Cablegate: Japanese Morning Press Highlights 07/30/07-2

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UNCLAS SECTION 01 OF 08 TOKYO 003459

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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.

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TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA

SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 07/30/07-2

Index:

11) Kokumin: Wins a seat in Shimane prefecture
12) Even Katayama, the Upper House LDP secretary general loses his
seat
13) Voter turnout rate 58.64% , up slightly from last election,
but absentee votes totaled over 10 million

Exit polls:
14) Yomiuri exit poll shows unaffiliated voters returned to the DPJ
fold
15) Yomiuri exit poll finds voters upset by the pension fiasco
turned to the DPJ
16) Yomiuri exit poll: 25% of LDP supporters defected to the DPJ

17) Asahi exit poll shows clear lack of confidence in Abe, with 56%
of voters (30% of LDP supporters) wanting him to quit

Policy impact of the election:
18) A move to dump Prime Minister Abe may start in the LDP
19) Important bills may not face a huge wall of opposition
resistance when Diet resumes in the fall
20) Prime Minister Abe still firm on completing his constitutional
reform agenda
21) Business leaders upset by the huge LDP defeat in the election

Articles:

11) PNP gains seat in Shimane; Tanaka of NPN elected

YOMIURI (Page 7) (Full)
July 30, 2007

The People's New Party (PNP) actively fielded candidates, but
maintained only two seats up for election. A sense of disappointment
is permeating the party. It gained only one seat in the proportional
representation segment, but it won in the Shimane constituency due
to cooperation with the Democratic Party of Japan (DPJ).

Regarding the LDP's devastating defeat in single-seat
constituencies, party head Tamisuke Watanuki told reporters early
today: "There was a considerable backlash in local districts. The
result shows a backlash to the fact that competition principles in
the market have given rise to major confusion." Concerning the
party's future approach, he said, "We will seriously take the
election cooperation with the DPJ. We want to indicate understanding
toward the DPJ's political trend." However, some party members take
the view that the PNP should search for ways to cooperate with the
ruling parties regarding approaches to such issues as individual
bills."

Yasuo Tanaka, head of the New Party Nippon (NPN), was elected,
backed by his high name recognition. Asked about to which political
group he will join, Tanaka said, "I have not given a thought to that
yet."

12) Secretary general of LDP members in Upper House loses election;
LDP candidate running from Aoki's home constituency also defeated

YOMIURI (Page 3) (Excerpts)
July 30, 2007

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In election districts, the strongholds of Liberal Democratic Party
(LDP) senior officials in the Upper House were greatly shaken.
Toranosuke Katayama, secretary general of Liberal Democratic Party
(LDP) members in the House of Councillors, running from Okayama, a
high-profile election district, was defeated by Yumiko Himei, new
candidate running on the Democratic Party of Japan's (DPJ) ticket.
Commenting on his defeat, Katayama said, "There was a major setback.
The defeat is entirely due to lack of insight and virtue on my
part."

Mikio Aoki, head of the LDP caucus in the Upper House, who is dubbed
the kingmaker of the Upper House, said during an NHK program, "I
never expected that Mr. Katayama would lose the election." Incumbent
Shuntaro Kageyama, who was running on the LDP's ticket in Shimane,
Aoki's home constituency, was also defeated by Akiko Kamei, a new
candidate of the People's New Party (PNP).

As symbolized by defeats in Okayama and Shimane, which had been
regarded as its impregnable strongholds, LDP candidates' defeats in
single-seat constituencies dealt a severe blow to the party.

All LDP candidates were defeated by candidates who either ran on the
LDP's ticket or were recommended by it in all four prefectures in
the Shikoku region. In six prefectures in the Tohoku region, LDP
candidates also fell behind candidates either running on the DPJ's
tickets or independent candidates with opposition-party affiliation
in four single-seat constituencies, with the exceptions of the
two-seat Miyagi constituency and the single-seat Fukushima
constituency. In Iwate Prefecture, DPJ head Ozawa's home
constituency, a DPJ candidate was elected in the Lower House Iwate
No. 1 Constituency by-election held the same day.

