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Cablegate: Daily Summary of Japanese Press 12/17/07

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UNCLAS SECTION 03 OF 16 TOKYO 005589

SIPDIS

SIPDIS

DEPT FOR E, P, EB, EAP/J, EAP/P, EAP/PD, PA;
WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST DIVISION;
TREASURY/OASIA/IMI/JAPAN; DEPT PASS USTR/PUBLIC AFFAIRS OFFICE;
SECDEF FOR JCS-J-5/JAPAN,
DASD/ISA/EAPR/JAPAN; DEPT PASS ELECTRONICALLY TO USDA
FAS/ITP FOR SCHROETER; PACOM HONOLULU FOR PUBLIC DIPLOMACY ADVISOR;
CINCPAC FLT/PA/ COMNAVFORJAPAN/PA.

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

SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 12/17/07

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tax-reduction strategy; and records held by those who emigrated
foreign countries and held by foreign nationals, who used to work in
Japan.

In the case of 1), since the SIA cannot find where mistakes are in
the records, it cannot analogize them, if it did so, the possibility
would increase that the records would mix up with those of other
pensioners. Regarding 2) and 4), unless pensioners and companies
make requests, it will be difficult to identify and consolidate
them. Regarding 3), no one would request.

The SIA cannot send pension records to the holders of 2.8 million
pension accounts who are believed to have died, and to the holders
of 5.1 million accounts, whose last names were changed. Although the
SIA will call out to pensioners through local governments, whether
it is effective is unknown since there are many people who don't
know about the survivor annuity system.

(2) Mainichi poll: 63 PERCENT approve of foreign workers with
conditions attached

MAINICHI (Page 1) (Full)
December 17, 2007

A nationwide telephone-based opinion poll conducted by Mainichi
Shimbun found that 63 PERCENT of pollees think it is all right to
accept unskilled foreign workers. The government does not intend to
allow simple laborers to work in Japan. However, more than half the
respondents who work in areas which are experiencing a labor
shortage approved accepting unskilled workers. However, 31 PERCENT
are against the idea of accepting such workers for the reason of
their having an adverse effect on the employment of Japanese. Many
are cautious about a policy change.

Japan has adopted a policy of practically not accepting unskilled
workers, based on the Sixth Employment Measures Basic Program,
adopted at a cabinet meeting in June, 1988, which notes that
specialist and technical workers can be accepted, but the acceptance
of simple workers (who do unskilled work) needs to be addressed in a
cautious manner.

To a question on this government policy, 58 PERCENT of pollees who
work in areas with a labor shortage approved of the acceptance of
unskilled workers. However, only 5 PERCENT replied that such
workers should be accepted without attaching any conditions. On the
other hand, 31 PERCENT replied that such workers must not be
accepted as it is the case now.

As reasons that unskilled workers should not be accepted, the
largest ratio of 51 PERCENT said, "Accepting such workers will have
an adverse effect on the employment of Japanese and the labor
environment," followed by 35 PERCENT , who replied, "Public security
will deteriorate, 10 PERCENT , who noted, "Trouble stemming from
differences in customs will occur," and 3 PERCENT , who said,
"Social security and education costs will increase." Regarding a
question on who should shoulder foreign workers' social security and
education costs, 38 PERCENT of respondents gave, "employers."
Another 38 PERCENT gave "industries that need foreign workers."
"Foreign workers" and "the entire people" were respectively cited by
11 PERCENT .

Consolidating system is pressing need


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preferred choice for the country's next-generation mainstay combat
jet.

Investigative authorities leaned toward a severe step, thinking that
it was grave that an MSDF officer leaked the information that could
have fell in the hands of other countries, harming Japan-US
relations. Law enforcement arrested Matsuuchi on Dec. 13, concluding
that his action taking advantage of his position that has access to
special defense secrets under the Law Concerning the Protection of
Secrets for the Japan-U.S. Mutual Defense Assistance Agreement led

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to the widespread dissemination of the information among
unauthorized MSDF personnel.

