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UNCLAS SECTION 01 OF 10 TOKYO 000795 
 
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 02/14/06-1 
 
 
INDEX: 
 
(1) US envoy vows to listen to counterproposal; Futenma 
relocation premised on feasibility 
 
(2) US envoy says US to "consider" local counterproposal, 
indicates US not sticking to coastal plan; True intentions 
unreadable 
 
(3) Okinawa residents perplexed by US ambassador's remarks 
suggesting modifications; Japanese government says, "No effect on 
ongoing talks"; Nago City denies possibility of its coming up 
with proposal 
 
(4) Realignment of US forces in Japan: Perception gap may bring a 
crisis to bilateral alliance; US distrustful of Japan's local- 
emphasized attitude 
 
(5) USFJ realignment: City gov't releases findings from Misawa, 
Iwakuni 
 
(6) Bid-rigging scandal involving DFAA stands in way of plan to 
upgrade JDA to ministry status 
 
(7) US steps up pressure on Japan, China due to record high of 
trade deficits with two countries regarding automobiles and the 
yuan 
 
ARTICLES: 
 
(1) US envoy vows to listen to counterproposal; Futenma 
relocation premised on feasibility 
 
RYUKYU SHIMPO (Page 1) (Full) 
February 14, 2006 
 
US Ambassador to Japan Thomas Schieffer addressed the Okinawa 
Association of Corporate Executives, or Okinawa Keizai Doyukai, 
in its monthly meeting held yesterday afternoon at the Loisir 
Hotel Okinawa. In his speech, Schieffer indicated that the United 
States is ready to consider any alternative ideas Okinawa has to 
propose for the planned relocation of the US Marine Corps' 
Futenma Air Station to Camp Schwab in the city of Nago, which the 
Okinawa prefectural government and the Nago municipal government 
have rejected. "If the people of Okinawa Prefecture and the local 
citizens of Nago are opposed to the relocation and if they say 
they have a better idea, we will sincerely listen to them," 
Schieffer said. 
 
Schieffer was asked what if Nago proposes building an offshore 
facility. "As a result of talking about that idea, the facility 
might be built as planned," Schieffer said. "If there is a better 
idea, we might choose it," the ambassador added. 
 
However, Schieffer also said Japan and the United States are 
holding negotiations based on a broad, conceptual agreement to 
relocate Futenma airfield to Camp Schwab. "We will sincerely take 
any proposal but will not necessarily agree to that proposal, and 
an agreement, if not translated into action, will be useless." 
With this, Schieffer implied that the Japanese and US governments 
would work out a final report based on a coastal plan. 
 
In the meantime, the Okinawa prefectural government has been 
 
TOKYO 00000795  002 OF 010 
 
 
seeking to relocate Futenma airfield elsewhere outside Okinawa 
Prefecture. However, Schieffer ruled out the possibility of doing 
so. In this regard, the envoy said reaching a settlement on the 
Futenma relocation is in a "total package" with returning bases 
south of Kadena base and reducing 7,000 Marines. When it comes to 
the final report, he said it would come out by the end of March. 
 
Schieffer met with Okinawa Gov. Keiichi Inamine yesterday 
morning. "The governor said the Futenma relocation is the only 
exception," Schieffer said. With this, he indicated that the 
Okinawa prefectural government would accept the agreed reversion 
of bases in the prefecture's central and southern districts. 
 
(2) US envoy says US to "consider" local counterproposal, 
indicates US not sticking to coastal plan; True intentions 
unreadable 
 
RYUKYU SHIMPO (Page 2) (Full) 
February 14, 2006 
 
"If the local communities propose a better idea, then we will 
sincerely listen to them." With this, US Ambassador to Japan 
Schieffer indicated yesterday that the United States would 
consider any alternative ideas Okinawa has to propose for the 
planned relocation of Futenma airfield to a coastal area of Camp 
Schwab while the Japanese and US governments are about to reach a 
final agreement on the realignment of US forces in Japan. 
 
In October last year, Japan and the United States released an 
interim report on the realignment of US forces, incorporating 
their agreement on specific plans. Before that, however, the US 
government had pushed a local proposal from former Nago Mayor 
Tateo Kishimoto and others to install a Futenma alternative in 
shallow waters off the coast of Nago's Henoko district. As it 
stands, the ambassador's remarks had a certain impact on local 
officials. "It's a flexible message to the effect that the US 
side will not stick to the coastal plan," a senior official of 
the Okinawa prefectural government says. One local official 
regards the ambassador's remarks as seeking to find a way out of 
the impasse over the Futenma relocation facing rough going. 
However, officials in the Okinawa prefectural government, Nago 
municipal government, and Japanese government are taking the 
ambassador's remarks in various ways. Some even wonder what his 
remarks really mean. 
 
