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UNCLAS SECTION 01 OF 12 TOKYO 003119 
 
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: JAPANESE MORNING PRESS HIGHLIGHTS 06/07/06 
 
Index: 
 
1)   Top headlines 
2)   Editorials 
3)   Prime Minister's daily schedule 
 
4)   Chief Cabinet Secretary Abe meets with envoys, including 
  Ambassador Schieffer, to make pitch for international solution to 
  North Korea abduction issue 
 
Iran connection: 
5)   Iran warns Japan to start Azadegan oil field project by 
  September of loss development right 
6)   Iran tells Japan it is considering the US' comprehensive 
proposal on the nuclear issue 
 
China ties: 
7)   Government unfreezing yen loans to China to accelerate 
  improvement in relations 
8)   Government awarding China yen loans in order to keep issue 
out of the LDP presidential race 
9)   Another US newspaper calls on next Japanese prime minister 
to comply with China's demand and avoid Yasukuni visits 
10)  Muneo Suzuki continues to pursue the Foreign Ministry in the 
Diet, this time on the spy-related Shanghai consulate suicide 
case 
 
Defense issues: 
11)  CNFJ website reveals berth that will be used by nuclear- 
  powered carrier 
12)  Cabinet to approve on June 9 bill raising JDA to ministry 
status 
 
Politics: 
13)  Former Prime Minister Hashimoto undergoes surgery in lower 
  intestine; recovery in several months 
14)  Minshuto (Democratic Party of Japan) experiences surge in 
registered "party supporters" thanks to the Ozawa factor 
 
Economic agenda: 
15)  Government trying to reduce the long-term fiscal revenue 
  shortfall to 15-17 trillion yen 
16)  NTT will be completely broken apart over 10 years: 
government panel 
17)  New government financial institution that replaces a number 
of obsolete ones will be a stock company completely funded by the 
government 
18)  "Regions are on the brink of collapse," Prime Minister is 
told by senior officials 
 
Articles: 
 
1) TOP HEADLINES 
 
Asahi: 
Murakami sold NBS shares at peak over period of two days soon 
after Livedoor bought NBS shares 
 
Mainichi: 
Murakami urged Rakuten to buy NBS shares 
 
Yomiuri: 
 
TOKYO 00003119  002 OF 012 
 
 
Murakami masterminded buyout of NBS hares 
 
Nihon Keizai: 
New government-affiliated financial institutions to be 
reorganized into stock corporations in Oct. 2008 
 
Sankei: 
Elevator manufacturer to be raided 
 
Tokyo Shimbun: 
Ministry of Land, Infrastructure, and Transport starts 
investigations on elevators nationwide 
 
2) EDITORIALS 
 
Asahi: 
(1)  30,000 suicides: The government must come up with measures 
(2)  World Cup: Exciting month ahead 
 
Mainichi: 
(1)  End of freeze on yen loans to China: Both Japan, China 
should benefit in the end 
(2)  Alleged slaying of Iraqis by US soldiers: Strict 
investigations needed to build relationship of trust 
 
Yomiuri: 
(1)  Plans to reform NHK cannot put money first 
(2)  Can Japan help develop Central Asia? 
 
Nihon Keizai: 
(1)  Consolidate farmland to improve productivity 
(2)  Reorganization of stock market through competition 
 
Sankei: 
(1)  Agricultural reform: Don't fear taboos 
(2)  Elevator deaths: Prevent future accidents 
 
Tokyo Shimbun: 
(1)  Central Asia: Can Japan make up for late start? 
(2)  Energy White Paper: Resource strategy indispensable 
 
3) Prime Minister's Official Residence (Kantei) 
 
Prime Minister's schedule, June 6 
 
NIHON KEIZAI (Page 2) (Full) 
June 7, 2006 
 
08:37 
Attended cabinet meeting. Administrative Minister Chuma stayed 
on. Met Chief Cabinet Secretary Abe. 
 
09:07 
Returned to Kantei. 
 
10:03 
Met Wakayama Prefecture Plum Queen Tanimoto and others, followed 
by Economy, Trade, and Industry Minister Nikai and others. 
 
