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Cablegate: Japanese Morning Press Highlights 07/11/06

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UNCLAS SECTION 01 OF 11 TOKYO 003844

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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 07/11/06


Index:
1) Top headlines

2) Editorials

3) Prime Minister's daily schedule

4) Yomiuri poll: Koizumi Cabinet support rate at 50.2 PERCENT ,
while 46 PERCENT support Abe as next prime minister, compared to
Fukuda's 18 PERCENT

5) Japan, US accept China's request to postpone UNSC vote on DPRK
sanctions

6) Japan, US watching carefully China's vice foreign minister's
talks in Pyongyang

7) US, Japan hold "sanctions card" in reserve, hoping North Korea
will agree to return to 6-party talks

8) ROK ambassador to Japan says statement that Japan overreacted to
missile launches is not his government's policy line

9) "Abe diplomacy" emerges with the North Korean missile launches,
overrides Foreign Ministry soft-liners opposed to sanctions

10) JDA chief Nukaga sets off debate by calling for study of strike
capability against enemy bases

11) Prime Minister Koizumi calls for "cautious study" of preemptive
strike capability

12) Asbestos victims working for Yokosuka Navy Base seek relief
under the SOFA

13) Prime Minister Koizumi begins his visit to tension-filled Middle
East today

14) Head of Taiwan's KMT party starts visit to Japan

15) Sparks fly between cabinet ministers Takenaka and Yosano over
deflation issue

16) LDP Secretary General Takebe taking conciliatory stand toward
postal rebels in Diet with eye on next year's Upper House election

17) Minshuto (Democratic Party of Japan) sets presidential election
for September 25

Articles:
1) TOP HEADLINES

Asahi: Mainichi: Sankei: Tokyo Shimbun:
UNSC postpones vote on draft resolution on North Korean sanctions;
Japan, US agree to watch China's diplomatic effort

Yomiuri:
Mitsui Life Insurance, Sumitomo Life Insurance to join hands; Joint
investment for establishment of new company that sell insurance
products over the counter

Nihon Keizai:

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NTT's new Internet Protocol (IP) network, including facilities, to
be made open for use by other telecom carriers

2) EDITORIALS

Asahi:
(1)World Cup was worth watching
(2)Net reduction in public servants

Mainichi:
(1)Unified reform of revenues and expenditures: LDP presidential
election that makes painful aspect of reform campaign issue
(2)Lowering cap on interest rates on loans: Real value of consumer
banking to be put to test

Yomiuri:
(1)Capability to attack enemy military bases: Discussion with eye on
threat needed
(2)Relief and rehabilitation system: Prevent emergence of repeat
offenders through drastic reform

Nihon Keizai:
(1)Major stockholder calls for reorganization of GM
(2)Deepen negotiations on gas field development in East China Sea

Sankei:
(1)Statement by defense agency director general: Time for discussion
on propriety of Japan having attack capability
(2)Gas fields in East China Sea: Do not allow China to buy time

Tokyo Shimbun:
(1)BOJ Governor Fukui's scandal could soil central bank's policy
(2)Emergency earthquake announcement system should be utilized to
the utmost

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, July 9 & 10

NIHON KEIZAI (Page 2) (Full)
July 11, 2006

-- 9th:
Spent all day at Kantei.
-- 10th
12:02:
Attended a government and ruling parties liaison council meeting at
Kantei. Later, met METI Minister Nikai.
14:05:
Met Ambassador to Chile Ogawa. Later, met Internal Affairs and
Communications Minister Takenaka. Followed by Cabinet Intelligence
Director Mitani.
15:20:
Met with incoming and outgoing METI Vice Minister Kitahata and
Sugiyama, and incoming and outgoing METI Deputy Vice Minister
Kitamura and Kusaka. Followed by Deputy Foreign Minister Nishida and
European Affairs Bureau Director General Harada.
16:30:
Met with Ghana Ambassador to Japan Adjei-Barwuah.
18:15:
Returned to his official residence.


