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Cablegate: Japanese Morning Press Highlights 12/28/06

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RHEHAAA/THE WHITE HOUSE WASHINGTON DC 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 1827
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UNCLAS SECTION 01 OF 08 TOKYO 007163

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 12/28/06

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Index:

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

4) JDA chief orders consideration be given to changing
Futenma-relocation plan, including revision of the V-shaped runway
at alternate site

5) Foreign minister of Japan, ROK agree to strengthen cooperation on
restarting six-party talks on North Korea

6) First round of meetings ends for joint Japan-China study group on
history

Sata flap:
7) Administrative Reform Minister Sata quits over fund scandal;
Watanabe immediately picked as successor
8) Reform minister Sata's resignation over money scandal another big
blow for the Abe administration, with opposition camp demanding he
quit the Diet, too
9) Reform minister Sata in resignation statement avoids mention of
78 million yen in unaccounted political funds
10) Sata quits, citing 'inappropriate" action, but expert concludes
that the reform minister completely broke the law
11) Opposition camp vows to go on the offensive in January when new
Diet opens

12) Successor body to the Regulatory Reform Council already named

Articles:

1) TOP HEADLINES

Asahi, Mainichi, Yomiuri, Sankei & Tokyo Shimbun:
State Minister in Charge of Administrative Reform Sata resigns to
take responsibility for improper bookkeeping for political funds;
Yoshimi Watanabe picked as successor assume

Nihon Keizai:
Survey of 100 presidents: 35% think economic growth "will continue
for one or more years"; 26% say, "Growth rate will slow down,"
expressing concern about consumer spending

Akahata:
Government aims to submit to the ordinary Diet session a bill aimed
at introducing a system of no pay for overtime (white-collar
exemption)

2) EDITORIALS

Asahi:
(1) Sata's resignation as state minister for administrative reform:
A reward-oriented appointment now comes back to haunt the prime
minister
(2) New chair of the government's tax panel: How will he regain
public trust?

Mainichi:
(1) Resignation of Sata: Prime minister's responsibility for
appointing him questioned

TOKYO 00007163 002 OF 008


(2) Kosai-led tax panel: No delay allowed in radical reform debate

Yomiuri:
(1) Resignation of Sata: Rebuild the system to produce results
(2) Poisoned wine incident is a challenge to the lay judge system

Nihon Keizai:
(1) Japan needs to achieve primary balance as quickly as possible
(2) Resignation deals a blow to Abe administration

Sankei:
(1) Sata's resignation a good opportunity for change
(2) Kosai-led tax panel: A proper tax system should be rebuilt

Tokyo Shimbun:
(1) Chain of resignations reveals weakness of the administration
(2) Reform of working hours: Now is not the time

Akahata:
Sata's resignation: Abe cabinet's "code of conduct" now questioned

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, Dec. 27

NIHON KEIZAI (Page 2) (Full)
December 28, 2006

09:01
Recorded for the government's Internet TV "Live Talk at Kantei."

10:01
Met South Korean Foreign Affairs and Trade Minister Song Min Soon,
with Asian and Oceanian Affairs Bureau Director General Sasae.
Followed by Finance Minister Omi. Later met Foreign Vice Minister
Yachi.

10:55
Met Deputy Foreign Minister Yabunaka, European Affairs Bureau
Director General Harada, and Economic Bureau Director General
Ishikawa, with Deputy Chief Cabinet Secretary Suzuki and Assistant
Deputy Chief Cabinet Secretary Ando.

13:15
Visited Tok Bearing Co. to make a tour in its plant. Later, met
President Hiroshi Yoshikawa and others, with Deputy Chief Cabinet
Secretary Shimomura.

SIPDIS

13:58
Arrived at Jujo Ginza shopping street, with New Komeito President
Ota and Shimomura.

15:35
Met at Kantei with Chief Cabinet Secretary Shiozaki, and deputy
chief cabinet secretaries Shimomura, Suzuki, and Matoba.

17:03
Visited the Imperial Palace for an informal representation.

18:25
Arrived at Kantei.


TOKYO 00007163 003 OF 008


19:10
Met Shiozaki, Shimomura, Suzuki, Matoba, and Special Advisor Seko.

20:07
Returned to his official residence.