11:30 
Met Defense Agency Director General Nukaga and Vice Defense 
Minister Moriya. 
 
TOKYO 00003119  003 OF 012 
 
 
 
14:06 
Attended a tourism promotion convention held at the Akasaka 
Prince Hotel by the National Hotel Unions Federation. 
 
15:15 
Met at Kantei with critic Naoki Tanaka, followed by Intellectual 
Property Rights Headquarters member Hiroyuki Abe, Kadokawa 
Holdings Tsuguhiko Kadokawa, and others. 
 
16:47 
Attended a party to celebrate the publication of a book on reform 
by mayors, at the City Center Hotel. 
 
17:30 
Met at Kantei with Economic and Fiscal Policy Minister Yosano, 
Assistance Deputy Chief Cabinet Secretary Saka, followed by 
Internal and Communications Minister Takenaka. 
 
19:02 
Met at his official residence with Abe, Deputy Chief Cabinet 
Secretaries Nagase and Suzuki, and parliamentary secretaries of 
 
SIPDIS 
various ministries. 
 
4) Chief Cabinet Secretary asks for cooperation from foreign 
ambassadors for resolution to abduction issue: "International 
support is essential" 
 
SANKEI (Page 2) (Full) 
June 7, 2006 
 
The government yesterday invited US Ambassador to Japan Schieffer 
and other foreign envoys from 18 countries and the European Union 
(EU) to the Prime Minister's Official Residence (Kantei) to ask 
for their cooperation to resolve the abduction issue caused by 
North Korea. This meeting was aimed at putting more pressure on 
North Korea. The envoys took a position of basically supporting 
Japan on the abduction issue. Ahead of the Group of Eight (G8) 
Summit in St. Petersburg, Russia, slated for mid-July, the 
government intends to strive to gain more international support 
so that the abduction issue will be on the major agenda at the G8 
Summit. 
 
Envoys of the G8, including the United States, Britain, Germany, 
France, and Russia, and representatives of the diplomatic 
missions of such countries as China, South Korea, Thailand, and 
Sweden were invited to the meeting. China and South Korea sent 
ministers on behalf of their ambassadors to the meeting. 
 
During the meeting, Chief Cabinet Secretary Shinzo Abe asked for 
international cooperation: "Abductions are acts that are 
impermissible in terms of human rights as well as humanity. 
Strong support from other countries of the world is essential to 
resolve such issues." Deputy Chief Cabinet Secretary Seiji Suzuki 
explained the measures the Japanese government has taken, such as 
stepping up pressure on North Korea by strictly applying existing 
laws in dealing with that country. 
 
Participants in the meeting expressed their willingness to back 
up Japan like: "This is an issue that transcends political 
principles and positions. We share your rage"; "It is a painful, 
tragic incident for families of abductees"; and "The 
 
TOKYO 00003119  004 OF 012 
 
 
international community should work together to grapple with the 
issue." 
 
5) Iranian oil minister warns Japan that it will cancel INPEX's 
exploration rights 
 
YOMIURI (Page 2) (Full) 
June 7, 2006 
 
Takehito Kudo, Teheran 
 
Iranian Petroleum Minister Kazem Vaziri-Hamaneh said regarding 
the development of the Azadegan oilfield, regarding which Japan's 
INPEX Corp. has exploration rights: "We cannot tolerate Japan's 
delay." He thus warned that Iran would cancel INPEX's exploration 
rights if the corporation did not start development work by 
September, according to the Iranian national television 
broadcaster on June 6. 
 
The oil minister's statement seems to reflect Iran's intention to 
place pressure on Japan not to fall in step with the United 
States and European countries, who have been searching for ways 
to apply sanctions on Iran on the nuclear issue by using a 
"coalition of the willing." 
 
6) Iranian foreign minister promises to give serious thought to 
package of proposals 
 
YOMIURI (Page 4) (Full) 
June 7, 2006 
 
Foreign Minister Taro Aso held a telephone conversation with 
Iranian Foreign Minister Manuchehr Motaki last night in which Aso 
again urged Iran to halt nuclear development as well as to accept 
a package of proposals for resolving the nuclear issue, produced 
by Germany and the United Nations Security Council. In response, 
Motaki said: "We will consider the proposals seriously." 
 
