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Cablegate: Japanese Morning Press Highlights 07/21/06

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ZNR UUUUU ZZH
P 210119Z JUL 06
FM AMEMBASSY TOKYO
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INFO RUEKJCS/SECDEF WASHDC PRIORITY
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RHMFIUU/HQ PACAF HICKAM AFB HI//CC/PA//
RHMFIUU/COMUSJAPAN YOKOTA AB JA//J5/JO21//
RUYNAAC/COMNAVFORJAPAN YOKOSUKA JA
RUAYJAA/COMPATWING ONE KAMI SEYA JA
RUEHNH/AMCONSUL NAHA 9899
RUEHFK/AMCONSUL FUKUOKA 7306
RUEHOK/AMCONSUL OSAKA KOBE 0612
RUEHNAG/AMCONSUL NAGOYA 7171
RUEHKSO/AMCONSUL SAPPORO 8442
RUEHBJ/AMEMBASSY BEIJING 3392
RUEHUL/AMEMBASSY SEOUL 9535
RUCNDT/USMISSION USUN NEW YORK 1267

UNCLAS SECTION 01 OF 09 TOKYO 004061

SIPDIS

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 07/21/06


Index:

1) Top headlines
2) Editorials
3) Prime Minister's daily schedule

Emperor Hirohito's statement on Yasukuni Shrine:
4) Calling it matter of the heart, Prime Minister Koizumi says Showa
Emperor's criticism of war criminals enshrined at Yasukuni will not
affect his visits there
5) Emperor's Yasukuni statement will add momentum to movement to
build new war memorial facility, un-enshrine Class-A war criminals


North Korea problem:
6) Japan continues effort to ratchet up pressure on North Korea by
hitting it in the pocket book
7) Japan, US, ROK senior officials discuss ways to further encircle
North Korea

8) Prime Minister Koizumi to travel to Central Asia as part of
energy resource strategy

Defense affairs:
9) Saito appointed top brass of SDF
10) Defense budget compilation may include special framework to
cover USFJ realignment cost

Political agenda:
11) Increasingly likely that Yasuo Fukuda will not run in the LDP
presidential race

Economic and trade issues:
12) US ends special inspections of beef processing plants but will
shrink regular l inspections soon to around 40,000 head of cattle
annually
13) Chief Cabinet Secretary Abe vows to continue 30 trillion yen cap
on deficit spending if elected prime minister

14) Government to scrap M-5 rocket program as cost ineffective

Articles:

1) TOP HEADLINES

Asahi:
Paloma knew of water heater glitches in 1982

Mainichi:
Fukuda unlikely to run in LDP presidential race; Abe out in front

Yomiuri:
Government to introduce video-link system in criminal court to
reduce mental stress for victims

Nihon Keizai:
Postal company to handle non-life insurance products once totally
privatized

Sankei:
Avian flu kills 42 people in Indonesia


TOKYO 00004061 002 OF 009


Tokyo Shimbun:
Koizumi: Later Emperor's Yasukuni Shrine statement will not affect
his visits

2) EDITORIALS

Asahi:
(1) Late Emperor's words on Class-A war criminals at Yasukuni Shrine
crucial
(2) Learn lessons from past flood damage

Mainichi:
(1) Emperor's memo: Enshrinement of Class-A war criminals at
Yasukuni inappropriate
(2) Use orthodox methods to get economy out of deflation

Yomiuri:
(1) Emperor spoke from heart in memo
(2) Overheated Chinese economy requires yuan reform

Nihon Keizai:
(1) Emperor's thoughts must be respected
(2) FRB chairman's congressional testimony

Sankei:
(1) Prime minister must continue visiting the shrine despite Tomita
memo
(2) Yuan peg to US dollar no longer necessary

Tokyo Shimbun:
(1) Tighten noose around bid-rigging companies
(2) Improved rehabilitation system necessary

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, July 20

NIHON KEIZAI (Page 2) (Full)
July 21, 2006

10:32
Met at Kantei with Deputy Chief Cabinet Secretary Futahashi.

11:00
Met Economic, Fiscal and Financial Policy Minister Yosano and
others. Followed by Morocco Ambassador Lecheheb. Later met JDA
Director General Nukaga.

13:57
Met Disaster Prevention Minister Kutsukake, Deputy Chief Cabinet
Secretary for Crisis Management Noda, and others.

SIPDIS

14:31
Met OECD President Gurria and others.

15:05
Met Japan Institution of International Affairs President Yukio Sato.
Followed by Lower House member Satsuki Katayama. Then met Secretary
General Takebe.

