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Cablegate: Japanese Morning Press Highlights 10/03/07

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UNCLAS SECTION 01 OF 12 TOKYO 004638

SIPDIS

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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.

E.O. 12958: N/A
TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA

SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 10/03/07

Index:

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

Anti-terrorism law:
4) Government and ruling parties agree on outline of the new
anti-terrorism bill that would allow the MSDF to continue Indian
Ocean refueling services
5) New anti-terrorism law will have a 2-year time limit and may stop
MSDF refueling of supply ships
6) Democratic Party of Japan (DPJ) refuses ruling camp's request for
prior consultation on anti-terror bill to iron out differences
7) Government reply to Diet question on charge of diversion of use
of MSDF-provided fuel in Indian Ocean: Not in a position to know
full details
8) Fierce confrontation expected in the Diet between ruling and
opposition camps over the extension of MSDF refueling services in
Indian Ocean
9) Ruling parties coordinating one-month extension of the Diet
session in order to have time to pass new anti-terror bill
10) Government denies that MSDF fuel oil supplied in the Indian
Ocean was diverted by US warships for use in Iraq war.

North Korea problem:
11) US, Japan reach understanding on latest 6-party agreement
setting timetable for limited North Korean nuclear disablement
12) Joint statement by six-party talks says delisting DPRK as state
sponsor of terrorism "depends on how that country will behave from
now on"
13) Chief cabinet secretary denies that tentative 6-party agreement
on North Korea contains stated timeframe for removing DPRK from
terror-sponsor list
14) Government has hopes and fears about ongoing South-North Korea
summit talks, but Japan will continue its sanctions

15) Fukuda administration swiftly responded to Okinawa textbooks
issue when caught by surprise monster rally in that prefecture

16) Support group of DPJ senior member Watanabe falsified political
funds records to claim large expenses for non-existent office

Business trends:
17) First triangular merger in Japan includes US' Citigroup
18) Japanese business circles alarmed by triangular merger, but METI
is cool about it

Articles:

1) TOP HEADLINES

Asahi: Nikkei:
Citigroup to wholly own Nikko Cordial in first case of triangular
merger: Nikko to be delisted as early as next January

Mainichi:
KDDI, DoCoMo to lower mobile phone call charges by about 30 PERCENT
possibly next month

Yomiuri:
New antiterror legislation to mention UNSC resolution: Government,

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ruling camp agree on outline; two-year term limit most likely

Sankei:
Medical care for the elderly: Radical reform plan to be compiled in
a year; LDP, New Komeito to review medical copayments by those in
65-74 age bracket

Tokyo Shimbun:
New refueling legislation: Ruling parties agree in principle;
Coordination underway for extending Diet session by a month

Akahata:
Government to review school textbook screening concerning mass
suicides: Hearts of people in Okinawa move government

2) EDITORIALS

Asahi:
(1) Inter-Korean talks: Secure commitment to disable nuclear
facilities from North Korea
(2) Medical services for the elderly: Freezing increase in
copayments a stopgap measure with eye on general election

Mainichi:
(1) Passages on mass-suicides: Just reinstating reference to
coercion by the military will not settle issue
(2) Privatized postal services launched: Do not forget user
convenience

Yomiuri:
(1) Mass-suicides in wartime Okinawa: Political intervention in
school textbook screening puzzling
(2) Death of 17-year-old sumo wrestler: Violence will disgrace
national sport

Nikkei:
(1) Show path toward nuclear abolition instead of dramatizing
inter-Korean reconciliation
(2) Sumo Association should be aware that it is a public interest
corporation.

Sankei:
(1) School textbook screening: Carry facts correctly, rejecting
political intervention
(2) Reform of government-affiliated financial institutions: Politics
should support personnel appointed from private sector

Tokyo Shimbun:
(1) New antiterror legislation: Information disclosure essential
(2) Fake cochin incident heightens distrust in food labeling

Akahata:
(1) Death of sumo wrestler: Root out violence from the professional
sumo world

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, October 2

NIKKEI (Page 2) (Full)
October 3, 2007


TOKYO 00004638 003 OF 012


10:02
Attended a cabinet meeting at the Kantei. Visited the office of
global warming countermeasures headquarters. Later, met Vice Defense
Minister Masuda.