TOKYO 00003844 003 OF 011


4) Poll: Abe leads Fukuda in post-Koizumi race

YOMIUIRI (Page 2) (Full)
July 11, 2006

The Yomiuri Shimbun conducted a face-to-face nationwide public
opinion survey on July 8-9, in which respondents were asked to pick
who they thought would be most appropriate as Prime Minister
Koizumi's successor. Among five listed lawmakers in the ruling
Liberal Democratic Party, Chief Cabinet Secretary Abe stood at 46
PERCENT , topping all others for the sixth month in a row since
February.

Yasuo Fukuda, one of Abe's predecessors in the CCS post, ranked
second at 18 PERCENT . Abe marked a lead of 27 percentage points
over Fukuda. Abe's lead is wider than the preceding month's 24
points. Among other LDP lawmakers, Foreign Minister Aso was at 4
PERCENT and Finance Minister Tanigaki at 2 PERCENT , both leveling
off from last month.

The approval rating for the Koizumi cabinet was 50.2 PERCENT , down
1.8 points from last month. The Koizumi cabinet's support rate went
down for the third month in a row. In the breakdown of public
support for political parties, the ruling Liberal Democratic Party
stood at 38.6 PERCENT , down 1.9 points from last month. The leading
opposition Democratic Party of Japan (Minshuto) was at 14.6 PERCENT
, down 0.2 points.

5) UNSC postpones vote on draft resolution on North Korean sanctions
at 11th hour with Japan, US agree to China's proposal out of concern
over its using veto right

SANKEI (Top Play) (Excerpts)
July 11, 2006

The United Nations Security Council (UNSC) yesterday decided to put
off a vote on a resolution on North Korean sanctions presented by
Japan and other countries. Chances are that the vote may be put on
hold until the G-8 Summit (St. Petersburg Summit) starting on the
15th. As Vice Foreign Minister Wo Dawei is now visiting Pyongyang,
China strongly called for postponing a vote on the resolution while
it is pursuing talks with North Korea. Japan and the US agreed to
postpone the vote.

Upon receiving China's request, Foreign Minister Taro Aso and Chief
Cabinet Secretary Shinzo Abe talked with Stephen Hadley, Assistant
to the President for National Security Affairs, separately and
discussed how to deal with the issue.

As a result, they agreed to (1) seek the adoption of a sanctions
resolution at the UNSC, (2) not to put the draft resolution to a
vote while China is continuing diplomatic efforts toward North
Korea; (3) and immediately put the draft resolution to a vote, if
China's effort fails. As conditions for avoiding the vote, the US
called on North Korea to unconditionally return to the six-party
talks and pledge to indefinitely postpone the test launching of
missiles.

Japan and the US had been determined to put the draft resolution on
a vote on the 10th, but China and Russia strongly opposed it. In
particular, China hinted at exercising its veto power.


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Aso told reporters at the Foreign Minister early this morning: "We
have given time for China to persuade North Korea, but there is no
change in our policy of putting the sanctions resolution to a
vote."

Regarding the draft resolution on North Korean sanctions at the
UNSC, Japan and the US had intended to put it to a vote on the 10th,
while assuming a possible use of veto power by China. However, they
stopped the move. They will now watch China's effort to persuade
North Korea for a while, but if its effort falls through, Japan and
the US will once again put the draft resolution to a vote. Chances
are, however, that the settlement of the issue may become further
off due to the change of direction at the 11th hour.

6) Japan, US carefully watching North Korea visit by Chinese Vice
Foreign Minister Wu

ASAHI (Page 2) (Full) July 1, 2006

Japan, the United States, Britain, France, and other countries have
jointly submitted to the United Nations Security Council a
resolution calling for sanctions against North Korea for its missile
launches. But voting on the resolution has been delayed, because the
US and other countries, out of consideration for China, which chairs
the six-party talks, have judged it better to ascertain the outcome
of a visit to North Korea by Chinese Vice Foreign Minister Wu Dawei.
Concerned that China might take a step to roll back, Japan had hoped
for a vote on the resolution on July 10 while working on China and
Russia to abstain from voting, but it had to follow Washington's
lead.

