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Cablegate: Daily Summary of Japanese Press 11/16/06

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DE RUEHKO #6576/01 3200816
ZNR UUUUU ZZH
P 160816Z NOV 06
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 8369
INFO RUEKJCS/SECDEF WASHDC PRIORITY
RHEHAAA/THE WHITE HOUSE WASHINGTON DC PRIORITY
RUEAWJA/USDOJ WASHDC PRIORITY
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RUEKJCS/JOINT STAFF WASHDC//J5//
RHHMUNA/HQ USPACOM HONOLULU HI
RHHMHBA/COMPACFLT PEARL HARBOR HI
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 1327
RUEHFK/AMCONSUL FUKUOKA 8828
RUEHOK/AMCONSUL OSAKA KOBE 2233
RUEHNAG/AMCONSUL NAGOYA 8448
RUEHKSO/AMCONSUL SAPPORO 9876
RUEHBJ/AMEMBASSY BEIJING 4891
RUEHUL/AMEMBASSY SEOUL 1001
RUCNDT/USMISSION USUN NEW YORK 2512

UNCLAS SECTION 01 OF 09 TOKYO 006576

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: DAILY SUMMARY OF JAPANESE PRESS 11/16/06

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INDEX:

(1) Column Jiji-kokkou: Lower House committee passes bill revising
Basic Education Law; Prime Minister Abe agrees to frontal clash
between the ruling and opposition camps, placing priority on keeping
momentum

(2) Editorial -- Passage of bill amending Basic Education Law by
Lower House panel with attendance of ruling parties only: Long-range
plan for future of education now frustrated

(3) Regulatory Reform Council led by Kusakari gets under way with
emphasis on reforming government-controlled markets - medical
services, agriculture, transport; Education area likely to be
postponed

(4) Queen Elizabeth II abandoned plan to visit Chidorigafuchi
National Cemetery during her tour of Japan in 1975, out of concern
about being it becoming entangled in Yasukuni Shrine issue,
according to diplomatic files disclosed by British government

(5) Interview with Inpex Chairman Kunihiko Matsuo on Azadegan oil
field development

ARTICLES:

(1) Column Jiji-kokkou: Lower House committee passes bill revising
Basic Education Law; Prime Minister Abe agrees to frontal clash
between the ruling and opposition camps, placing priority on keeping
momentum

ASAHI (Page 2) (Excerpts)
November 16, 2006

The Abe government has now made a first step toward revising the
Basic Education Law, which is called "Constitution on Education."
Yesterday the House of Representatives' special committee adopted
the bill in the absence of lawmakers from opposition parties. Some
in the ruling coalition had been reluctant to put the bill to a vote
before the Nov. 19 Okinawa gubernatorial election. Running this
important bill through the Diet during the current session is a
major goal for the Abe administration. If it fails to do, it will be
dealt a serious blow. The ruling coalition, therefore, rammed the
bill through the committee. Once the legislation clears the Diet, a
review of a number of related bills and systems will start moving on
a full-scale. Since the axis of the Basic Education Law will move
from "individual respect" to "public respect," schools will
inevitably be affected.

"It was regrettable that opposition lawmakers were not attend the
session to take a vote on the bill. It was good anyway that the
committee adopted it," Prime Minister Shinzo Abe proudly told
reporters last night at the Prime Minister's Official Residence.

The Abe government made a good start in its diplomacy. Since it
made, however, such mistakes as "staged questions" at town meetings,
it might lose its impetus quickly. Abe reportedly agreed to the idea
of putting the bill to a vote in his talks on the phone with Liberal
Democratic Party (LDP) Diet Affairs Committee Chairman Toshihiro
Nikai and Nobutaka Machimura, chief committee director.

After the bill was pushed through the special committee, Machimura
stressed at a press conference: "We spent a lot of time -- the fifth

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longest time in the postwar period -- for deliberations on the bill.
We never took arm-twisting approaches." He meant that the ruling
camp spent more than 100 hours for the debate, accepting the
opposition's demand. Nikai had repeatedly said that a forced vote
would not be taken. A senior LDP member said, "We sought a
soft-landing approach in managing the Diet."

However, Ichiro Ozawa, president of the largest opposition party,
Minshuto (Democratic Party of Japan), assumed a stance of fighting
back, the ruling coalition failed to take a soft-landing approach.