12:02
Attended a liaison meeting of the government and the ruling
parties.

14:33
et Cabinet Office's Vice Minister Uchida and Decoration Bureau
Director General Fukushita. Followed by Japan Chamber of Commerce
and Industry Chairman Yamaguchi and Japan Retailers Association
Chairman Nakamura.

15:22
Met Education Vice Minister Zeniya. Followed by Special Assistant
Yamatani.

18:09
Met Deputy Chief Cabinet Secretary Futahashi.

19:00
Arrived at his private residence in Nozawa.

4) Government, ruling parties agree to mention UN resolution in new
antiterrorism bill; Term likely to be set at two years

YOMIURI (Top play) (Excerpts)
October 2, 2007

The government and ruling parties yesterday reached a broad
agreement on new legislation replacing the Antiterrorism Special
Measures Law for continuing the Maritime Self-Defense Force's
refueling operations in the Indian Ocean. The MSDF operations will
be limited to providing fuel and water to foreign vessels. The
government will be required to report to the Diet regularly,
removing the requirement of retroactive Diet approval from the
current law. A senior ruling party lawmaker indicated last night
that the term of the new law would be two years, saying: "It would
be good for two years and the government would be required to report
to the Diet a year after the law takes effect."

Following the basic agreement on the draft legislation, the focus
will shift to coordination of views with the major opposition
Democratic Party of Japan (Minshuto or DPJ). The government and
ruling parties intend to make a final decision on Oct. 4 and begin
talks between the ruling and opposition camps with a Diet chiefs'
meeting on the 5th. They are also planning to introduce a bill to
the Diet before the end of the month for an early enactment of the
new legislation.

As grounds for the MSDF operation, the outline includes mention of
UN Security Council Resolution 1997, adopted in September, which
expressed appreciation for the maritime interdiction operations by
the coalition forces, including the MSDF.

The chief cabinet secretary, foreign minister, and defense minister
held a meeting yesterday morning, and the antiterrorism project team
chaired by former LDP Vice President Taku Yamasaki also met in the
afternoon to finalize the outline.


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The government presented a plan to set the law's period at two
years, while the New Komeito insisted on one year. Foreign Minister
Komura in a media interview yesterday indicated that in order to
conduct stable operations, two years would be better than one year.
Also aiming to make it mandatory for the government to report to the
Diet on the amounts of oil and water supplied by the MSDF and to
increase the number of countries receiving services, the government
is horridly coordinating views with the United States and other
countries.

5) Government eyes halting MSDF refueling service to supply vessels,
sets new law's effective period at two years in outline

ASAHI (Page 1) (Full)
October 3, 2007

The government yesterday launched a discussion on the possibility of
discontinuing the Maritime Self-Defense Force's (MSDF) refueling
service to other countries' supply vessels in its refueling mission
in the Indian Ocean. This is because the final destination of the
fuel supplied to replenishment vessels remains unknown. The
government hopes to make MSDF operations more transparent by calling
off the refueling service to supply ships. The government also
presented an outline for a new bill to replace the Antiterrorism
Special Measures Law to the ruling camp the same day. The outline
sets the new law's effective period at two years.

In a press conference with the Asahi Shimbun and other press
companies yesterday, Defense Minister Ishiba indicated that the
ministry would consider discontinuing the ongoing MSDF's refueling
service to replenishment vessels. He said: "We will also have to
study whether the suspension of the refueling operation to supply
vessels would have some impact on overall maritime intercept
operations."

Ishiba also implied that the new legislation would include mention
of a ban on refueling supply ships, remarking: "Although we have yet
to reach the stage of making a definite statement, it is a matter of
technology whether it is possible to put it in a provision or in
official notes (exchanged between governments)."

Meanwhile, the government presented the outline of the bill
yesterday to the project team of the Liberal Democratic Party and
the New Komeito, chaired by Taku Yamazaki. The outline sets the new
law's effective period at two years. It also requires the government
to annually report on the MSDF mission to the Diet, scrapping the
clause in the current Antiterrorism Law that requires Diet
approval.