4) JDA chief instructs that consideration be given to revising
government plan for Futenma relocation, including revision of
V-shaped runway

YOMIURI (Page 2) (Full)
December 28, 2006

It was learned yesterday that Defense Agency (JDA) Director General
Kyuma has instructed administrative officials to study the
possibility of revising the government's plan to relocate the US
Marine Corps' Futenma Air Station (Ginowan City, Okinawa Prefecture)
to the shoreline of Camp Schwab (Nago City). According to a senior
official in JDA, Director General Kyuma said: "It would be good if
the views of the local communities and the US forces would match.
How about not dislocating the weed bed (where dugongs feed)? The
runway could be something other than V-shaped, as well." Upon
receiving his instruction, JDA is thinking of considering such
revisions as placing the alternate facility dozens of meters more
toward the sea than the government plan's location, and revising the
actual plan that now calls for a V-shaped double runway.

Okinawa Governor Hirokazu Nakaima, attending the meeting of the
joint council of central government and prefectural representatives
on Dec. 25, reiterated his stance that he could not accept the
government's plan as it stands now. On hearing this, JDA apparently
started to consider the possibility of revising the government plan,
aiming at reaching agreement with the prefecture and local
communities. There are some in JDA who are negative about changing
the plan, so it is unclear at this point of the future of the
study.

5) Japan, South Korea will strengthen cooperation on six-party
talks; Visiting South Korean Foreign Minister Song meets with Prime
Minister Abe, other Japanese leaders

SANKEI (Page 2) (Full)
December 28, 2006

Prime Minister Shinzo Abe yesterday met at the Prime Minister's
Official Residence with visiting South Korean Minister of Foreign
Affairs and Trade Song Min Song. During the talks, Abe referred to
the six-party talks on North Korea's nuclear issue and stated, "I'd
like to join hands so as to produce practical results." The two
agreed to step up cooperation in order to restart the multilateral
talks. Song stated, "We on the part of the South Korean government
has a good understanding of Japan's abduction issue."

Abe welcomed Song's choice of Japan as his first overseas
destination after assuming office as foreign minister early this
month. On relations with South Korea, Abe confirmed he would aim to
build a future-oriented relationship as agreed on during the
Japan-South Korea summit talks in October, noting: "I hope to see
(both countries) further develop bilateral ties with a
future-oriented approach."

Afterwards, Foreign Minister Taro Aso, as well, met with Song at the

TOKYO 00007163 004 OF 008


Foreign Ministry's Iikura Guest House. On the six-party talks, Aso
criticized North Korea's response this way: "It's regrettable that
North Korea brought up the financial sanctions issue and refused to
join the talks." The two foreign ministers confirmed that both
countries would work together to steadily implement the joint
statement released in September 2005 by the six-party talks. Prior
to this meeting, the two exchanged instruments of ratification on
the Treaty on Mutual Legal Assistance in Criminal Matters.

6) Japan, China to release results of joint history study in 2008

NIHON KEIZAI (Page 2) (Full)
December 28, 2006

Katsuhiko Iino, Beijing

Japan and China wrapped up two days of talks in Beijing of the joint
history study group that is charged with narrowing the perception
gap between the two countries on history from an academic
standpoint. The group concluded by deciding to aim for releasing the
results of the study in 2008. The chair of the Japanese team,
Shinichi Kitaoka, a professor at the University of Tokyo, commented
favorably about the sessions at a press conference afterward: "The
meetings were held in a serious, frank, and friendly atmosphere. We
made a good start."

The first round of meetings confirmed the policy line of holding the
next round of the plenary session in March 2007, the third in
December 2007, and the fourth in June 2008. It also decided to hold
two subcommittee meetings on "ancient, medieval and modern history"
and "contemporary history" on a timely basis.

On the focal issue of "contemporary history," discussions will be
held on "the prewar period," "the period from the Manchurian
Incident to the end of WWII"; and "the 60 years after WWII,"
respectively. Kitaoka, however, commented that "nothing has yet been
decided" about what form the final conclusions would take.