The reason why the ruling camp forced the bill through the committee
even though they knew that a hard-line approach would inevitably
affect the Okinawa gubernatorial race is their concern that if a
vote call was put off, debate would be conducted on the opposition's
pace, and that even if the current session was extended, the bill
would not clear the Diet. A former education minister commented:
"The Okinawa race is important. But this is more significant than
the Okinawa election."

The fact that the opposition did not assume a tactic of physical
resistance made it work for the ruling coalition. If the session
became disorderly, the ruling camp would have unavoidably come under
fire. A senior New Komeito member said, "We made the decision to
take a vote on the bill after ascertaining there would be no
physical resistance by the opposition camp." Nikai told reporters:
"Using good sense on the education issue, the opposition lawmakers
expressed their views in the form of absenting themselves from the
session." He expressed his appreciation to Minshuto.

However, there still seems to be no prospect that the bill will be
passed in the current Diet session. A senior LDP member commented:
"If necessary, we may have to give up on the bill upgrading the
Defense Agency to the status of a ministry."

Among the opposition parties, Social Democratic Party head severely
criticized the ruling coalition's bulldozing the bill, saying, "It
is a contemptible trick that the ruling coalition is trying to push
through the bill, deceiving and telling lies to the public."

The opposition parties, with an eye on the Okinawa race, in which
they back the same candidate, plan to appeal to the public the
ruling camp's refusal of deliberations on the legislation. Today,
after holding a protest rally in the Diet building, senior
opposition members will give street corner speeches. Minshuto
President Ozawa held a meeting last night with Secretary General
Yukio Hatoyama and said: "It was important that the opposition
parties, including the Japanese Communist Party, fell into line."

(2) Editorial -- Passage of bill amending Basic Education Law by
Lower House panel with attendance of ruling parties only: Long-range
plan for future of education now frustrated

MAINICHI (Page 5) (Full)
November 16, 2006

The governing Liberal Democratic Party (LDP) and its junior
coalition partner New Komeito yesterday took a vote on the bill
amending the Basic Education Law at a session of the Lower House
Special Committee on the Basic Law of Education. We have until now
reiterated the starting point for revision is unclear or why the law
needs to be amended is unclear. We wonder if the ruling parties
would say that such a question has been resolved now. Although we

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can't see any reason why they had to be so much in a hurry, they did
vote yesterday on the amendments at a committee meeting that
opposition parties boycotted. A bill that passed committee with only
the ruling parties attending is certain to be a source of trouble in
the future.

At one point, even some members of the ruling parties suggested
delaying the vote until next week arguing that if the amendment were
forced through the committee, there would be negative impact on the
gubernatorial election in Okinawa on Nov. 19. Why did the ruling
camp railroad the bill yesterday? Many questions remain unanswered,
but one sure thing is that Prime Minister Shinzo Abe was determined
to do so.

The amendments in question were submitted to the previous ordinary
session of the Diet. Although former Prime Minister Junichiro
Koizumi had no interest in the bill, Abe (who then served as chief
cabinet secretary) was passionate about it, according to sources.
The amendment, which states the goal of education is "to foster love
of country and homeland," has been criticized from the start as
giving too much priority to the desire of rewriting the current law
because it was imposed by the Occupation.

Compared to the previous Diet session, much more time has been
devoted to deliberations on the amendment, but it still remains
unclear how Japanese education systems will be improved by amending
the law -- although Abe was asked a number of times about that
point.

In the current Diet session, new problems have cropped up relating
to educational administration, such as children committing suicide
after experiencing bullying in school, the schools' failure to teach
compulsory subjects, and bureaucrats prearranging questions and
answers for planted participants in government-led town-hall
meetings. School bullying and the failure to teach compulsory
subjects are both pressing tasks that involve the very basis of the
present educational system. Still, the prime minister and officials
remain unable to answer the question, "Will those problems be
remedied if the Basic Education Law is revised?" They just dodge the
question by saying, "The Basic Education Law has nothing to do with
them." Consequently, they in effect admitted that there was no
urgency in revising the Basic Education Law.

If the vote on the amendments had been delayed until next week or
later, it would have been difficult to enact it into law during the
current Diet session unless the session were extended. Except for
the resumption of summit meetings with China and South Korea,
respectively, right after he took office as prime minister, Abe has
yet to achieve any tangible results elsewhere. That is why he might
have been so keen about producing results quickly -- only for his
convenience.

