Cablegate: Daily Summary of Japanese Press 10/05/06

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UNCLAS SECTION 01 OF 09 TOKYO 005812

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WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST DIVISION;
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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.

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TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA
SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 10/05/06

INDEX:

(1) In first Diet interpellations in Lower House, Abe presents "safe
driver" replies on history, Yasukuni issues, sealing off criticism
of China, South Korea

(2) Restart of Japan's relations with China and with South Korea
(Part 1): Good chance to repair soured ties

(3) Interview with Chief Cabinet Secretary Yasuhisa Shiozaki: Japan
should regularly hold meetings with China, South Korea

(4) Expert views on North Korea's nuclear-testing announcement

(5) If nuclear test carried out, government plans to expand own
sanctions against North Korea to include ban on all North Korean
ships from entering Japanese ports

(6) Iranian oil co. president: "Japan has lost its right to the Iran
oil project"

(7) Trend away from bid-rigging part 2: Ultimate preventive measures
is to pull out of business

(8) Government to accept more US students as payback for Fulbright
Grant Program

ARTICLES:

(1) In first Diet interpellations in Lower House, Abe presents "safe
driver" replies on history, Yasukuni issues, sealing off criticism
of China, South Korea

MAINICHI (Page 2) (Excerpts)
October 3, 2006

"We always hold the door open to summit meetings with China and
South Korea. To realize summits, both sides have to make efforts."
In a House of Representatives plenary session on Oct. 2, Prime
Minister Abe reiterated the need for both sides' efforts to improve
strained ties with China and South Korea. In reference to the
Yasukuni Shrine issue, too, he sealed off (former Prime Minister
Koizumi's) criticism of China and South Korea that "it is strange
for them to refuse meetings over a single issue," only saying, "I
will not make public whether I will go to the shrine."

On historical views, Abe admitted Japan's "colonial rule and
aggression" but he stopped short of touching on "the apology and
remorse" expressed in the statement issued by Prime Minister
Tomiichi Murayama in 1995. His remark, though, take a step forward
from the government's conventional vague explanation that it "honors
the spirit" of the statement.

Prime Minister Abe devoted himself to offering safe-driver replies
on such delicate issues as Yasukuni Shrine and historical views.
Such a stance reflects the fact that although arrangements have been
made for him to visit China and South Korea, on the international
stage negotiations are still going on, with the Yasukuni issue
focused on. Whenever former Prime Minister Junichiro Koizumi was
asked about the Yasukuni issue in the Diet, his criticism of these
two countries became more radical. Keeping this in mind, Abe seems
to have judged it unwise to irritate them.

TOKYO 00005812 002 OF 009

On the question of the responsibility of Class-A war criminals,
Prime Minister Abe replied, "It is not appropriate for the
government to make a specific judgment."

China cites the enshrinement of the souls of Class-A war criminals
along with the war dead as the main reason for its reaction to the
prime minister's visits to the shrine. But Abe replied in the Diet
when he was chief cabinet secretary: "They are not criminals in
Japan." He made the remark probably keeping in mind the fact that
Class-A war criminals were released by 1956 and that a resolution
calling for discharging war criminals was repeatedly submitted to
the Diet in the 1950s. Abe avoided, in a sense, recognizing Class-A
war criminals as war criminals.

In the upcoming meetings with Chinese President Hu Jintao and South
Korean President Roh Moo Hyun, the focus of attention is how
cleverly the prime minister will deal with the Yasukuni and history
issues. Regarding the Yasukuni issue, Vice Foreign Minister Shotaro
Yachi said in a press conference on Oct. 2 that the ministry has
mapped out a scenario to obtain understanding from the Chinese
government in preparation for the Oct. 8 summit meeting.