The ruling bloc will finalize the outline by Oct. 5 and submit it to
the Democratic Party of Japan and other opposition parties the same
day, hoping to start substantive talks at meetings of both houses
scheduled for next week.

Besides, the outline of the bill restricts the MSDF activities to
supplying oil and water to vessels of other countries. The new bill
would also specify that the MSDF mission is rooted in the United
Nations Security Council Resolution 1368, adopted immediately after
the terrorism attacks on the United States in 2001, and Resolution
1776, which expresses appreciation for the operations by
multinational forces, including Japan, intended to prevent the
movement of terrorists and weapons.

TOKYO 00004638 005 OF 012

6) DPJ refuses prior consultations with government, ruling
coalition

NIKKEI (Page 2) (Full)
October 3, 2007

When asked whether to respond to prior discussions with the
government and ruling coalition on the issue of the refueling
mission in the Indian Ocean, Democratic Party of Japan (DPJ)
President Ichiro Ozawa strongly denied yesterday, saying:

"Since the position of the (DPJ) is that the Constitution does not
allow (refueling mission), we cannot hold any discussions. If they
accept our assertion, it would be a different story."

Asked whether he would hold a meeting with Prime Minister Yasuo
Fukuda, Ozawa responded flatly: "It is an issue that should be
resolved in debate at the Diet." The DPJ intends to refuse the
Liberal Democratic Party's proposal of setting up a consultative
body.

The DPJ, however, is concerned about trends of public opinion. Many
in the party think that they want to prevent the public from seeing
them as opposing the government for the sake of just opposing it.

In an effort to win the public over to its side, the DPJ will pursue
allegation of Japan's fuel being used for the Iraq war. In a meeting
of the party's foreign affairs and defense division, Secretary
General Yukio Hatoyama urged the officials in charge of foreign and
defense affairs to disclose information, saying: "We want to know
the truth." Hatoyama will bring up this issue at a questioning
session at the Diet today.

Tsuyoshi Yamaguchi, vice defense minister of the "Next Cabinet,"

SIPDIS
said: "Without shedding light on the allegation, the refueling
mission will not be allowed." The DPJ is looking into the
possibility of evoking the right of the Diet to investigate state
affairs.

7) Allegation of fuel diversion: Government in written response
says, "It is not position to know details" of operations by foreign
ships

NIKKEI (Page 2) (Full)
October 3, 2007

The government revealed yesterday in a written response adopted by
the cabinet that it had received in 2003 an answer from the United
States regarding allegations of fuel diversion. The answer from the
US was that there had been no case in which Japan's fuel was used
for purposes other than that stipulated in the Antiterrorism Special
Measures Law. The fuel supplied by Japan would not be used for other
purposes.

As to the operations of foreign ships that were provided fuel by
Japan's Maritime Self-Defense Force, the government's written
response was: "The government is not in a position to know the
details because each country decides its operations."

8) Bill to extend refueling mission outlined by government and
ruling bloc likely to bring about a full confrontation in Diet; New

TOKYO 00004638 006 OF 012


Komeito cautious about putting bill to revote

NIKKEI (Page 2) (Full)
October 3, 2007

The government and the ruling bloc yesterday shaped an outline of a
bill allowing the Maritime Self-Defense Force's (MSDF) refueling
mission. They intend to show this outline to the opposition parties
to discuss it, but the major opposition Democratic Party of Japan
(DPJ) is unlikely to respond to discussion and to prefer a total
confrontation with the ruling bloc. Now that the opposition parties
control the Upper House, if the ruling parties fail to obtain the
opposition parties' support for the bill, the major ruling Liberal
Democratic Party (LDP) may put the bill to a revote in the Lower
House and pass it into law by a two-third majority there, but some
in the junior coalition partner New Komeito are cautious about doing
so. Meanwhile, some in the DPJ noted that the party could not obtain
the public's understanding if it simply opposes it. A battle over
the bill is about to start in the Diet with both ruling and
opposition parties harboring concerns.

