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UNCLAS SECTION 01 OF 09 TOKYO 002980 
 
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 05/31/06 
 
INDEX: 
 
(1) Economic Minister at US Embassy sees Japan-US FTA as 
premature, cites agricultural protection policies as impediment 
 
(2) Iran appeals to Japan to start work on Azadegan oil-field 
project, citing that removal of land mines is 96% complete 
 
(3) Japan's FDI exceeds 5 trillion yen in FY2005, with more 
earnings set aside for reinvestment 
 
(4) China calls on METI to remove 14 firms from list of firms 
that may use products, technologies for developing nuclear 
weapons 
 
(5) Nago City does not intend to participate in consultative body 
on Futenma relocation unless prefecture agrees; Refusal could 
delay implementation of Cabinet decision on USFJ realignment 
 
(6) Kakushin (heart of matter) column - point and counterpoint: 
The cabinet approves US force realignment plan, but what will 
happen to Okinawa's burden? 
 
(7) What underlies relations between Abe and Fukuda as rivals for 
LDP presidency (Part 5 - conclusion): Relying on Fukuda is Anti- 
Koizumi force's weakness 
 
(8) Energy Agency's "plan for building nuclear power-oriented 
nation" proposes augmenting funds for reprocessing nuclear fuel 
 
ARTICLES: 
 
(1) Economic Minister at US Embassy sees Japan-US FTA as 
premature, cites agricultural protection policies as impediment 
 
NIKKAN KOGYO SHIMBUN (Page 2) (Full) 
May 31, 2006 
 
James Zumwalt, economic minister at the US Embassy in Japan, gave 
a speech in Tokyo on May 30, prior to his leaving post in July. 
In it, he expressed the view that "it would seem too early" to 
think about the possibility of a free-trade agreement (FTA) 
between Japan and the United States. Regarding the East Asia 
economic zone initiative, he gave this advice: "If an 
organization is to be created that is in line with World Trade 
Organization (WTO) rules and is open and does not exclude other 
countries, the US would not oppose it." 
 
The economic minister is slated to assume the position of Japan 
Desk director at the State Department in August. In his speech, 
he predicted that if concessions are made to reach agreement on a 
US-South Korea FTA, now being negotiated, "It may possibly 
stimulate Japan (to move toward an FTA, too)." But he pointed to 
the negative stance of the Japanese government, which is shackled 
by agricultural protection policies. He said the US was not 
insisting on an FTA, for "there are many areas in which the US 
and Japan cooperate (outside of an FTA). It would be better to 
move forward from what we can do now." He appealed for a 
strengthening of the relationship in a layered fashion. 
 
In addition, he cited as examples of US companies that had 
successfully invested in Japan such companies as Pfizer, P&G, and 
AIG. He mentioned that among those companies, AIG in particular 
 
TOKYO 00002980  002 OF 009 
 
 
had created approximately 2,000 new jobs at its facility in 
Nagasaki. He proudly pointed out, "American firms have 
contributed to the regional economies in Japan, as well," 
 
He added: "The reason that companies are concentrated in Tokyo is 
because the power to make decisions is centered there. As 
decentralization of authority to the regions progresses, we can 
expect to see the effects (there) of foreign direct investment 
(FDI) and policies to invite in companies." He expressed his high 
hopes for regional decentralization reform, if only to reach the 
Koizumi Cabinet's target of doubling FDI. 
 
(2) Iran appeals to Japan to start work on Azadegan oil-field 
project, citing that removal of land mines is 96% complete 
 
NIHON KEIZAI (Page 3) (Full) 
Evening, May 31, 2006 
 
By Kazushige Sagaya in Teheran 
 
At a meeting of oil companies held in Teheran on May 30 to 
discuss the plan to develop the Azadegan oil field in southern 
Iran, Mehdi Bazargan, managing director of the Petroleum 
Engineering and Development Co., an affiliate of National Iranian 
Oil Co. that is in charge of negotiating with foreign companies, 
appealed to INPEX, Japan's major oil-development enterprise, to 
start development "by September 22, the time limit under the 
contract." The report was carried by the Iran's government-run 
news service. 
Bazargan stated that several foreign companies had sounded him 
out with their own development plans, so if INPEX should pull 
out, he expected that "we could sign a contract with one of these 
companies." INPEX has insisted that the reason for the delay is 
because Iran had not removed the land mines in the oil field, as 
promised. But Managing Director Bazargan refuted that claim, 
stating, "Removal of land mines is 96% complete, there is no 
problem with work in the field." 
 