On the other hand, the largest opposition Democratic Party of Japan
(DPJ or Minshuto) plays up the ruling parties' overbearing behavior,
but it, too, deserves criticism. Minshuto has submitted a counter
bill intended to amend the Basic Education Law, but it appears that
it has no enthusiasm about enacting it, and it has only called for
the need to take time for deliberations. After concluding that the
current Basic Education Law needs to be amended, Minshuto should
have submitted its own bill instead. But the party has not yet
united over the question of whether to agree to amend the law. In
order to avoid causing division in the party, the ruling bloc's
forcing the bill through committee has helped Minshuto get out of a

TOKYO 00006576 004 OF 009


rut. The public should realize well that Minshuto was counting on
this to happen.

Amending the Basic Education Law should have been part of a
long-range plan for the government and the ruling parties. But the
bill is going to pass the Lower House without the nation deeply
understanding its contents. The current law is being criticized by
the administration as forced on Japan by Occupation forces, but the
way it is passing the amended law is likely to leave doubts in
peoples' minds for the future.

(3) Regulatory Reform Council led by Kusakari gets under way with
emphasis on reforming government-controlled markets - medical
services, agriculture, transport; Education area likely to be
postponed

NIHON KEIZAI (Page 3) (Excerpts)
November 14, 2006

The government's Regulatory Reform and Privatization Promotion
Council (chaired by Takao Kusakari, president of Nippon Yusen KK) on
Nov. 13 discussed a final report to be compiled late next month.
Participants decided to mention in the report such areas as medical
services and agriculture as key areas for regulatory reform,
characterizing them as government-controlled markets, because new
participation in those areas is difficult due to government
regulations. Reform of the education area will likely be relegated
to a successor panel. With fierce resistance expected to come from
concerned government agencies over remaining areas, concern about
the reform drive losing momentum is mounting.

Last major work

Since the panel is scheduled to go out of existence at the end of
next March, deregulatory debate will likely be taken over by a
successor panel. The final report to be issued this time will be the
present panel's last major work.

The draft of the gist of the final report presented at the meeting
underscored the need to reform medical services, agriculture,
information technology, energy, transportation, financial services
and other areas, calling them government-controlled markets.

The panel will promote deregulation with focus on the entry of stock
companies into medical services, increased access to agriculture by
private companies, including reform of agricultural cooperatives,
integration of broadcasting and telecommunications and reform of NHK
in the IT field, and expanded liberalization of power and gas
businesses. Regarding the transportation area, easing procedures for
customs clearance and the clarification of rules on the allocation
of landing and departure slots at airports has surfaced as argument
points.

For the employment and labor area, the panel will look into how to
expand the number of foreign workers to be allowed into Japan as
part of efforts to realize an open economic society through reform
and competition, the target, which the prime minister advocated in
his policy speech.

Race against time

Kusakari, picked as a member of the panel in 2004, led reform of
social regulations in such areas as medical services and education.

TOKYO 00006576 005 OF 009


Upon taking office as the panel's chairman, he added two persons who
are knowledgeable of the situation in the labor and agriculture
areas as a measure to bolster the panel.

However, there is only about a month left until the issuance of the
final report. The process of working out deregulatory measures from
now on will be a race against time. Kusakari told reporters after
the meeting: "I want to produce results in compliance with the prime
minister's policy, but some issues cannot be dealt with because of
the limited time. I will relegate matters that remained unsettled by
the end of the year to the successor panel." There is concern that
deregulatory efforts in the agricultural and medical services areas
might be stalled at the stage of readjusting argument points.

Educational reform will most likely be postponed. Kusakari and other
panel members have looked into deregulation aimed at increasing the
freedom of local governments, including the scrapping of the
obligation to set up a board of education. However, following
serious bullying cases at schools, an argument calling for
strengthening the functions of the education boards has emerged in
the government and ruling camp. State Minister in charge of
Administrative Reform has urged State Minister in charge of
Administrative Reform Sata to take a second look at the panel's
policy.

Regulatory reform as cardinal feature of Abe's growth strategy;
Opportunities for challenges to be expanded

The report the Regulatory and Privatization Promotion Council will
issue in December will focus on social regulations, such as labor
and foreign workers issues. The panel has thus far made proposals
for reforming social regulations, but their proposals have been
hampered by resistance from the iron triangle of organizations that
are afraid of losing vested rights and interests, bureaucrats who
have jurisdiction over concerned areas and Diet policy cliques
specializing in those areas. A source connected with the pane said,
"We have achieved only 40% of the target."

