Cablegate: Japanese Morning Press Highlights 09//08

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UNCLAS SECTION 01 OF 12 TOKYO 002538

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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 09//08

Index:

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

U.S. financial crisis:
4) Impact of Lehman Brothers' collapse spreads; U.S., Japan, Europe
pump 36 trillion yen into markets (Nikkei)
5) AIG insurance giant in trouble in Japan, as well (Nikkei)
6) Japanese banks hit by wave from U.S. financial crisis to tune of
44 billion yen (Nikkei)
7) Japan has no cards to play to counter U.S. financial crisis
(Mainichi)
8) Market insiders deeply worried about impact on Japanese economy
of U.S. financial crisis (Yomiuri)
9) Financial crisis in U.S. could affect Diet-dissolution strategy
(Asahi)
10) U.S. financial crisis, tainted rice issue hit the Japanese
government at a time when it is falling into a political vacuum
(Nikkei)
11) Government denies there will be a significant impact on Japan
from the U.S. financial crisis (Tokyo Shimbun)

Defense affairs:
12) State Department Japan Desk Director Russel calls on Japan to
continue oil-refueling mission in the Indian Ocean (Yomiuri)
13) Chief Cabinet Secretary Machimura to probe into delay of Kantei
receiving report of intrusion of foreign submarine into Japanese
waters (Asahi)

Political season:
14) Taro Aso virtually assured of garnering majority in first ballot
in LPD presidential election (Asahi)
15) Okazaki City protests to Aso for gaffe about it being good that
heavy rains had fallen there and not elsewhere (Yomiuri)
16) Former Prime Minister Koizumi cheers on Yuriko Koike in the LDP
presidential race (Nikkei)
17) Ota reelected head of the New Komeito (Yomiuri)
18) Japanese Communist Party cuts by half its officially sponsored
candidates in the upcoming Lower House election, giving the ruling
LDP jitters about impact (Yomiuri)
19) Democratic Party of Japan on verge of merging with splinter
party People's New Party (Nikkei)
20) Kono Yohei to resign post of Lower House speaker (Nikkei)

ARTICLES:

1) TOP HEADLINES

Asahi:
Monetary authorities of Japan, U.S., Europe pump 35 trillion yen
into money markets after Lehman Brothers collapses

Mainichi:
Tainted rice distributed to 118 hospitals, facilities in 24
prefectures

Yomiuri:
U.S. financial markets shaken in aftermath of Lehman's failure;
AIG's credit rating downgraded

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Nikkei:
Fund injection amounts to 36 trillion yen in Japan, U.S., Europe

Tokyo Shimbun:
Hinode Town to shoulder medical bills for elderly patients starting
next fiscal year

Akahata:
With Lehman's failure, JCP Secretary General Ichida stresses need to
review policy of following U.S.

2) EDITORIALS

Asahi:
(1) Collapse of Lehman Brothers: First make efforts to stop chain
reaction

Mainichi:
(1) U.S. must do utmost to prevent larger crisis from Lehman's
failure
(2) Sales of tainted rice: Strictly pursue Agriculture Ministry's
responsibility

Yomiuri:
(1) U.S. paying the price for hesitating to inject public funds

Nikkei:
(1) Take bold measures to prevent U.S.-triggered financial panic

Tokyo Shimbun:
(1) Make utmost efforts to prevent chain of bankruptcies in
aftermath of Lehman failure
(2) LDP-New Komeito government must take deplorable political vacuum
seriously

Akahata:
(1) Put end to casino-type capitalism

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, September 15

NIKKEI (Page 2) (Full)
September 17, 2008

Spent the whole day at his official residence.

Prime Minister's schedule, September 16

NIKKEI (Page 2) (Full)
September 17, 2008

09:28
Met at the Kantei with Justice Minister Yasuoka, MHLW Minister
Masuzoe, MAFF Minister Ota, National Safety Commission Chairman
Hayashi, Consumer Administration Minister Noda, Chief Cabinet
Minister Machimura, and Deputy Chief Cabinet Secretary Futahashi,
followed by Defense Minister Hayashi, Vice Defense Minister Masuda,
Machimura and Hayashi.

10:01
Attended a cabinet meeting, followed by a meeting of

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financial-affairs-connected cabinet ministers.

11:14
Attended an administrative spending examination meeting. Afterward
met Noda.

