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UNCLAS SECTION 01 OF 08 TOKYO 003809 
 
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 07/07/06 
Part-2 
INDEX: 
(6)  Study of structural reform: Japan implements many US-proposed 
deregulatory measures; US now takes cooperative stance, stops 
high-handed approach 
 
(7)  GSDF mission to Iraq: Though unshakable Japan-US alliance 
established, it has yet to gain trust of the international 
community 
 
(8)  Risky challenge-North Korea's missile firing (Part1): Last 
resort to deal with US 
 
(9)  Iran's nuclear program, China's offensive make it difficult for 
Japan to secure energy resources 
 
ARTICLES: 
(6)  Study of structural reform: Japan implements many US-proposed 
deregulatory measures; US now takes cooperative stance, stops 
high-handed approach 
 
ASAHI (Page 11) (Excerpts) 
July 7, 2006 
 
In their meeting in Washington on June 29, President Bush and Prime 
Minister Koizumi issued a joint document that stressed: "The 
US-Japan relationship stands as one of the most accomplished 
bilateral relationships in history," playing up their close personal 
ties established over the past five years. 
 
Another document released at the summit was the "Fifth Report on the 
US-Japan Enhanced Initiative on Deregulation and Competition 
Policy," which lists achievements made through the Japan-US 
deregulation talks, including postal privatization, reform of 
special corporations, reform of the legal system, and introduction 
of the New Corporation Law. The report lists a number of 
deregulatory measures Tokyo implemented in accordance with 
Washington's requests. 
 
Japan-US Structural Impediments Initiative 
 
Starting from the 1960s through the 1980s, Japan and the US sparred 
over Japan's exports of textile and steel products, autos, 
semiconductors, and the like. In a bid to resolve the disputes, 
Japan took steps to limit exports voluntarily. Despite such efforts, 
the trade imbalance between the US and Japan did not shrink. The US 
Department of the Treasury proposed to the Finance Ministry in 1989 
that they "hold talks on structural problems, in order to open up 
the Japanese market." The two countries launched the Japan-US 
Structural Impediments Initiative (SII). 
 
More than 240 requests came from the US, including a review of the 
Large-Scale Retail Stores Law. Former International Trade and 
Industry Ministry Deputy Vice Minister Noboru Hatakeyama, who 
engaged in those negotiations with the US, grumbled: "Intervention 
in domestic affairs was made a common practice." SII was transformed 
into the Initiative on Deregulation and Competition Policy under the 
Bush administration. 
 
Detailed, specific proposals 
 
Both Japan and the US annually present recommendations regarding the 
other side's regulatory reform. But the US presents a larger number 
of proposals, and its proposals are more detailed and specific than 
 
TOKYO 00003809  002 OF 008 
 
SUBJECT:  DAILY SUMMARY OF JAPANESE PRESS 07/07/06 
Part-2 
INDEX: 
(6)  Study of structural reform: Japan implements many US-proposed 
deregulatory measures; US now takes cooperative stance, stops 
high-handed approach 
 
Japan's. The US reports called on Japan to privatize postal 
services, accelerate the disposal of non-performing bank loans, and 
strengthen the role of the Fair Trade Commission. These measures 
were also included in the Koizumi structural reform plans. 
 
Although the US demanded Japan set an import goal or a target share 
for each product In the 1990s, it has no longer resorts to such a 
high-handed approach. 
 
Takeo Harada, former Foreign Ministry official and the author of the 
book titled: America, which deceives Japan, and Japan, which is 
deceived by America, stated: "Since persons who want Japan to pursue 
an American-style market economy, including Internal Affairs and 
Communications Minister Heizo Takenaka and Council on Promotion of 
Regulatory Reform and Market Liberalization Chairman Yoshihiko 
Miyauchi, joined the nation's policymaking team, persistent demands 
from the US have become unnecessary." 
 
Takenaka, who has played a role like "the control tower for economic 
policy" in the Koizumi administration, has extensive personnel ties 
in the US established during his days as a student at Harvard 
University. 
 
In the fall 2002, when Takenaka as financial services minister came 
under heavy fire from the Liberal Democratic Party for his attempt 
to implement drastic measures to dispose of nonperforming loans, US 
Council on Economic Advisors Chairman Glenn Hubbard offered a 
helping hand to him by saying, "The US supports Mr. Takenaka." 
Hubbard has been his friend since Takenaka was studying at Harvard 
University. 
 
When work to design a system to privatize postal services was 
underway in the government, senior Postal Privatization Office 
members frequently met officials from the US Treasury Department and 
the US Trade Representatives (USTR), envoys at the US embassy, as 
well as US business executives. 
 
Denounced by opposition party members saying: "The 
postal-privatization plan is totally in accordance with requests 
from the US, Takenaka argued back: "That is a sort of fairy- tale 
criticism." 
 
