices. Local
government should collect founding on their own and government
should allocate them subsidies as a package.


TOKYO 00003368 013 OF 013


Education / nurturing talented people
Create a system under which municipalities can freely create
their own programs.The state should bear responsibility for
compulsory education at the end.

Foreign policy/security
Under the present Constitution, Japan should actively participate
in UN-centered activities to contribute to the internal
community.

20) Ozawa likely to be reelected as Minshuto president; Akihiro
Ota most likely to be picked as Minshuto leader

YOMIURI (Page 1) (Full)
June 18, 2006

With the close of the regular Diet session on June 18, Minshuto
(Democratic Party of Japan) and the New Komeito have stepped up
their intraparty efforts to choose leaders in fall. Minshuto
President Ichiro Ozawa, 64, will likely to be reelected as the
party's leader in the September presidential election, while New
Komeito representative Takenori Kanzaki, 62, is expected to be
replaced by Acting Secretary General Akihiro Ota, 60.

Ozawa is currently serving out the remainder of former President
Seiji Maehara's term, which expires in September. In addition to
Ozawa showing his willingness to stay on as party leader, Acting
President Naoto Kan and Secretary General Yukio Hatoyama have
expressed their intention of supporting him in the election. With
an eye on the House of Councillors election next summer, more
Minshuto members are pinning hopes on Ozawa's reputation of
scoring election victories. As a result, he is highly likely to
be reelected without going through an election.

Ozawa is expected to announce his policy proposals for the
party's basic policy platform prior to the presidential race and
has already ready been working on the party management structure
on the assumption he will be reelected as its leader.

Since the party has been advertising that those who register as
party members or supporters can vote in its presidential poll and
some members have called for taking a vote, there is a
possibility that young lawmakers will run in the race. However,
the Kan and Hatoyama groups, and members hailing from the former
Social Democratic Party have decided to support Ozawa in the
race. The expectation is that Ozawa will easily win the election.

Meanwhile, Kanzaki will end his term as new Komeito leader at
October's party convention. Kanzaki has said that he will make a
final decision after seeing the result of the Liberal Democratic
Party presidential election in September. There is a possibility
of his remaining in his post, but he is likely to step down since
he will have served in the post over eight years. Some members
supported Kazuo Kitagawa, minister of land, infrastructure and
transport, but it is highly likely that Ota will be Kanzaki's
successor.

SCHIEFFER

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