Difficulty in reforming social regulations is that it is subject to
the criticism that it will threaten people's lives and widen income
and regional disparities. Of course, it is necessary to give full
consideration to those who are unable to take part in competition
due to some kind of handicap they have. However, deregulation is a
potent means of expanding opportunities for challenges by anybody.
The essence of the prime minister-proposed measures to give second
chances to people should be found in this point.

The Regulatory Reform Council is the creator of the Privatization
Test Law or the public service reform law intended to urge
liberalization of government-controlled businesses. Government
organizations, such as the Social Insurance Agency, have
experimented privatization tests. Now that local governments are
more aware of the idea of privatization has risen, 26 entities have
started considering introducing privatization tests.

If private companies that tendered successful bids in open public
bidding involving local governments make profits in that line of
business, tax revenues of the local governments that were beaten in
the bidding will eventually increase. In that sense, it can be said
that privatization tests will be a tool to push ahead with
administrative and fiscal reforms simultaneously. In other words, it
is the linchpin of the administration's economic growth strategy. It
comes down to that this is why the prime minister has to bolster

TOKYO 00006576 006 OF 009


regulatory reform.

(4) Queen Elizabeth II abandoned plan to visit Chidorigafuchi
National Cemetery during her tour of Japan in 1975, out of concern
about being it becoming entangled in Yasukuni Shrine issue,
according to diplomatic files disclosed by British government

YOMIURI (Page 9) (Full)
November 16, 2006

Chiharu Mori, London

When Queen Elizabeth II made her first visit as the head of Britain
in 1975, both the Japanese and British governments had a plan for
her to visit the Chidorigafuchi National Cemetery, but the plan was
later dropped because of concern about doing damage to the Yasukuni
Shrine issue. This episode came to light through classified
diplomatic documents disclosed on Nov. 14 by the British
government.

Accepting Emperor Showa's invitation, the Queen visited Japan on a
six-day tour from May 7-12 of 1975. According to the British
government's draft itinerary for the Queen prepared on Jan. 14,
1975, there was a mention of a visit to the Chidorigafuchi National
Cemetery by the Queen and her husband Prince Philip on May 8, the
second day of her tour, to lay a wreath.

According to a document written by the British Embassy in Japan
around that time, during working-level talks between Japan and
Britain, British officials indicated an intention for the Queen to
visit the Commonwealth of Nations Cemetery in Yokohama City's
Hodogaya, where British prisoners of war during World War II had
been buried. In response, Japanese officials asked them to add a
plan to visit the Chidorigafuchi National Cemetery in order to "keep
a balance." The visit to Chidorigafuchi was then added to the
Queen's itinerary.

At the time, the question of whether Yasukuni Shrine should be
protected by the state was a political issue, and British officials
from the beginning did not plan for the Queen to visit the shrine.
But because the Chidorigafuchi National Cemetery, where the remains
of the war dead who had no relatives were buried, was not affiliated
with any religious group and was not a target of a dispute, British
officials accepted the Japanese proposal.

However, according to an official telegram dated Feb. 25 of the same
year sent by the British Embassy in Japan to the home office, during
bilateral talks held in the latter half of February of that year,
Japanese Foreign Ministry officials became less eager for the Queen
to visit Chidorigafuchi, advising British officials instead, "It may
be a good idea to cancel the plan to visit the cemetery." British
officials became worried then that if the Queen visited
Chidorigafuchi, Britain could become entangled in a domestic
political dispute over Yasukuni Shrine. Japanese politicians
favoring the idea that the state should protect Yasukuni Shrine were
alarmed by the possibility that the Chidorigafuchi National Cemetery
would take the place of Yasukuni Shrine, British officials
concluded. Wary of becoming wrapped up in the Yasukuni Shrine issue,
the British decided not to have the Queen visit the national
cemetery but to only visit the Commonwealth Cemetery as planned.

Emperor Showa laid a wreath in front of the cemetery of unknown
soldiers at Westminster Abbey in London in 1971, but the Queen was

TOKYO 00006576 007 OF 009


unable to pay respect in Japan as the Emperor did in Britain.

The Japanese populace warmly welcomed the Queen and her visit to
Japan was described as a great success, but Japan was and has been
left with the question of how to respond to the victor nation's head
of state's willingness to pay respect to the war dead.