12:12
Met Cabinet Intelligence Director Mitani, Deputy Chief Cabinet
Secretary for Crisis Management Ito, followed by Futahashi.

14:27
Met incoming and outgoing Supreme Court Justices Sakurai and Yokoo.

15:02
Met Gunma Gov. Osawa, followed by Machimura.

16:43
Met Futahashi.

17:05
Met Defense Ministry Defense Policy Bureau chief Takamizawa, Defense
Intelligence Headquarters chief Hokazono, and Mitani. Mitani stayed
on. Afterward met Noda.

18:01
Returned to his official residence.

4) Fallout from Lehman Brothers' collapse continues: Funds injection
by Japan, U.S., Europe totals 36 trillion yen in two days; Dollar
temporarily tests 103 yen-range; Nikkei Stock Average records
year-to-date low

NIKKEI (Top Play) (Lead para.)
September 17, 2008

The failure of Lehman Brothers, a major U.S. securities house, is
sending shockwaves across markets around the world. The 225-issue
Nikkei Stock Average on September lost more than 600 points on the
Tokyo market, recording the lowest level in six months. Asian
markets have also suffered sharp falls. Dollars were sold on the
foreign exchange market. The selling spree sent the U.S. dollar to
the 103-yen range. The central banks of Japan, the U.S. and Europe
the same day injected funds worth over 23 trillion yen in order to
quell market jitters. More than 36 trillion yen was injected in two
days. European and U.S. markets opened broadly lower. The market
continues to be shaky.

5) Uncertainty over AIG with six life, non-life insurers in Japan

NIKKEI (Page 3) (Full)
September 17, 2008

Uncertainty over American International Group Inc.'s (AIG) situation
also will unavoidably affect its business in Japan. The company has
three life insurance and three non-life insurance companies in
Japan. As of the end of March, AIG has concluded 9 million contracts
for life insurance policies alone. The company received 2.5 trillion
yen in life and non-life insurance premium revenues in fiscal 2007.
If simply compared, its business scale is equivalent to that of
Sumitomo Life Insurance Co., Japan's leading life insurer.

AIG's life insurance companies in Japan are Alico Japan, AIG Edison

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Life Insurance Co., and AIG Star Life Insurance Co. The company
earns a total of 2.1 trillion yen, accounting for one-fourth of the
total revenue earned by all life insurance businesses across the
world. AIG has also non-life insurers in Japan, including AIU
Insurance Co., American Home Insurance Co. These companies'
businesses are firmly managed, as Nobuyasu Uemura, chief analyst at
Rating and Investment Information Inc., said: "The group's
contributions are rated high and stable."

6) Japanese banks may suffer losses totaling over 230 billion yen
with 440 billion yen worth of loans to Lehman Brothers

NIKKEI (Page 3) (Excerpts)
September 17, 2008

Lehman Brothers Japan (Minato Ward, Tokyo), the Japanese arm of
Lehman Brothers Holdings Inc., filed for bankruptcy protection
yesterday with the Tokyo District Court. The business failure of the
major U.S. securities firm is expected to hit not only the financial
institutes and companies that are doing business with Lehman but
even many areas in Japan, including individual investors and real
estate companies investing their money in the company.

Leading banks, local banks, and insurance companies that have loan
claims on Lehman Brothers and hold bonds issued by that company
revealed the values of such assets yesterday. The total amount of
their investments in and lending to Lehman exceeds 440 billion yen.
Of this amount, more than 230 billion yen will not likely be covered
by collaterals or transactions to avert losses.

The extent of the losses the Japanese firms will suffer in the end
will depend on how Lehman Brothers will dispose of its holdings, but
each financial institution will inevitably have to write off bad
loans to the company. The disposal of losses related to Lehman will
likely deal another blow to banks that have already been suffering
from non-performing loans claims to domestic firms in the current
worsened economic climate. Japanese leading financial institutions
(six major banks and Nomura Holdings) disposed of nonperforming
loans worth 1.4 trillion yen linked to the U.S. subprime mortgage
crisis by the year that ended in June 2008.