(2) Restart of Japan's relations with China and with South Korea
(Part 1): Good chance to repair soured ties

YOMIURI (Page 1) (Full)
October 5, 2006

"I would like to build future-oriented relations (with China and
South Korea), so it will be a great achievement for the top leaders
to meet and express their opinions," said Prime Minister Shinzo Abe,
who has finally decided to visit China on Oct. 8 and South Korea the
following day, to reporters last night at the Prime Minister's
Official Residence (Kantei). He was enthusiastic about his first
overseas tour as prime minister. He appears to be willing to repair
Japan's ties with the two countries, which were strained by former
Prime Minister Junichiro Koizumi's annual visits to the
controversial Yasukuni Shrine. He also appears to be eager to boost
the political base of his government by securing a steppingstone to
rebuild Japan's Asia diplomacy.

It is the first time for a Japanese prime minister to visit Asia
immediately after assuming office since Prime Minister Kiichi
Miyazawa picked South Korea as the country for his first overseas
tour in January 2002. It is also unprecedented for a prime minister
to make an overseas trip to China only 13 days after assuming
office.

Among prime ministers since the cabinet of Prime Minister Nobusuke
Kishi, Abe's 13 days would be the third shortest period of time,
following the seven days by former Prime Minister Tomiichi Murayama,
who left for Italy to attend the annual G-7 summit, and the five
days by former Prime Minister Tsutomu Hata, who took over the
predecessor's overseas schedule.

Former Prime Minister Yasuhiro Nakasone has lauded Abe's quick
decision made immediately after the inauguration of his
administration. Nakasone visited Seoul soon after he assumed the
prime minister's post in order to mend the bilateral relationship
soured by economic frictions. In a bid to realize his trip to South
Korea, his government conducted prior coordination behind the
scenes, sending an envoy secretly to Seoul. He commented:

TOKYO 00005812 003 OF 009

"Political change is a good chance for shifting foreign policy.
Feeling this way, both China and South Korea became positive about
resuming summits with Abe. Therefore, Tokyo and Beijing and Tokyo
and Seoul shared the same view. I think the summits will be
successful."

The dominant view used to be that it would be difficult for Abe to
rebuild diplomacy toward China and South Korea since he had
supported Koizumi's visits to Yasukuni Shrine. Nakasone, however,
said: "The Chinese government has now taken a positive stance of
hearing Prime Minister Abe's views."

The fact that Japan, China and South Korea maintained close economic
ties under the Koizumi government seems likely one reason to prompt
the suspended summits between Japan and China and between Japan and
South Korea.

Japan's total trade with China (including Hong Kong) increased from
12 trillion yen in 2000 to 25 trillion yen in 2005. China has been
Japan's largest trade partner, surpassing the United States in 2004.
Japan's trade value with China and South Korea accounts for 25% of
its total trade value. Travel of people between Japan and China and
between Japan and South Korea has increased to more than 4 million
annually. Stabilization of political ties between Japan and China
and between Japan and South Korea will directly link to benefits for
both sides.

An increase in the importance of a multinational framework
tightening the noose around North Korea, which has pushed ahead with
brinkmanship by announcing that it will conduct a nuclear test, is a
major reason why China and South Korea have decided to repair their
ties with Japan.

The upcoming summits alone will not be able to mend the once
strained relations.

At the Japan-China summit held in October 2001 after Koizumi had
visited Yasukuni Shrine for the first time as prime minister, the
top leaders agreed to improve the bilateral relations, but "the
reconciliation" did not last long.

Akihiko Tanaka, professor at graduate school of the University of
Tokyo, commented:

"Under the Koizumi government, talking about the Yasukuni issue
became the same as talking about relations between Japan and China
and between Japan and South Korea. It will be good if the suspended
mutual summit visits are resumed."

Abe's diplomatic skills will be tested in the upcoming tour. It
remains to be seen whether he will be able to link this opportunity
to a resumption of the protocol of mutual visits by the top leaders
of Japan and China and the top leaders of Japan and South Korea.