(5) Interview with Inpex Chairman Kunihiko Matsuo on Azadegan oil
field development

YOMIURI (Page 13) (Slightly abridged)
November 14, 2006

The Japanese government-funded oil company Inpex Holdings held 75%
of the rights to develop Iran's Azadegan oil field, but the ratio
has been reduced to 10% . Chairman Kunihiko Matsuo, 71, responded to
an interview with the Yomiuri Shimbun.

-- Your company's right to develop the Azadegan oil field has been
significantly reduced, hasn't it?

Iran was calling for an early start of the Azadegan project, but
there was no guarantee for it to be able to procure the development
cost worth about 2 billion dollars, or about 235 billion yen from a
government-affiliated financial institution. About 10% of the right
is appropriate for the company to proceed with the project with its
ready money.

-- What prospects did the company have when the company signed a
contract to undertake the project in February 2004?

At that time, we had anticipated that all the landmines would be
removed in a year or so, but it took more than two years. Given
this, the Azadegan project overlapped with other large-scale
projects in which our company will take part in Australia,
Indonesia, and other countries. In terms of management resources,
like human resources, too, conditions became severer, so we made the
decision upon determining the optimal allocation of resources.

-- Did Iran's nuclear development program and North Korea's nuclear
test have any effects?

We continued to inform the Japanese government (the biggest
shareholder) as one of the big shareholders of progress in
negotiations. But it is not correct to think that the nuclear issue
prompted us to decide to reduce our concession right.

-- Has your company received a serious blow from the large shrinkage
of the concession right?

Since our company will remain in the project as a business partner,
we will be able to maintain mutual confidence with Iran. We expect
Iran as the second largest oil producing country among the OPEC
(Organization of Petroleum Exporting Countries) countries to come up
with another new project in the future. I think this was the best
way of settlement both for our company and the Iranian side.

-- Isn't there the possibility that the portion of concession right
you lost may go to foreign companies?

Iran is willing to push ahead with the oil development project at an
early date. I think well-known foreign petroleum companies with
great capital resources and high technology will join the project

TOKYO 00006576 008 OF 009


over the medium-to long-term. We have no desire to increase our
rights again.

-- Even after business mergers, there are still wide gaps in
business scale between your company and American and European oil
mergers, don't they?

There are wide discrepancies between our company and the super oil
majors. In the group of companies coming after the majors, though,
our company is in the middle. Although the volumes of crude oil and
natural gas produced by majors remain unchanged or are on the
decrease, but our company is planning large-scale projects and
expects an annual 5% growth in production.

We will continue to invest more than 200 billion yen in developing
oil fields every year. In FY2005, we produced 380,000 barrels of oil
a day, but we expect the amount to increase to 500,000 barrels in
FY2010 and 1 million barrels around 2015. If our product reaches to
this level, our company will be labeled as a quasi-major.

-- What large-scale projects are you planning for the future?

We are planning to pump 6 million tons of liquefied natural gas
(LNG) annually in 2012 from the Ixis gas filed off the west coast of
Australia. We will also develop a large-scale natural gas field in
the Timor Sea (Abadi) in Indonesia.

-- Do you expect the oil industry will be reorganized further?

Our company would like to promote negotiations on plans for M&A
(merger and acquisition) or for purchase of business rights that
will contribute to enhancing the company's value. But there are
limits to mergers between Japanese companies. And there is no
Japanese company that can boost our company's value (through M&As).
There are a variety of options overseas. We will always keep our
eyes open.

-- Japanese companies are beginning to have a hard time in battles
for new concession rights overseas. Do you think it is possible for
Japan to produce energy resources in a stable way in the future?

There are two reasons why Japan has faced such a situation. One
reason is that new rivals, like China and India, are appearing.
Another reason is that resource nationalism is growing in
resource-rich countries. China has made utmost efforts to secure
resources, but oil countries take the view that overdependence on
certain countries will undermine the independence of its diplomacy.
Meanwhile, they have a good image of Japan. Oil countries hope to
deepen relations with Japan. I believe that Japan and the resource
powers have a common basis.

-- Foreign companies have cooperated with their governments in
securing resources.

In negotiations with oil countries, our partners are cabinet
ministers. But we are private sector types. Japanese companies also
need to prepare a comprehensive menu including official development
aid and the transfer of technology so that they can meet partners'
demands; otherwise, Japanese firms will find themselves in difficult
circumstances. In Western countries, prime ministers or presidents
take action to secure resources. It is indispensable for Japan also
to strengthen its diplomatic approach to secure resources.


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