7) Japan to resume yen loans to China to improve relations; 
Decision splits cabinet ministers 
 
YOMIURI (Page 2) (Full) 
June 7, 2006 
 
The Council for Overseas Economic Cooperation, chaired by Prime 
Minister Junichiro Koizumi, has decided to lift a freeze on the 
disbursement of about 74 billion yen in yen loans to China for 
fiscal 2005. The decision is apparently intended to improve 
relations with China, which have been strained due to Koizumi's 
visits to Yasukuni Shrine and other issues. "The Japan-China 
foreign ministerial in May has set the tone for improving 
bilateral relations," Foreign Minister Taro Aso noted. The 
government intends to accelerate the trend. 
 
Before reporters last night, Koizumi underlined the significance 
of the government's decision to resume yen loans to China. At the 
same time, he only explained that the decision was made after 
considering the matter comprehensively. Chief Cabinet Secretary 
Shinzo Abe's explanation was also vague: "The decision was made 
after discussing the importance of Japan-China relations, China's 
sentiment toward Japan, and other factors." 
 
 
TOKYO 00003119  005 OF 012 
 
 
Toranosuke Katayama, secretary general of the LDP caucus in the 
House of Councillors, criticized the government's lack of a clear 
explanation, saying, "A thorough explanation is necessary to lift 
a freeze on financial aid. It's not good to generate an 
indecisive impression." 
 
Views were split even along cabinet ministers. Economy, Trade, 
and Industry Minister Toshihiro Nikai, known as being pro-China, 
commented, "I hope (the resumption of yen loans to China) will 
bring good results both to Japan and China." Agriculture, 
Forestry, and Fisheries Minister Shoichi Nakagawa raised an 
objection, saying, "I don't understand why Japan has to aid 
China." 
 
8) Government decides to end freeze on yen loans to China in a 
bid to prevent it from becoming a campaign issue in LDP 
presidential race 
 
ASAHI (Page 4) (Excerpts) 
June 7, 2006 
 
Daisuke Yamamoto 
 
The government yesterday decided to end the freeze on yen loans 
to China for fiscal 2005, which will be implemented in fiscal 
¶2006. Behind this decision lies the government's intent to 
demonstrate a positive stance on relations with China and also 
its political motive to prevent the yen loans from becoming a 
campaign issue in the Liberal Democratic Party (LDP) presidential 
election. China, however, is opposed to the idea of yen loans 
turning into a political issue. The lifting of the freeze on yen 
loans to China is unlikely to serve as a diplomatic tool to 
improve relations with China. 
 
The Japanese and Chinese governments have agreed to end the yen 
loan program in 2008. The government planned to get approval of 
this agreement at a cabinet meeting at the end of March but 
deferred doing so due to critical views within the LDP. Given 
that a Japan-China foreign ministerial was held in a good 
atmosphere in May, the Foreign Ministry confirmed its judgment 
that ''it is the right time to (lift the freeze on yen loans), as 
both nations are now in a lull," according to a senior diplomat. 
 
When the August 15 anniversary of the end of the war draws near, 
the question of whether Prime Minister Koizumi will visit 
Yasukuni Shrine will draw wide attention; Japan-China relations 
will inevitably become tense. A high-level government official 
also revealed consideration to China yesterday, noting: "There's 
no need to end the yen loans to China at this point. Instead of 
rocking the boat, it's wiser to signal a get-along message." 
 
Also, if Japan delayed deciding on lifting the freeze on yen 
loans to China, this could become an issue in the LDP 
presidential race. The next administration would be forced to 
make a decision. Such a situation should be avoided. There seems 
to have been such a political judgment. In fact, a Foreign 
Ministry official pointed out: "The longer the decision is 
delayed, the more complicated the issue will be in terms of 
internal politics as well as on the diplomatic front." 
 
9) China will continue to blame Japan: US column 
 
 
TOKYO 00003119  006 OF 012 
 
 
SANKEI (Page 6) (Full) 
June 6, 2006 
 
Yoshihisa Komori 
 
WASHINGTON-China will never stop blaming Japan even if Japan's 
prime minister in the future pledges not to visit Yasukuni Shrine 
in compliance with the Chinese government's demand, a US-based 
Chinese journalist said in a US newspaper column. 
 