(3) Interview with Chief Cabinet Secretary Yasuhisa Shiozaki: Japan
should regularly hold meetings with China, South Korea

YOMIURI (Page 4) (Full)
October 5, 2006

-- What is the point of the upcoming summits between Japan and China
and between Japan and South Korea?

TOKYO 00005812 004 OF 009

Both sides agreed on the need to overcome their respective political
difficulties and try to find common ground so that each nation will
be able to accept the other side's views while respecting its
people's feelings, position, and way of thinking. We should not be
overjoyed with the leaders meeting only once. The question is how to
regularize it. It is important for the leaders to meet on a regular
basis and discuss issues on which both have different views. It is
what protocol requires (for the prime minister to invite the two
leaders to Japan during the summits). The prime minister's view (on
the prime minister's annual visit to Yasukuni Shrine) is totally
consistent.

-- Are you going to visit Yasukuni Shrine while in office as chief
cabinet secretary?

The question of whether one goes to Yasukuni Shrine or not is a
matter of faith or a matter of the heart. Meanwhile, I am in the
post of chief cabinet secretary, and I also need to keep this in
mind. Upon fully considering these two matters, I will reach a
judgment in a proper way.

-- What is the aim of strengthening the functions of the Kantei?

There is a judgment that must be made at the best time, and it will
take time if coordination is carried out among government agencies.
A sharply increasing number of issues now require the prime
minister's decision. The role of the special advisors is to help the
prime minister make appropriate judgments and offer the best advice
to him. We don't aim to go up against the bureaucracy by our
strengthening the functions of the Kantei.

-- Why is the government planning to study possible cases for
collective self-defense?

The ongoing changes in the global security situation require the
proper functioning of the Japan-US alliance. In order to make the
Japan-US alliance useful for the world and Asia, it is necessary to
discuss cool-headedly whether the Cabinet Legislation Bureau's
interpretation that "although Japan has the right to collective
self-defense, it is not allowed to use it" is applicable under any
circumstances. In short, the purpose is to have the Japan-US
alliance function properly. Although we have cleared up each case
under the right of individual self-defense, there might be something
that can be done under the category of collective self-defense. On
this issue, we need to conduct discussion coolly. We are going to
proceed with the discussion within the framework of the
Constitution, and the discussion will never deviate from the spirit
of the Constitution.

-- What themes will be discussed at the education revitalization
conference to be set up shortly?

Now that education power at schools, in local communities, and at
home is significantly declining, I expect wide-ranging topics to be
discussed, focusing on how to build a nation in which strong-minded
persons will be created once again."

-- What determination do you have in addressing the abduction issue
as the cabinet minister in charge of the issue?

Based on the principle that "there will be no normalization of
diplomatic ties with North Korea without a resolution of the
abduction issue," we will continue to ask the North to send

TOKYO 00005812 005 OF 009

abduction victims back to Japan immediately, reveal the truth, and
to hand the perpetrators over to Japan. We must make utmost efforts
to resolve (the abduction issue) at the United Nations Human Rights
Committee, the six-party talks, and on other occasions, along with
the issue of North Korea's denuclearization.

(4) Expert views on North Korea's nuclear-testing announcement

NIHON KEIZAI (Page 3) (Full)
October 4, 2006

Pyongyang probes China, South Korea, Russia for reactions: Masao
Okonogi, professor at Keio University

The timing of North Korea's nuclear-testing statement is probably
because Pyongyang deemed it difficult for the United States to deal
with the issue of North Korea's nuclear ambitions while the United
Nations Security Council's permanent members are in the midst of
talks over the issue of Iran's nuclear programs. North Korea has
said that country would return to the six-party talks if the United
States calls off its financial sanctions. This is what North Korea
aimed at, I think.