Matsuura's awareness of defense secrets weak, actively attending
study sessions

Although Matsuura belonged to the programming unit, he was
responsible for the domestically-produced destroyer system and was
not in a position to directly handle the Aegis data provided by the
United States. How could Matsuura get hold of Aegis information?

Japanese-made destroyers take joint action with Aegis-equipped
vessels and perform duties, such as escorting cargo ships, in
collaboration with them. In the early 1990s, a senior officer
ordered developing a new domestic system transcending the Aegis
system. For cooperation between the domestically-made destroyers and
Aegis vessels, officers responsible for the system needed to know
the state-of-the-art Aegis system inside out. Looking back at those
days, an official used to be responsible for the system said: "We
worked until night on our regular shift and attended study sessions
from midnight to morning. We worked like crazy."

Matsuura joined the section in 2001. As a young promising officer,
he made extra efforts to acquire knowledge of the Aegis system,
attending a workshop in the United States as well.

Their daily access to Aegis information has weakened the
organizational awareness of handling special secrets. Special
defense secrets were kept on a computer shared by the officers
responsible for the domestic destroys instead of security storage.

Such mentality seems to be at work behind Matsuura's provision of
the Aegis data to a First Service School instructor, also a
lieutenant commander. A former senior officer said regrettably:
"Preoccupied with absorbing new knowledge and developing a new
system, we could not think of information security."

Ban on keeping business data on personal computers failed to bear
fruit

The latest incident was preceded by the upload of information to the
Internet via file-sharing software by an official of MOD and the
Self-Defense Forces, respectively. In April this year, MOD and SDF
compiled fundamental measures to prevent any recurrence and
prohibiting the use at workplaces of personal computers and mobile
large capacity storages, also introducing encrypted software and
conducting spot inspections.

As part of this effort, the MSDF made its personnel declare and
delete all business-related data stored on their personal computers.
But the officers possessing the Aegis data made false declarations.


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If they had deleted the data as was ordered, the latest incident
would not have come to light. This reveals the limits to a response
based on the belief that human nature is fundamentally good and the
difficulty in raising awareness throughout the organization,
including the rank and file.

"It's ironical that their failure to delete the data exposed the
sloppy data management system, giving an opportunity for a thorough
review," a senior MSDF official noted.

A senior MSDF officer also took this view about the fact that
Matsuura handed the Aegis data to the First Service School chief
instructor at the request of his request: "At the SDF, it has been a
tradition that when a junior member is asked by a senior officer for
something, he has to comply with it. But such nature must be
reexamined."

The Defense Ministry Reform Council made up of experts held its
inaugural meeting at the Prime Minister's Official Residence
(Kantei) earlier this month, in which the establishment of a sound
information security system was mentioned as a must. The council is
being challenged to come up with effective countermeasures,
including the improvement of hardware.

Establishing a system that does not leak defense secrets essential

A senior investigator who lead the case said: "Japan is being tested
if it is trustworthy as a security partner, and we looked for a
conclusion that can convince the United States." Although
investigators arrested the lieutenant commander for leaking
information, they did not conduct a criminal investigation into
other MSDF officers who had also been involved in the information
leakage, concluding that they did not have any malicious intent. But
the case has marred the country's credibility.

The senior investigator also said: "In a way, petty officers'
eagerness to deepen their knowledge for defending the country ran
wild." The ministry needs not only to increase the level of
awareness of SDF personnel but also to build a system that does not
leak defense secrets.

(4) Good chance to review everything in Defense Ministry: Shikata

SANKEI (Page 13) (Abridged)
December 13, 2007

Toshiyuki Shikata, professor at Teikyo University

Due to the Antiterrorism Special Measures Law's expiry, the Maritime
Self-Defense Force was ordered to recall its squadron that was on a
refueling mission in the scorching Indian Ocean for nearly six
years. Japan has been inattentive to its defense policy. Now, Japan
has exposed the vagueness that is a defect in its defense policy.

At the time, the matter was politically delicate, and the government
needed to rush. That is why the government passed a special measures
law. Since then, many years has passed. However, the government has
yet to create a permanent law. Over the past three years, six
defense ministers were replaced. Even if the cabinet is changed due
to political developments, the foreign minister and the defense
minister must not be changed so frequently.