7) Administrative Reform Minister Sata resigns to take
responsibility for inappropriate accounting of political
contributions

SANKEI (Top Play) (Full)
December 28, 2006

Genichiro Sata, 54, state minister in charge of regulatory reform,
local revitalization and administrative reform, held a press
conference last night at the Cabinet Office, in which he announced
his resignation after admitting one of his political support
organizations engaged in inappropriate accounting of reported
political funds. Prime Minister Shinzo Abe accepted his resignation
and then decided to appoint Senior Vice Cabinet Office Minister
Yoshimi Watanabe, 54, to be Sata's replacement. Watanabe's
appointment will be officially announced today. Abe made a quick
decision in a bid to avoid adverse effects on deliberations at the
regular Diet session to be convened in January and on next summer's
House of Councillors election. However, the resignation of Sata, who
was in charge of reform of the public servant system, just three
months after assuming office, has given a severe blow to the Abe
administration.

In his press conference yesterday, Sata said: "I sincerely apologize

TOKYO 00007163 005 OF 008


for causing public misunderstanding and distrust due to media
allegations about my political support organization." Although he
stressed that the political funds reports did not include alleged
expenses for an office that did not exist and political activities
not carried out, he admitted that expenses for another political
group were posted in the reports. He then stated:

"I decided to step down from the post in order to keep the scandal
from affecting deliberations on the fiscal 2007 state budget at the
regular Diet session next year. I have no intention to give up my
Diet seat."

The political support organization in question was created in 1990
and disbanded last month. It had an office in a Tokyo building for
which there was no record of a lease. The support group submitted to
the government political fund reports from 1990 to 2000 claiming 78
million yen for utilities and rent.

Since the scandal came up soon after the resignation of Tax
Commission Chairman Masaaki Honma, who also was appointed by the
prime minister, the government has suffered serious political
damage. Opposition parties, including Minshuto (Democratic Party of
Japan), intend to pursue Abe's responsibility for appointing the
two. A senior New Komeito member expressed concern, saying, "The
public support rate may drop even more."

Sata is now serving in his sixth term in the Lower House after being
elected for the first time in 1990 from the former Gunma No. 1
constituency. He belongs to the Tsushima faction in the LDP. He
obtained a cabinet post for the first time after having served in
such posts as senior vice minister of the Ministry of Internal
Affairs and Communications, chief deputy secretary general of the
LDP, Lower House Steering Committee chairman.

Yoshimi Watanabe, Sata's successor, is the oldest son of late Michio
Watanabe, one-time foreign minister. He is now serving in his fourth
term in the Diet after being elected in 1996. He served in such
party posts as director of the Land, Infrastructure and Transport
Division and chief of secretariat of the Tax Research Commission.

8) Resignation of Administrative Reform Minister Sata gives
unexpected blow to Abe government

SANKEI (Page 3) (Excerpts)
December 28, 2006

The Abe administration, which pledged to create a "beautiful
country," is now suffering a serious setback in the resignation of
Administrative Reform Minister Genichiro Sata just three months
after assuming his post. There is no doubt that Prime Minister
Shinzo Abe did not expect Sata would step down over the scandal
involving money. Opposition parties will inevitably go on the
offensive at the regular Diet session with an eye on next summer's
Upper House election. Different from the resignation of Tax
Commission Chairman Masaaki Honma, however, Abe approved of Sata's
resignation only three days after the scandal was brought to light
in an attempt to remove a worrisome issue in the government.

Minshuto to call on Sata to resign from the Diet

Opposition parties regard Sata's resignation as only natural.
Minshuto (Democratic Party of Japan) plans to demand the resignation

TOKYO 00007163 006 OF 008


of Sata from the Diet, in addition to the opening of closed-hearing
sessions of the Lower House Budget Committee during Diet recess.

Minshuto Secretary General Yukio Hatoyama told reporters yesterday:
"Just stepping down from the cabinet post is not enough. The prime
minister must explain to the public after thoroughly investigating
the scandal. This is what the prime minister must do at a minimum."

9) Sata stops short of mentioning revenue sources for 78 million
yen

MAINICHI (Page 3) (Abridged)
December 28, 2006

It has been reported that a political organization under State
Minister for Administrative Reform and Regional Revitalization Sata
submitted political funds reports that recorded about 78 million yen
in rent and utilities between 1990 and 2000 for offices for which it
actually had no lease with the building operators.

According to a government journal, Sata's political research group
was established in 1990, when Sata was elected as a member of the
House of Representatives for the first time. It set up an office in
the Tokyo branch of Sata Construction Co., based in Maebashi and
managed by his father. It claimed about 78 million yen for office
rent and utilities during the period from 1990 to 2000. The group
submitted a notice of dissolution this October.