"It is important for us to draft a good bill and demonstrate through
Diet debate that our bill is excellent," Prime Minister Yasuo Fukuda
said at a liaison meeting yesterday of the government and the ruling
parties.

Afterwards, the ruling bloc held its working group meeting and
decided there to specify in the bill (1) limiting the MSDF's
operations to the supply of fuel and water and (2) a United Nations
resolution adopted in September expressing appreciation for the
MSDF's refueling mission.

On the question of when the bill will expire, discussion between the
government, the LDP and the New Komeito failed to reach agreement
with the government and the LDP calling for the two-year duration of
the bill, insisting that they don't want to discuss the same matter
every year, and the New Komeito insisting on one year on the grounds
that Diet's supervision should be strengthened. The government also
sought to eliminate the provision of Diet approval, but it met with
opposition from the LDP and the New Komeito. No agreement was thus
reached on this matter, either.

Considering the DPJ, they suggested establishing a consultative
council to reflect the opposition bloc's ideas in the bill. If
agreement were reached, they want to pass the bill into law by
mid-December. LDP Secretary General Bunmei Ibuki noted: "If support
for the bill widened, the opposition bloc would find it difficult to
stick to opposition."

When asked by reporters whether he has confidence in making the DPJ
compromise, Fukuda said: "All I can do is to make efforts for
that."

9) Ruling bloc approves outline of new refueling legislation;
Coordination underway for extending Diet by one month

TOKYO SHIMBUN (Top play) (Abridged slightly)
October 3, 2007

The Liberal Democratic Party and New Komeito approved yesterday
afternoon an outline of government-drafted new legislation enabling
the Maritime Self-Defense Force to continue its refueling operations

TOKYO 00004638 007 OF 012


in the Indian Ocean. Following this, the ruling bloc asked the major
opposition Democratic Party of Japan (Minshuto or DPJ) for talks,
but the DPJ declined the request saying the legislation has yet to
be made into a bill. There is no prospect that the new legislation
will clear the Diet before it closes on Nov. 10. The government and
ruling parties began studying the option of substantially extending
the Diet session. Coordination is expected to proceed for extending
the session for about one month.

The LDP-New Komeito antiterrorism project team that met yesterday
approved the outline of the government-drafted legislation except
for the new law's period. Although the LDP agreed to the government
plan to set the period for two years, the New Komeito called for one
year, as is the case with the current Antiterrorism Special Measures
Law, citing the Diet's need to check the MSDF operations. The two
parties will aim at a final agreement through another session on
Oct. 4.

The outline specifies that: (1) the MSDF operations in the Indian
Ocean will be limited to oil and water supply, (2) retroactive
approval by the Diet will not be required, and (3) UN Security
Council Resolution 1776 that expressed appreciation for the Maritime
Interdiction Operations in the Indian Ocean, in which the MSDF is
taking part, will be added to the purposes of the new law.

The government and ruling parties plan to present the outline to the
opposition bloc, including the DPJ, as early as Oct. 5 to make it
into a bill after hearing views of the opposition bloc at a Lower
House Budget Committee session next week, in order to introduce it
to the Diet.

The government and ruling parties have reached a conclusion that
Diet deliberations would not begin until mid-October and that a Diet
extension is inevitable for the enactment of the new law. The
dominant view is to extend the session until around Dec. 10 so as
not to affect the planned budget compilation for the next fiscal
year.

10) MSDF fuel not used in Iraq operation

SANKEI (Page 5) (Full)
October 3, 2007

The government adopted at a cabinet meeting yesterday a statement on
the alleged diversion of fuel provided by the Maritime Self-Defense
Force for use in the Iraq operation. The amount of fuel provided to
a US supply vessel on February 25, 2003, has now officially been
corrected from the 200,000 gallons (760 kiloliters) to 800,000
gallons. The statement also says that the fuel provided to a US
aircraft carrier via the US supply ship was not used in the Iraq
operation, which does not meet the spirit of the Antiterrorism
Special Measures Law. The statement is in response to a question by
House of Representatives member Kenji Eda.