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Politicians-whenever they open their mouths-say "civilian control".
In the absence of politics, however, it is difficult to have defense
bureaucrats become clearly aware of what it really means.

Foreign countries refer to "political leadership" when it comes to
relations between their governments and militaries. This means that
politics comes before military affairs. I don't know why, but this
is called "civilian control" in Japan. So there are some people who
misunderstand its meaning.

Then, some defense bureaucrats are thinking to themselves that
civilian control is for bureaucrats in suits to control the
Self-Defense Forces' personnel in uniforms. There are also some
people who often see discord between the SDF's uniformed staff and
the Defense Ministry's bureaucracy as a problem. In fact, the media
only plays it up for fun.

The SDF's uniformed staff takes it as 'orderliness' in doing their
jobs, and they are extremely coolheaded.

The SDF's uniformed staff officers are frequently transferred.
Moreover, they are often away from Tokyo. They are busy with
educational and training programs for the rank and file. Moreover,
they are also busy with disaster relief operations and overseas
missions. As it stands, they cannot afford to give explanations in
detail to politicians.

Accordingly, it is only natural that the Defense Ministry's
bureaucrats in suits liaise with politicians, get budgets, acquire
equipment, improve facilities, maintain and manage them.

Taking the Moriya issue as an opportunity, the government launched a
panel on Dec. 3 to reform the Defense Ministry. The government
intends to carry out a drastic reform of the Defense Ministry for
thoroughgoing civilian control, transparent procurement, and strict
information security. The present cabinet has technocrats for the
posts of chief cabinet secretary, foreign minister, and defense
minister. The Defense Ministry has also reshuffled its personnel.
The government therefore must not miss this timing for a reform of
the Defense Ministry.

Those who passed the career-track examination for the national
public service at the Defense Ministry go up the ladder of success
without knowing anything about Japan's national defense on the
front. In order to eliminate its negative effects, the SDF's officer
candidate schools can establish an experimental course for those
young career-track bureaucrats. This can help the Defense Ministry's
bureaucracy and the SDF's uniformed staff understand each other.

Furthermore, it is also important for the Defense Ministry to have
its young bureaucrats experience SDF local recruiting offices and
some SDF workplaces. The Defense Ministry currently contracts
trading companies in order to procure equipment for the SDF. If the
Defense Ministry is to do this job on its own, it will need human
resources with expertise for collecting and analyzing information,
negotiating with manufacturers, preparing data, and providing
aftercare.

Overhauling the Defense Ministry's organization within its current
personnel scheme will end up affecting SDF units on the front. If
that is the case, the SDF's manning level, which is low even now,
will further go down. It will be difficult for the SDF to train its

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members.

In addition, the retiring age of SDF personnel is younger that that
of other government employees. The SDF continues its employment of
some personnel after retirement only for areas where their knowledge
and insight are needed. However, they are limited.

SDF personnel with a knowledge and insight of specific defense
equipment are not useful in the private sector at all. SDF retirees,
however, can find jobs with trading companies dealing in defense
equipment. This is good not only for SDF retirees but also for
trading companies. In addition, SDF retirees can also serve as
advisors for civilian defense drills.

The bottom line is the government must keep an eye on collusive
ties. At the same time, the government must consider how to bring
its collaboration with the private sector to fruition.

It is easy to denounce this as "amakudari" (literally "descent from
heaven"). However, the SDF's aging will progress after its early age
limit is dropped. Of course, SDF personnel are also on the
government's payroll as public servants. However, the SDF must not
lower its manning level. I hope the panel will come up with good
suggestions.

(5) Regulatory Reform Council: Second report puts emphasis on area
directly related people's lives: Reform of child-care centers

MAINICHI (Page 2) (Full)
December 17, 2007

The government's Regulatory Reform Council (chaired by Nippon Yusen
Kaisha Chairman Takao Kusakari) has completed its second report.
The package of proposals |2"]and reform of child-care
centers with emphasis placed on areas directly related to people's
lives and areas contributing to the revitalization of regional
areas. The panel will submit the report to Prime Minister Yasuo
Fukuda later in the month. The government will revise the three-year
regulatory reform program in March next year, accordingly.

