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Cablegate: Japanese Morning Press Highlights 07/20/07

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UNCLAS SECTION 01 OF 12 TOKYO 003318

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 07/20/07


Index:

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

4) Ambassador to US Kato warns that House passage of comfort-women
resolution could "damage" US-Japan relations

North Korea problem:
5) Japan, North Korea meet for the first time bilaterally in four
months at the six-party talks
6) Japan, DPRK agree in meeting to make efforts to resolve pending
issues
7) Government gets mixed feelings from bilateral meeting with DPRK
delegate at six-party meeting

8) Another gaffe by Foreign Minister Aso: Even someone with
Alzheimer's disease can tell the difference between high and low
farm prices

Opinion polls:
9) DPJ (Minshuto) continues to command the lead as choice of voters
in upcoming election, but Cabinet support rate rises to 34.8% in
Yomiuri poll
10) Internet monitor poll by Tokyo Shimbun finds 80% of public have
doubts about prime minister's policy stance on taxes, pensions
11) Asahi survey predicts that ruling coalition will lose majority
in the upcoming election, making DPJ the number party in the Upper
House

12) Prime Minister Abe stays clear of issue of use of collective
self-defense in election campaign, while coalition partner Komeito
comes out against it

Earthquake troubles:
13) More troubles revealed for quake-hit nuclear power plant:
Blowers left on afterward releasing radioactive particles outside
plant
14) Air conditioners donated by US to quake victims cannot be used
due to different electrical-power standard

15) Agricultural Minister Akagi describes chair's proposals for WTO
farm negotiations as having "very severe contents" for Japan

16) Prime Minister's Official Residence (Kantei) will be the control
tower for global-warming countermeasures

17) Japan Fair Trade Commission ready to crack down under
anti-monopoly law on possible international air fare cartel by
American and European carriers

18) Japanese traders to use Siberian Railroad for cargo shipping,
saving much time

Articles:

1) TOP HEADLINES

Asahi:
LDP, New Komeito could fall into minority in Upper House; LDP
lagging in single-seat districts; DPJ looking to become number-one

TOKYO 00003318 002 OF 012


party

Mainichi:
10 electric power companies found to have no manuals to deal with
possible fire caused by earthquake

Yomiuri:
Chuetsu earthquake: Sloppy management at nuclear power plant,
including loss of quake data, unattended leak of radioactive
material

Nikkei:
Cargo service via Trans-Siberian Railway: Mitsui & Co. to team up
with Russian Railways: 40% cut in travel time possible; Boon for
Japanese companies looking to move into Russia

Sankei:
Murakami gets two-year prison term

Tokyo Shimbun:
Leak of radioactive material continued at Kashiwazaki nuclear power
plant even after detection -- ventilator left running

Akahata:
Chuetsu earthquake recorded intensity exceeding the level
anticipated when designing seven reactors at Kashiwazaki nuclear
power plant; Massive data lost

2) EDITORIALS

Asahi:
(1) Murakami found guilty
(2) Chuetsu earthquake: Support elderly people

Mainichi:
(1) Murakami gets prison term: Root out irregularities through
strengthened monitoring
(2) Upper House election: Disparities among workers -- compete over
measures to improve working conditions of part-timers

Yomiuri:
(1) Constitution: Why are all political parties refraining from
discussing future of state?
(2) Murakami Fund: Profit-first principle condemned

Nikkei:
(1) Mask stripped away from Murakami
(2) Further reform of yuan necessary

Sankei:
(1) Murakami gets prison term: First step toward creating market
that does not allow unrestrained business activities
(2) Foreign policy and security in upcoming Upper House election: To
which party can we delegate national interests and security?

Tokyo Shimbun:
(1) Murakami handed prison term: Profit-first principle condemned
(2) Eel regulation: Protect food culture through disciplined
consumption

Akahata:
(1) Shady ties between politics and money: Cast ballots to shed

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light on corrupt money politics

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, July 19

NIKKEI (Page 2) (Full)
July 20, 2007

07:53
Left the Hotel New Matsumi in Beppu, Oita.