In a discussion program on a major US TV network on July 9, Under
Secretary of State Burns stated about Washington's moves over North

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Korea's missile launches: "The US has conducted multilateral
diplomacy." He cited as factors to determine its future moves Wu's
visit to North Korea, in addition to developments at the UN and
visits to countries concerned by US Assistant Secretary of State
Christopher Hill.

Wu arrived in Pyongyang on July 10, but it seems unlikely that he
will wind up his schedule that same day. Burns stated: "Once we see
the outcome of the Chinese delegation's visit to North Korea, we can
guess how things will develop in the UNSC." He also said: "We would
like to take a vote in several days," adding: "We hope China will
apply pressure to and exert influence over North Korea."

Japan, in an attempt to bring about an early vote on the resolution,
called on China and Russia to abstain or be absent from voting, with
a senior government official criticizing these two countries: "Do
they remain opposed because their political systems are similar to
North Korea's?" Regarding Wu's visit to North Korea, Chief Cabinet
Secretary Abe stated in a press conference yesterday: "The UNSC

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resolution has nothing to do with the planned negotiations between
China and North Korea in principle. It is important for the
international community to play up its reaction to North Korea's
missile launches."

Foreign Minister Aso also told Hill: "The Japan-US alliance is being
put to a test. It is of importance for the two countries to take
joint steps."

If the Japanese government forces a vote before convincing China and

TOKYO 00003844 005 OF 011


Russia to change their position, they might veto the resolution.

Some government officials suggest that separate from the UN
framework, sanctions by a coalition of the willing composed of the
US, Japan, and other countries should be considered in the event
that the resolution fails. But Washington gives priority to the
unity of the international community in dealing with North Korea.
Under such circumstances, things are unlikely to proceed as Japan
hopes.

7) Japan, US save "sanctions card" for later use with vote on
resolution for sanctions against North Korea postponed, expect North
Korea to return to six-party talks

NIHON KEIZAI (Page 3) (Excerpts)
July 11, 2006

The Japanese and US governments yesterday accepted a delay in the
vote on a resolution imposing sanctions against North Korea at the
United Nations Security Council (UNSC), being determined to closely
watch what will happen to coordination by Chinese Vice Foreign
Minister Wu Dawei and other officials with North Korea. Wu is now
visiting North Korea. Japan and the United States, saving the
"sanctions card" for later user, hope that North Korea will return
to the six-party talks as quickly as possible. If a vote on the
resolution is forced through, China may use its veto right. In
addition, Britain and France, co-sponsors of the resolution, have
stated their disagreement with taking a vote that day, some
observers remarked.

The new situation developed late at night on July 10. US
Presidential Assistant for National Security Affairs Stephen Hadley
told Chief Cabinet Secretary Shinzo Abe on the phone that China had
asked for a delay in the vote and asked Japan to accept the request.
Foreign Minister Taro Aso and US Secretary of State Condoleezza Rice
held a teleconference.

The Ministry of Foreign Affairs' (MOFA) position until then was that
a vote on the resolution should be taken on July 10 and that
delaying a vote was unnecessary, noting, "China-North Korea
consultations and the UN resolution are two different matters." On
the evening of July 10, US Assistant Secretary of State Christopher
Hill met with MOFA's Asian and Oceanian Affairs Bureau Director
General Kenichiro Sasae and other officials at a restaurant in
Tokyo. After the meeting, one participant said, "MOFA's position
remains the same, namely, a vote should be taken on July 10, local
time." But at the time, the momentum for postponing a vote was
already gathering.