11) Six-party talks: Japan, US agree to accept draft agreement

YOMIURI (Page 2) (Excerpts)
October 3, 2007

The government yesterday decided to accept a draft joint statement
as provisionally agreed on in the six-party talks on Sept. 30 to
discuss the North Korean nuclear issue. This decision reportedly has

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already been conveyed to China, the host of the talks.

Foreign Minister Komura referred to the draft joint statement at a
press briefing yesterday and indicated problematic factors about the
statement by saying, "Nuclear programs should have been 'fully
reported,' but (the joint statement in this regard) is not perfect.
In addition, disablement is limited to several (nuclear-related
facilities in Yongbyon." On the other hand, Komura commented, "I am
sure it is one step forward toward (denuclearization). I hope it
will take effect as quickly as possible," expressing his
expectations that every member of the six-party talks will accept
the statement.

A senior Foreign Ministry official, as well, explained: "(The joint
statement) is not necessarily satisfactory in part because nuclear
facilities subject to disablement are limited to those in Yongbyon.
But it has moved the six-party talks forward and is the first step
forward toward achieving the final goal of denuclearizing the Korean
Peninsula. That's why we can't oppose it." The contents of the joint
statement has yet to be disclosed, but it includes a roadmap to
implement by the end of the year the "next step," which consists of
disabling North Korea's nuclear facilities and requiring the North
to make a full report on its nuclear programs.

Takashi Sakamoto, New York

US Assistant Secretary of State Christopher Hill, the chief delegate
to the six-party talks, yesterday told the Yomiuri Shimbun and other
press companies at a New York hotel that the US government accepted
the draft joint statement as provisionally agreed on in the
six-party talks on Sept. 30 and yesterday conveyed this to China,
the host of the six-party talks. Hill also revealed that the joint
statement did not specify any deadline for the US to remove North
Korea from the list of state sponsors of terrorism.

12) Draft joint statement by six-party talks says delisting DPRK as
state sponsor of terrorism "depends on how that country will behave
from now on"

ASAHI (Page 1) (Full)
October 3, 2007

During the recent six-party talks held in late September,
host-nation China drafted the joint statement. Yesterday, the
wording used in the statement on whether to delist North Korea as a
state sponsoring terrorism was revealed. The phrase states: "We will
delist North Korea depending on how it will behave." The draft shows
neither a deadline for delisting nor requirements for delisting.

Pyongyang appears to have taken it as meaning that if it disables
its nuclear-related facilities located in three places in Yongbyon
in accordance with the latest six-party agreement, the United States
will agree to the delisting. The wording is likely to give cause for
dispute in the process of promoting disablement in the future about
whether it "rewards" the North.

According to a source involved in the six-party talks, the draft
joint statement includes wording about the North disabling by the
end of the year its nuclear-related facilities in three places in
Yongbyon. On the question of whether to delist the DPRK, the joint
statement refers to the February six-party agreement, in which the
US confirmed it would start such a process, as well as to the

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US-North Korea working group talks, which discussed the delisting
issue. The joint statement also says, "Based on the consensus
(understanding) of the US-North Korea working group and in response
to North Korea's behavior, the US will refer to the February
agreement and implement (the delisting)."

North Korea's Vice Foreign Minister Kim Kye Gwan, the chief delegate
to the six-party talks, yesterday told reporters: "The draft joint
statement contains a timeframe (for the delisting)." The implication
is that the North will call on the US to delist it as a state
sponsor of terrorism if the North disables its nuclear facilities in
Yongbyon within the year and meet the requirements for the
delisting.

Chief Cabinet Secretary Machimura, however, rejected (Kim's remark)
at a press briefing yesterday, saying: "It is not true."

13) Chief Cabinet Secretary Machimura denies Kim Key Gwan's remark
that delisting date is specified

TOKYO SHIMBUN (Page 2) (Full)
October 3, 2007

Referring to North Korean Vice Foreign Minister Kim Gye Gwan's
remarks that the date when the United States will remove the North
from its list of terrorist-sponsoring states is specified in a
tentative six-party agreement, Chief Cabinet Secretary Nobutaka
Machimura denied Kim's remarks, saying: "It is not true."