7) Failure of Lehman Brothers: Japan's hands tied; Ministers rule
out impact of bankruptcy

MAINICHI (Page 8) (Abridged slightly)
September 17, 2008

Following the bankruptcy of Lehman Brothers, a major U.S. securities
house, the government on the morning of September 16 held an
emergency cabinet meeting. Amid growing concern that the ensuing
global stock plunge could deal a serious blow to the Japanese
economy, Prime Minister Fukuda ordered ministers, "Take all possible
measures to prepare for every situation." However, it is impossible
for him to take drastic measures, as he has a lame-duck cabinet due
to his recent announcement of his decision to step down, and the
Liberal Democratic Party (LDP) presidential election campaign is now
in progress. As such, participants just confirmed that as of this
moment, no serious impact on Japan's financial institutions is
expected, as State Minister for Financial Policy Motegi revealed.
The meeting brought together Chief Cabinet Secretary Machimura,
Finance Minister Ibuki, State Minister for Economic and Fiscal
Policy Yosano as well as Motegi. Bank of Japan Governor Shirakawa

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also took part. Yosano said that participants agreed to consider
what Japan can do for international cooperation.

However, measures that can be taken for the moment are limited to
the BOJ boosting money-market liquidity and aiming to bring about
economic pump-priming measures that include measures to help small-
and medium-size businesses. However, whether the fiscal 2008
supplementary budget intended to finance the economic stimulus
package will secure Diet approval in the next extraordinary session
depends on when the next prime minister to be chosen in the LDP
presidential election will dissolve the Lower House for a snap
election.

8) Lehman Brothers collapses: Banks intensifying move to avoid risk;
Market observers expects serious impact of failure of leading U.S.
securities house

YOMIURI (Page 8) (Full)
September 17, 2008

Most market observers view the failure of Lehman Brothers, a leading
U.S. securities firm, as serious. Banks had hoped that the U.S.
would not allow the firm to fail because of its huge size. However,
with their expectations let down, they are now increasingly taking a
stance of avoiding any risks involved in the Lehman Brothers
collapse. There is fear that economies throughout the world will
lose momentum. If companies that are in a bind try to cut jobs in an
effort to reduce expenses as much as possible, the unemployment rate
would jump, adversely affecting personal consumption.

Nomura Securities Financial and Economic Research Center Economic
Research Department chief Kiuchi pointed out: "There is a
possibility of a recurrence of the financial problem that pushed up
crude oil prices. The triple evil of the high yen, low stock prices,
and high crude oil prices could apply further downward pressure on
the Japanese economy, which has already entered a recessionary
phase."

"The impact would not be deep"

State Minister for Economic and Fiscal Policy Yosano during a press
conference on the 16th took an optimistic view about the impact of
the failure of Lehman Brothers on Japan. He noted, "It is
predictable that U.S.-bound exports will drop. But this has been
expected since last year. It is unlikely that the failure of Lehman
Brothers will have an immediate impact of any depth."

9) Global financial crisis likely to affect ruling coalition's
strategy of holding early Lower House election

ASAHI (Page 1) (Full)
September 17, 2008

With Liberal Democratic Party (LDP) Secretary General Taro Aso
gaining support from LDP Diet members and prefectural chapters for
the Sept. 22 presidential election, Aso and Democratic Party of
Japan (DPJ) President Ichiro Ozawa will likely fight the next House
of Representatives election with an eye on the reigns of government.
The opposition camp intends to bring up the tainted rice issue and
ongoing global financial crisis as campaign issues. The developments
of the financial crisis will likely have an impact on the ruling
coalition's strategy of holding an early Lower House election.

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An Asahi Shimbun survey has found that Aso now has about 230 or 60
PERCENT of the 386 LDP lawmakers and 141 local votes. Aso,
therefore, is certain to become the new LDP president. The ruling
camp's election strategy is to dissolve the Lower House at the
outset of the upcoming extraordinary Diet session to call a general
election. Some in the LDP even hope for a general election on Oct.
26.

However, Lehman Brothers' bankruptcy, the tainted rice issue, and
the pension-record mess have begun to have an impact on the ruling
coalition's election strategy. DPJ Deputy President Naoto Kan said
yesterday: "The present situation is that the government has
abandoned its responsibility to respond to the global crisis."
Opposition parties plan to call for closed-hearing sessions during
the Diet recess in order to pursue the government and ruling camp.

The ruling camp, however, cannot ignore the situation. Aso yesterday
questioned the U.S. government's response, saying: "I have serious
questions about whether doing nothing and ignoring the situation is
the best way to resolve the global crisis."