A government official revealed: "We were informed by the Prime
Minister's Official Residence that 'other countries, including
Britain and France, are concerned about Japan's rushing into the
resolution.'"

"It was not a prearranged matter to (take a vote) on July 10." This
remark came from a senior MOFA official late at night on July 10
when senior MOFA officials gathered together at the foreign
minister's office to examine the situation.

8) South Korean ambassador to Japan: South Korean Presidential
Office's statement criticizing Japan for "overreacting" is not the
government's policy line

TOKYO 00003844 006 OF 011

TOKYO SHIMBUN (Page 2) (Full)
July 11, 2006

South Korean Ambassador to Japan Na Jong Il met yesterday with
Administrative Vice Foreign Minister Shotaro Yachi. In the meeting,
referring to a statement issued by the South Korean Presidential
Office, saying, "There is no reason for Japan to overreact," Na told
Yachi: "The statement neither expressed the government's position
nor criticized the Japanese government."

The South Korean ambassador responded to the Japanese vice foreign
minister's claim that issuing this kind of statement at present is
not productive.

9) DPRK missile launches: Abe at forefront of Japan's diplomacy
while Prime Minister Koizumi quietly watches the situation

MAINICHI (Page 2) (Full)
July 11, 2006

Naoyuki Inukai

Japan has taken an unusually hard-line stance in dealing with North
Korea's missile launches. Standing at the forefront of Japan's
diplomacy now is Chief Cabinet Secretary Shinzo Abe, known for his
tough stand toward North Korea. Those who are backing Abe are
Foreign Minister Taro Aso and Administrative Vice Foreign Minister
Shotaro Yachi. Prime Minister Junichiro Koizumi is just watching
what will happen, giving the impression that "Abe diplomacy" has
already begun.

"Some 13 of the 15 United Nations Security Council members favor the
resolution. Under this situation, if only China and Russia object,
they will embarrass themselves," an official at the Prime Minister's
Official Residence (Kantei) said, adding, "As we experienced a
similar case in dealing with the postal bills last year, there is a
big difference between opposition and abstention."

Referring to the Kantei's victory over opponents of postal reform
last year, this remark stresses the progress that Japan has made to
this point.

Following the missile launches, Abe's made a number of prominent
moves. His first move was the decision for Japan to impose sanctions
on North Korea, including a ban on port calls by North Korea's ferry
Man Gyong Bong. On the evening of July 4, the day before the missile
launches, Abe and a senior Cabinet Office official exchanged the
following views:

Senior official: "I think it would be difficult to prohibit the Man
Gyong Bong from entering Japanese ports if North Korea launched only
a Rodong missile, whose range is shorter than that of the Taepodong
missile."

Abe: "Japan is within the range of the Rodong, so it poses a real
threat to Japan."

Overridden by Abe, Japan's Security Council decided on a set of
sanctions, including the ban on port calls. Aso teamed up with Abe.
Meeting the press separately, the two indicated their intention to
aim to get a punitive resolution adopted at the UNSC by using the

TOKYO 00003844 007 OF 011


same language: "The international community should condemn it
harshly." Aso has undertaken an aggressive diplomatic offensive.

At one point, MOFA was of the view that adopting a punitive
resolution would be difficult, but Abe instructed MOFA officials:
"Japan cannot accept a chairman's statement (that has no binding
force)." Afterward, no senior MOFA officials expressed hesitant
views.

Abe maintains a tough stance, while Koizumi has been flexible and at
times emphasized the importance of dialogue with North Korea. An
aide to Koizumi explained the role sharing between Koizumi and Abe:
"By putting front-stage diplomacy in the hands of Mr. Abe and Mr.
Aso, the prime minister is watching how they act, taking a seat in
the gallery. This attitude would give the public a sense of
relief."