Regarding the medical services area, the report notes that a
shortage of doctors should be addressed first. As part of such
measures, it calls for an immediate revision of the roe-shring
btwee nurses and doctors, including allowing nurses to administer
simple medicines, a practice now prohibited without the presence of
a doctor. However, regarding the blanket lifting of a ban on
hospitals operating two different systems for medical bills -- one
with medical insurance and the other without it, coordination with
the Ministry of Health, Labor and Welfare has yet to be undertaken.

The package proposes that authorized child-care centers, to which
municipalities allocate children to be admitted, adopt a direct
contract system with users for improved services. The report also
calls for a revision of admission standards so that children of
part-timers can also be admitted.

The report attaches importance to the fact that when foreigners
marry Japanese citizens, their names are not entered into the Basic
Resident Register, causing harmful results in terms of taxation,
etc. To address this problem, the report proposes the drafting of a
basic initiative for a new registration system linked with

TOKYO 00005589 009 OF 016


foreigners' registration system within fiscal 2007 and the
introduction of related laws to the regular Diet session in fiscal
2009.

Concerning the education area, the package calls for the description
of world history appropriate for compulsory education on social
studies provided at middle schools with the aim of cultivating an
international viewpoint and a revision of Education Ministry
guidelines to adopt an optional system for world history taught at
high schools, replacing the current compulsory system.

Outline of second report by Regulatory Reform Council

1. Realize peace of mind and affluence: Expand medical services
areas offered by nurses and midwives to reduce the burden of
doctors. Introduce a direct contract method between authorized
child-care centers and users. Ease standards for admission to
child-care centers. Establish a school teacher-rating system by
students and parents. Disseminate a school-choice system. Adopt a
choice system for world history taught at high schools. Improved
transparency of the school textbook screening process.
2. Improve vitality and livelihood in regional areas: Construct a
database for information on farming land and forests. Ease the
diversion regulation for effective use by regional areas of
state-subsidized facilities. Ease the ratio of floor space to land
space regarding factory sites.
3. Accelerate growth backed by strengthened international
competitiveness: Speedier customs clearance procedures for imports
and exports, based on a complete on-line system. Further expansion
of capacity at Haneda and Narita Airports.
4. Realize equal opportunities: Clarify differences between
dispatched workers and sub-contractors in order to prevent faked
sub-contracts. Set up a new basic resident register system to be
applied to foreign residents.
5. Reform government enterprises: Abolish, curtail or liberalize
independent administrative agencies that receive a large amount of
fiscal assistance from the state.

(6) Challenge for special investigators to probe the dark recesses
of Japan-U.S. defense interests

SENTAKU (Pages 56-58) (Abridged)
December 2007

Deep relationship between the grand-alliance concept and the Yamada
Yoko Corp.

Prior to the arrest former Administrative Vice Minister for Defense
Takemasa Moriya for receiving bribes, the special investigation team
of the Tokyo District Special Prosecutors Office on Nov. 9 entered
the main office of Nihon Mirise, located near the Prime Minister's
Official Residents, and on the 10th, they arrested it president,
Motonobu Miyazaki, on embezzlement charges.

A source in the Tokyo District Prosecutor's office said:

"Upon sending over the papers charging Moriya for using his
influence in the bidding war over the CX engine for the next
generation transport aircraft, the special investigative unit is
thinking of making Miyazaki and Moriya break their silence on what
might be called a major state secret centered on the political
world."

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The targets of the special investigators go beyond the alleged
wining and dining of defense policy specialists in the Diet and the
clearing up of charges of their providing their good offices in
return. Their main mission is the dirty tricks by vested interests
tied to Japan-U.S. defense affairs.