08:06
Left JR Beppu Station by a special express.

11:38
Arrived at JR Miyazaki Station. Met Miyazaki Governor
Higashikokubaru in the station building.

11:51
Delivered a campaign speech in front of a department store in
Miyazaki.

12:29
Had lunch at a restaurant with Upper House member Masaaki Yamazaki
and others.

13:43
Gave a speech at a park in Miyakonojo City.

14:33
Arrived at Sueyoshi in Soo City, Kagoshima, accompanied by Lower
House member Hiroshi Moriyama.

15:36
Met Kagoshima Governor Ito at JR Kagoshima Chuo Station

17:08
Met family members of Shuichi Ichikawa, an abductee by North Korea,
and others at the Kirishima City Hall. Attended a speech meeting
sponsored by the LDP Kagoshima Prefectural Chapter.

19:22
Met Lower House member Yasuhiro Ozato at Kagoshima Airport.

19:55
Left Kagoshima Airport by JAL1878.

21:13
Arrived at Haneda Airport.

21;45
Returned to his official residence.

4) Ambassador to US Kato warns US House against "comfort women"
resolution: "It will have a harmful effect on Japan-US relations"

SANKEI (Page 7) (Full)
July 20, 2007

Yoshihisa Komori, Washington


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US media reported on July 18 that Japanese Ambassador to the United
States Kato has sent a letter to leaders of the House of
Representatives noting that harmful, long-term damage to Japan-US
relations is likely if the US House of Representatives passes a
resolution denouncing Japan over the issue of "comfort women" during
World War II. Reportedly, the House is expected to take a vote on
the resolution after Japan's Upper House election.

The Washington Post in its July 18 edition carried an article
headlined "Japan warns US House against resolution on WWII sex
slaves," in which it said that Japanese Ambassador to the US Ryozo
Kato again appealed to House Speaker Pelosi and some House leaders
not to pass the resolution and that the ambassador warned that
passage of the resolution "will almost certainly have lasting and
harmful effects on the deep friendship, close trust and wide-ranging
cooperation our two nations now enjoy."

The Post reported that it had obtained a copy of the letter dated
June 22, noting that Japan may reconsider its role as a supporter of
US policy in Iraq if the resolution is adopted in the House, as
Ambassador Kato in the letter cited, as "specific examples of
Japan's support for the US," its cooperation for stabilizing and
rebuilding Iraq.

Reuters also reported a similar story on July 18, saying it obtained
a copy of the ambassador's letter. The Japanese Embassy in the US
confirmed that a letter had been sent by the ambassador to leaders
of the House of Representatives, but declined to comment on that.

5) Japan, DPRK hold talks after four months' silence; "Will work
together to resolve pending issues"

NIKKEI (Page 1) (Full)
July 20, 2007

Manabu Shimada, Beijing

Japan's envoy to the six-party talks, Kenichiro Sasae,
director-general of the Foreign Ministry's Asian and Oceanian
Affairs Bureau, yesterday had a one-hour meeting with his North
Korean counterpart, Vice Foreign Minister Kim Kye Gwan. According to
an account by the Japanese side, both officials agreed to endeavor
to resolve the outstanding issues between the two countries,
including the abductions of Japanese citizens by North Korea.

Reportedly, the Japanese side asked for a positive response from the
North Koreans to the abduction issue, as well as an early resumption
of the Japan-North Korea working group. The North Korean side
reportedly said, "We will relay this to our home government."
Full-scale talks between the two countries took place after a hiatus
of four months since the meeting of the working group on diplomatic
normalization between the two countries.