The New Komeito, the LDP's coalition partner, and its major backer,
religious sect Soka Gakkai, have already prepared for the general
election, with a Nov. 9 vote in mind. So, it is now difficult to
delay the election until late November.

10) Lehman, tainted rice directly hit "political vacuum"

NIKKEI (Page 2) (Excerpts)
September 17, 2008

The failure of the U.S. major securities firm Lehman Brothers
Holding Inc. and the illegal resale of tainted rice have directly
hit Japan's "political vacuum." Even after announcing his
resignation, Prime Minister Yasuo Fukuda has been busy dealing with
critical events. Finding appropriate measures for them is becoming
an issue in the ongoing LDP presidential race to determine a
successor to Fukuda. But there is no silver bullet and the matter
must be left to the next administration. Some in the ruling bloc
have expressing concern that those issues will dampen plans to move
up the next Lower House election to the ruling camp's favor.

Late at night on Sept. 15, the prime minister telephoned his
secretary from his official residence to instruct him to set up a
venue for concerned cabinet ministers to discuss a response to the
Lehman issue the following morning. The prime minister strongly
asked for the attendance of Bank of Japan Governor Masaaki
Shirakawa.

Fukuda experienced many financial crises during his tenure as chief
cabinet secretary. Before reporters on the evening of Sept. 16,
Fukuda said: "It is necessary to grasp the situation and manage the
economy and financial markets in close cooperation with other
countries." His comment shows that there is no master plan other
than watching the situation.

LDP presidential candidates cannot afford to ignore the situation,
either. In a meeting on Sept. 16 with Machimura faction supporters,
Secretary General Taro Aso said: "It is clear what will happen to
the market economy if it is left as is." Economic and Fiscal Policy
Minister Kaoru Yosano will skip today's LDP presidential election

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speech meeting in Okayama. In yesterday's open discussion held by
the LDP Youth Bureau, former Policy Research Council Chairman
Nobuteru Ishihara commented: "The dire situation has resulted from
lending money to parties that did not deserve it." Former Defense
Minister Yuriko Koike said: "I am shocked by the failure of
Lehman."

Although one can take great satisfaction in criticizing the
U.S.-model market principles, what Japanese politics can do about
the global financial turmoil is limited. Some have indicated that
the country's food safety, which is again at risk, is far more
serious.

The Agriculture, Forestry and Fisheries Ministry's explanation on
the evening of Sept. 15 that it has failed to clarify the names of
companies involved in the resale of tainted rice enraged the prime
minister. He immediately ordered the ministry to produce a complete
list of companies involved in the illegal resale. As a result, the
ministry revealed on Sept. 16 the names of companies that
distributed tainted rice via Mikasa Foods. Although all opposition
parties have condemned the bureaucracy for dereliction of duty,
hardly anyone has mentioned lawmakers' failure to take steps to
prevent such a case.

Policy Research Council Chairman Kosuke Hori on Sept. 16 called in
the policy officers of the five LDP presidential candidates and
asked them to actively take up the Lehman and tainted rice issues.

11) Government denies impact of U.S. financial crisis, while
focusing on handling of supplementary budget

TOKYO (Page 2) (Full)
September 17, 2008

With the bankruptcy of the U.S. securities house Lehman Brothers,
the government, eager to wipe away domestic anxieties, has called
for a cool-headed response from the nation. Although it is
anticipated that public opinion would clamor for measures to prop up
Japan's economy, the Fukuda administration is already on its last
legs. With the prospects of a Lower House dissolution and snap
election bearing down, there is no environment being built for the
next administration to immediately tackle a package of economic
stimulus measures.

In the extraordinary Diet session set to convene of Sept. 24, the
administration will directly face the issue of what to do about the
fiscal 2008 supplemental budget bill that includes a comprehensive
economic package, when setting the timing for Diet dissolution.
Prime Minister Yasuo Fukuda, speaking to the press core at the
Kantei, his official residence, called for a cool-headed response:
"The impact on financial institutions here is not that great.
Instead, it is somewhat small. Calm responses are being sought." He
then added: "It is important to properly deal with the supplementary
budget."