The Japanese government has accepted a number of proposals from the 
US since SII was launched. Even so, it is not correct to say that 
Japan simply yielded to US pressure. The US also skillfully 
reflected consumers' voices in many of its recommendations. 
 
One of them is the review of the Large-Scale Retail Stores Law. The 
US government called on Japan to scrap the law, defining it as "a 
typical barrier to market entry." Behind this call was the 
advancement into the Japanese market of Toys "R" Us, a leading toy 
store chain in the US. In addition, Japanese consumers also desired 
to see large-scale retail stores that offer a variety of goods at 
low prices opened in their communities. The law was phased out 
during the 1992-2000 period. 
 
Revival of store-opening regulations 
 
 
TOKYO 00003809  003 OF 008 
 
SUBJECT:  DAILY SUMMARY OF JAPANESE PRESS 07/07/06 
Part-2 
INDEX: 
(6)  Study of structural reform: Japan implements many US-proposed 
deregulatory measures; US now takes cooperative stance, stops 
high-handed approach 
 
Store-opening regulations will soon revive in a different form. 
Taking it seriously that downtown shopping streets are dying as a 
result of large stores moved to the suburbs, the government enacted 
in the recent regular Diet session a law amending the said law to 
apply restrictions again on opening suburban large stores. 
 
Heated discussions were conducted on the revised law in the 
government. Former Vice Minister of International Financial Affairs 
Makoto Utsumi, who served as co-chairman at the SII, commented: "All 
of the assertions by the US were not necessarily based on global 
standards." 
 
(7)  GSDF mission to Iraq: Though unshakable Japan-US alliance 
established, it has yet to gain trust of the international 
community 
 
MAINICHI (Page 6) (Excerpts) 
June 29, 2006 
 
Many say that US President Bush and Prime Minister Junichiro Koizumi 
are close friends, but a certain Foreign Ministry official involved 
in Japan - US relations likened them to "brothers in arms." The 
prime minister shared the US president's unflinching, tough stance 
in the war on terror, and he decided to dispatch Self-Defense Forces 
personnel to Iraq, a country at war. It was the first dispatch of 
SDF troops to the front line of Iraq. Not only does Prime Minister 
Koizumi share common values and ideals with the US, he risked danger 
and was resolved to make sacrifices together with President Bush -- 
something unheard of among past prime ministers. 
 
As the Ground Self-Defense Force (GSDF) prepared to end its mission 
in Iraq, the US Department of State released a statement that was 
full of praise for Japan: "We are grateful for the courage and 
sacrifice that Prime Minister and the Japanese people showed and 
their involvement in the effort to bring freedom to Iraq. Japan has 
played a powerful and positive role appropriate for a major power in 
the international society." 
 
GSDF troops dispatched to Iraq were engaged in humanitarian and 
assistance activities in a safe area, but the death toll of US 
military personnel since the start of the Iraq war has topped 2,500, 
underscoring a clear difference in terms of the risk and cost they 
shoulder. However, if one reads between the lines of the comment, 
one will realize that Japan has fully met the US' expectations. 
 
The Bush administration's policy toward Japan is based on the 
so-called Armitage report: (1) making Japan-US relations more like 
US-Britain relations so that the two countries can share interests 
and act in unity; (2) respect Japan's independence by avoiding 
pressure tactics; and (3) constraining Japan's military power - the 
"cork-in-the-bottle" argument. 
 
It cannot be ruled out that the Bush administration tends to take 
unilateral action, but it does not mean that it has been willful and 
arbitrary. Koizumi told Bush: "The US has the just cause of 
democratizing Iraq, and it also is the greatest power in the world. 
It will be in an excellent situation if it lines up international 
cooperation." Bush has tried to respond to Koizumi's advice. 
 
TOKYO 00003809  004 OF 008 
 
SUBJECT:  DAILY SUMMARY OF JAPANESE PRESS 07/07/06 
Part-2 
INDEX: 
(6)  Study of structural reform: Japan implements many US-proposed 
deregulatory measures; US now takes cooperative stance, stops 
high-handed approach 
 
 
The Japanese government proposed building a confrontational scheme 
that would line up Iraq, with its weapons of mass destruction, 
against the international community. The US accepted the idea. 
Although diplomatic efforts to secure international cooperation 
failed, the US moved ahead with various measures toward Iraq until 
immediately before the start of the war. Japan was involved in this 
process to a large extent. 
 
The US paid attention not to what GSDF troops actually did in Iraq 
but to the process of both countries undertaking coordination right 
from the planning stage and moving forward in cooperation to settle 
various problems. This process has satisfied the US, and the 
dispatch of GSDF troops by Japan to Iraq was the ultimate goal of 
that process. 
 