The LDP also failed in Saga, Nagasaki and Miyazaki in Kyushu region.
In Okinawa, incumbent Keiko Itokazu with no party affiliation,
recommended jointly by the DPJ, the Japanese Communist Party (JCP),
the Social Democratic Party and the People's New Party (PNP)
defeated Junshiro Nishime running on the LDP's ticket. The joint
struggle among opposition parties at last came to fruition, after
defeats in the gubernatorial election and the Upper House
by-election since last fall.

The LDP also suffered a severe setback in the Hokuriku region, the
LDP's stronghold. Tomiro Yata, a new candidate fielded by the LDP
was defeated by Yasuo Ichikawa, former Lower House member fielded by
the DPJ, in Ishikawa, former Prime Minister Yoshiro Mori's home
constituency. Kotaro Nogami, a former LDP Diet member, was defeated
by Takashi Morita, an independent new candidate with no party
affiliation, in Toyama as well.

13) More than 10 million absentee votes prior to election day;
Turnout rate on election day was 58.64%

MAINICHI (Page 2) (Full)
July 30, 2007

The voter turnout for the 21st House of Councillors election
conducted Sunday was 58.64% across the nation, according to
counting by the Mainichi Shimbun. Although such issues as the
pension-records fiasco and political money scandals that voters have
strong interest were surfaced as campaign issues, there was only a
2.07 percentage point increase from the 56.57% turnout rate in
the 2004 Upper House election, resulting in the 6th lowest-turnout

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in the postwar period. Meantime, the number of people who cast
absentee ballots taking advantage of the early voting system was up
50.58% from the previous race to 10,798,996, the largest number
since the system was introduced in 2003.

By prefecture, the highest turnout was 71.81% of Shimane
Prefecture, followed by 67.70% of Akita, 67.67% of Tottori.
The turnout this time around increased in 39 prefectures. In Toyama,
the turnout in creased by 7.34 points to 64.96% .

Aomori Prefecture marked the lowest turnout of 53.88% , followed
by 54% of Ibaraki and 54.6 of Gunma. Turnout in Miyazaki was
decreased by 5.35 points, the largest drop. Turnout in Gunma and
Oita (63.04% ) was the second lowest in the 21 Upper House
elections. One of the reasons for the low turnout this time around
is that 2007 is the year of the boar in the 12-year cycle of the
Chinese zodiac, when the Upper House election and unified local
election take place simultaneously once in 12 years.

The early voting system has conducted three times -- the 2004 Upper
House poll, the 2005 House of Representatives election, and the 2007
Upper House race. In Sunday's election, the number of voters cast
ballots through the early voting system exceeded the 8,962,911 of
the 2005 Lower House election, which attributed to 10.33% of the
all voters.

The number of voters took advantage of the early voting system
increased from the previous election across the country, including
Yamagata and Akita which experienced a 90% or more increase.

14) DPJ wins back unaffiliated voters in urban areas, reversing
results of "postal election"

YOMIURI (Page 6) (Excerpts)
July 30, 2007

Exit polls showed that 51% of swing voters cast ballots for the
major opposition Democratic Party of Japan in the proportional
representation segment in Sunday's House of Councillors election.
The Liberal Democratic Party won big in the 2005 House of
Representatives election, when the privatization of postal services
was the major campaign issue. In this year's election, the DPJ
achieved an overwhelming victory by winning back unaffiliated
voters.

Asked which party or candidates they voted for in the
proportional-representation segment, 51% of unaffiliated voters
said they voted for the DPJ and 14% for the Liberal Democratic
Party, a difference of 37 points. The DPJ's performance was
especially strong in urban areas, such as Kanagawa and Chiba, led by
Iwate's 65% .

The DPJ also made gains in the 2004 Upper House election, garnering
51% of unaffiliated votes. The DPJ's recovery of unaffiliated
votes shows that the party is now firmly established as a receptacle
for votes critical of the ruling coalition.

15) Exit Poll: Distrust over the pension issue leads to increased
DPJ support

YOMIURI (Page 6) (Full)
July 30, 2007

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The results of a joint exit poll conducted yesterday by the Yomiuri
Shimbun and the Nippon Television Network (NTV) show that during
this Upper House election, 50% of those who said they "cannot
trust the current pension system" voted for the Democratic Party of
Japan (DPJ, or Minshuto), far surpassing the 10% who voted for
the Liberal Democratic Party (LDP). It seems that the DPJ was able
to obtain the support of voters distrustful towards pensions.