Schieffer said the United States would not necessarily agree to 
Okinawa's counterproposal. The ambassador drove a wedge into a 
sudden spread of expectations for progress in talks over an 
alternative idea. 
 
Referring to last October's intergovernmental agreement on the US 
military's realignment, Schieffer reiterated that it is a "broad, 
conceptual agreement," thereby implying possible alterations to 
specifics. However, there is still no knowing how seriously the 
United States will explore changes to the coastal plan, such as 
whether the United States will really consider an offshore site 
for the Futenma relocation. 
 
"I can't say the US side has shown a stance of responding to our 
alternative idea," a senior official of the Okinawa prefectural 
government says. "But," this official added, "we can clearly see 
problems about the Japanese government that is sticking to the 
coastal plan." With this, the official noted that the Japanese 
 
TOKYO 00000795  003 OF 010 
 
 
government holds the key to break the impasse. 
 
Meanwhile, Nago Mayor Yoshikazu Shimabukuro is poised to sit down 
at the negotiating table with the government if the government 
modifies the coastal plan. However, the new mayor remains 
committed to his usual stance, declaring that the Nago municipal 
government would not offer to make any overtures. The Okinawa 
prefectural government is also seeking to rectify the coastal 
plan or otherwise to relocate Futenma airfield to another site 
outside Okinawa Prefecture. The Japanese government is aiming to 
reach a final agreement in the force realignment talks along with 
the coastal plan. Most of its officials are taking a cool view of 
the ambassador's remarks, with a senior official of the Foreign 
Ministry saying the ambassador "probably played lip service." 
 
"The ball is now in our court," says a Defense Facilities 
Administration Agency source. However, the four parties-involving 
the Japanese government, Okinawa prefectural government, and Nago 
municipal government-remain unchanged in their respective 
positions. There is no predicting what will happen to the coastal 
plan from now on. 
 
Main points from Ambassador Schieffer's remarks 
 
Following are main points from US Ambassador to Japan Schieffer's 
remarks: 
 
-- Okinawa Prefecture and Nago City are both opposed to the 
coastal plan. Will be there no change to the plan? 
 
Schieffer: The Japan-US agreement is a broad, conceptual 
agreement to relocate (Futenma airfield) to Camp Schwab. If the 
people of Okinawa Prefecture and the local communities of Nago 
say they are opposed to the plan and they have a better idea, we 
will have to listen to them. If we can reach an agreement in 
detail as a result of talks, then I hope that it will be 
acceptable to the people of Okinawa Prefecture. 
 
-- Is it a package to reach a settlement on the Futenma 
relocation, return bases south of Kadena base, and reduce 7,000 
Marines? 
 
Schieffer: It's a total package. Governor Inamine said the only 
exception is the Futenma relocation issue, and he indicated that 
he could accept all other specific realignment plans. 
 
-- You said you will listen to local proposals. Do you mean that 
the United States will consider local proposals, or do you 
otherwise mean it's a proposal on the US government's part? 
 
Schieffer: We will sincerely take local proposals, but we will 
not necessarily reach an agreement. I mean that the United 
States, as a friend and as an ally, will respect and appreciate 
their views. Any agreement will be of no use unless it's 
translated into action. 
 
-- How about the possibility of relocating Futenma airfield 
elsewhere outside Okinawa Prefecture? Is Nago's assertion 
acceptable? 
 
Schieffer: There's no option to relocate Futenma airfield outside 
Okinawa Prefecture. As a result of talks, it may be relocated as 
planned, and if there is a better way, we may choose to do so. 
 