"Ozawa seems to have brought the message to Fukuda that Kyuma cannot
be helped." This was the rumor whispered about parts of the Liberal
Democratic Party (LDP) following the Nov. 2 meeting between Fukuda
and Ozawa: "Fukuda said that the Bush administration told him it was
displeased with Ozawa's hard-lined stance toward the antiterrorism
special measures law and prior to his visit to the U.S., he asked
about Ozawa's intentions. At the time, the topic of the Yamada
Corporation seems to have come up. There would be a deadlock if
Kyuma were to be arrested, for it would come out that the scandal
scheme was something that came out of the U.S. force realignment
plan that the U.S. dreamed up as it pleased. If that were the case,
the Japan-U.S. relationship would deteriorate. He said that the only
way to put a lid on the scandal was to form a grand alliance."

USFJ realignment bid-rigging scheme by Japan, US political and
business circles

What then is this scandalous scheme, Fukuda referred to?

We present here the testimony of related sources and material that
has come into our hands. If we were to sum it all up, the story goes
back to last year in September. At that time, a delegation of top
executives from the Shaw Group, a large plant development company
founded by retired military officers, came to Japan. They had
prepared a plan that described in detail the USFJ realignment, which
the Japanese government had not yet approved.

Although the large framework of the USFJ realignment was agreed on
by the Japan-U.S. Security Consultative Committee (2-plus-2) on May
last year, the Japanese government had promised to cough up 3
trillion yen, including footing the bill for the transfer of 8,000
U.S. Marines from Okinawa to Guam. This plan for paying for the
construction of a U.S. base facility within the United States was
attacked in the Diet by the opposition as "selling out our
country."

A source in the Defense Ministry stated: "The Shaw Group is a
company that backs the Bush administration. It earned its reputation
for petroleum projects in Iraq after the war. In the project to
relocate Marines to Guam, Bechtel, the world's largest construction
company, and other firms have announced they wished to participate,
so channels are being created between Japan and the U.S., and moves
are going on behind the scenes to gain the advantage with their
respective plans."

The Shaw Group executive team came to Japan only four months after
the final realignment agreement had been reached. At the time, it
was still unclear who would be in charge of sending out bids for
contract orders or even how the Japanese side would fund the
projects. The Shaw Group approached influential political and
business figures. The U.S. military was categorized as the
organization to put out the orders, and the Japanese side was
presented with the difficult choice of the fiscal burden and making
sure that Japanese and U.S. companies had their fair shares. The
same source said: "In accordance with this request, the Japanese

TOKYO 00005589 011 OF 016


side began in secret to carefully consider the realignment plan as
it was restated."

A set of those documents exists. On the flow chart on page one, the
U.S. military is listed as the contracting source for the Guam
relocation project, and a completely unknown Japanese company, ODC,
K.K., is listed as the subcontractor. Under that are arrows pointing
to three areas, civil engineering, housing, and construction. Under
those categories, civil engineering was assigned to a top class
general contractor headquartered in Tokyo; housing would be assigned
to an Osaka-based home builder, one of Japan's best, and so forth.

A source in the Tokyo District Prosecutors Office noted: "The
Defense Ministry held a briefing for companies interested in the
realignment projects this August. This kind of international
bid-rigging was going on already a year before that. The special
investigators have already confiscated documents from the related
parties. We were surprised that the farcical realignment plan was
already making its way about."

According to testimony and documents obtained, after the top
executives of the Shaw Group came to Japan, the movements of Kyuma
became extremely active. First, since there was strong resistance
that the money for Japan's share would have to come out of the
defense budget, he came up with the scheme of placing matters under
the government's lead and creating a special account in the Japan
Bank for International Cooperation (JBIC) for funding the project.

In addition, in order to camouflage that the project was being
ordered by the U.S. military, a special-purpose enterprise (SPE) was
established as an independent company. Here is where the funding
from the JBIC would go, and capital would also be solicited from
private-sector companies, the plan being to pool the money. The SPE
was visibly placed under the control of such US firms as the Shaw
Group.

A general construction company manager said: "Around that time,
working behind the scenes on the Shaw Group's behalf were Japanese
lobbyists who had hailed from the Finance Ministry. They were
approaching large general contractors and the like saying, 'The
government and big business leaders are on board, so we would like
you to invest with peace of mind. If you do, you will receive a
construction order from the U.S. military. But some of the general
contractors were concerned this might be a new type of fraud.