On the other hand, a spokesperson for Iran's Foreign Ministry at 
a press conference on May 30 pointed out, "There is plenty of 
time until the September deadline; this is not the time to make 
speculations." 
 
(3) Japan's FDI exceeds 5 trillion yen in FY2005, with more 
earnings set aside for reinvestment 
 
NIHON KEIZAI (Page 1) (Full) 
May 31, 2006 
 
Direct investment abroad by Japanese companies in fiscal 2005 
increased 32% over a year ago to 5.8 trillion yen, exceeding 5 
trillion yen for the first time in 15 years. The amount of 
earnings put aside by Japanese affiliates abroad for reinvestment 
doubled to 1.6 trillion yen, greatly expanding foreign direct 
investment (FDI) from Japan. This result underscores that 
Japanese companies' globalization has entered a new phase where 
affiliates abroad use their profits for reinvestment, without 
relying on the parent companies in Japan. 
 
Japan's FDI began to surge briskly in the late 1980s and reached 
a record 7.35 trillion yen in fiscal 1989 because of the 
appreciation of the yen and responses to increased trade disputes 
with the US and European countries. With the bursting of the 
 
TOKYO 00002980  003 OF 009 
 
 
asset-price bubble around 1990, however, Japan's annual outflows 
declined sharply to 1.6 trillion yen in fiscal 1993. 
 
The surge in FDI is attributed to sharply increasing earnings 
reserved by Japanese affiliates abroad for reinvestment. The 
amount of such reserves climbed to 1.6 trillion yen - about 30% 
of Japan's total FDI, reaching its highest level ever, 
outstripping the 1.7 trillion yen record set in fiscal 2001. The 
increased portion of retained earnings is included in the amount 
of FDI. 
 
Meanwhile, FDI outflows from Japan for such purposes as takeover 
bids or establishing new firms increased 17% over a year ago to 
2.99 trillion yen. 
 
The expansion of retained earnings overseas reflects the success 
of Japanese affiliates overseas. In Japan, given that the 
declining population might shrink domestic earnings, Japanese 
corporations will inevitably be pressed to earn more in foreign 
markets than now. It is likely that the localization of Japanese- 
owned companies overseas will accelerate even more. 
 
(4) China calls on METI to remove 14 firms from list of firms 
that may use products, technologies for developing nuclear 
weapons 
 
SANKEI (Page 1) (Full) 
May 30, 2006 
 
China has demanded that the Japanese government remove 14 Chinese 
firms from its End User List, a list of foreign firms placed 
under export restrictions on the basis of the prospect that they 
might use imported products or technologies to develop nuclear 
weapons, according to informed sources yesterday. The Ministry of 
Economy, Trade and Industry (METI) has compiled the list based on 
information exchanged with the US and European countries, so it 
is impossible for Japan to independently redefine such companies 
as "free from any concerns." In part also because China's demand 
will affect the basis of Japan's national security policy, METI 
has no intention to respond to the request. 
 
According to METI, Chinese Commercial Minister Bo Xilai made the 
above request when he met with METI Minister Toshihiro Nikai in 
Beijing this February. In another meeting with Nikai in the Kyoto 
Guest House on May 27, Bo repeated the request. In the second 
meeting, though, both agreed to have their responsible officials 
continue to exchange views. 
 
METI introduced in 2002 the End User List, together with catch- 
all restrictions as a new system for trade management. The export- 
control system that had been adopted until then, such as the 
Coordinating Committee on Multilateral Export Controls (COCOM), 
was designed to restrict the export of items that might be 
diverted for military use, but under the catch-all restriction 
system, suspicious firms are listed, and if a company plans to 
export products to a listed firm, the company is required to 
submit the plan to METI for screening. 
 
In the past, Israel and other countries asked Japanese 
authorities to remove their domestic firms from the black list. 
According to an expert on trade management, however, "This is the 
first case of a request brought into a ministerial meeting as a 
formal agenda item," adding: "Should nuclear-related technology 
 
TOKYO 00002980  004 OF 009 
 
 
be transferred to China, the technology might flow into Pakistan 
or North Korea." 
 
Japan's list reflects information based on the lists of the State 
Department and the Commerce Department. Japan's list and those 
worked out by such industrialized democratic countries as 
Britain, Canada and Germany have contributed to preventing the 
proliferation of nuclear weapons. 
 
A senior METI official said: "We will not engage in negotiations 
with China" in response to its repeated requests, but based on 
the judgment that cooperative relations with China is 
indispensable for trade management, the ministry has agreed to 
continue talks. 
 
METI filed a criminal charge against Yamaha Motor Co. this 
January for illegally exporting to China and other countries 
unmanned helicopters that could be turned into mass-destruction 
weapons. 
 