TOKYO 00000795  004 OF 010 
 
 
 
(3) Okinawa residents perplexed by US ambassador's remarks 
suggesting modifications; Japanese government says, "No effect on 
ongoing talks"; Nago City denies possibility of its coming up 
with proposal 
 
OKINAWA TIMES (Page 2) (Full) 
February 14, 2006 
 
By Go Watanabe of the politics and economics desk and Ou Yoshida 
at the Tokyo branch office 
 
During a question-and-answer session after a speech yesterday, US 
Ambassador to Japan Thomas Schieffer indicated a stand that could 
be taken as being flexible about modifying the present plan for 
relocating the US Marine Corps Futenma Air Station to the coastal 
area of Camp Schwab. Many in the Okinawa prefectural government, 
as well as in the central government, are perplexed by his 
apparent display of flexibility, wondering what is his real 
intention. Some are, however, taking it cool-headedly. A senior 
prefectural government official, for instance, remarked: "It'll 
never happen that Okinawa Prefecture or Nago City will come up 
with a modification proposal." A central government official also 
stated, "That's unlikely to affect Japan-US talks." The fate of 
Japan-US talks is drawing wide attention, as the end-of-March 
deadline for a final report on the realignment of US forces in 
Japan is nearing. 
 
Subtle difference felt 
 
"I thought there was a subtle difference in nuance from the 
previous US position," a senior prefectural government official 
said. This official felt a "change" in the US stance from 
Ambassador Schieffer's answer when he said in response to 
questions on the coastal relocation plan: "If local residents 
have better plans, we have the responsibility to listen to them." 
 
Late last month, US Secretary of Defense Donald Rumsfeld, keeping 
in mind the interim report released last October, urged Japan to 
make efforts, telling Liberal Democratic Party lawmakers and 
others while they were in the US: "We need to implement the 
agreed items in a steady manner." Regarding the Futenma 
relocation issue, too, the US had never hinted at revising or 
changing the coastal relocation plan until recently. 
 
Schieffer, however, went as far as to say that as a result of 
accepting local ideas, "we may go ahead with the present plan or 
may look for ways to find better ideas." 
 
"This remark could be taken as being flexible, but it depends on 
how you interpret it," the same prefectural government official 
noted. In actuality, however, the prefectural government remains 
unable to discern the real intention of the remark. 
 
Another senior prefectural government official commented: "Isn't 
the US still sticking to the shallow-water plan (to relocate the 
airfield to somewhere within the Henoko reef)?" This official at 
the same time said flatly: "The shallow-water plan is worse (than 
the coastal plan) from the prefectural government's point of 
view." 
 
No surprise 
 
 
TOKYO 00000795  005 OF 010 
 
 
A senior Foreign Ministry official who looked perplexed said: 
"Supposedly such a remark came out, perhaps out of consideration 
for locals, but we have no idea about the real intention." 
 
Another official of the same ministry pointed out: "At one point 
in the past before the interim report came out, the US promoted 
the shallow-water plan in response to Nago City's proposal. Given 
this, the remark emphasizing the wishes of locals is not 
surprising." 
 
This official interpreted Secretary Rumsfeld's disapproval of 
revising the coastal plan as "indicating his desire to see the 
Japanese government fulfill its responsibility as it has promised 
before the release of the interim report to implement without 
fail the coastal plan." 
 
Yet, the official had not taken (Scheiffer's) remark this time as 
expressing a US intention to respond to modifying the coastal 
plan. He has taken it coolly, noting: "There was no proposal for 
revising the plan in the recent working-level talks, nor was 
there any change felt from the prevailing mood of the US. It is 
unlikely that there will be any effect on the future talks." 
 
(4) Realignment of US forces in Japan: Perception gap may bring a 
crisis to bilateral alliance; US distrustful of Japan's local- 
emphasized attitude 
 
SANKEI (Page 1) (Full) 
February 12, 2006 
 
By Naohisa Hanzawa 
 
The Japanese and US governments yesterday ended the three days of 
working-level talks on the realignment of US forces in Japan 
(USFJ). In the meeting, the United States emphasized its 
strategy, while Japan prioritized the wishes of local 
municipalities. The perception gap between the two nations 
apparently obstructed progress in the talks. The recent 
revelation of the bid-rigging scandal involving the Defense 
Facilities Administration Agency (DFAA) has forced Japan to stop 
local coordination, and the Defense Agency (JDA) official in 
charge of negotiations was replaced recently. All these events 
have also helped the US to harbor a sense of distrust of Japan. A 
number of tasks, for instance, when to pull out Self-Defense 
Forces (SDF) troops from Iraq, are yet to be addressed. If the 
talks on the USFJ realignment broke down, the failure could bring 
the bilateral alliance to a crisis. 
 
No strategic dialogue 
 
"Local coordination has often cropped up, but what is important 
for Japan? You should think hard of this point." 
 
"We know what is important for us. But holding discussion with 
locals is also necessary." 
 