16:45
Met Tunisia Ambassador Hannachi and others.

TOKYO 00004061 003 OF 009

17:00
Met METI Vice Minister Kitabatake, and Natural Resources and Energy
Agency Director General Mochizuki. Attended a meeting of the Council
on Economic and Fiscal Policy. Later, met Finance Minister
Tanigaki.

18:24
Returned to his official residence.

4) Koizumi: Emperor Showa's Yasukuni Shrine statement will not
affect his visit

TOKYO SHIMBUN (Top play) (Abridged)
July 21, 2006

In the wake of the revelation of a memorandum showing Emperor
Showa's displeasure with the enshrinement of Class-A war criminals
at Yasukuni Shrine along with the war dead, Prime Minister Junichiro
Koizumi was queried by the press yesterday afternoon if this would
have any impact on his practice of visiting the shrine. In response,
Koizumi said:

"No, it won't. To visit or not to visit is every individual's
choice. It is a matter of the heart. No one can force it. You cannot
say good or bad because so and so went there, either."

Thus Koizumi left open latitude for a visit to the shrine before his
term of office expires in September.

Regarding a report that Emperor Showa expressed displeasure with the
enshrinement of Class-A war criminals at Yasukuni, Koizumi said:

"I don't know it in detail, but it's a matter of the heart. I think
(Emperor Showa) had various thoughts in his mind."

Regarding the fact neither Emperor Showa nor the present Emperor
have visited Yasukuni since it enshrined Class-A war criminal along
with other war dead, Koizumi only said:

"I cannot say anything about it because different people have
different thoughts. It's a matter of the heart. Every individual has
the freedom to decide whether to visit or not."

Touching on calls for removing Class-A war criminals from Yasukuni,
he also said:

"The government should abstain from imposing its view on any
religious organization. People are free to discuss it, however."

Meanwhile, Chief Cabinet Secretary Shinzo Abe in a press conference
yesterday afternoon reiterated the government's view on the Class-A
war criminals' responsibility for the war:

"It is a fact that they were convicted of committing crimes against
peace in the International Military Tribunal for the Far East. Japan
is not in a position to raise objections."

Chinese Foreign Ministry expresses hopes for speedy removal of
obstacle to Japan-China relations

Norihiro Shingai, Beijing

TOKYO 00004061 004 OF 009

In a telephone interview on July 20 with a Chinese Foreign Ministry
official on the revelation of a memorandum showing Emperor Showa's
displeasure with Yasukuni Shrine's step, he said:

"There is no change in our clear intention to bring progress to
relations with Japan. We hope for a removal of an obstacle to the
improvement of bilateral relations."

China's official Xinhua News Agency also simply reported on July 20
that the memorandum was discovered without any commentaries.

Yuji Yamamoto, Seoul

On July 20, South Korea's KBS-TV 9 p.m. news program reported on
Emperor Showa's alleged displeasure with Yasukuni Shrine's step
regarding Class-A war criminals, while citing Prime Minister
Koizumi's comments. The program also said that conservative Japanese
lawmakers would lose their justification for visiting the shrine.

The South Korean government has not released any official comment.

5) '06 LDP presidential election: Emperor Showa's "Yasukuni" remarks
found in a memo likely to give impetus to calls for separate
enshrinement and construction of a new facility; Abe may find
himself at disadvantage

YOMIURI (Page 4) (Excerpts)
July 21, 2006

Following the discovery of a memo confirming Emperor Showa had
discontinued visiting Yasukuni Shrine because of the enshrinement of
Class-A war criminals there, speculation began growing in the ruling
and opposition parties yesterday that this development is likely to
give a boost to the notion of separate enshrinement, as proposed by
former Liberal Democratic Party (LDP) Secretary General Makoto Koga,
chairman of the Japan War-Bereaved Association. It could also help
the move led by former LDP Vice President Taku Yamasaki for the
construction of a national memorial facility. There is also an
analysis that Chief Cabinet Secretary Abe, who is positive about
paying homage at Yasukuni Shrine, may be placed at a disadvantage in
the upcoming LDP presidential election in September.

"I have nothing to comment beyond this," Abe said in a firm tone to
end a press briefing yesterday evening, in which he faced a barrage
of questions about the Yasukuni issue.

Abe's position is that the Yasukuni issue should not be used as a
campaign issue. In his book published yesterday, Abe insists on the
appropriateness of visits to Yasukuni Shrine and expresses his deep
respect for the imperial family. He appeared irritated at the sign
of an escalation of debates over shrine visits in the wake of the
discovery of the memo.