The New York Sun carried Kin-Ming Liu's article in its column 
dated May 16: "Look Who's Talking." 
 
Referring to recent Japan-China relations, the article quotes the 
Chinese government as saying Prime Minister Koizumi's repeated 
visits have "hurt the feelings of the Chinese people and damaged 
the political foundation of China-Japan relations, which is why 
the relations have deteriorated." This Chinese assertion is 
false, Liu writes in the article. This article argues that China 
is critical of Japan's foreign policy in general and that China's 
real aim is to keep Japan in a weak position. 
 
"Imagine," Liu continues in the column, "that Japan's next prime 
minister announces that he will honestly face history and do the 
following things to mend fences with China: 1) he will never 
visit Yasukuni Shrine; 2) he will apologize for Japan's World War 
II atrocities every time the subject arises; and 3) Japan will 
ban all history textbooks that irritate China." The article goes 
on: "Would the Chinese then forgive and embrace the Japanese once 
and for all if Japan were to perform this ultimate kowtow? No." 
 
Even if Japan's next prime minister refrains completely from 
visiting Yasukuni Shrine and fulfills any other demands from 
China, the article says, "China will maintain that Japan hasn't 
repented enough." Liu further writes: "China will keep opposing 
Japan's permanent membership on the United Nations Security 
Council. Chinese submarines will still enter Japan's waters, 
secretly if necessary. And, of course, anti-Japanese riots will 
 
SIPDIS 
always be stirred up." 
 
Liu recounts in the column: "The problem lies not with what Japan 
does or doesn't do but what China is. China takes full advantage 
of Japan's war guilt to extract concessions from Japan on 
whichever current issue is on the negotiating table." With this, 
the column says Beijing's attack on Yasukuni visits is one of its 
strategies toward Japan. 
 
Liu, who wrote this column, was a Hong Kong daily's copy chief 
and was a Washington-based columnist. The writer is now a US- 
based journalist on Asia. 
 
10) Aso, Suzuki exchange verbal jabs on issue of suicide of 
diplomat in Shanghai 
 
YOMIURI (Page 4) (Abridged) 
June 7, 2006 
 
At a meeting yesterday of the House of Representative Committee 
on Audit and Oversight of Administration, Lower House member 
Muneo Suzuki of the New Party Daichi clashed with Foreign 
Minister Taro Aso over the issue of the suicide of a diplomat at 
the Consulate General in Shanghai, the Foreign Ministry's 
 
TOKYO 00003119  007 OF 012 
 
 
measures for improprieties involving ministry officials, and 
other matters. 
 
It was the second time for Suzuki to pursue the Foreign Ministry 
since last November. Suzuki asked how the Foreign Ministry 
responded to the Shanghai suicide case, saying, "When the 
official killed himself on May 6, 2004, what did the Foreign 
Ministry do? I want to know all the facts." In response, Aso 
said: 
 
"The direct cause was intimidation by Chinese security 
authorities, a threat, or an act similar to that. The ministry 
has repeatedly filed stern protests with China since the 
occurrence of the incident. Although it was not immediately 
reported to the Prime Minister's Official Residence, the ministry 
judged back then that it would cause any problem. I think that 
was the decision made by officials concerned." 
 
Given the fact that the person who committed suicide was in 
charge of communication, Aso also indicated the ministry had 
taken necessary measures to prevent the leakage of secrets, 
saying, "Upon confirming that any secrets had not been leaked, 
the ministry has changed coded." 
 
Suzuki also criticized the ministry's punishments as too lenient 
by pointing out such incidents as a fatal traffic accident by 
drunken driving, sexual molestation, and sneaking camera shots of 
women. 
 
Aso rebutted, "The ministry punished them properly." But Suzuki 
protested, "Anyone committing such a crime outside the 
bureaucracy would be fired. Decisions must be made based on 
social rules." 
 