However, the forming of a "council of government and ruling parties
concerned with the review of the force structure of U.S. forces in
Japan and the like," which had 19 names listed under it, including
then Chief Cabinet Secretary Shiozaki at the top and then high-level
government officials, as well as the three top executives of the
Liberal Democratic Party and the New Komeito, it seemed clear that
the government had given its seal of approval to the series of
schemes.

The council held its first meeting last year on Dec. 15. It
announced the drafting of a bill to promote realignment that would
include a system of subsidies for local communities totaling 100
billion yen in order to promote realignment projects that were being
resisted by protest movements among local residents. At the time,
one of the council members, expecting a press conference by Kyuma,
happily said, "In proposing the bill, we need to make a clear stance
that the central government is handling the USFJ realignment. This

TOKYO 00005589 012 OF 016


will be a plus for the Japan-U.S. relationship."

A source in the Tokyo District Prosecutors Office said: "The one who
was active in responding to the Shaw Group's request and did the
spade work for creating the council was Kyuma." The scandal then
developed as follows:

"I would like you to pay attention to the date of the announcement,
Dec. 15. Ten days before, on the evening of the 5th, Kyuma secretly
met with Shiozaki at an exclusive Japanese restaurant (fugu-ryouri)
in Tokyo. Also present at the dinner meeting was Naoki Akiyama, the
executive director of the Japan-U.S. Peace and Cultural Exchange
Council, who served as the contact person for the two. At the time,
there was suspicion that the secret information had been leaked that
the Japanese government would agree to the realignment plan. In
actuality, even though Miyazaki had just come up with his company
Nihon Mirise, ODC, which was the subcontractor of the Shaw Group,
signed a contract entrusting it with the work, and in late November,
it began to circulate to companies as it pleased a plan that was
born in America."

The special investigation unit indicated that it intended to ferret
out from Moriya, who had intimate knowledge of the internal workings
of the USFJ realignment, and Miyazaki, the way that Kyuma was
maneuvering in the background.

Ozawa's true intention is to rescue Kyuma

Meanwhile, Ozawa from around the time of his meetings with Prime
Minister Fukuda became sensitive to the trail the investigation was
taking. The background of this stems from the time when Ozawa was
LDP secretary general. At the time of the Gulf war, when Japan
provided $9 billion in financial assistance to the multinational
force, the one who was running about working as his flunky was
Kyuma. An LDP lawmaker observed: "During the Papa Bush
administration, Ozawa built a close relationship with then Secretary
of State George Shultz, who had been a top executive at Bechtel
Corp. For that reason, Ozawa did not want to see the USFJ
realignment agreement collapse. Indeed, he and Kyuma, who was close
to the Shaw Group, were like two peas in a pod."

Regarding the financial aid (for the Gulf war), a number of
allegations have been rumored linked to those around Ozawa, but the
one who intensely knows the inside story is Kyuma. One lawmaker who
came from the former Keiseikai faction (which Ozawa hailed from)
said: "For Ozawa, the arrest of Kyuma would be inconvenient, indeed.
In his desire to rescue Kyuma lies the real intention of holding off
an investigation."

Even though they are from different parties now, Ozawa and Kyuma
both back the giant American company. In the history of the
splitting of the LDP, there is a dark unfathomable area. In order to
understand what that entails, one has to probe deep into the meaning
to each side of the term "grand alliance." The "don" of the defense
policy clique (boei-zoku) in the LDP, Shin Kanemaru, was also
Kyuma's and Ozawa's mentor (when they were young politicians).
Kanemaru, along with Ryuzo Sejima and others, established the Japan
Center for Strategic Research. It became a central spot for LDP
defense policy specialists, uniformed officers from the Defense
Agency, and defense industry executives could gather together. Ozawa
eventually inherited the post of chairman. However, in 1993,
Kanemaru was arrested for possession of improper assets, and the LDP

TOKYO 00005589 013 OF 016


then split apart. After that, Ozawa and his followers left the party
and formed a coalition with (Prime Minister) Morihiro Hosokawa.
After the collapse of the administration, the research center left
the LDP.