In a sense, the statement might be intended to test the other
countries participating in the six-party talks. China, South Korea,
and Russia will be prodded to clarify whether they will tune in to
Japan and the United States or whether they will give first
consideration to maintaining the status quo. North Korea's collapse
due to tougher sanctions would cause China and South Korea the most
trouble. Both China and South Korea will probably make desperate
efforts to persuade North Korea in trying to stop it from carrying
out a nuclear weapons test. North Korea might think this approach
might easily get the sanctions removed.

North Korea probably wants to obtain diplomatic clues by threatening
to carry out nuclear tests and then waiting to see how other
countries will respond. If North Korea fails to get the sanctions
called off, the North is highly likely to carry out a nuclear test.
It is aware of a country like Israel that carried out nuclear tests
and continued to extract plutonium after that. Israel in the end had
to be acknowledged as a nuclear power. It's not strange to see North
Korea aiming at the same.

North Korea prepared for nuclear testing: Tatsujiro Suzuki, visiting
professor at Graduate School of Public Policy, University of Tokyo

There are many mountains in North Korea. Judging from this
geological feature, North Korea is highly likely to choose to carry
out an underground nuclear test like Pakistan. That means tunneling
deep into the mountains and detonating the bomb there. Its risk is
high, when compared with digging a deep hole under the ground. If
they should fail in that nuclear test, radioactive substances may
flow into the air. However, North Korea would take every possible
measure in order to prevent its land from being contaminated.

If they carry out a nuclear test, it's possible to pick it up right
away with oscillatory waves. We can tell it from an earthquake. So
if they say they carried out a nuclear test without doing it, we can
check it out right away to see whether it's true or false.

A country that is in the process of nuclear testing proves that that
it has certainly increased its nuclear capability. In nuclear
testing, they need a set of three nuclear warheads: one for testing,

TOKYO 00005812 006 OF 009

another for actual use, and a spare. We can take it that North Korea
has at least two sets or a total of six nuclear warheads. It's
possible that their nuclear testing is also intended to advertise to
the nuclear black market. It's the last card for North Korea to
use.

(5) If nuclear test carried out, government plans to expand own
sanctions against North Korea to include ban on all North Korean
ships from entering Japanese ports

YOMIURI (Top play) (Abridged)
October 5, 2006

The government yesterday firmed up its response plan in case North
Korea carries out a nuclear weapons test. It will be centered on
such measures as expanding the ban on port entries by North Korean
ships already in place. At the same time, in order to bring the
international community in line on applying sanctions against North
Korea, the plan is to have the United Nations Security Council adopt
a sanctions resolution based on Chapter 7 of the UN Charter that
forms the base for such UN actions as economic sanctions.

Speaking about North Korea's nuclear testing in the Upper House
plenary yesterday, Prime Minister Abe stressed: "It would be totally
unacceptable. We will respond appropriately, linking with the United
States, as well as with China, the Republic of Korea and other
countries." If North Korea decides to go ahead with the nuclear
test, , coming after the missile launches in July, the government
will take it as a major crisis for its national security.

Under Japan's own sanctions, a measure to ban port entries by North
Korean ships was introduced under the Law Banning Port Entries by
Specified Vessels, under which the Mang Gyong Bong-92 has been
prohibited entry, the plan is to subject other North Korean cargo
vessels to the measure as well. On the issue of cargo ships from
third countries that passed through North Korean ports, Japan is
considering not allowing their entry in principle.

Already there are measures in place based on the foreign exchange
and foreign trade laws targeting 15 companies and one individual
that include North Korean trading firms placing a ban on remittances
and capital transactions. The government intends to broaden the
target list.

Under the import-export regulations, trade in approximately 70 items
feared to be convertible for use in missiles or weapons of mass
destruction have been restricted. If the North carries out a nuclear
weapons test, the government is considering expanding the list of
items subject to regulation to include farm and fisheries products,
such as asahi clams and matsutake mushrooms -- both a main staple of
North Korean exports.