On Feb. 10., in this way US Deputy Under Secretary of Defense 
Richard Lawless and JDA Director-General Fukushiro Nukaga 
exchanged views at the JDA. This exchange has projected the 
difference of stances between the two nations. The US has pursued 
military rationality, while Japan has considered what impact 
there will be on locals and called for figures necessary to make 
an explanation at home. "The US is becoming increasingly 
 
TOKYO 00000795  006 OF 010 
 
 
irritated at the fundamental gap of perception," a government 
source said. 
 
On the transfer of US Marines in Okinawa to Guam, the US has 
indicated about 8 billion dollars, or approximately 950 billion 
yen as the transfer cost Japan and the US would pay. Japan asked 
the US to quickly come up with the basis of the calculation. But 
the US' priority is on "promoting discussions on expanding, for 
instance, the SDF's role along with the transfer of Marines, in 
order to maintain deterrent force," a senior uniformed official 
explained. 
 
Local coordination hits a snag 
 
The realignment of USFJ is also a base issue for Japan. Many in 
the JDA firmly believe that if they miss this opportunity, burden 
reduction, for instance, would become impossible. In order to pay 
part of the cost of the transfer of Marines to Guam, however, 
Japan needs budgetary measures, and for that, data showing how 
the cost is calculated is also indispensable. But some officials 
in the Foreign Ministry expressed concern that if the present 
negotiating approach of focusing on burden reduction is not 
modified, "the talks with the US could hit a snag." 
 
Smoldering US discontent with Japan stems from the lack of 
tangible progress in local coordination. The US also appears 
unable to understand at all Nago Mayor Yoshikazu Shimabukuro's 
attitude. As a candidate backed by the ruling camp, Shimabukuro 
was recently elected mayor of Nago in Okinawa, but he is 
reluctant to respond to negotiations on the transfer of the 
Futenma Air Station to the coastal area of Camp Schwab. 
 
Late January, the JDA transferred its Defense Policy Bureau's 
Deputy Director-General Chisato Yamauchi, a responsible official 
for talks on the USFJ realignment. Rumor has it that Yamauchi, 
before his transfer from the post, consulted with Lawless on the 
transfer. This replacement, too, has become a "factor that has 
made the US distrustful of Japan, wondering whether the JDA is 
serious enough to conclude the talks," a Liberal Democratic Party 
lawmaker familiar with national defense said. 
 
Aftermath of DFAA-led bid-rigging scandal 
 
The DFAA plays a leading part in local coordination as a working 
group. But it is being rocked by the recent bid-rigging scandal 
involving itself and finds itself unable to function properly. A 
proposal for dismantling the DFAA is also beginning to have an 
unexpectedly adverse effect, because local governments cite such 
a dismantlement plan as an excuse not to sit at the negotiating 
table with the central government, arguing that it would be 
useless to hold discussions with officials whose organization is 
set to disappear. 
 
Challenges facing Japan on the security front are not limited to 
the USFJ realignment. One is related to Ground Self-Defense Force 
(GSDF) troops now stationed in Iraq. Japan intends to withdraw 
all of them from there by May. Another is associated with the 
dispatch of Maritime Self-Defense Force (MSDF) troops to the 
Indian Ocean. Japan is looking for ways to end this dispatch by 
September, when the tenure of Prime Minister Junichiro Koizumi 
expires. Given these factors, Japan is likely to face 
difficulties in negotiations with the US in the first half of 
this year. Japan plans to resume working-level talks before the 
 
TOKYO 00000795  007 OF 010 
 
 
end of the month and after intensive discussion, reach a final 
agreement in late March. But should domestic issues derail talks 
on USFJ realignment, a crisis could develop in the alliance with 
the US. 
 
(5) USFJ realignment: City gov't releases findings from Misawa, 
Iwakuni 
 
CHITOSE MIMPO (Web version) (Full) 
February 11, 2006 
 
While Japan and the United States are currently in the process of 
holding intergovernmental consultations on their planned 
realignment of US forces in Japan, the municipal government of 
Chitose City (in Japan's northernmost main island of Hokkaido) 
has released findings from its recent monitoring surveys of 
Misawa airbase in the city of Misawa, Aomori Prefecture, and 
Iwakuni airfield in the city of Iwakuni, Yamaguchi Prefecture. 
The surveys both in Misawa and in Iwakuni monitored more frequent 
noise occurrences than in the case of Chitose airfield on 
Saturdays and Sundays. However, the surveys also found that both 
bases have generally exercised self-restraint on flights during 
the late night and early morning hours from 10 p.m. to 6 a.m. 
 