At that point, the defense policy clique in the LDP linked up with
Akiyama and his Japan-U.S. Cultural Promotion Society. Akiyama was
formerly a flunky for Kanemaru, and he also served as a secretary to
LDP lawmaker Tamisuke Watanuki (now head of the splinter party
People's New Party). He was always a person who moved about in the
background.

With the defense policy clique between split into ruling and
opposition camps, Akiyama allowed them to come together by joining
his society. National policy had to be reunified, was the view of
the defense policy specialists. The DPJ's Seiji Maehara and even New
Komeito lawmakers could join, making the defense specialists one
group again. An LDP lawmaker noted: "Akiyama's group came to be
known as an influential organization, even appointing to its board
such American defense specialists as former Defense Secretary Cohen
and former Deputy Secretary of State Armitage. Even Shinzo Abe and
Yasuo Fukuda were added. Only Ozawa was left to be invited to join
in. In other words, under the flag of the Japan-US security
relationship, the defense specialists in the various parties could
reorganize and unite."

Ozawa group and LDP defense policy clique would form a new party

At a meeting of the DPJ that called strongly for Moriya to be
summoned as a sworn Diet witness, when it came to come up questions
that would be posed to the witness, a member of the Ozawa group in
the party - the Isshinkai - had two questions: ask him to tell the
truth and a question that would benefit the party's interests and
strategy. He warned that it would be dangerous to ask questions that
went too far into the Yamada Corp. incident. The lawmakers in this
group were surprised when the party members in their Diet questions
probed into the political trail. That is when the idea of a grand
alliance erupted, said one DPJ lawmaker.

However, the Upper House of the Diet has many DPJ members from the
progressive wing, and they would not give up their pursuit (of the
political trail). That is why on Dec. 15, Upper House lawmaker
Keiichiro Asao elicited from Moriya the testimony that "Mr. Kyuma
was at the dinner party with Mr. Akiyama." This was criticized by
DPJ lawmakers in the Lower House as having gone too far. This is
because if the Akiyama group is poked into, DPJ blood would be
spilled. The anti-Ozawa group within the DPJ has given up on
maintaining a two party system that could go in and out of
alliances. The following concept has been hammered out:

"The pro-American Seiwakai members in the LDP (86 members, led by
Chief Cabinet Secretary Machimura) and the former Takeshita faction
members who now form the Ozawa group in the DPJ (Isshinkai group of
35 members) will merge to form a new LDP. The Kochikai or
non-defense policy types in the LDP (51 members led by Makoto Koga)
will merge with the anti-Ozawa group in the DPJ to form a new DPJ.
(TN: Unclear how many this would be, since there are other groups
like Seiji Maehara's 25 member one who could go either way.) These
two groups will lead the political realignment."

The dilemma is that the more Kyuma and Akiyama are pursued on the
defense scandals, the more the political distortion that exists will

TOKYO 00005589 014 OF 016


come out. This could become the driving force for political
realignment in the near future.

The investigation into the Yamada Corp. since Moriya's arrest will
first expose Moriya's interests. By that is meant the case of
collusion among Moriya, the Naha Defense Facilities Administration
Bureau chief, who was in his camp, lawmakers from the local area,
and local businesses. They colluded to try to grab a monopoly on the
relocation project.

Because Moriya had teamed up with lawmakers from the local area,
invading Kyuma's Okinawa interests and rupturing the Kyuma-Moriya
line, Kyuma's scheme will not lead to his arrest. The special
investigators have formed a separate team to probe into Kyuma, and
they are slowly getting to the inner core, but Chief Prosecutor
Keichi Tadaki is not about to investigate political circles. Prime
Minister Fukuda and Tadaki have had a long partnership relation
since Fukuda was chief cabinet secretary and Tadaki was
administrative vice minister of justice. His giving "political
consideration" to the case is unavoidable. Although the head of the
special investigation unit, Hiroyuki Yagi, has said he hopes to
investigate the case, with his resignation in one hand, the reality
is that treading on a political trail is a risky business.