In a press conference yesterday, Sata said that the group held
lecture meetings (in the Tokyo Branch), and he said, "The group paid
office rent and utilities properly." But he stopped short of
mentioning where the money came from.

10) Minister Sata quits in scandal over political funds

ASAHI (Page 31) (Excerpts)
December 28, 2006

Genichiro Sata, state minister for administrative reform and
regional revitalization, was forced to resign from his post
following the discovery of his political organization's
inappropriate accounting records. In a press conference yesterday,
Sata said, "There were no fictitious office expenses," but when
asked for a specific explanation, he only replied, "I cannot reveal
everything."

Commentaries

By Yasunobu Iwai, Nihon University professor: It is fully a crime

Although he said, "There were no fictitious expenses," entering
falsified expenses in income and expenditure reports is fully a
crime. If such an act goes unchallenged, the political fund
reporting system will become meaningless. The matter is not settled
just by his resigning, for Sata, as a politician, is still held
accountable.

Politicians must examine their political fund reports on their own
responsibility. There may be many politicians who are interested in
income but lax about examining expenditures. One idea might be to
have all political fund reports be listed on the Internet, so that
the public would have the opportunity to scrutinize them. It is also

TOKYO 00007163 007 OF 008


necessary for all receipts to be attached to the reports.

By Takashi Uesugi, former secretary of a Lower House member and
journalist: Prime Minister's was too lax in his perception

The resignation of Sata came quickly, probably stemming from a
desire to minimize damage (to the government). But the prime
minister holds a heavy responsibility for appointing someone with a
problem.

The Koizumi administration lasted for five years and a half, but
there was no one who resigned over a scandal, because that
administration had checked before appointing them to see if
candidates were involved in any scandal. Mr. Abe followed Mr.
Koizumi's method of trying to win over to his views one person at a
time, but his aides probably had no capability to check. Prime
Minister Abe also was too lax in his perception, I think.

The first regular Diet session will be held next month. The case may
adversely effect deliberations on the budget.

11) Opposition parties to toughen attack following the resignation
of Administrative Reform Minister Sata, summoning him as a Diet
witness when the regular session opens early next month

MAINICHI (Page 5) (Excerpt)
December 28, 2006

It was very painful for the Abe administration that Administrative
Reform Minister Genichiro Sata was driven to resign over allegations
of improper accounting of political funds by his support
organization. Although Prime Minister Shinzo Abe aimed to quickly
assuage the situation by settling the issue before the end of the
year, the opposition parties, with next year's unified local
elections and the Upper House election in mind, plan to strengthen
their attack stance against the Abe government in the regular Diet
session that opens early in the year. It appears that the outlook
for the regular Diet session, which will deliberate the initial
fiscal 2007 budget draft, the prime minister's first such
experience, is likely to be tumultuous from the start.

12) Government selects members for successor panel to regulatory
reform conference

ASAHI (Page 4) (Full)
December 28, 2006

The government decided yesterday to install 15 members, including
Matsui Securities Co. President Michio Matsui, to the successor
panel to the Regulatory Reform and Privatization Promotion Council,
chaired by Nippon Yusen K.K. Chairman Takao Kusakari. The council is
to expire at the end of March next year. The picked as members those
who are eager to push ahead with regulatory reforms and also gave
consideration to the need to promote the Abe administration's key
policy measures, such as local revitalization.

After the new panel is inaugurated in January, new members will be
officially appointed. The government plans to integrate its Office
of Trade Ombudsman (OTO) into the panel, because of overlapped
themes for discussion at both committees. The government has so far
come up with its three-month plan in March, but the new group will
finalize its first report around June next year in order to reflect

TOKYO 00007163 008 OF 008


discussions there in the report.

Prime Minister Abe said in a cabinet ministerial meeting on Dec.
26:

"The government will boldly scrap those regulations standing in the
way of economic recovery, but there are some rules that are
necessary to ensure the security of the people's livelihood. I hope
those well versed in local circumstances will join (the new panel)."


Some personnel selections reflect Prime Minister Abe's policy
identity, like the selections of the president of a housing
equipment manufacturer based in Shimonoseki, Yamaguchi Prefecture,
and a standing director of a NPO Corporation supporting construction
firms' advancement to the farm business.

The new panel will include eight members of the current council,
including Kusakari, who is scheduled to serve as chairman.

DONOVAN

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