6) Japan, DPRK to "endeavor" to resolve outstanding issues

SANKEI (Page 7) (Full)
July 20, 2007

Mashiho Akachi, Beijing

Kenichiro Sasae, director-general of Japan's Foreign Ministry's
Asian and Oceanian Affairs Bureau, yesterday had a one-hour meeting

TOKYO 00003318 005 OF 012


with North Korean Vice Foreign Minister Kim Kye Gwan, the North's
chief negotiator in the six-party talks, at the Diaoyutai Guest
House of China in Beijing. According to Sasae, the two officials
agreed to make efforts to resolve outstanding issues, including the
abductions of Japanese citizens by North Korea. But later in the
day, North Korea's Foreign Ministry released a long statement
denouncing Japan for its calling for the resolution of the abduction
issue, making again clear that there is no change in its stance that
this issue has already been settled.

The bilateral dialogue between the chief negotiators of Japan and
North Korea took place after a hiatus of four months since the
Japan-North Korea working group talks held in Hanoi in March. The
dialogue yesterday was realized at the request by the Japanese
side.

In the session, Sasae reportedly asked for an early resumption of
the Japan-North Korea working group to discuss diplomatic
normalization between the two countries and indicated an intention
to take part in the aid programs for North Korea, such as provision
of 950,000 tons of heavy fuel oil as energy aid, which is planned to
be extended as part of the "next-phase" action, if the abduction
issue makes progress leading to its resolution.

Sasae also gave an account of the Japanese government's position
about the public sale of the property of the pro-Pyongyang General
Association of Korean Residents in Japan's (Chongryon)
headquarters.

After the meeting, Sasae told reporters at a hotel: "Both of us
agreed to make efforts to resolve the issues, though there are
questions about the six-party talks and Japan-North Korea relations,
respectively. We had a discussion (premised on the resumption of the
working group talks)."

The Korean Central News Agency (KCNA), however, denounced the Abe
administration's stance and strongly warned that "Should Japan's
desire be accepted, the issue of denuclearizing the Korean Peninsula
cannot be indefinitely resolved." KCNA concluded that the Abe
administration was misusing the abduction issue to portray North
Korea as a threat, and at home, stepping up economic sanctions and
clampdown on Chongryon, and swinging to the right.

7) Government has mixed feelings about meeting held between Japan,
North Korea, paying attention to future moves on abduction issue

NIHON KEIZAI (Page 2) (Full)
July 20, 2007

Manabu Shimada, Beijing

Japan's and North Korea's chief delegates to the six-party talks
held a meeting on July 19. A Foreign Ministry official commented on
this meeting: "North Korea's agreement to hold separate talks with
Japan is a step forward. We need to carefully watch what move it
will make next." The Japanese government, keeping the North's
intensifying media criticism of Japan in mind, intends to try to
ascertain the North's true motives.

The bilateral meeting was held at the request of Japan. According to
a government source, "We were surprised because we had not
anticipated the North would accept our offer. It was good for both

TOKYO 00003318 006 OF 012


sides to sit down at the table." But many government officials took
the view that: "Pyongyang probably thought Japan's influence would
be indispensable if energy aid is to be provided to it. It is
premature to take it as a positive message about progress on the
abduction issue."

According to a report by the Korean Central News Agency (KCNA), the
North Korean Foreign Ministry released the memorandum record (on the
bilateral meeting) and said critically: "Japan is struggling to hold
even the six-party talks as hostage to the abduction issue."

Japan's strategy is to resume talks by the working group on
normalization of diplomatic ties between Japan and North Korea at an
early date and move the abduction issue forward. Japan is also
aiming to have a decision to resume the bilateral working group in a
chairman statement, but the North has not agreed to it. The focus is
on whether a meeting of the Japan-North Korea working group will be
held prior to the foreign ministerial of the six-party talks planned
for September in accordance with Japan's scenario.

Regarding the six-party talks, many officials are worried that Japan
might find itself isolated because of its tough stance toward the
North or that other participants might become less interested in the
abduction issue. Japan's basic policy is not to make any easy
concession, but it is also hopeful of drawing North Korea to the
discussion table.