When asked what they thought about Japan's pension system, 10% of
respondents said that they "can trust" the system whereas over 60%
said they "cannot trust" the system ("No response" answers were not
included). These numbers show that a large number of voters are
worried and distrustful regarding pensions.

Looking at the voting patterns of those distrustful of the pension
system, 52% voted for the DPJ in the proportional-representation
segment, and 53% voted for the DPJ in the electoral districts. In
comparison, 14% voted for the LDP in the
proportional-representation segment and 15% voted for the LDP in
the electoral districts. It seems that voters approved of the DPJ's
pursuit of the pension issue during Diet debates and handed a harsh
sentence to the LDP, which had held power for many years.

Looking at the breakdown by age group of those distrustful of the
pension system, 13% of those in their 50s voted for the LDP and
54% voted for the DPJ, a 41 point gap. Among those in their 30s
and 40s and those over the age of 60, there was also a large gap (37
to 40 points) between the percentage of those who voted for the DPJ
and those who voted for the LDP.

Meanwhile, looking at the voting patterns of those who said they
"can trust" the pension system, 50% voted for the LDP in the
proportional-representation segment and 19% voted for the DPJ.
Among this group, the LDP has a 31 point lead over the DPJ, a
completely opposite result from the other group.

Furthermore, when asked what issue they placed the most focus on
when voting, the respondents' number one response was "pensions,"
followed by the economy, social disparity, politics and money
scandals, and education. It seems then that pensions had a huge
effect on how people cast their votes.

Among those who placed the most emphasis on pensions, 43% voted
for the DPJ in the proportional-representation segment as compared
to the 24% who voted for the LDP, giving the DPJ a 19 point lead.
The strength of the "pension head wind" is evident from these
numbers.

16) Exit poll shows 25% of LDP supporters voted for the DPJ

YOMIURI (Page 2) (Abridged)
July 30, 2007

In a joint exit poll conducted yesterday by the Yomiuri Shimbun and
the Nippon Television Network (NTV), it was discovered that the LDP
was unable to maintain its own support base.

Among those polled, 37% said that they usually support the LDP,
an increase of 1 point from the last Upper House election in 2004.
However, of these LDP supporters, 56% voted for the LDP or for an
LDP candidate in the proportional-representation segment of this

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election, a 4% decrease.

Instead of voting for the LDP, 25% voted for the Democratic Party
of Japan (Minshuto) or its candidates, a 5% increase from the
last election. Support also went to the New Komeito (5% ), the
Japanese Communist Party, the Social Democratic Party, New Party
Nippon, and the People's New Party (each 1 to 2% ), bringing total
support for other parties to 37% .

Even in traditional LDP strongholds, the percentage of LDP
supporters voting for the LDP decreased. In Nagasaki Prefecture,
where the highest percentage of LDP supporters voted for the LDP in
the last election (69% ), support decreased to 61% during this
election. Even in Shimane Prefecture, the home territory of Diet
member Mikio Aoki, support decreased from 64% to 60% . Out of
25 electoral districts, districts where over 60% of LDP
supporters voted for the LDP decreased to 9 overall. In Miyagi,
Yamagata, Hiroshima, and Okinawa Prefectures, support was less than
50% . In Nagano, Niigata, and Yamanashi Prefectures, almost 30%
voted for Minshuto instead of the LDP.

Judging from these results, it seems that after the pension fiasco
and the numerous scandals involving cabinet members, those who had
supported the LDP until now withheld their votes as a form of
punishment.

17) Asahi exit poll shows clearly a lack of voter confidence in Abe,
with 56% wanting him to resign; Even 30% of LDP supporters
want prime minister to step down

ASAHI (Page 5) (Excerpts)
July 30, 2007

An exit poll carried out by this newspaper for the Upper House
election found that even 30% of the supporters of the ruling
Liberal Democratic Party (LDP) are calling for Prime Minister Abe to
resign his post. Although there was high hopes for Prime Minister
Abe as "the face of the election," 70% of the unaffiliated voters
and over 50% of all voters who responded to the exit poll
expressed their lack of confidence in him in this way. In addition,
over 50% of the voters polled replied that they had voted for the
Democratic Party of Japan (DPJ or Minshuto) influenced by the
pension issue. Less than 20% said they had voted for the LDP, so
it appears that the pension issue was the driving force for the
DPJ's leap forward.