11) Yokosuka base berth for nuclear carrier use: US Navy website 
 
MAINICHI (Page 27) (Full) 
June 7, 2006 
 
The US Navy has now announced a plan to deploy a nuclear-powered 
aircraft carrier in 2008 to Yokosuka base in the city of 
Yokosuka, Kanagawa Prefecture. At the base, Berth 12 was expanded 
with construction work starting in 2003. The US Navy had 
explained on its website that the berth's expansion was intended 
to moor a nuclear-powered aircraft carrier. The Defense 
Facilities Administration Agency's Yokohama bureau, which ordered 
the expansion work, has recounted that the berth was renovated 
because it became too old to use. The DFAA bureau has also 
explained that the expansion work has nothing to do with the 
planned deployment of a nuclear-powered aircraft carrier. The 
DFAA is thinking of filing a protest with the US Navy. The 
Yokosuka city government, which has yet to decide on whether to 
accept the nuclear carrier deployment plan, is also upset. The US 
Navy will correct the website information. 
 
The explanation in question was given in a May 25 article of 
"Navy News" released by US Naval Forces Japan on its website. 
"Berth 12 has been expanded for the USS George Washington, which 
will be deployed to Yokosuka in 2008," the English-language news 
blog said. 
 
Berth 12 was extended from its overall length of 277 meters to 
 
TOKYO 00003119  008 OF 012 
 
 
410 meters, and the expansion work was completed in late March 
this year. In yesterday's ceremony at the berth, DFAA Yokohama 
Bureau Director General Takamizawa gave a speech, in which he 
said the expansion work was for the USS Kitty Hawk, a US flattop 
currently deployed to Yokosuka. 
 
"We will inquire of the US Navy about the article," a DFAA 
Yokohama bureau official commented. The official added, "We need 
to consider filing a protest." Meanwhile, Yokosuka City has asked 
the United States to deploy a conventional flattop. "They 
probably thought to deploy a nuclear carrier because they've 
agreed with the Japanese government," said Base Relations 
Division Director Akimoto at the Yokosuka city government office. 
Akimoto also said, "They don't understand our standpoint." 
 
A US Navy official at USNFJ headquarters told the Mainichi 
Shimbun that the berth expansion work had nothing to do with the 
USS George Washington's planned deployment to the base. The 
official also said the article would be corrected. 
 
12) Cabinet to adopt on June 9 bill upgrading the Defense Agency 
to a ministry 
 
SANKEI (Page 5) (Full) 
June 7, 2006 
 
The Liberal Democratic Party (LDP) endorsed yesterday a bill to 
upgrade the Defense Agency to a ministry.  After approval of the 
New Komeito, the LDP's coalition partner, the government is 
expected to adopt the bill at a cabinet meeting today. With Prime 
Minister Junichiro Koizumi seeking no extension of the current 
session ending June 18, the bill will probably be carried over to 
the next session for deliberations. 
 
The bill would change the Defense Agency, now affiliated with the 
Cabinet Office, into an independent ministry. 
 
It also calls for making international cooperation, including UN 
peacekeeping operations and activities based on the terrorist and 
Iraq special measures laws, a main duty of the Self-Defense 
Forces. Following this, international cooperation and responses 
to contingencies surrounding Japan would be stated in the 
advisory items to the National Security Committee. 
 
13) Former Prime Minister Hashimoto underwent operation to remove 
parts of intestines; Recovery to take several months 
 
YOMIURI (Page 4) (Full) 
June 7, 2006 
 
Former Prime Minister Ryutaro Hashimoto, 68, underwent emergency 
surgery at a Tokyo hospital on June 5 to remove a large part of 
his large intestine and part of his small intestine and to attach 
an artificial anus, his son revealed, Lower House member Gaku 
Hashimoto of the Liberal Democratic Party, in a press conference 
yesterday in Tokyo. The former prime minister remains in 
intensive care and is conscious. But it could be several months 
before Hashimoto can resume his daily routine. 
 