(6) Iranian oil co. president: "Japan has lost its right to the Iran
oil project"

TOKYO SHIMBUN (Page 1) (Full)
Evening, October 5, 2006

Takeshi Hamaguchi, Cairo

State-run National Iranian Oil Company President Gholam Nozari
announced on Oct. 4 that Japan's Inpex Holdings Inc. has lost its
rights to develop the Azadegan oilfield in the southwestern part of

TOKYO 00005812 007 OF 009

Iran since negotiations have ended in failure, according to
information from Iran.

Japan in February 2004 won concession rights to develop the
oilfield, which is estimated to have reserves of approximately 26
billion barrels of oil. However, construction work was delayed,
affected by sharp rises in material costs and Iran's nuclear
development program.

Once Japan loses the rights to develop the largest oil field in the
Middle East, it will be pressed to revamp its energy
resources-procurement strategy.

Iran's news agency quotes President Nozari as saying:

"Japan has lost an opportunity to develop the Azadegan oilfield.
Although we discussed various options with Japan, both countries
failed to find common ground."

A senior official at the Ministry of Economy, Trade and Industry
indicated a willingness to continue negotiations with Iran, saying,
"We have not heard that negotiations had ended. I believe
negotiations will continue in the future."

With the aim of starting production in the Azadegan oilfield next
June, the Iranian government had demanded that Japan start the
project, setting the deadline at Sept. 15, and then at Sept. 30.
Japan has put off the start of the project, citing skyrocketing
material costs, and the state of insufficient removal of the
landmines buried in the Iran-Iraq War in the 1980s.

In addition, under the situation in which the United States has
indicated the possibility of imposing sanctions on Iran over its
nuclear development program, Japan remained unable to push ahead
with the project in that nation.

(7) Trend away from bid-rigging part 2: Ultimate preventive measures
is to pull out of business

NIHON KEIZAI (Page 11) (Almost Full)
September 11, 2006

Daisuke Hatakake, president of Kubota, last October presented the
then chief of the Environmental Engineering Business Department a
paper stating, "The Environmental Engineering Business Department
will be closed down immediately, if it again engages in
bid-rigging."

Demand from government and public sectors on decline

The Fair Trade Commission (FTC) last August searched a dozen or so
companies, including Kubota, over bid-rigging activities concerning
the construction of human-waste and sludge treatment facilities.
Hatakake mulled how bid-rigging can be rooted out from his company
for two months and reached a conclusion, "If they cannot stop
bid-rigging, they should withdraw from the business."

At that time, Kubota was faced with another serious challenge. It
last June released the deaths of 79 employees including those of
affiliated companies due to mesotheliomas believed to be caused by
asbestos. It was of urgent necessity for the company to deal with
patients who reside near the site in Amagasaki, Hyogo Prefecture,
where its plant was previously located.

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Hatakake ordered an early resolution, noting: "If the problem
becomes protracted as was the case with the lawsuit over the
Minamata disease, both residents and the company would suffer." The
company last December decided to compensate local residents who
developed mesotheliomas, paying compensations on a level similar to
that of compensations paid to employees. The residents' side highly
evaluated the decision as a great step forward. However, Hatakake
was not so proactive when it came to the bid-rigging issue.

Bid-rigging activities are apparently deep-rooted in Kubota. The FTC
ordered his company to stop engaging in illegal practices in a
number of public projects, including the construction of human waste
and sludge treatment facilities, the delivery of vinyl chloride
conduit pipes in a paddy field consolidation project in 1992 and
sewage pump work in 2004.

Explaining the background of his decision to pull out of businesses
in which his company carried out bid-rigging activities, Hatakake
noted: "In 1999 the ratio of demand from the government and public
sectors commanded 50% of sales, but such a ratio has now dropped
below 20% even on a consolidated bases." Kubota's performance in the
agricultural machines and construction equipment business abroad has
been booming with its operating income resetting a new record high
in the March 2006 term. Hatakake said, "Even if no demand comes from
the government and public sectors, it will not affect our company's
business performance." As a matter of fact, it announced this
January a decision to pull out of the human waste and sludge
treatment facilities business.