(7) TOP HEADLINES

Asahi:
Abnormal change on earth: Island in Bangladesh moves 20 kilometers
in 50 years due to torrential rains, floods, soil degradation, soil
deposit

Mainichi:
Random shooting in Sasebo City: Gunman Magome had 2,700 bullets;
Aimed to kill four of his friends?

Yomiuri:
Arrested lieutenant commander leads limit of Aegis destroyer leaked

Nikkei:
Raw material makers to manufacture high-performance products in
China; Shift from export-oriented policy; New strategy to come with
boosted demand

Sankei:
From mistrust in pension to mistrust in politics: Gap in premier's
statement from public opinion

Tokyo Shimbun:
Public support rating for Fukuda cabinet dips to 35 PERCENT in
nationwide telephone survey; 57 PERCENT see government resignation
of overall settlement of pension issue as breach of policy pledge

Akahata:
Tracking daily workers dispatched by Goodwill: 1,000 people
transported by bus to workplaces

(8) EDITORIALS

Asahi:
(1) Proposal for hopeful society: Three pillars to maintain class-A
industrial clout; Livelihood-related services industry should be
made linchpin for strengthen people's defense; Assume offensive, by

TOKYO 00005589 015 OF 016


improving financial system, developing goods-making technology

Mainichi:
(1) Fiscal reconstruction by local governments: Residents should
strengthen vigilance for getting local finances healthy again
(2) Expanded funds supply is only emergency measure to deal with
Subprime loan fiasco

Yomiuri:
(1) Ruling parties' annual tax code revision guidelines: Talks with
opposition camp holds key to whether they are realized or not
(2) Bank of Japan "Tankan" short-term business survey report: What
will become of real economy following sZf9x("|Titis C
suit
(2) IHI marred investor confidence

Sankei:
(1) Seventy years since Massacre of Nanjing: Send message to correct
mistaken historical evidence
(2) Major league and drugs: Use pinch as opportunity

Tokyo Shimbun:
(1) Thoughts at beginning of week: Three excellent plans for
integration of Europe

Akahata:
(1) Measures on soaring crude oil prices: Effective measures to deal
with serious damage

(9) Prime Minister's schedule, December 14

NIKKEI (Page 2) (Full)
December 15, 2007

08:42
Chatted with New Komeito leader Ota in Diet building. Met with
Education Minister Tokai.

09:00
Attended cabinet meeting. Welfare Minister Masuzoe and Chief Cabinet
Secretary Machimura remained the office. Met again with Machimura.

SIPDIS

09:33
Met at Kantei with Vice Foreign Minister Yachi.

10:19
Met with Economic and Fiscal Policy Minister Ota, Assistant Deputy
Chief Cabinet Secretary Saka, Cabinet Office directors general
Fujioka and Matsuoka. Ota remained in the office.

10:59
Met with China-Japan Friendship Association Chairman Song Jian.

13:02
Attended Lower House plenary session.

14:49
Met at Kantei with Vice Defense Minister Masuda, followed by
Financial Services Agency Director General Sato and Planning and

TOKYO 00005589 016 OF 016


Coordination Bureau chief Mikuniya.

15:35
Met with Lower House member Taro Nakayama.

16:15
Interviewed by the cabinet's reporters' club. Met with Machimura.

17:25
Met with Administrative Reform Minister Watanabe. Attended Economic
and Fiscal Policy Council meeting.

20:38
Videotaped TV talk show at TBS center in Akasaka.

21:52
Returned to his private residence in Ozawa.

Prime Minister's schedule, December 15

NIKKEI (Page 2) (Full)
December 16, 2007

Morning
Spent time at his private residence in Nozawa.

12:54
Met University of Tokyo Prof. Yoshikawa at Grand Prince Hotel
Akasaka.

16:04
Toured "Eco Products 2007" at Tokyo Gig Site in Ariake, Tokyo.

17:15
Met with secretaries at Grand Prince Hotel Akasaka.

19:17
Returned to his private residence.

Prime Minister's schedule, December 16

NIKKEI (Page 2) (Full)
December 17, 2007

Spent the whole day at his private residence in Nozawa.

SCHIEFFER

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