14) Minshuto's rank-and-file members, supporters greatly increase 
to 240,000 due to "Ozawa effect" 
 
 
TOKYO 00003119  009 OF 012 
 
 
TOKYO SHIMBUN (Page 2) (Full) 
June 7, 2006 
 
The number of supporters and rank-and-file members of Minshuto 
(Democratic Party of Japan) reached about 244,000 at the end of 
May, as reported yesterday to a standing secretaries general 
meeting of the main opposition party. Although the figures were 
less than the party's target of a membership of 250,000, the 
supporters and rank-and-file members substantially increased by 
about 100,000 compared to the previous year. Minshuto had its 
largest membership of about 310,000 in 2002, as tallied prior to 
its presidential election in September that year. The supporter 
system is Minshuto's unique arrangement introduced in 2002. A 
supporter has to pay an annual registration fee of 2,000 yen, 
while each rank-and-file member is required to pay 6,000 yen 
annually for the party membership fee. Both supporters and 
members are given the right to vote. 
 
The party's action plan for fiscal 2006 set a target of securing 
250,000 supporters and rank-and-file members. To attain the goal, 
the party obliged each of its lawmakers to enroll 1,000 
supporters or rank-and-file members of at least 500. The party 
imposed a penalty on those who failed to collect 500 names, and 
awarded those who secured more than 1,000. 
 
Minshuto suspended its recruitment due to the falsified email 
issue. In the wake of Ichiro Ozawa's assumption of the party's 
presidency in April, Minshuto won the Lower House by-election for 
the Chiba No. 7 constituency and it then accelerated the drive to 
recruit new members. The "Ozawa effect" led to the great increase 
this time of supporters and rank-and-file members. 
 
The showcase of the supporter system is that both supporters and 
members can vote in the presidential election, but no 
presidential election has been conducted since September 2002. 
This is because all the past four presidents stepped down before 
serving out the presidential term; and so, the party had to carry 
out a vote of only its Diet members. The possibility is that 
Ozawa will be elected without going through a vote. The 
supporters, therefore, again may be unable to use their right to 
vote in September's election. 
 
15) Government, ruling parties plans to shift primary balance 
into black in FY2011 by reducing revenue shortage to 15 to 17 
trillion yen 
 
NIHON KEIZAI (Page 1) (Excerpts) 
June 7, 2006 
 
The government and the ruling coalition yesterday started looking 
into setting the total amount of shortages in revenues to fund 
policy-related expenditures, without depending on loans, for 
fiscal 2011 at 15 to 17 trillion yen. This is a hot issue in 
discussions on a simultaneous reform plan for revenues and 
spending. The Cabinet Office had estimated the amount at 
approximately 20 trillion yen, but the amount will be revised 
downward, given estimated tax revenues put on an upward trend 
owing to the recent economic recovery and also because it now 
seems to be possible to cut spending on some certain policy- 
related items. 
 
The government plans to turn the primary balance into the black 
 
TOKYO 00003119  010 OF 012 
 
 
in fiscal 2011. The primary balance is an indicator to show 
whether policy spending will be covered with tax and other 
revenues through the reform of revenues and expenditures. The 
government intends to make up for the expected revenue shortfall 
by spending cuts and tax increases. 
 
Assume that the amount of revenue shortages would be set at 17 
trillion yen. In this case, if a 10-trillion-yen cut in 
expenditures is realized, the shortage will be covered by tax 
increases worth only 7 trillion yen. Should a thorough cut in 
expenditure be carried out, a hike in the consumption tax rate 
will be modest. 
 
The government will announce tax revenues for the last fiscal 
year by the end of this month. The amount is expected to be up 2 
trillion yen over the estimate. In addition, the growth of 
spending in such areas as social security is likely to be held 
down more than expected. In the government and ruling parties, 
the view is gaining influence that it would be possible to reduce 
the revenue shortage for fiscal 2011 by more than 3 trillion yen. 
If the government comes up with a more bullish outlook on 
economic growth, the amount of estimated revenue shortage might 
be further reduced to upper 10 trillion yen. 
 
16) Telecommunications panel advises NTT to completely split 
group in 10 years, NHK to reduce the number of channels to five 
 
MAINICHI (Page 7) (Excerpts) 
June 7, 2006 
 
The council on telecommunications and broadcasting, an advisory 
panel to Internal Affairs and Communications Minister Heizo 
Takenaka and chaired by Toyo University Professor Satoshi 
Matsubara, compiled a final report on NHK and NTT reforms. On the 
sticky issue of NTT's organization, the report recommended that 
the current holding-company system should be scrapped in 2010 to 
completely separate the equity links in the group company. For 
NHK, the report included measures to lower the subscription fees, 
separate the sports and entertainment sections from its main 
business, and reduce the number of channels to five. 
 