Also, LDP Secretary General Takebe emphasized to the press corps:
"Yasukuni Shrine is a religious corporation. So, the government and
politicians should not tell the shrine to do this or that. It's
wrong to see this development in the context of whether it has an
impact on the presidential election or not." In contrast, New
Komeito Representative Kanzaki told reporters: "Calls for separate
enshrinement are certain to gain momentum in various quarters of
Japan."

TOKYO 00004061 005 OF 009

LDP lawmakers who are in favor of the prime minister's visits to
Yasukuni Shrine were shaken by the memo.

6) Japan ratcheting up pressure on North Korea

NIHON KEIZAI (Page 2) (Full)
July 21, 2006

Without waiting for additional sanctions against North Korea, both
the public and private sectors are ratcheting up pressure on that
nation. Some local governments have reduced or exempted the property
tax for facilities related to North Korea. The government yesterday
released the results of its survey on these governments and urged
them to strengthen taxation on such facilities. In the private
sector, many companies have voluntarily refrained from discharging
cargo from North Korean-registered ships at ports across the
nation.

The Internal Affairs and Communications Ministry conducted a survey
on 140 local governments that house the head office or branch
offices of the General Federation of Korean Residents in Japan to
see the state of their special measures to reduce the property tax
for such facilities for fiscal 2006 and released its results
yesterday. The ministry publicized the results of the survey for
fiscal 2005 in March. The latest survey is intended to see if the
tax on North Korean facilities was raised over the last four
months.

There are 44 municipal governments that have exempted North
Korea-affiliated facilities from taxation, including Sapporo,
Saitama, and Fukuoka. This figure is 19 less than in the previous
survey. The number of governments that have not taken preferential
measures increased nine to 41.

Mainly private businesses have voluntarily refrained from
discharging cargo. Nippon Express Co., has stopped cargo-handling
operations for North Korean ships since July 7 at Maizuru Port in
Kyoto, at which the largest number of North Korean ships called. A
company worker said: "We voluntarily decided it, taking various
circumstances into consideration." The company has no plan to remove
this measure for the time being.

7) Japan looking for ways to surround North Korea; High-level
officials of Japan, US, South Korea meet

YOMIURI (Page 2) (Excerpts)
July 21, 2006

Following the United Nations Security Council's (UNSC) recent
adoption of a resolution on North Korea, visiting high-level
officials from the US government and the South Korean government
yesterday met separately with senior officials of Japan's Ministry
of Foreign Affairs (MOFA) and other agencies. They discussed such
matters as the possibility of the resumption of the six-party talks.
While leaving room for discussions with other countries, for
instance, under the six-party framework, the Japanese government
intends to look for ways to tighten the net around North Korea in
preparation for additional sanctions to take under the Foreign
Exchange and Foreign Trade Control Law.

MOFA's Asian and Oceanian Affairs Bureau Director-General Kenichiro

TOKYO 00004061 006 OF 009


Sasae yesterday met with South Korea's Foreign Affairs and Trade
Ministry's Korean Peninsula Peace Diplomacy Department Director Chun
Young Woo at MOFA, and the two officials agreed on the policy of
implementing the UNSC's North Korea resolution and bringing North
Korea back to the six-party talks as quickly as possible. They also
confirmed that they would use the upcoming ASEAN Regional Forum
(ARF) in Malaysia slated for July 28 in order to translate this
policy into action.

But there is a difference between Japan and South Korea in terms of
which to emphasize, dialogue or sanctions. After the meeting, Chun,
speaking of the UNSC's resolution that includes a provision
preventing the transfer of money and technologies for missile
development in North Korea, stressed: "(The resolution) must not be
used to obstruct the resumption of the six-party talks. It should
not be used to impose sanctions for the sake of sanctions." Chun
then indicated a willingness to hold a five-party meeting without
North Korea.

8) Koizumi to visit resource-rich Central Asia next month

YOMIURI (Page 1) (Full)
July 21, 2006

Prime Minister Junichiro Koizumi decided yesterday to visit several
countries in Central Asia in late August. The aim is to strengthen
relations with Central Asian countries with rich energy resources,
such as oil and natural gas. This will be the first trip to Central
Asia by a Japanese prime minister. Koizumi is also scheduled to go
to Mongolia in early August as part of strategic diplomatic efforts
to curb the increasing influence of China and Russia in this
region.

In meetings with Kazakhstan President Nursultan Nazabayev and other
leaders in this region, Koizumi will reveal plans to support their
efforts to adopt a market economy, construct roads, eradicate
infectious diseases, and to protect the drought-affected Aral Sea.