The Japanese and US governments have released an interim report 
regarding the planned realignment of US forces in Japan, 
incorporating a plan to redeploy US jet fighters from three bases 
at Kadena in Okinawa Prefecture, Iwakuni, and Misawa to the Air 
Self-Defense Force's Chitose base (Chitose airfield) for some of 
their training flight missions. The Chitose municipal government 
sent personnel to Misawa and Iwakuni and conducted fact-finding 
surveys in the two cities. 
 
According to findings from the surveys, Misawa airfield, though 
there are no arrangements between US forces and their local hosts 
regarding flight restrictions, conducts training that complies 
with local requests, such as: 1) considering noise even during 
routine training flights; 2) refraining from conducting training 
flights during the late night and early morning hours; 3) 
notifying local governments in advance of training flights 
scheduled for the late night and early morning hours; and 4) 
conducting no routine training flights on Saturdays, Sundays, and 
holidays. 
 
When it comes to facts about aircraft noise (around Misawa 
airfield), annual data is not available because the Misawa 
municipal government has not disclosed findings from its own 
monitoring surveys. However, the Chitose municipal government 
found from its hearings with local residents that noise occurs 
frequently and that there are a little more frequent noise 
occurrences on Saturdays and Sundays than in the case of Chitose. 
 
In addition, Misawa-based US military personnel and local 
citizens are animatedly communicating through a number of 
programs, such as holding Japanese and American cross-cultural 
events, opening an on-base golf course to the local public, and 
sending English teachers to local primary schools. In addition, 
the city of Misawa is also constructing American Village to 
revitalize its local economy. 
 
In the case of Iwakuni Air Station, the Iwakuni Japan-US 
Consultative Council-a four-party body consisting of the Iwakuni 
municipal government, the Japanese government, the Yamaguchi 
 
TOKYO 00000795  008 OF 010 
 
 
prefectural government, and US forces-has confirmed that the US 
military would refrain from conducting flights during the late 
night and early morning hours and would not conduct flights over 
the city's industrial zone situated north of the base's runway. 
The US military has generally abided by these arrangements, 
according to the Chitose municipal government. 
 
However, actual aircraft noise in Iwakuni City, when compared 
with Chitose City's Sumiyoshi district, is about five times more 
frequent on Saturdays and Sundays and about 30 times more 
frequent during the late night and early morning hours. 
 
Iwakuni has a population of about 106,000, and US military 
personnel based there number about 5,300. In FY2004 (April 2004 
through March 2005), there were 21 crimes (involving US military 
personnel). This crime rate is equivalent to 0.88% of all crimes 
that occurred in the Iwakuni Police Station's district during 
that fiscal year. In the meantime, traffic accidents (caused by 
US military personnel) numbered 41 or 1.06% of all traffic 
accidents in the district. Based on these findings, the Chitose 
municipal government will refer to the data when specifics about 
training flights are revealed. 
 
(6) Bid-rigging scandal involving DFAA stands in way of plan to 
upgrade JDA to ministry status 
 
YOMIURI (Page 3) (Excerpts) 
February 14, 2006 
 
Speaking to reporters at his official residence yesterday, Prime 
Minister Junichiro Koizumi reiterated a cautious stance about the 
submission of related bills to the current Diet session to 
upgrade the Defense Agency (JDA) to ministry status. Koizumi 
said: "I will closely watch the development of talks (by the 
Liberal Democratic Party and the New Komeito). Upon seeing the 
situation, I would like to make a judgment." When he held a 
meeting with former LDP Vice President Taku Yamasaki and others 
late last year, the prime minister had indicated his 
determination to carry out the JDA-upgrading plan during his term 
of office. But Koizumi has now made an about-face. 
 
LDP Policy Research Council Chairman Nakagawa told reporters the 
same day: "We need first to see what measures the JDA will 
present to prevent a recurrence of bid-rigging practices." He 
indicated that priority should be given to efforts to investigate 
the bid-rigging scandal involving the Defense Facilities and 
Administration Agency (DFAA) late last month and to work out 
preventive measures. A senior New Komeito member also stated: "In 
our party, there is strong opposition to the plan to raise the 
JDA to a ministry. The atmosphere in the party is that there will 
be no other option but to put the related bills on the 
backburner." 
 