8) "Even Alzheimer's patients can understand," Aso says

MAINICHI (Page 2) (Full)
July 20, 2007

Referring in his speech yesterday in the city of Takaoka, Toyama
Prefecture to the differences of the prices of domestic and foreign
agricultural products, Foreign Minister Taro Aso stated: "Even
Alzheimer's patients know which one is expensive, 78,000 yen
or16,000 yen."

In a rally for the ruling Liberal Democratic party (LDP) incumbent,
who is seeking to hold his seat in the Toyama constituency (one seat
up for reelection) in the July 29 House of Councillors election, Aso
tried to explain how expensive Japanese agricultural products are
overseas, mentioning the fact that a sack of Japanese rice worth
16,000 yen is sold for 78,000 yen in China. He then cited the word
"Alzheimer's" disease.

There were elderly supporters at the rally. Aso touched on the
pension record-keeping fiasco, stating: "This issue is a matter for
30 years from now. I understand that those who pay premiums are
concerned about it, but you don't have to worry about it."

9) Poll: Minshuto maintains lead; Cabinet support rate rebounds to
34.8%

YOMIURI (Page 1) (Full)
July 20, 2007

The Yomiuri Shimbun conducted its fifth telephone-based nationwide
poll on July 17-19. About 28% of those polled said they would vote
for Minshuto (Democratic Party of Japan) in the
proportional-representation segment of the July 29 House of
Councillors election, while 20% said they would vote for the ruling

TOKYO 00003318 007 OF 012


Liberal Democratic Party, widening the gap by one point over the
previous poll (conducted on July 10-12). Meanwhile, 28% of
respondents said they would vote for the main opposition party
Minshuto in the prefectural constituencies, an increase of one
percentage point from the July 10-12 poll, while 24 %intend to vote
for the LDP, up two points from the previous survey. The results of
the latest survey show that Minshuto still leads the LDP both in the
proportional-representation segment and the prefectural constituency
races.

The survey on voters' attitudes toward the prefectural electoral
districts indicated that the LDP had regained some support in towns
and villages, with 29% of the surveyed saying they would vote for
the party and 28% saying they would vote for the largest opposition
party. Meanwhile 35% of voters in large cities said they would vote
for Minshuto and 21% favored the LDP.

The approval rating for the cabinet of Prime Minister Shinzo Abe
rebounded to 34.8% , up 4.6 percentage points from the previous
poll. In the consecutive Yomiuri polls, the highest disapproval
rating for the Abe cabinet was 52.6% . Asked about the government's
measures for the pension record-keeping blunders by the Social
Insurance Agency, 36% of the pollees said they valued them, up five
points from the previous poll, 55% answered otherwise, a decrease of
five points.

Asked whether Minshuto had come up with effective measures for the
pension fiasco, 61% of the respondents said they did not think so,
while 18% answered yes.

10) Poll: 80% have doubts about Abe's elusive attitude toward
consumption tax hike

TOKYO SHIMBUN (Page 2) (Abridged slightly)
July 20, 2007

The Tokyo Shimbun yesterday compiled the results of its
Internet-based opinion survey that was conducted to find out the
political awareness of 500 monitors. The results exposed their
strong sense of resistance to the question of raising the
consumption tax rate -- a focus in the upcoming Upper House election
-- discontent with Prime Minister Shinzo Abe's elusive attitude
toward the question.

To a question asking whether the consumption tax rate should he
hiked for financing the pension program, over 70% of respondents
answered it should not be hiked for the time being or must
absolutely not be raised, greatly surpassing positive answers.
Although the government and the ruling coalition mainly believe the
consumption tax must be raised eventually in order to secure a
stable financial resource, obtaining support from voters seems
difficult.

Asked about Prime Minister Abe's noncommittal attitude toward a
consumption tax hike and the Democratic Party of Japan's plan to
fund the basic portion of the pension program without raising the
tax, 41.4 %answered that they could understand the DPJ's plan but
the prime minister's attitude was questionable, while 40.1% said
both were questionable. At the same time, 11.2 %said the prime
minister's position was understandable but the DPJ's plan was
questionable and 7.4 %answered both were understandable.