However, looking at the strengthened Japan-US relations, the 
international community sees Japan from a different angle. The US 
was the only country to praise Japan for its role in the Iraq war. 
The international community has no appreciation for that. This was 
plainly seen when Japan tried to seek a permanent seat on the UN 
Security Council (UNSC). 
 
In a bid for a permanent UNSC seat, Japan characterized itself a new 
representative of Asia, following China, but it failed to garner 
support from Asian countries. To Asian countries, the way Japan 
acted in response to the Iraq war appeared as if it was blindly 
following the US. Given this aspect, a mood of resignation that 
voting for Japan is like giving two votes to the US dampened their 
willingness to back Japan. 
 
Japan opted for the Japan-US alliance, when it was urged to choose 
between the alliance and international cooperation in the wake of 
the voting down of the resolution authorizing the use of armed force 
against Iraq. Its decision was correct. However, Japan has also lost 
something because of this decision. It is true that the timing of 
its bid for a permanent seat on the UNSC was wrong. 
 
In a joint survey carried out by the University of Maryland and BBC 
of about 40,000 people throughout the world, Japan ranked first in 
31 out of 33 surveyed countries a "country making a good influence 
on the world." It is now time for Japan to examine and deliberate on 
how to use the trust the in it that has taken root in the 
international community. 
 
(8)  Risky challenge-North Korea's missile firing (Part1): Last 
resort to deal with US 
 
NIHON KEIZAI (Page 1) (Full) 
July 7, 2006 
 
On July 6, one day after seven missiles landed in the Sea of Japan, 
North Korea admitted to its firing of those missiles. Moreover, 
Pyongyang proclaimed its challenge to continue missile testing. The 
United States is trying to contain North Korea through the United 
Nations. Meanwhile, North Korea is provoking the United States 
again. Why is North Korea becoming so ambitious to promote its 
nuclear and missile development? 
 
TOKYO 00003809  005 OF 008 
 
SUBJECT:  DAILY SUMMARY OF JAPANESE PRESS 07/07/06 
Part-2 
INDEX: 
(6)  Study of structural reform: Japan implements many US-proposed 
deregulatory measures; US now takes cooperative stance, stops 
high-handed approach 
 
 
In North Korea, there is an economic organization called the Second 
Economic Committee (SEC). SEC is under the National Defense 
Commission, which is North Korea's supreme authority headed by 
Korean Workers Party (KWP) General Secretary Kim Jong Il. SEC 
oversees North Korea's production and distribution of all war 
supplies, and it also controls North Korea's foreign trade. SEC is 
said to have developed the seven missiles. This point implies the 
real aim of North Korea's nuclear and missile policies. 
 
South Korea's intelligence body, the National Intelligence Service 
(NIS), noted in its parliamentary report yesterday that the Scud and 
Rodong missiles among those launched missiles may be aimed to secure 
foreign markets for exports. This also tallies with media reports on 
North Korea's substantial loss of its foreign currency assets due to 
financial sanctions imposed by the United States on North Korea. The 
NIS report says the Taepodong-2, which has a long range, is meant to 
be a tool for use in demonstrating against the United States. The 
Chosunilbo, a South Korean daily, says the export price of a Scud 
missile is approximately 4 million dollars or about 460 million 
yen. 
 
According to the Korea National Statistical Office, North Korea's 
per-capita national income is 900 dollars or so, about a fifteenth 
of South Korea's. The Research Institute for National Unification, a 
think tank affiliated with the South Korean government, explains 
that North Korea's prioritized use of resources for its production 
of munitions in spite of its material shortages has deteriorated its 
economy. 
 
North Korea, which has appropriated about a third of its national 
income for its military buildup, has many more troops than South 
Korea. However, most of the North Korean military's tanks and 
fighters were made in the former Soviet Union in the 1950s or 1960s, 
according to a North Korean military defector. He added, "They don't 
have enough fuel to train for actual combat operations, so the 
number of training days is 10 PERCENT  to 20 PERCENT  of the planned 
number of days." North Korea is eager to get the United States' 
guarantee for the Kim Jong Il regime's continued existence. To that 
end, North Korea has chosen to have weapons of mass destruction 
(WMD) instead of employing a large number of troops for its 
military. This option, in other words, would be inexpensive and 
effective for North Korea. 
 
Of course, there is no doubt that Pyongyang is exploring 
reconciliation with the United States through a direct deal for fear 
that the US Bush administration might come out to overthrow the Kim 
Jong Il regime. North Korea shows off its WMD arsenal to stir up the 
international community and find a clue to talks with the United 
States. That is Pyongyang's brinkmanship. 
 
Such a tactic has gone unchallenged. That is because the 
international regime for nuclear deterrence under the Nuclear 
Nonproliferation Treaty (NPT) has hit a snag. This is also why the 
international community is at a loss over how to cope with Iran's 
nuclear program. 
 