(5) Nago City does not intend to participate in consultative body 
on Futenma relocation unless prefecture agrees; Refusal could 
delay implementation of Cabinet decision on USFJ realignment 
 
OKINAWA TIMES (Page 1) (Excerpts) 
May 31, 2006 
 
Nago City 
 
The prefectural government has taken a stance of not 
participating in the consultative body between the central 
government and local governments to discuss such matters as the 
construction plan for the alternate facility to the US Marines' 
Futenma Air Station. In that connection, a senior Nago official 
revealed that his city, too, would not participate, taking the 
view that "the precondition for Nago City joining the talks would 
be the prefecture's agreeing to join them." The central 
government, having made a cabinet decision, aims at quickly 
drafting a construction plan, but the possibility has emerged now 
of a major delay. 
 
The senior official expressed the understanding that "the 
decision on the basic document of agreement in which the central 
government received the concurrence of the prefecture is still 
valid." He also said that there is also Nago City's decision in 
1999 to accept the request from the prefecture and let Nago be 
the site for the relocation of the alternate facility. 
 
The construction of an alternate facility is difficult to 
implement without the cooperation of the prefecture, such as 
procedures for an environmental assessment and reclamation of 
public waters. In the official's view, "Nago City and the central 
government cannot move ahead on this issue on their own." 
 
Moreover, even the cabinet decision stated that in connection 
with the construction plan, "a consultative body would be 
established with the prefecture and local governments." 
 
(6) Kakushin (heart of matter) column - point and counterpoint: 
The cabinet approves US force realignment plan, but what will 
happen to Okinawa's burden? 
 
TOKYO SHIMBUN (Page 3) (Almost full) 
 
TOKYO 00002980  005 OF 009 
 
 
May 31, 2006 
 
By Masakazu Kaji 
 
At a cabinet meeting yesterday, the government approved a basic 
policy on the US force realignment plan. The basic policy 
includes the construction of two runways in a V-shape at Camp 
Schwab in Nago City, Okinawa Prefecture, to relocate the 
functions of the US forces' Futenma Air Station there, and the 
transfer of 8,000 Marines from Okinawa to Guam. All these steps 
are reportedly intended to alleviate the burden on Okinawa, home 
to 75% of US military facilities in Japan, but what are the local 
people's views of this development? We interviewed two lawmakers, 
one from the ruling camp and the other from the opposition. 
 
Kozaburo Nishime of the Liberal Democratic Party (LDP): I give 
the government a score of 70 out of 100 for choosing the best 
available option 
 
-- What is your evaluation of the new Futenma relocation plan? 
 
"Frankly, the construction of two runways (as shown in the plan) 
astonished me, but this will help reduce noise pollution that may 
affect nearby communities. Relocating the base outside the 
prefecture would be the best choice, but given that there are no 
prefectures that would accept the relocation, this plan is a good 
choice." 
 
-- Do you think the relocation will make progress under the 
government's plan? 
 
"The construction work will be done within the US military 
facility that is fenced in, so opponents will find it difficult 
to obstruct the construction work. However, the construction work 
will not go as planned without full local understanding. Although 
Okinawa remains heavily burdened with US military facilities, I 
think the central government needs to explain in detail and even 
more carefully that the US military presence in Japan has 
contributed to peace in the country." 
 
-- What is your view of the overall US force realignment plan? 
 
"My impression is that this is not a groundbreaking agreement 
between the two countries. Both sides, having in mind the 
situation on the Korean Peninsula and China-Taiwan tensions, 
reached an accord on reducing the military burden (on Okinawa). 
As for this accord, I have a sort of favorable opinion of the 
central government and give it a score of 65 to 70 out of 100. 
The Futenma relocation and the transfer of Marines must be 
realized as quickly as possible. If burden reduction is realized 
in a visible manner, more local people will show their 
understanding toward the realignment plan." 
 
-- What do you think are the issues that Japan will have to deal 
with in the months ahead? 
 
"A matter of national concern is who will bear the costs relating 
to the realignment plan. It would be ideal if this did not cost 
any money, but we want to move forward to reduce the burden. We 
must be accountable to the nation." 
 
-- Okinawa Gov. Keiichi Inamine has expressed discontent with the 
central government's adoption of the realignment plan. 
 
TOKYO 00002980  006 OF 009 
 
 
 
"Supposedly, the governor is in distress, partly because he has 
been forced to scrap the plan he has until recently advanced. But 
it is not necessarily correct to say that economic assistance for 
the local economy will come to an end. Rather, it is possible to 
take the government decision this time to mean that the promotion 
measures have been secured." 
 