TOKYO 00003318 008 OF 012


This means that over 80% of respondents have doubts about the prime
minister's stance. With the tax system scheduled to be discussed in
the fall or later, the prime minister's approach of not making the
consumption tax a campaign issue seems to appear cunning in the eyes
of voters.

To a question asking for how the prime minister should take
responsibility in the event the ruling coalition was defeated in the
Upper House election, 37.3 %said he should dissolve the Lower House
for a snap general election, while 35.1% indicated he should resign
if the ruling bloc failed to win a majority. In addition, 12.8% said
he should not resign regardless of the results of the election.
Although there is a view in the LDP that the outcome of the election
must not be linked to the prime minister's fate, voters are
apparently expecting a proper consequence.

As for the question of Agriculture Minister Akagi's shady office
expenses, an overwhelming 82.3 %said he must disclose receipts.

Those who said they would "support" or "more or less support" the
Abe cabinet accounted for 22 % , while nonsupport totaled 77.4 % .
Of the 94 respondents who had expressed support for the cabinet in
the previous survey, 22, or 23.4 % , said they no longer support
it.

11) Situational survey at the opening stage of the Upper House
election: Possibility of LDP, Komeito coalition losing majority; LDP
stagnant in the single districts; DPJ moving to become no. 1 party
in the Upper House

ASAHI (Top play) (Excerpt)
July 20, 2007

The Asahi Shimbun on July 17 and 18 carried out a situational survey
by telephone targeting eligible voters nationwide on the House of
Councilors election that will take place July 29. Adding information
from nationwide news gathering to probe the situation at the opening
stage of the election, the conclusions reached included: 1) The
Liberal Democratic Party (LDP) is stagnant, and there is a
possibility it could obtain less than the 44 seats it obtained in
1998, when it lost the election; 2) It is a delicate question
whether the New Komeito can secure 12 seats in the election; 3)
Minshuto (Democratic Party of Japan or DPJ) is doing well and has
the momentum for exceeding 50 seats, the largest number it has
attained (in an Upper House election) so far; and 4) the Japanese
Communist Party and Social Democratic Party will have trouble
picking up seats. In order for the ruling parties to maintain their
coalition, they need to win a total of 64 seats in this election (of
half the upper house), but that seems fairly difficult to achieve,
even adding those independents who have LDP backing. However, about
50% of the voters have yet to clarify their choices in the district
races and about 30% are still undecided in the proportional
representation segment of the election, so the situation is still
fluid. This newspaper will carry out another similar survey next
week at the final stage of the campaign.

12) Abe shies away from collective defense in election campaign out
of consideration for New Komeito

ASAHI (Page 1) (Abridged slightly)
July 20, 2007


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In the ongoing election campaign, Prime Minister Shinzo Abe has
rarely touched on the question of allowing the country to exercise
the right to collective self-defense, although he is eager to change
the government's interpretation of the Constitution to open the door
for it. That is mainly because New Komeito, the Liberal Democratic
Party's coalition partner, remains cautious about the matter. A
blue-ribbon panel launched by Abe is expected to produce a report
this fall embracing the idea of exercising the right. But the hurdle
might rise higher depending on how the election turns out and the
response of the New Komeito.

In May, Abe presented to the blue-ribbon panel four scenarios, such
as whether the SDF can intercept a US-bound missile, to find out the
extent to which Japan can deal with those situations under the
current interpretation of the Constitution.

Most panel members are in favor of exercising the right to
collective defense. The panel's dominant view is that the
government's interpretation of the Constitution has reached its
limit. The panel's chair Shunji Yanai, a former ambassador to the
United States, also pointed in a July 10 Asahi Shimbun interview to
the likelihood of reaching a conclusion endorsing Japan's right to
collective defense.