Takenaka would like to carry out coordination with the Liberal 
Democratic Party first and then reflect the panel's 
recommendations in the government's basic policy on economic and 
fiscal management for 2006 due out in July. The LDP, however, has 
opposed a reduction in NHK's subscription fees, as well as an 
early review of its organization. Given this, stormy negotiations 
are expected, and it is still uncertain to what extent the 
panel's recommendations will be adopted in the government's 
policy. 
 
17) Public lenders to be turned into stock firms in Oct. 2008 
 
NIHON KEIZAI (Top Play) (Excerpts) 
June 7, 2006 
 
The government's plan to reform public financial institutions was 
unveiled yesterday. Such institutions as the Japan Finance 
Corporation for Small Business (JFCSB) and the National Life 
Finance Corporation (NLFC) will be integrated into a stock firm - 
fully financed by the government - in October 2008. The new firm 
will apply a corporate accounting system in accordance with the 
 
TOKYO 00003119  011 OF 012 
 
 
Corporate Law. An expert committee will monitor whether the 
company is doing business effectively. The reform plan will 
provide the basis for a financial reform bill to be submitted to 
the Diet by the start of next year's regular Diet session. The 
government, however, intends to have the new firm continue 
offering loans to bluechip firms, so uncertainty is still looming 
over whether the new company would squeeze the private sector. 
 
Under the Administrative Reform Promotion Law, enacted in the 
current Diet session, the eight government-affiliated financial 
institutions will be reorganized or privatized. It has also been 
decided in general that some businesses of JFCSB, NLFC, and other 
institutions will be integrated into a new government-affiliated 
institution and that the Development Bank of Japan and the Shoko 
Chukin Bank will be privatized. But since the law presents no 
specific measures, the government is working out details. 
 
Main points in reform plan for public lenders 
 
    Reorganize or privatize government-affiliated institutions 
in October 2008. 
    Submit reform-related bills to the next regular Diet 
session. 
 
(New government-affiliated firm) 
    Establish a 100% state-owned stock company. 
    Separate the accounts of domestic and international 
businesses. Clarify profitability. 
    Have an expert panel monitor whether the new firm is doing 
business effectively and whether the firm is exerting pressure on 
e on 
the private sector. 
 
(Shoko Chukin Bank and Development Bank of Japan) 
    Completely privatize the institutions. 
    Apply the Banking Law. 
    Have an expert panel examine the privatization process. 
 
(Response to crisis) 
    Set up a designated financial institution system designed to 
enable short-term funds to be offered quickly. 
 
18) Parliamentary secretaries complain to prime minister: "Local 
economies are on verge of collapse" 
 
ASAHI (Page 4) (Full) 
June 7, 2006 
 
"Local economies are on the verge of collapse." "Because of the 
Koizumi reforms, we might have lost votes." These remarks came 
from parliamentary secretaries last night when they dined with 
Prime Minister Koizumi at the Prime Minister's Official 
Residence. The Koizumi administration's reform line is again 
drawing criticism, following the Murakami Fund scandal. Koizumi 
promptly rebutted them: "I don't agree." 
 
According to a participant, Parliamentary Secretary for 
Environment Wataru Takeshita (Liberal Democratic Party) and 
and 
Parliamentary Secretary for Land, Infrastructure, and Transport 
Masatoshi Ishida complained to the prime minister. Ishida told 
Koizumi: "In the previous elections, our party saw a drop in 
 
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votes in three municipalities. Isn't this the results of the 
Koizumi reforms?" Takeshita criticized the widening regional 
disparities: "Local economies are experiencing hardship and are 
on the verge of collapse. Japan cannot grow unless it keeps a 
balance between urban and rural areas." 
 
Koizumi elaborated: "Even when we think things are no good, there 
is always hope." He appeared not to be attentive to the candid 
advice of others. 
 
SCHIEFFER