-- Gov. Inamine says he will not run in the gubernatorial 
election in November. 
 
"We on the part of the ruling camp think we are in a very severe 
situation. Taking over what the Inamine-led prefectural 
government has done so far is, I think, a way to bring stability 
to Okinawa. We'd like to ask his help to back a successor 
candidate. Doing so would be the shortest path to realization of 
the realignment plan." 
 
Masahide Ota of the Social Democratic Party (SDP): Construction 
of alternative facility means the facility will be permanent 
 
-- What is your evaluation of the central government's Futenma 
relocation plan? 
 
"Building a new base within the same prefecture does not reduce 
the Okinawan people's burden. A new base, if constructed, will be 
permanent. The central government says two runways will be 
constructed to use one for landings and the other for takeoffs, 
but there is no guarantee that that rule will be observed by US 
forces. Seventy percent of the prefecture's residents are opposed 
to the central government's plan." 
 
-- What do you think are problems in terms of the environment? 
 
"The planned relocation site is within an area described as the 
most wonderful natural environment in Okinawa. However, an iron 
frame will be constructed on atolls there. If heavy oil spills 
out from the construction site into the sea, it will be 
impossible to stop the spread of oil contamination. Fishery 
operators who have until recently supported the relocation are 
now opposed to the central government's plan. It is impossible to 
put the base policy into practice without concurrence with 
affected local residents." 
 
-- What do you think about the overall US force realignment plan? 
 
"My impression is that America's interests come first before 
anything else. A new base, which is likely to be a permanent 
facility, will be constructed, and even after the Futenma base is 
relocated, the Futenma site will not be returned to Okinawa for 
at least the next eight years. Should an accident resulting in 
injury or death occur in the future, the public will erupt in 
rage to an extent the central government cannot control; if that 
happens, the Japan-US security arrangements will collapse. Even 
if all programs laid out this time under the US force realignment 
plan are implemented, 70% of the US military bases in Japan will 
remain in Okinawa." 
 
-- What is your view of the central government's action? 
 
"It has yet to come up with a clear answer to the question of 
what structure the US forces in Japan will have after they return 
some of their bases in Japan. There is a plan to construct a 
 
TOKYO 00002980  007 OF 009 
 
 
large military depot in Urasoe City. There is also a rumor that 
nuclear submarines will be allowed to make port calls. If that 
happens, (all the central government is doing) will only lead to 
strengthening the bases. 
 
"It is also unclear how the realignment costs have been 
calculated. The Futenma relocation has been estimated to be at 
least 400 billion yen, but some in the Defense Agency estimate 
the cost at some 1 trillion yen. The central government has yet 
to make clear the details of the estimate." 
 
-- Okinawa will have a gubernatorial election in November. 
 
"Gov. Inamine complained about the central government's plan but 
allowed it. He did so perhaps because he had to accept requests 
from the construction industry, which backed him in the previous 
election. The US force realignment will be an issue in the 
election. Opposition parties would be able to form a more united 
front than ever." 
 
(7) What underlies relations between Abe and Fukuda as rivals for 
LDP presidency (Part 5 - conclusion): Relying on Fukuda is Anti- 
Koizumi force's weakness 
 
MAINIHCHI (Page 2) (Full) 
May 30, 2006 
 
On the morning of May 24, Makoto Koga, a former secretary general 
of the Liberal Democratic Party (LDP), called on Taku Yamasaki, a 
former LDP vice president, at the office of the LDP faction 
headed by Yamasaki. Koga proposed on May 18 that Class-A war 
criminals now enshrined at Yasukuni Shrine be separated from it. 
The two discussed Prime Minister Junichiro Koizumi's visits to 
the Shinto shrine. They also criticized the Koizumi government. 
Yamasaki lashed out at LDP Policy Research Council Chairman 
Hidenao Nakagawa, who has close ties with Koizumi, saying, "The 
present LDP Policy Research Council has automatically followed 
proposals by the government." Koga responded: "I have the same 
feeling." 
 
The current assumption is that Chief Cabinet Secretary Shinzo Abe 
is the person whom Koizumi is thinking of as his successor. The 
strategy of the cross-factional group that is critical of the 
Koizumi government is to tighten the noose around Abe by 
developing an Asia diplomacy argument. As part of that effort, 
Koga, who heads the Japan Association for the Bereaved Families 
of the War Dead, seems to have proposed a study of removing Class- 
A war criminals from the list of those enshrined at Yasukuni 
Shrine. 
 