Abe also indicated before assuming office that the government's
position banning exercising the right was unacceptable in the
international community.

But in the ongoing campaign, Abe has not touched on collective
defense in roadside speeches. Asked about the issue in a July 11
party-head debate ahead of the opening of election campaigning, Abe
simply said: "Discussion is underway (by the blue-ribbon panel)."

Abe's elusiveness comes from the New Komeito's strong opposition to
allowing the country to exercise the right. Although the LDP vows in
its manifesto to sort out the relationship with the Constitution,
including the question of the right to collective defense, the
ruling coalition's manifesto does not mention collective defense.

New Komeito leader Ota on a television program on July 17 said: "The
prime minister and I talk quite often, and he has assured me that he
will stand by the government's traditional interpretation of the
Constitution." It will not be easy for the government to change its
constitutional interpretation even if the Abe administration manages
to get through the upcoming election and the panel reaches a
conclusion supportive of collective defense.

13) With exhaust fan left on, iodine found emitted even after
discovery of problem at nuclear plant, probably due to errors in
operation procedure

NIKKEI (Page 1) (Excerpts)
July 20, 2007

Tokyo Electric Power Co. announced yesterday that after radioactive
substances were detected from the No. 7 reactor of the
Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture
following the Niigata Prefecture Chuetsu Offshore Earthquake on July
16, iodine had continued to leak out of the plant for a few days. It
is believed that radioactive iodine was emitted from an exhaust fan
that continued to run due to errors in the operation procedures,
even though the reactors were automatically shut down after the

TOKYO 00003318 010 OF 012


quake.

14) US air conditioners unable to be used because of different
voltage standards; Adjustment of voltage standards and plug
remodeling necessary

MAINICHI (Page 26) (Full)
July 20, 2007

The 96 air conditioners delivered by the US military for use in the
evacuation centers for those affected by the Niigata Chuetsu
earthquake are sitting in a corner, unable to be used because they
are set to US voltage standards.On top of adjusting the voltage
standards, the plugs must also be remodeled, and as a result, it is
uncertain when the air conditioners can be put to use.

The air conditioners are a portable model made by Sears Roebuck.They
were delivered to Niigata Airport on the 18th and 19th and
immediately brought to Kashiwazaki City.Ambassador to Japan
Schieffer personally delivered to the airport the 48 air
conditioners brought on the 18th.However according to the Niigata
branch of Tohoku Electric Power Co., while most homes have electric
currents of 100-volts and bigger facilities such as schools have at
the most 200-volts, the air conditioners are made for electric
currents of 230-volts.

Currently, members of the Self-Defense Forces, who came to the area
to assist with relief efforts, are working to adjust the air
conditioners under the guidance of US technicians so they can be
used at quake-stricken areas throughout the city.Yet someone
involved with the situation said, "We want to fix up and use quickly
the (air conditioners) that (the US) took the trouble to send, but
we wish that (the US) had sent them to us in a condition that was
easier to deal with."

15) WTO agricultural committee chairman's new proposal "severe" for
Japan, Agricultural Minister Akagi says

YOMIURI (Page 9) (Full)
July 20, 2007

World Trade Organization (WTO) Agricultural Committee Chairman
Crawford Falconer on July 17 presented a new set of proposals to WTO
members. Regarding a cut back on the number of key items eligible
for exceptionally high tariffs, Agricultural Minister Akagi said,
"The package includes very severe proposals."

Japan had maintained that 10% -15% of all agricultural trade items
(133-200 items) should be allowed as key items. However, the
chairman's proposal proposed 4 %or 6% (40 or 60 items) of taxable
items. Akagi indicated his intention to seek a revision in future
talks, noting, "The scope of proposed items is very narrow. It is a
problem."