Machimura stated on the tentative agreement: "We are not satisfied
with the contents of the agreement, but the action plan incorporates
the common perception to push forward with denuclearization of the
Korean Peninsula."

14) Inter-Korean summit: Japanese government has mixed feelings of
expectation and alarm

MAINICHI (Page 2) (Full)
October 3, 2007

The leaders of North and South Korea will hold talks for the first
time in seven years. The Japanese government has mixed feelings of
expectation and alarm, welcoming the event as leading to bringing
about peace and stability to the Korean Peninsula while worrying
that if the two Koreas promote rapprochement, the abduction issue
might be left behind.

Foreign Minister Komura said in a press conference yesterday: "The
inter-Korean summit will contribute to denuclearizing the Korean
Peninsula, resulting in peace and stability in the region. I hear
that the issue of Japanese nationals abducted by North Korea will
also be taken up in the summit."

The Japanese government was carefully watching to see whether
President Roh Moo Hyun's conciliatory policy toward North Korea
would disrupt the unity of the international community. The
government was favorably taking the cooperative policy maintained by
the South Korean government until recently, seeing its decision to
shelve energy aid to the North. The government, however, is also
increasingly concerned about the current situation, with a senior
Foreign Ministry official saying that the recent closer relationship
between the United States and North Korea "has a delicate impact on

TOKYO 00004638 010 OF 012


North-South relations, making it easier for the Roh administration
to take a conciliatory stance again."

Komura talks about plan to extend sanctions against North Korea for
six months

In an interview with the Mainichi Shimbun and other press companies
yesterday, Foreign Minister Masahiko Komura indicated his view that
Japan should extend its economic sanctions against North Korea,
which is due to expire on Oct. 13, for another six months. He said:
"I do not think that North Korea has changed remarkably enough for
Japan to remove its sanctions." This remark reflects his judgment
that Japan needs to continue to apply pressure as no progress has
been made on the abduction issue.

Japan will extend the measures to prohibit the North from exporting
any items to Japan and its ships from making port call in Japan. The
government slapped these sanctions in reaction to North Korea's
missile launch last July and nuclear test last October.

15) Fukuda government responds quickly to Okinawa textbook issue due
to huge public outcry in Okinawa

MAINICHI (Page 2) (Excerpts)
October 3, 2007

References suggesting the Imperial Army forced civilians to commit
mass suicides during the 1945 Battle of Okinawa have been deleted
from history textbooks by the official textbook screening process.
However, the government and ruling parties have now begun taking a
stance of allowing textbook publishers to reconsider the deletion of
the references. The move seems to demonstrate efforts by the
government of Prime Minister Yasuo Fukuda to display a sharp
contrast to his nationalistic predecessor, Shinzo Abe.

On March 30, the results of the textbook screening were made public
under the cabinet of then Prime Minister Abe. In June when Abe
visited Itoman City in Okinawa, he was adamant about not retracting
the results of the screening, saying: "The council on textbook
screening looked into them with an academic viewpoint."

In Okinawa on Sept. 29, however, 110,000 people staged a protest
rally in Ginowan City, demanding the retraction of the results of
the textbook screening.

The Fukuda administration and ruling coalition were quick respond to
Okinawa's anger. On Oct. 1 Chief Cabinet Secretary Nobutaka
Machimura told Education, Culture, Sports and Science and Technology
Minister Kisaburo Tokai to make an appropriate response. The
government adopted on Oct. 2 a statement agreeing to revisions that
would retain the references.

In a meeting the same day of the government and ruling coalition,
New Komeito leader Akihiro Ota proposed setting up a joint research
panel of experts from the government and Okinawa. He stated:
"Involvement of the Imperial Army cannot be denied. Based on
history, we should accurately and correctly transmit such matters."
Liberal Democratic Party (LDP) Deputy Secretary General Hiroyuki
Hosoda also stated in a press conference: "It is important to
acknowledge that a tragedy occurred."