Chief Cabinet Secretary Machimura also told the press corps: "The
effect on domestic financial institutions and their customers is
very limited." Although State Minister for Economic and Fiscal
Policy Yosano denied that there would be a major impact (from the
U.S. financial crisis), he put off attending the LDP presidential
campaign rally today in order to devote his time to handling the
issue. At a meeting of LDP supporters, LDP Secretary General Aso

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said: "There will be a major impact on the Japanese economy. Right
now, the number one priority is measures to stimulate the economy."
He stressed the need to quickly deal with a package of economic
measures.

On the other hand, Democratic Party of Japan Vice President Naoto
Kan at a party meeting lashed out at the government and the LDP,
saying, "There is no response at all to the global crisis. They are
abandoning their responsibility."

12) Japan Desk: U.S. hopes for continued refueling

YOMIURI (Page 4) (Full)
September 17, 2008

Satoshi Ogawa

WASHINGTON-Daniel Russel, the newly appointed director for Japanese
affairs (Japan Desk) at the U.S. Department of State, told the
Yomiuri Shimbun in an interview on Sept. 15 that Afghanistan and
Iraq are of "extremely high priority" among current international
issues in connection with the United States' hopes for Japan's
international contributions. Regarding the Maritime Self-Defense
Force's refueling activities in the Indian Ocean, Russel stated: "In
addition to substantial effectiveness, they have an extremely
symbolic and political meaning for Japan. I know there is political
strife in Japan, but we strongly hope the Japanese government and
people will continue the activities or find ways to resume them (if
discontinued)."

Russel also said, "If the political situation in Japan becomes a
little clearer and if a government that can properly take action
appears, we will be happy." With this, he implied that the U.S.
government was increasingly concerned about the Japanese
government's declining ability to translate its policies into action
as the Diet has been divided since the summer of last year with the
ruling parties holding a majority of the seats in its lower chamber
and the opposition parties dominating its upper chamber.

13) Kantei probing into MSDF's delayed reporting on sub intrusion

ASAHI (Page 4) (Full)
September 17, 2008

Chief Cabinet Secretary Machimura, meeting the press yesterday,
raised a question about the Maritime Self-Defense Force's recent
action upon its destroyer's spotting of a submarine of unknown
nationality in Japan's territorial waters. "We're now probing into
this since I think there might have been some problem about the time
it took until the report came in to the Kantei (prime minister's
office) after they spotted something like a periscope," Machimura
said. The MSDF took 1 hour and 40 minutes to touch base with a
secretary of the prime minister to report on the submarine's
intrusion after confirming its periscope. Machimura indicated that
the Kantei would look into the communication arrangements. He also
revealed that the MSDF had discontinued its search for the submarine
yesterday at 3 p.m.

14) Aso locks up majority

ASAHI (Page 4) (Full)
September 17, 2008

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According to the Asahi Shimbun's coverage of the situation in the
ruling Liberal Democratic Party's ongoing presidential election, LDP
Secretary General Taro Aso is now certain to win the race with a
majority of votes for him in the first ballot. Kaoru Yosano is
expected to garner nearly 50 votes, outpacing three other
candidates-Yuriko Koike, Nobuteru Ishihara, and Shigeru Ishiba.

Among the LDP's 386 lawmakers in both houses of the Diet, Aso has
now locked up around 70 PERCENT of the Machimura faction, the
largest faction in the LDP, and more than 50 PERCENT of the Koga
faction and nearly 90 PERCENT of the Ibuki, Nikai, and Koumura
factions. Aso has also gained support from about 40 PERCENT of the
Tsushima faction, from which Ishiba is running. Aso has secured
support from about 30 PERCENT of the party's unaffiliated
lawmakers, and about 60 PERCENT of all LDP lawmakers are backing
him.

Aso is gathering momentum among the LDP's local chapter executives
(adding up to 141 votes) as well. Its local chapters in the
prefectures of Miyagi, Gumma, and Oita, which said "no idea" as the
campaign was in its initial phase, have now indicated that they will
cast their respective three votes for Aso. Miyazaki Prefecture,
which has switched from the d'Hont formula, will also cast its three
votes for Aso.

Former Prime Minister Koizumi has now clarified his support for
Koike. However, Koike does not appear to be gaining broad support
among the LDP's local leaders across the nation. Kanagawa
Prefecture, which is Koizumi's home turf, is also expected to cast
its three votes for Aso.