Japan has mapped out a plan to transport oil and natural gas
exploited in Central Asia to the Indian Ocean via Afghanistan and
then to import them to Japan. It is necessary to construct a
pipeline and road network first. But such facilities will run
through politically unstable areas, so no specifics have yet been
worked out. In a bid to turn this plan into action, Koizumi will
convey Japan's willingness to accelerate working-level talks.

Countries in Central Asia are traditionally pro-Japanese, but as
members of the Shanghai Cooperation Organization, they are forging
stronger cooperative relations with China and Russia on the
political and military fronts. By expanding its economic ties with
Central Asia, Japan would like to prevent a formation of bloc
economy, centered on China and Russia, in this region.

9) Maritime Chief of Staff Saito tapped as joint staff head

NIHON KEIZAI (Page 2) (Full)
July 21, 2006

Defense Agency (JDA) Director General Fukushiro Nukaga yesterday
accepted Head of the Joint Staff Hajime Matsusaki's honorable
retirement and unofficially appointed Maritime Chief of Staff
Takashi Saito to replace him. The personnel decision will be

TOKYO 00004061 007 OF 009


officially announced upon reported and approved at a cabinet meeting
on Aug. 4. Matsusaki, who used to be a Ground Self-Defense Force
(GSDF) member, assumed the current post when the SDF integration
operation system was introduced in March. Saito will be the second
head of Joint Staff. Given the completion of GSDF withdrawal from
Samawah, the JDA decided on the replacement.

Takashi Saito: After graduating from National Defense Academy in
1970, joined the Maritime Self-Defense Force; after serving as
Maizuru district commandant and Yokosuka district commandant,
assumed the post of maritime chief of staff in January 2005; comes
from Kanagawa Prefecture; 58 years old.

10) Defense spending cut likely to be focus of budget compilation;
Tug of war between JDA, MOF over budget for US force realignment

YOMIURI (Page 4) (Full)
July 21, 2006

With a 1% cut in the national defense budget's discretionary outlays
set by a guideline for budgetary requests, which will be formally
decided today, a tug of war between the Defense Agency (JDA) and the
Ministry of Finance (MOF) is likely to intensify in the budget
compilation that will start shortly. Given the huge amount of US
force-realignment-related costs, the focus of budget compilation
will be (1) the question of whether the realignment costs will be
appropriated separately from the defense budget; and (2) when and
how the midterm defense buildup program covering fiscal 2005 through
fiscal 2009 will be reviewed.

Regarding the US force realignment costs, the guideline for
budgetary requests states: "If trouble in terms of reducing local
burdens is likely to arise even after the defense-related
expenditures are further streamlined, such costs will be separately
discussed in the process of budget compilation." The JDA has held
that "it is impossible to include all the realignment costs in the
defense budget," as JDA Director-General Nukaga has said. A senior
JDA official interprets the guidelines as "leaving open the
possibility of handling realignment costs in a separate budget."

The realignment costs planned in the fiscal 2007 budget will be
research expenses and the like, but in the three years ahead, the
construction of an alternate facility for the US Futenma Marine
Corps Air Station, for example, will be set into full motion, and
the annual realignment costs are expected to reach hundreds of
billions of yen.

In the fiscal 2006 guideline for budgetary requests, there was a 3%
cut in the defense budget's discretionary outlays, but in the fiscal
2007, such a cut is likely to be only 1% . This has made the JDA
relieved.

The JDA's initial plan was to put off a review of the midterm
defense buildup program until next year, when the details of the US
force realignment plans are made clear. But in response to North
Korea's recent ballistic missile launches, some in the JDA are
beginning to contend that in order to minimize defense spending
cuts, it is wise to review the buildup program this year, when there
is a heightened sense of crisis.

11) Increasingly unlikely that Yasuo Fukuda will run in the LDP
presidential election, making Abe the easy frontrunner

TOKYO 00004061 008 OF 009

MAINICHI (Top play) (Excerpt)
July 21, 2006

The outlook is growing stronger that former Chief Cabinet Secretary
Yasuo Fukuda will not declare himself as a candidate in the
September election of the Liberal Democratic Party (LDP) president.
In addition to the large number of supporters of Chief Cabinet
Secretary Shinzo Abe in the Mori faction, to which Fukuda also

SIPDIS
belongs, Fukuda himself on the 20th strongly hinted to his aides his
intention not to run. Another strong possibility that he will not
run has been his showing in public opinion polls, always second
after Abe. The probability has become strong now that the LDP
presidential election will find Abe as the easy frontrunner.