16) DPJ Watanabe's political organization declared 170 million yen

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during 12 years for non-existent office

ASAHI (Page 31) (Excerpts)
October 3, 2007

It has been revealed that the political organization of House of
Representatives member Kozo Watanabe (Fukushima No.4 District),
supreme advisor to the Democratic Party of Japan (DPJ), had
registered the apartment of Fukushima Governor Yuhei Sato, his
nephew, as its main office with the Internal Affairs and
Communications Ministry during the 12 years through 2004, though it
actually had not used it. Sato, who used to be a secretary to
Watanabe, said: "I just allowed the name to be used, receiving no
rent or utility fees." But the organization declared a total 178
million yen in its political funds reports during this period as
office and other expenses.

A secretary to Watanabe commented on the registration of Sato's
private residence as the main office: "The main office is located in
the Diet Members Office Building. If one claims that the report goes
against the facts, it might be true." According to its political
funds reports, the political organization's office is now located in
a room of the apartment in Chiyoda Ward, Tokyo, owned by Watanabe,
but during the 12 years between 1993 and 2004, the organization
reported that its main office was in Sato's apartment in Shinjuku
Ward.

17) Citigroup to wholly own Nikko Cordial in first case of
triangular merger

ASAHI (Top Play) (Excerpts)
October 3, 2007

US financial giant Citigroup announced on Oct. 2 that it will wholly
own the Nikko Cordial Group, in which it has about 68 PERCENT
stake, by acquiring the remaining stocks using the triangular merger
method next January. This will mark the first case of a foreign
company acquiring a Japanese company by exchanging its own stocks
for the Japanese company's Nikko shares, using the triangular merger
method approved this May. The financial giant Citigroup's decision
to use the triangular merger method could spur buyouts of Japanese
companies by foreign companies.

The Citigroup at present holds roughly 68 PERCENT of Nikko stocks
(on a voting right basis). It will transform Nikko Cordial into a
wholly owned subsidiary through a stock swap with Nikko
shareholders.

The Nikko stocks yesterday closed at 1,462 yen, up 17 yen, on the
Tokyo Stock Exchange, compared with the previous day. In the stock
swap, Nikko stockholders will receive the equivalent of 1,700 yen --
the same value as set in the takeover bid this spring -- for each
Nikko share. Stocks up for exchange are estimated to total
approximately 530 billion yen. The exchange rate will be decided
between this December and next January.

18) Companies alarmed about first triangular merger: METI remains
calm, noting it was carried out in anticipated manner

ASAHI (Page 10) (Excerpts)
October 3, 2007


TOKYO 00004638 012 OF 012


A triangular merger will be formed for the first time since the
lifting of the ban on such in May. The removal of the ban on
triangular mergers had long been put off because business circles
were against the method out of fear of an increase in hostile merger
bids by foreign companies. The Ministry of Economy, Trade and
Industry (METI) has remained calm with one official noting, "The
method will be used in an anticipated manner." However, companies
are worried about the move.

The same senior METI official said in a matter-of-fact manner, "This
is only the first case since the approval of triangular mergers. The
merger is within the same group. People overly made a fuss over the
removal of the ban on triangular mergers, saying that the decision
would pave the way for a flood of foreign companies to buy Japanese
companies."

Japanese companies had been alarmed about the removal of a ban on
triangular mergers this May. In order to counter possible bids for
triangular mergers, they purchased their own stocks with the aim of
raising the value of them. They also increased cross holdings of
stocks.

According to Nomura Securities, the ratio of cross-held stocks among
about 3,000 listed companies reached 12.0 PERCENT in fiscal 2006,
up 0.9 percent from the previous year, though the ratio had been on
the decline since a survey started in fiscal 1990.

In particular, the steel and paper industries, which underwent major
reorganization last summer, made hard efforts to increase mutual
equity holdings. Behind their effort is presumably a rising sense of
crisis toward the removal of the ban on triangular mergers.

However, there have been no triangular mergers over the past five
months since the removal of the ban. The case this time is not based
on a hostile merger.

DONOVAN

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