10) Focus again on enemy base strike

MAINICHI (Page 2) (Abridged)
July 11, 2006

In the wake of North Korea's recent firing of ballistic missiles,
some in the government and the ruling Liberal Democratic Party are
beginning to call for enabling the Self-Defense Forces to strike
enemy bases. That is because Japan has no means to defend itself in
case another country fires a warheaded missile at Japan at this
point when Japan has yet to deploy a missile defense (MD) system.
However, Japan has not acquired long-range missiles or any other
weapons intended to strike enemy bases. This is because of Japan's
defense-only posture. Reviewing this line of national policy would
incur strong backlashes at home and from neighboring countries, so
the hurdle is very high.

The problem was kick-started by Defense Agency Director General
Fukushiro Nukaga's advocacy. "It's only natural to have the limited
capability (of striking an enemy country) for national security,"
Nukaga said on July 9. Chief Cabinet Secretary Shinzo Abe also said
yesterday, "We need to study this matter at all times from the
perspective of what to do for national security." LDP Secretary
General Tsutomu Takebe has also suggested the need for positive
studies.

The government has so far taken the position that Japan is
constitutionally allowed to strike an enemy country only when it
would be unavoidable to do so in self-defense. In the meantime, the
government has also taken the position that it would be
unconstitutional for Japan to acquire intercontinental ballistic
missiles, long-range strategic bombers, and attack aircraft carriers
while regarding them as offensive weapons to be used solely for the
purpose of destroying a foreign country.

In 2003, North Korea declared its secession from the Nuclear
Nonproliferation Treaty (NPT). At the time, the then defense chief,
Shigeru Ishiba, suggested the need to study the possibility of
enabling the SDF to strike an enemy country, with government
officials and LDP lawmakers insisting on introducing Tomahawk
long-range cruise missiles. In 2004, the Defense Agency moved to
study long-range precision guided missiles. However, the agency gave
up because the New Komeito, an LDP-allied coalition partner, raised
a strong objection. Officials in the agency, aware of the high
hurdle, welcome Nukaga's advocacy. They are poised to fast-track MD

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introduction.

11) Cautious study needed for enemy base strike capability: Koizumi

YOMIUIRI (Page 2) (Full)
July 11, 2006

In connection with North Korea's recent firing of missiles, Prime
Minister Koizumi said yesterday evening that it would be all right
to study whether to enable Japan to strike enemy bases while
theoretically anticipating various cases. Koizumi also noted that it
would be difficult to judge whether a specific country intends to
attack Japan. In this context, he pointed to constitutional problems
about whether Japan is allowed to use armed force. "We will have to
think about this matter in a cautious manner," he added. He was
replying a question from reporters at his office.

12) Government gives relief to former US base asbestos victims in
accordance with SOFA

TOKYO SHIMBUN (Page 1) (Excerpts)
July 11, 2006

In accordance with the Japan-US Status of Forces Agreement (SOFA),
the government has paid a total of 56 million yen in compensation to
four former Japanese employees of US Yokosuka Naval Base who sued
the government seeking compensation for suffering from
pneumoconiosis and other illnesses from inhaling asbestos, sources
revealed yesterday.

It was the third case for the government to pay compensation in
accordance with the SOFA. The Defense Facilities Administration
Agency paid compensation to three former base workers suffering from
pneumoconiosis in 1997 and two last year. After going through three
stages, the last case came to an end in May last year with the court
deciding in favor of the plaintiffs.

Compensation has been paid for reconciliation after court rulings in
the past. The government's payment of compensation based on the
court ruling in accordance with the SOFA is likely to swiftly pave
the way for the relief of base employees suffering from damage to
their health from asbestos.

The four former employees ranging in age from 63 to 76 worked at the
Yokosuka Base's vessel repair plant for 27 to 40 years as mechanics
and welders.