High potential litigation risk

Kubota is not the only company that has opted to pull out of
businesses in question, which was apparently an ultimate measure to
prevent bid-rigging. Ebara Corporation, Sumitomo Heavy Industries,
JFE Engineering and Kurita Water Industries decided to stop taking
orders for projects to construct human waste and sludge treatment
facilities, occasioned by bid-rigging incidents. They reached that
judgment because continuing the business would not be profitable
enough to make up for potential risks due to a declining demand as a
result of the dissemination of the sewer system.

Corporate managers can no longer afford to disregard potential risks
involved in bid-rigging. Damage compensation claims in lawsuits
filed by residents near project sites are increasingly drawing
attention. Cases in which civic groups lodge a damage compensation
claim against a company carrying out the concerned project, citing
that the cost of the construction of an incinerator sponsored by a
local government was illegally raised because of bid-rigging, are
becoming visible.

Regarding bid-rigging over the construction of incinerators, the FTC
in August 1999 ordered Hitachi Zosen Corporation, NKK (now JFE
Engineering), Takuma, Mitsubishi Heavy Industries and Kawasaki Heavy
Industries to end illegal trade practices. In lawsuits seeking
bid-rigging damage compensation filed in Fukuoka City and Yokohama
City the court of law handed down a decision in favor of the
plaintiff, ordering the corporate side to pay a large amount of
damage compensation.

There is another possibility of such companies becoming embroiled in
shareholder suits for their management having failed to perform
their duties. It is perhaps inevitable for top management to decide

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to pull out of business areas, if potential risks continue to
increase there.

(8) Government to accept more US students as payback for Fulbright
Grant Program

SANKEI (Page 9) (Full)
October 5, 2006

The Ministry of Economy, Trade and Industry (METI) and the Ministry
of Education, Culture, Sports, Science and Technology (MEXT) have
decided to accept 200 more US students and support them in landing
jobs with Japanese companies. Though the initial plan targeted Asian
students, they have decided to expand the countries eligible for the
scheme to include the United States with the aim of correcting the
imbalance between the numbers of Japanese students studying in the
US and US students studying in Japan, thereby bringing capable US
personnel into the Japanese economy. Another aim is to nurture
pro-Japanese Americans so as to strengthen bilateral ties.

Under the scheme, METI and MEXT will newly establish education
courses for foreign students that provide Japanese language courses
and an internship system at universities all over the country. They
will also ask companies to accept foreign interns in line with the
program.

METI formulated a global economic strategy this spring, in which it
proposed establishing an Asian Human Talent Fund Initiative (Ajia
jinzai shikin) as an organization in charge of inviting Asian
students, modeling the program after the Fulbright Scholarship
Program in the US. Upon hearing of the plan, then Prime Minister
Junichiro Koizumi proposed, "If it is the Japanese equivalent to the
Fulbright Scholarship Program, would it be possible to accept US
students, as well?" Following the proposal, a decision was made to
invite US students in addition to 2,000 Asian students. METI and
MEXT earmarked a total of approximately 6 billion yen in the fiscal
2007 budget.

Under the Fulbright Grant System intended for mutual exchanges of
students between the US and other countries, more than 260,000
students from 150 nations have studied in the US, contributing to
the nurturing of pro-American individuals and experts on the US.
Between the US and Japan, approximately 6,000 Japanese students have
studied in the US, and about 2,300 have studied in Japan.

In Japan, Fulbrighters have been highly evaluated as having
contributed to postwar recovery and economic development as leaders
of society. The new system Japan is envisaging is in a sense
intended to repay the US for the Fulbright Grant Program. The number
of Japanese students who went to the US to study there has reached
42,000, while US students who came to Japan to study totaled 1,600
-- a big gap. The government intends to encourage US students to
come study in Japan.

DONOVAN

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