The government and the ruling coalition had decided to submit 
related bills to the current Diet session to raise the JDA to a 
ministry. New Komeito Vice President Shozo Kusagawa also listed 
on Jan. 25 these conditions for upgrading the JDA: (1) integrate 
the JDA and DAFF; and (2) ensure civilian control of the 
military. 
 
The disclosure of a bid-rigging scandal involving the DFAA in 
late January applied the brakes to the moves favorable for the 
JDA-upgrading plan. JDA Director General Nukaga and other 
 
TOKYO 00000795  009 OF 010 
 
 
officials had initially envisioned a scheme under which the JDA 
would be upgraded to ministry status and the DFAA would be kept 
in place." After the DFAA scandal was reported, the JDA officials 
worked out a strategy to have the agency dissolved and integrated 
into the JDA and then to have the JDA upgraded to a ministry. But 
arguments urging caution about raising the JDA status have 
emerged in the ruling camp. One ruling party member said: "If we 
come up with the JDA-upgrading plan before bringing out the truth 
of the DFAA scandal, the result will be that we provide the 
opposition camp, including the Democratic Party of Japan 
(Minshuto), with ammunition to attack us." 
 
Later, more bid-rigging cases were found in construction and 
engineering projects at US military, such as the US Marines 
Corps' Iwakuni Base in Yamaguchi Prefecture and the US Navy 
Sasebo Base in Nagasaki Prefecture. The series of scandals are 
likely to affect the ongoing US force realignment talks. Under 
such a circumstance, the JDA and the DFAA have no leeway to 
tackle the JDA-upgrading issue. 
 
The LDP, though, incorporated the promotion plan in its action 
program for 2006 at the January convention. The party has 
referred to the defense ministry plan in ruling party agreements 
since 2002. An LDP member who once assumed the prime ministership 
said: "The issue should not be put off forever. We should decide 
on a specific timeframe for implementing the plan, even if it is 
difficult to do so during the current Diet session." 
 
Given this, some in the ruling camp suggest forming a new 
agreement in the camp to ensure the defense ministry plan, and 
others propose that bills should be submitted at the last stage 
of the current Diet session and carried over to the next Diet 
session. 
(7) US steps up pressure on Japan, China due to record high of 
trade deficits with two countries regarding automobiles and the 
yuan 
 
MAINICHI (Page 11) (Full) 
February 11, 2006 
 
With the new record high in US trade deficits with Japan and 
China in 2005, US political circles will inevitably become more 
sensitive about trade relations with Tokyo and Beijing with an 
eye on the fall off-year congressional election. Intertwined with 
the second ban on imports of US beef, there is the possibility 
that the US Congress will heighten criticism of Japan and that it 
will urge China to move ahead with the revaluation of the yuan. 
 
The US trade deficit with Japan expanded in 2005 due to the 
strong US economy, as well as the depreciation of the yen. US 
imports of Japanese automobiles also increased. Exports of 
Japanese automobiles and auto parts accounted for 60% of the 
entire US deficit with Japan. Although Japan has refrained from 
intervening in the market to prevent yen appreciation, the US 
auto industry, which is in a predicament, has been criticizing 
Japan's exchange policy for failing to allow the yen to 
strengthen. 
 
The US livestock industry and the Congress are growing 
dissatisfied with Japan's re-imposition of a ban on US beef 
imports. If Japan prolongs the ban on US beef imports, calls for 
invoking economic sanctions on Japan might flare up again in the 
United States because of huge US trade deficit with Japan. 
 
TOKYO 00000795  010 OF 010 
 
 
 
Chances are slim that trade friction will become serious because 
the Bush Administration has urged US automobile makers to make 
their own efforts to revitalize the industry and because the 
administration has been negative about imposing sanctions again 
Japan due to the beef issue. However, with the fall election in 
mind, the US Congress' criticism of Japan cannot be ignored. 
 
Secretary of the Treasuries John Snow asserted: "There are limits 
 
SIPDIS 
to the Japanese and EU purchasing power of US products because 
their economic growth rates are low." Japan will likely be urged 
to accelerate further the growth of its economy at the G-8 
finance ministerial conference to be convened on Feb. 10. 
 
China revalued the yuan in July 2005. However, since the US 
deficit with China, expanded, the US is growing dissatisfied with 
the meager appreciation of the yuan. In his State of the Union 
address in late January, President Bush characterized China as a 
competitor of the US. He will likely strengthen pressure on China 
to revalue the yuan in consideration of a visit to the US by 
Chinese President Hu Jintao in April. 
 
SCHIEFFER