16) Government to set up at Kantei control tower in charge of global
warning countermeasures

YOMIURI (Page 2) (Full)
July 20, 2007

In order to respond to the problem of global warming, which will
become a major topic of discussion in the 2008 Group of Eight Summit

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to take place in the Lake Toya area in Hokkaido, the government
decided yesterday to set up in early August or so a "control tower"
in the Kantei (Prime Minister's Official Residence) in charge of
coming up with measures to cope with climate change. Several
ministries concerned have compiled measures so far.

Specifically, the members of the new body will be picked from among
the private sector experts, bureaucrats, special advisors to the
cabinet, and special advisors to the prime minister, offering
suggestions and recommendations to the prime minister. The control
tower will likely fulfill the function of secretariat of a
four-minister conference (foreign minister, chief cabinet secretary,
environment minister, and minister of economy, trade and industry),
and be permanently stationed in the Kantei.

As the European Union and the United States have stepped up their
efforts for dealing with global warming, concern has spread in the
government, with a government source saying, "Japan is falling
behind other countries in the area of creating a system."

The government, therefore, decided to set up the new post
responsible for proactive policy-making in the light of the Council
on Environment Quality of the United States.

17) FTC mulls application of Antimonopoly Law for international
airfare cartels, focusing on moves in US, Europe

NIKKEI (Page 5) (Full)
July 20, 2007

The study group on government regulations and competitive policy
under the Fair Trade Commission (FTC) released a report yesterday on
whether to apply the Antimonopoly Law to international airfare
cartels designed to fix prices through negotiations among airlines.
Currently, international airfare cartels are exceptionally placed
outside the reach of the law. The report points out that the current
scope of subjects to the exceptional regulation is not necessarily
at "the minimum necessary level." It also refers to the decisions of
the European Union (EU) and the United States to scrap their
special-exemption measures for international airfares, indicating
the need for Japan to review its regulation.

If the study group defines it proper to remove the exception for
international airfares in its final report due out in the fall or
later, the FTC will ask the Ministry of Land, Infrastructure and
Transport to revise the Aviation Law under its jurisdiction.

The international airfare cartel is a system for prices for each
route to be set by the International Air Transportation Association
(IATA) joined by worldwide airlines or by bilateral treaties. In
Japan, the Antimonopoly Law is not applied to the cartel system
under the Aviation Law.

The EU decided in late 2006 to regard the said cartel as illegal.
The US authorities are also looking into scrapping the special
regulation.

When a review of the exceptional regulation for international
airfares was discussed in 1999 in Japan, it was decided to keep the
cartel system in place, on the grounds that "Japan's system should
be in line with the international one." The study group now finds no
reason for continuing the current system.

TOKYO 00003318 012 OF 012

Since many domestic airlines have already offered discount services,
prices set by IATA have hardly been adopted in the domestic aviation
industry. Given this, many anticipate that even if the Antimonopoly
Law begins to apply, there will be no major impact.

Each airline company, however, has set discount rates based on
IATA-fixed prices, so some voice concern that "the abolishment of
the cartel system might cause a price collapse."

18) Cargo service via Trans-Siberian Railway: Mitsui & Co. to team
up with Russian Railways: 40% cut in travel time possible; Boost to
Japanese companies' advance into Russia

NIHON KEIZAI (Top Play) (Lead para.)
July 20, 2007

Mitsui & Co. plans to team up with state-run Russian Railways to
launch cargo service for Japanese companies using the Trans-Siberian
Railway connecting the Far East and western Russia. Mitsui will
serve as Russian Railways' Japanese agent responsible for goods
distribution operations. The business tie-up will enable a reduction
in travel time from the Far East to western Russia to about 25 days,
which is about 40% quicker than using ship freight, currently main
means of transporting cargoes to western Russia. Mitsui hopes to
lead the tie-up deal to efficient distribution, which has been a
theme for the Japan-Russia business. Since Toyota Motors, which is
now constructing a plant in Russia, is also looking into the
possibility of using the Trans-Siberian Railway, the railway will
likely support Japanese companies' advance into Russia as a main
means of connecting Japan to Russia and East Europe.

SCHIEFFER

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