In the exit poll, the question was asked, "Do you want Prime
Minister Abe to continue?" Those who replied that they wanted him to
stay in office totaled only 32% , while those who wanted him to be
replaced by another prime minister reached 56% .

18) Moves to urge Prime Minister Abe to step down may start

SANKEI (Page 3) (Excerpts)
July 30, 2007

"I did not imagine that we would suffer a major setback," said Mikio
Aoki, chairman of the ruling Liberal Democratic Party's caucus in
the House of Councillors. Aoki's comment described how greatly the
results of Sunday's Upper House election had rocked the LDP.
Although Prime Minister Shinzo Abe, president of the LDP, expressed
his intention last night to stay in office, his management of his

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administration will inevitably be difficult. Although the factions
in the LDP said they are willing to allow him to remain in the LDP
presidential post in the interest of party unity, a mood in the
party is already growing for Abe to step down, depending on trends
in public opinion.

Last night, Aoki said he would resign as chairman of the LDP Upper
House caucus, noting, "I have prepared myself (for taking
responsibility for the setback). If the prime minister is willing to
remain in office, I will accept it." General Council Chairman Yuya
Niwa took a position of supporting Abe's intention to remain in
office, noting, "The defeat is a great loss for the Abe
administration, but I want the prime minister to hang in there, and
not quit his job."

Expecting that the LDP would be defeated in the election, the LDP
leadership took precautions against possible calls in the LDP for
Abe to step down after the election. Secretary General Hidenao
Nakagawa, who is responsible for elections, discussed last evening
with former Prime Minister Yoshiro Mori about the future course of
his action. At that time Nakagawa made up his mind to resign as
secretary general. He then said that Abe should shuffle his cabinet

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and the lineup of the LDP executives.

However, Koichi Kato, former LDP secretary general, who has been
critical of Abe, expressed his view opposing Abe's staying in
office, arguing, "I fear that if the prime minister remains in his
current post, neglecting the feelings of the voters, both he and the
party will be hurt." Yoichi Masuzoe, chairman of the LDP Upper House
Policy Research Council Chairman, citing gaffes by cabinet ministers
as a reason, said, "People had great doubts about the Abe cabinet. I
thought that we would lose the election." He was referring to Abe's
responsibility for the election results.

Early yesterday afternoon when a prediction that the LDP would
suffer a major defeat, senior members of the faction led by former
Finance Minister Sadakazu Tanigaki assembled in a Tokyo hotel.
Reportedly the participants agreed that a unanimous cabinet
arrangement should be formed under the leadership of Tanigaki or
former Chief Cabinet Secretary Yasuo Fukuda.

However, the heads of factions, including Tanigaki, who have shied
away from the Abe administration, last night stressed the need for
unanimity in the party in order for Abe to stay in power.

19) Big barrier may stand in way of government and ruling bloc's
plan to extend antiterrorism legislation, tax reform

YOMIURI (Page 7) (Excerpts)
July 30, 2007

Now that the ruling bloc suffered a crushing defeat in Sunday's
House of Councillors election, the government's priority legislation
and reform debate are expected to stall. A big barrier now stands in
the way of Prime Minister Shinzo Abe's goals of creating a beautiful
country and breaking away from the postwar regime.

The extension of the Antiterrorism Special Measures Law, scheduled
to expire on November 1, is a pressing issue for the government and
ruling bloc. The Maritime Self-Defense Force's refueling activities
in the Indian Ocean has been playing an important role in the solid
Japan-US alliance. Some in the major opposition Democratic Party of

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Japan hold high regards for the MSDF's activities. However, in the
event the Diet failed to approve the law's extension due to the
DPJ's strong resistance following a reversal of the standings
between the ruling and opposition parties in the Upper House as a
result of yesterday's election, that could be a serious blow to the
Japan-US alliance.