12) BSE: US to end special inspections as early as end of August;
Number of cattle subject to inspection to be reduced to 40,000 a
year

TOKYO SHIMBUN (Page 3) (Full)
July 21, 2006

Washington, Shinichi Kuru

Mike Johanns, secretary of the Department of Agriculture, gave a
telephone press conference yesterday. He announced that the US would
end special BSE inspections, which were introduced in June 2004, as
early as the end of August and instead reinstate regular
inspections.

Japan imposed a second ban on US beef imports following to the
discovery of specified risk materials in shipments, which are
believed to be the cause of BSE. The outlook is now that the beef
trade will be reinstated as early as the end of this month. The
curtailment of safety inspections before the resumption of beef
trade will likely incur the distrust of Japanese consumers.

The special inspections target cattle categorized as high risk,
including downer animals. Inspections have thus far been carried out
on 759,000 cattle, and two positive cases have been found.

Commenting on the special inspections, Johanns concluded, "It was
found that the BSE level of US cattle is extremely low." Regarding
regular inspections, which target 40,000 cows, he noted, "The
regular inspections by the US are ten times stricter than
international standards." He thus underscored his perception that
there is no problem about the safety of US beef. As to the timing of
the announcement of the decision, he took the view that it would not
bring a sharp reaction from Japanese consumers, saying, "Announcing
the decision now is more honest than doing so after beef trade
resumed."

13) Abe effectively pledges to maintain 30-trillion-yen government
bond framework

SANKEI (Page 5) (Excerpts)
July 21 2006

Referring to policy themes to be tackled by the post-Koizumi
administration, Chief Cabinet Secretary Shinzo Abe in a speech given
at a meeting of the Editorial Study Group of Subscribers to the
Kyodo News Agency, held in Tokyo yesterday, revealed his stance of

TOKYO 00004061 009 OF 009


maintaining the current fiscal reconstruction efforts and the
30-trillion-yen framework for the issuance of government bonds. He
thus effectively made public commitments in the run-up to the
Liberal Democratic Party (LDP) presidential election. He is viewed
as being good at diplomatic and security policies, as can be seen
his tough approach to North Korea. However, the deep-seated view in
the LDP is that his vulnerable point is domestic policy, including
economic policy, as an LDP-connected source put it. He has
apparently taken a positive stance of playing up his approach to
domestic affairs with an eye on the upcoming presidential race.

Commenting on next year's draft budget, Abe noted: "Prime Minister
Junichiro Koizumi upheld the 30-trillion-yen framework for the
issuance of government bonds in the current fiscal year's budget. I
will make efforts to maintain that framework." He thus hinted at
including it in his own policy initiative.

The 30-trillion-yen framework was a policy pledge Koizumi made when
he came into office. However, he had been unable to fulfill it due
to a tax revenue shortage until this year, when he managed fulfill
this commitment, backed by an increase in tax revenues.

14) M-5 rocket to be abandoned: JAXA to develop successor at lower
cost

TOKYO SHIMBUN (Page 3) (Full)
July 21, 2006

The Japan Aerospace Exploration Agency (JAXA) has decided to end the
use of the M-5 solid-fueled rocket for the launch of a science
satellite and instead develop a smaller-size solid-fuel rocket. The
M-5 was developed by the former Institute of Space and Astronaut
Science (ISASS). It has the capability of launching a satellite
weighing 1.8 tons into an orbit 250 kilometers high. Six satellites
have been launched as of this February, of which five were
successful. The problem was that one M-5 rocket costs 7 billion yen,
which is expensive in light of its launching capability.

JAXA was established in October 2003, merging the former ISASS and
another organization. The new organization reviewed projects that
had been undertaken by the three organizations and decided not to
allocate new budgetary funds to reduce the cost of the M-5. There
was a strong call for continuing the development of a solid-fuel
rocket, which is connected with missile technology.

The launch capability of a rocket to be developed anew will be
between 0.5 and 1 ton, but its price will be held to around 2.5
billion yen. There is now a plan to use a solid strap-on booster for
the main H-IIA rocket for the main part of the envisaged rocket.
JAXA will decided on details by around next May after completing
research and development. It said that it wants to begin
full-fledged development starting in 2008.

The launching of the Solar-B, a solar observation satellite, at the
end of September will be the last launch of an M-5.

JAXA will report its decision at a meeting of the Space Development
Commission on July 26.

SCHIEFFER

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