13) Koizumi off to Middle East today in tense atmosphere;
Immediately return home if North Korea launches another missile

SANKEI (Page 5) (Abridged slightly)
July 11, 2006

Prime Minister Junichiro Koizumi will make a five-day visit to
Israel, the Palestinian region, and Jordan starting today. The
region is becoming tense with Israel sending troops to the Gaza
Strip in the Palestinian Authority. Koizumi intends to play up
Japan's commitment in an effort to put the receding peace process
back on track. But he might have to cut short his trip if North
Korea launches another missile. Koizumi begins his Middle East trip
today in a tense atmosphere.


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Koizumi will depart for the Middle East as scheduled, concluding
that North Korea would not launch another Taepodong-2 missile for
the time being, despite its declaration to continue missile
launches. But a source connected with the Prime Minister's Official
Residence (Kantei) noted: "If a North Korean missile landed in
Japanese territory or Japanese waters during the prime minister's
Middle East trip, he will immediately return home."

After the Middle East tour, Koizumi will attend the G8 summit to be
held in St. Petersburg from July 15. Koizumi wants to increase his
voice regarding the Palestinian issue during the summit. But how
much he can display Japan's influence and Japan's presence remains
to be seen.

Intense armed conflict

Koizumi will visit Israel and the Palestinian Authority as the first
Japanese prime minister since former Prime Minister Tomiichi
Murayama 11 years ago. Koizumi's Middle East trip was originally
scheduled for January, but it was postponed due then Israeli Prime
Minister Ariel Sharon's grave condition. Consequently, Israel has
installed Ehud Olmert as prime minister. The peace process has
stalled with the Islamic fundamentalist group Hamas having strong
control over the cabinet of the Palestinian Authority. Last month,
Israel also sent troops to the Gaza Strip to secure the release of a
captive Israeli soldier, causing an intense armed conflict. The
peace process has bogged down.

Koizumi will become the first major international leader to visit
Israel and the Palestinian Authority under such circumstances. A
Foreign Ministry official explained: "The tour provides a timely
diplomatic stage. Even if the trip ends in failure, the prime
minister has nothing to lose politically."

In his talks with Israeli Prime Minister Olmert on July 12, Koizumi
is expected to express his concern over the use of force against
Palestinians, urging Israel to resume dialogue with the Palestinian
Authority. On July 13, Koizumi is scheduled to meet with Palestinian
leader Mahmound Abbas in which he is expected to underline the need
to settle the situation quickly and return to peace talks. Koizumi
intends to urge the two leaders to push ahead with the Middle East
roadmap and aimed for confidence building.

A clear distinction with the US and EU

Following the establishment of the Hamas-controlled Palestinian
cabinet in March, the United States, which has designated Hamas as a
terrorist organization, and the European Union have frozen their
financial assistance to the Palestinian Authority. But making a
clear distinction with the US and the EU, Koizumi plans to convey
Abbas Japan's policy to continue providing financial support for
creating jobs and ensuring security for Palestinian people.

Through the Middle East tour, Koizumi intends to play up Japan's
unique commitment to peace and complement the Middle East strategy
of the US, which has been leading the peace process. But a Middle
Eastern diplomatic source took this view: "Japan has been taking a
lukewarm position toward Israel and the Palestinian Authority. There
are limitations to how much Japan can wield its influence on the two
sides. Koizumi's visit might be taken as a mere performance."

14) Taiwan's Nationalist Party Chairman Ma visits Japan

TOKYO 00003844 010 OF 011

ASAHI (Page 4) (Full)
July 11, 2006

Taiwan's main opposition Nationalist Party Chairman Ma Ying-jeou
arrived in Japan yesterday. He is energetic to strengthen
communication channels to Japanese political circles. He already met
with former Chief Cabinet Secretary Yasuo Fukuda and Liberal
Democratic Party (LDP) Secretary General Tsutomu Takebe. Ma called
at LDP headquarters immediately after arriving in Tokyo. He
underscored that he would strengthen relationships with Japan and
the United States, sharing the sense of values of democracy and
human rights, while pushing ahead with efforts to repair relations
with the Chinese Communist Party.