The election results are likely to have an impact on the Hokkaido
Toyako Summit 2008, which Japan will chair, as well. Although the
government intends to take the initiative in international efforts
to create a post-Kyoto Protocol framework to fight global warming, a
senior Foreign Ministry official said: "When a country's domestic
policies become instable, the country's is underestimated by others
and its bargaining ability becomes weaken on the diplomatic front."
Japan's overall diplomacy, including the North Korean nuclear and
abduction issue, might come to s standstill, as well.

On the economic and fiscal front, turbulence is expected in the tax
reform argument for raising the government's contribution to the
basic pension scheme to half in fiscal 2009. The government plans to
submit to the Diet a bill to raise the consumption tax rate in 2008.
The prime minister, however, indicated in the lection campaigning
that the government might not hike the consumption tax due to an
increase in tax revenues resulting from economic growth. The prime
minister might be pressed for dissolving the House of
Representatives for a snap general election. Given the situation,
cautious views about raising the consumption tax rate may grow
stronger for the sake of the next election.

20) Prime Minister Abe still adheres to revising the Constitution:
"The nation understands our basic policy"

ASAHI (Page 3) (Excerpts)
July 30, 2007

Appearing on TV programs late yesterday, Prime Minister Shinzo Abe
said, "I'm responsible for this crushing defeat," but he emphasized
at the same time, "The nation has understood our basic policy."
These remarks gave a glimpse of his feelings that his ruling Liberal
Democratic Party (LDP) suffered a crushing defeat principally
because of a series of scandals involving cabinet members as well as
the pension issue, but that the nation did not necessarily say no to
his own ideas.

In the last September LDP presidential election, Abe came up with
two policy goals: "breakaway from the postwar regime" and "turning
Japan into a beautiful country." What underlies these ideas is
"rebuild postwar conservatism."

However, Abe's these policy ideas obviously lost their luster in the
election campaign this time. In speaking to voters, Abe desperately
emphasized the recent passage of a national referendum bill, a
necessary element for constitutional revision, and other
achievements, but he was eventually unable to turn around an adverse
wind from the pension fiasco and a series of scandals involving his
cabinet members.

Despite this massive defeat, Abe declared he would stay on. The
reason is presumably because he would think that if he steps down at
this point in time after he somehow managed to enact the national
referendum bill into law, he will come to give up halfway preparing
a process for constitutional revision. Also, he may think that if he

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steps down now, a council of experts established to discuss the
question of the right to collective self-defense may delay
presenting a conclusion, though it plans to come up with a
conclusion in September.

Furthermore, Abe is to host the Group of Eight (G-8) summit
conference in Lake Toya, Hokkaido, in next July. In line with
Japan's own measures against climate change, which he unveiled in
May and which involves major emitters like the United States, China,
and India of greenhouse gases, Abe wants to play a leading part in
creating a new international framework.

Considering such an attitude of the prime minister, most of his
aides had insisted that the blame lay with some cabinet members (who
caused scandals and repeated gaffes), and that the prime minister
himself did not make a blunder. Many aides had stressed that
regardless of the election results, the prime minister should stay
on.

Obviously, voters cast doubts on Abe through the Upper House
election this time for his ability to hold the reins of government.
Even if he stays on, things will not necessarily go as he expects.

21) Economic circles perplexed by ruling bloc's crushing defeat

YOMIURI (Page 7) (Full)
July 30, 2007

Business circles are shocked by the ruling bloc's major setback in
Sunday's House of Councillors election.

Japan Association of Corporate Executives representative secretary
Masamitsu Sakurai took this view:

"The outcome is regrettable for a group which has been supporting
the Abe administration's reform course. It is a manifestation of
public criticism of the pension fiasco and the question of politics
and money. There are mounting vital challenges, such as a
fundamental reform of the tax system and building a sustainable
social security system. We fear that instability in the political
situation might roll back reform efforts and the Japanese economy
would stall again as a result. We would like to see both the ruling
and opposition camps to affirm the basic thinking that there will be
no growth without reform."

Japan Chamber of Commerce and Industry President Nobuo Yamaguchi
noted:

"The public do not want to see national politics stand still. We
would like to see lawmakers run the administration in a way to give
consideration to local economies and small businesses while making
maintaining sustainable economic growth."

SCHIEFFER

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