Koichi Kato, a former LDP secretary general who has been critical 
of Koizumi, has formed a study group that mainly discusses views 
of history, particularly World War II. Those attending the first 
meeting included former Foreign Minister Masahiko Komura, 
Economy, Trade and Industry Minister Toshihiko Nikai, and former 
Education Minister Kunio Hatoyama. They exchanged views on what 
drove Japan and China to fight the Sino-Japanese War. 
 
Kato and Yamasaki expect that former Chief Cabinet Secretary 
Yasuo Fukuda will run in the upcoming LDP presidential race. 
Fukuda has criticized Koizumi's visits to Yasukuni Shrine. If 
both Abe and Fukuda run for the LDP presidency, the Mori faction, 
the largest party faction, would split in two, forcing other 
 
TOKYO 00002980  008 OF 009 
 
 
factions to field their own candidates. If so, Abe would not be 
able to obtain a majority of votes in the first casting of votes, 
and he would be defeated in the runoff, according to a veteran 
lawmaker. 
 
The parliamentary group to study building a national war memorial 
held a meeting on May 25, but Fukuda, a key group member, did not 
attend the session. 
 
Anti-Koizumi lawmakers are skeptical about Fukuda's candidacy 
since he seems to be intentionally distancing himself from party 
members. They have found it difficult to field a candidate beside 
Fukuda even though they strongly suspect that Fukuda will not run 
in the end. 
 
Factions with not presidential candidates are uneasy about the 
standoff between Abe and Fukuda growing more intense. On the 
evening of May 25, Defense Agency Director General Fukushiro 
Nukaga, a member of the Tsushima faction, and faction members now 
serving in their first to fifth term in the Diet gathered 
together in a Tokyo restaurant. Koizumi has given the cold 
shoulder to the faction since he gained control of his 
government. As a result, the faction that was once the largest 
faction in the LDP slipped to the second largest one, replaced by 
the Mori faction. The faction has 74 members and the Mori faction 
has 86. 
 
The meeting was intended to prevent the Tsushima faction from 
becoming a hunting ground for the presidential election. LDP 
Upper House Chairman Mikio Aoki, a Tsushima faction member, has 
remained silent about the presidency. Aoki is regarded as a 
person who is trying to field a post-Koizumi contender under 
cooperation between the Mori and Tsushima factions. 
 
If the Mori faction splits, major existing factions will step 
down from the center stage without fail. If the Mori faction can 
field a single candidate, it alone will stick out from other 
factions. If so, such a situation will continue even after the 
presidency. 
 
(8) Energy Agency's "plan for building nuclear power-oriented 
nation" proposes augmenting funds for reprocessing nuclear fuel 
 
TOKYO SHIMBUN (Page 3) (Full) 
May 31, 2006 
 
The Agency for National Resources and Energy in the Ministry of 
the Economy, Trade and Industry (METI) yesterday submitted an 
outline of its report titled "Plan to Build a Nuclear Energy- 
Oriented Nation" to the Nuclear Power Subcommittee under the 
Study Committee for National Resources and Energy. The report 
proposes that Japan continue to supply in 2030 and beyond 30% to 
40% of domestic electric power with nuclear power. It also calls 
for increasing funds set aside for reprocessing nuclear fuel and 
constructing or expanding nuclear plants as part of efforts to 
promote the nuclear fuel cycle. 
 
Recently, many countries have begun to focus again on nuclear 
power as an energy source as part of efforts to successfully cope 
with surging oil prices and the need to address global warming. 
In response to such a global trend, the agency will come up with 
a nuclear fuel-cycle policy, which has been put on the backburner 
in the wake of the Monju incident and the disastrous nuclear 
 
TOKYO 00002980  009 OF 009 
 
 
accident in Tokaimura. Before promoting the policy, though, there 
are a host of tasks to clear, such as the deadlock in the 
pluthermal energy project, the delay in resuming operating the 
Monju fast-breeder reactor, the disposal of nuclear waste. 
 
The outline of the report notes that the government will come up 
with an inconsistent policy from a medium to long-term 
perspective and present a major policy direction for electric 
power companies and manufacturers based on the policy. It also 
promises that the government will boost investment in 
constructing, expanding, or renovating nuclear plants and helping 
the domestic nuclear power industry to do business overseas. 
 
The draft report also suggests that the government will instruct 
power companies to reserve funds for constructing the second 
reprocessing plant to dispose of nuclear waste that cannot be 
disposed of at the reprocessing plant of Japan Nuclear Fuel 
Limited in Aomori Prefecture. It also will allow such companies 
to reserve money for constructing nuclear plants in the future. 
 
SCHIEFFER