15) Okazaki City sends protest note to Aso over gaffe

YOMIURI (Page 37) (Full)
September 17, 2008

The ruling Liberal Democratic Party's Secretary General Aso,
currently running in his party's presidential election, upset the
Aichi prefectural cities of Okazaki and Anjo with his recent gaffe
in a campaign speech he made in front of JR Nagoya Station on Sept.
14. In the stumping speech, Aso, referring to a heavy rainfall that
had hit the two cities' area in late August, said: "The heavy
rainfall in Okazaki recorded 140 mm per hour. It was Anjo and
Okazaki, so that's good. But if that had happened in Nagoya, all
this area would have been under water." The cities of Okazaki and
Anjo sent letters of protest to Aso yesterday.

The letter of protest sent from Okazaki City is under the joint
signatures of Deputy Mayor Masaru Ishikawa, acting for the mayor,
and Municipal Assembly Speaker Masahiro Yamamoto. The letter notes:
"The heavy rainfall caused an unprecedented disaster, including two
victims. Our recovery efforts are still going on. The remarks were
inappropriate and inconsiderate."

16) Koizumi encourages Koike camp

NIKKEI (Page 2) (Abridged slightly)
September 17, 2008

Former Prime Minister Junichiro Koizumi had lunch yesterday at a
Tokyo Italian restaurant with former Defense Minister Yuriko Koike,

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an LDP presidential candidate, and others. Koizumi gave Koike this
advice: "A bigger battlefield awaits. You should deal with the race
as one step in the process, a good experience."

Touching on his failure to win the presidency in his first attempt,
Koizumi also said: "That made me who I am today. People on your side
might become your enemies someday. People criticizing me became my
powerful supporters later on. That's the political world. You
shouldn't pay too much attention to people criticizing you."

Meanwhile, the Machimura faction, to which Koike belongs, launched
an election campaign headquarters yesterday morning for Secretary
General Taro Aso. Chief Cabinet Secretary Nobutaka Machimura, who
heads the faction, declared: "Let us build a system for the Seiwaken
(Machimura faction) to faithfully back Mr. Aso till the end." Aso
received a letter of recommendation with the signatures of 60
lawmakers, or 70 PERCENT of the faction's members.

17) Ota to be reelected as New Komeito leader

YOMIURI (Page 4) (Full)
September 17, 2008

Unchallenged by other candidates, Akihiro Ota was assured yesterday
that he would remain leader of the New Komeito. The 62-year-old
Ota's reelection will be formally endorsed at a party convention
scheduled for Sept. 23. At a press conference after his reelection
was assured, Ota expressed eagerness for adding some more Diet seats
to his party's present 31, citing victory in the House of
Representatives election as the top priority for his second term as
party head.

Ota will serve as head of the New Komeito through September 2010. He
is expected to retain key party executives, including Secretary
General Kazuo Kitagawa and Policy Research Council Chairman Natsuo
Yamaguchi.

Ota, at the press conference, stressed that he would do his best to
increase the party's presence in the next Lower House election. He
stated: "I will make clear our party's stance of supporting the
daily lives of people." He also took a position of stepping up his
party's demands toward its coalition partner, the Liberal Democratic
Party (LDP). He said that the relations between his party and the
LDP have grown mature.

When asked by reporters about the rumor that Democratic Party of
Japan (DPJ) President Ichiro Ozawa may run from the Tokyo No. 12
district, which he represents, Ota said: "I will win the election at
any cost."

New Komeito's executives have accelerated preparations for the
general election and they plan to finish up before the end of
September the compilation of a manifesto (set of campaign pledges)
for the next Lower House election.

18) JCP announces it will file 138 candidates for Lower House
election, half of its usual number

YOMIURI (Page 4) (Excerpts)
September 17, 2008

The Japanese Communist Party (JCP) announced yesterday that it plans

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to field 138 persons for the next House of Representatives election
as candidates to run in the single-seat constituency race. Although
the JCP has said that it will add some more candidates, the number
of the JDP candidates will likely be reduced by half from the 275 it
ran in the 2005 Lower House race. Since it is predicted that many
votes in electoral districts for which the JCP has not yet fielded
any candidates would go to candidates on the Democratic Party of
Japan's (DPJ) ticket, the reduction in the JCP candidates is certain
to affect the results of the general election.