Many Nationalist Party members are concerned that their
communication channels to Japanese political circles have rapidly
narrowed since they handed over the reins of power to the Democratic
Progress Party in 2000. The main purpose of Ma's Japan visit is to
build the relationship of trust with Japan with an eye on regaining
the political reins in the 2008 general election.

15) Takenaka, Yosano at odds over deflation

MANICHI (Page 11) (Full)
July 11, 2006

State Minister for Financial, Economic, and Fiscal Policy Kaoru
Yosano and Minister of Internal Affairs and Communications Heizo
Takenaka have often been at loggerheads over the issue of fiscal
reconstruction during meetings of the Council on Economic and Fiscal
Policy, chaired by Prime minister Junichiro Koizumi. This time,
sparks are flying between them over the perception of deflation.

In a press conference after a cabinet meeting on July 4, Takenaka
said: "Deflation has yet to be overcome," citing declining growth in
total money supply as the main reason. Yosano offered a
counterargument in a NHK TV program on July 9: "Mr. Takenaka's
argument is in line with monetarists' theory (that an increase in
monetary supply will improve the economy). It has been proved over
the past 10 to 15 years that this theory does not apply to the
current Japanese economy. The Bank of Japan (BOJ) has not taken this
view, either." Yosano criticized Takenaka's stance of giving
priority to money supply in containing deflation, ironically calling
him "Professor Takenaka."

Many economists in the private sector support Yosano's view, as
Dai-ichi Mutual Life Insurance Research Institute Chief Economist
Naomi Iizuka said: "The slow growth of total money supply reflects
the fact that people, in anticipation of price hikes with the end of
deflation, have shifted funds from deposits to policies bearing a
good return." Nomura Securities Financial and Economic Research
Institute Senior Economist Kiuchi said: "The Takenaka remark might
be intend to pressure the BOJ to end its zero-rate policy.

16) LDP Secretary General Takebe: Whether lawmakers who rebelled
against LDP in vote on postal bills can rejoin LDP depends on how
much they will cooperate with the party in next Upper House
election

ASAHI (Page 4) (Full)
July 11, 2006

TOKYO 00003844 011 OF 011

Referring to House of Representatives members who left the Liberal
Democratic Party (LDP) after voting against the government's
sponsored postal-privatization legislation in last year's regular
Diet session, LDP Secretary General Tsutomu Takebe stated in a press
conference yesterday: "It is important for them to make efforts for
our party's candidates in the House of Councillors election. What is
important is how they will take action."

He indicated in his remark that he would allow the rebels to rejoin
the LDP even though he had previously rejected that option.

Takebe stressed: "We must appeal to unaffiliated voters in next
year's Upper House election that the LDP is the responsible party."

He then added:

"Those who worked with us as politicians have similar views.
Needless to say, there are political realignment moves afoot since
we called for even Minshuto (Democratic Party of Japan) to form a
grand alliance."

17) Minshuto to hold presidential election on Sept. 25

ASAHI (Page 4) (Full)
July 11, 2006

Yukio Hatoyama, secretary general of the main opposition party
Minshuto (Democratic Party of Japan), presented to a meeting
yesterday with President Ichiro Ozawa and Acting President Naoto Kan
a plan that the party will announce on Sept. 12 the start of the
official campaign period for its presidential election and conduct
the election on Sept. 25. The plan was approved.

The expectation is that Hatoyama will report the plan to a standing
secretaries meeting today and to a meeting of the party's all

SIPDIS
lawmakers. After that, the plan will be formally decided.

The ruling Liberal Democratic Party (LDP) will hold its presidential
election on Sept. 20 by its Diet members. Minshuto has decided to
hold the election after the LDP presidential race in order for its
new leader to come up with policy after ascertaining the new LDP
president's policy stance.

SCHIEFFER

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