JCP Head of the Secretariat Tadayoshi Ichida explained the reason
for his party's decision to cut its candidates to reporters
yesterday: "It is desirable for us to devote the utmost effort for
the proportional representation segment race. It means we will carry
out a realistic election."

A deposit for candidacy in a single-seat constituency is 3 million
yen. If a candidate fails to secure 10 PERCENT of the votes, the
deposit will be forfeited. Therefore, another reason is that the JCP
wants to reduce its financial costs.

The JCP's reduction in its candidates will have a major impact on
other parties. Because if votes in 162 electoral districts, for
which the JCP has not yet fielded its candidates, go to DPJ
candidates, there will be a great change in which party wins in the
single-seat constituencies.

The ruling Liberal Democratic Party (LDP) has become increasingly
alarmed, with one member saying: "We will have a close contest with
the DPJ in every electoral district. It is not good that JCP votes
will go to the DPJ." A midlevel LDP member pointed out: "We should
attract conservative voters by asking them whether they want to
entrust the political helm to the DPJ, which cooperates with the
JCP."

19) DPJ, PNP in final coordination for merger in bid to take reins
of government under Ozawa's leadership; Decision next week

NIKKEI (Page 2) (Abridged slightly)
September 17, 2008

The Democratic Party of Japan and the People's New Party yesterday
undertook coordination to finalize their plan to merge the two
parties. The plan is being implemented under the leadership of DPJ
President Ichiro Ozawa, who is determined to take the reins of
government through the next Lower House election. But because there
are some objections in the PNP, the two parties will discuss
conditions for reaching a conclusion early next week.

After his meeting with PNP representative Tamisuke Watanuki in the
Diet building on Sept. 16, Ozawa said to Watanuki, "Let us join
hands again." Although the two leaders did not touch on the possible
merger in their talks, the DPJ had conveyed the plan to the PNP
behind the scenes. DPJ Secretary General Yukio Hatoyama told
reporters in Tokyo on the same day, "(The merger) is one of the
strong options." Ozawa, Hatoyama and others are scheduled to
exchange views today to make a formal proposal before long.

In response to Ozawa's proposal, the PNP last evening held a general
meeting of its Diet members from both chambers and discussed the
matter. Although many endorsed the plan, some expressed concern that
the party's policies would sink into insignificance after the

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merger. As such, the party has decided to re-discuss the matter
after receiving a formal proposal from the DPJ. Meanwhile, Watanuki
also met Takeo Hiranuma, who does not belong to any party, in Tokyo
and gave up the idea of forming a joint parliamentary group before
the next Lower House election.

Ozawa's move to merge with the PNP comes from the hope to push ahead
with coordination for overlapping constituencies with the party with
the aim of winning total support from the postal policy study group
that backs the PNP. Ozawa also apparently plans to win "third
forces" to the DPJ's side in advance in order to turn the political
situation after the election in the DPJ's favor.

20) Lower House Speaker Kono to retire from politics

NIKKEI (Page 2) (Abridged)
September 17, 2008

Lower House Speaker Yohei Kono, 71, has now decided not to run in
the next Lower House race and to retire from politics after the
current term, a senior LDP lawmaker revealed yesterday. Kono, who
represents the Kanagawa No. 17 constituency, currently does not
belong to the LDP as the Lower House speaker. Work to select his
successor is underway centering on the LDP's Kanagawa chapter.

Kono was born in 1937 to former agriculture minister Ichiro Kono. He
left the LDP after criticizing it for its money-oriented nature in
the wake of the Lockheed scandal and launched the now-defunct New
Liberal Club. He returned to the LDP in 1986, and served as
president of the LDP when it was an opposition party in 1993.

In January 1994, he, along with then Prime Minister Morihiro
Hosokawa, played a central role in reaching an agreement on revising
political-reform-connected bills featuring the introduction of
single-seat constituencies and proportional representation. In the
same year, the LDP became a ruling party by making Socialist Party
lawmaker Tomiichi Murayama prime minister, and Kono later served as
deputy prime minister and foreign minister. He gave up seeking a
second term in the 1995 LDP presidential race and became the only
LDP president not to become prime minister.

Known as a dove and a defender of the Constitution, Kono remained
cautious about supporting the United States even after then Prime
Minister Junichiro Koizumi announced that Japan would back the
United States in the Iraq war. He became Lower House speaker in
November 2003.

SCHIEFFER

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