Meanwhile, Chinese Vice Foreign Minister Wu Dawei, who chairs the 
 
TOKYO 00003809  006 OF 008 
 
SUBJECT:  DAILY SUMMARY OF JAPANESE PRESS 07/07/06 
Part-2 
INDEX: 
(6)  Study of structural reform: Japan implements many US-proposed 
deregulatory measures; US now takes cooperative stance, stops 
high-handed approach 
 
six-party talks over the issue of North Korea's nuclear programs, 
will visit North Korea on July 10. In addition, US Assistant 
Secretary of State Hill, chief US delegate to the six-party talks, 
 
SIPDIS 
will visit China, South Korea, Japan, and Russia. Six-party member 
nations are now gearing up for diplomatic maneuvering. 
 
The key is in the hands of China, Russia, and South Korea. Former 
Chinese President Jiang Zemin once likened China and North Korea to 
"teeth" and "lips." Russia is also deeply tied to North Korea. South 
Korea has pushed for President Roh Moo Hyon's sunshine policy toward 
North Korea. The missile launches caused the three countries to lose 
face. However, China and Russia still remain cautious about the idea 
of imposing sanctions on North Korea. Japan and the United States 
are teaming up to pressure North Korea, but their pressure cannot 
work well without the international community's unity. 
 
Can they get together and send a strong message to North Korea? 
China has advocated holding an informal meeting for the six-party 
talks in order to resolve the situation. Will this Chinese 
initiative come true? North Korea is aiming to become a nuclear and 
missile power. How will the international community bar the door to 
that ambition? Its crisis management is facing a challenge. 
 
(9)  Iran's nuclear program, China's offensive make it difficult for 
Japan to secure energy resources 
 
YOMIURI (Page 9) (Full) 
July 7, 2006 
 
The Azadegan oil field, which is believed to be one of the largest 
crude oil deposits, is located in the southwestern part of Iran. The 
issue of Iran's nuclear program has endangered the 75 PERCENT  of 
the oil field's interests that Japan's INPEX Corporation possesses. 
 
The Iranians have made statements warning Japan. National Iran Oil 
Corporation said, "If the prospects for implementation of the 
project are not obtained, the (interest) contract will be 
automatically nullified." Iranian Petroleum Minister Vaziri-Hamaneh 
also stated, "Iran will develop the oil field on its own." 
 
A Japanese official involved in the development said, "We don't 
understand Iran's real intention." 
 
The Azadegan oil field was discovered in 1999. Japan and Iran agreed 
in February 2004 to jointly develop it. It was expected that the 
production of crude oil would start in 2006. However, the start of 
the oil production has been delayed due to the prolonged land 
mine-clearing operation. It is believed that as many as 1 million 
land mines were laid during the prolonged Iran-Iraq war. 
 
The United States, which has pressed Iran to stop its nuclear 
program, has been calling on Japan to freeze the oil development 
plan. Many Japanese oil company officials have pointed out the 
possibility that China would obtain the right to develop the 
Azadegan oil field if the joint development accord is withdrawn. Not 
only INPEX Co. but also Japan's energy security policy is now being 
pushed into a corner. 
 
 
TOKYO 00003809  007 OF 008 
 
SUBJECT:  DAILY SUMMARY OF JAPANESE PRESS 07/07/06 
Part-2 
INDEX: 
(6)  Study of structural reform: Japan implements many US-proposed 
deregulatory measures; US now takes cooperative stance, stops 
high-handed approach 
 
Of Japan's crude oil imports, the percentage of independent 
development of oil resources by Japanese companies accounts for only 
15 PERCENT . In a bid to strengthen Japan's energy security policy, 
the Ministry of Economy, Trade and Industry (METI) adopted in May a 
New National Energy Strategy. In order to increase the percentage of 
independent development of oil resources to 40 PERCENT  in 2030, 
METI has hammered out a comprehensive strategy of securing oil 
resources. 
 
It will be difficult to attain the 40 PERCENT  goal, however. Japan 
has another thorny issue with Russia. Japan aims to secure the right 
to develop an oil field in East Siberia. Russia will chair the 
upcoming G-8 summit to take place in St. Petersburg. Talks between 
Tokyo and Moscow have not moved forward as the two countries have 
different pipeline plans for transportation of crude oil. 
 
In late 2004 Russia announced its plan to construct a Pacific 
pipeline connecting between East Siberia and the Pacific coast, the 
suburb of Nakhodka. Japan decided to cooperate with Russia, assuming 
that it would be able to import substantial amount of crude oil. 
However, Russia is now considering building a China-proposed 
pipeline as that country has expressed strong interests in oil 
development. 
 
A senior Resources and Energy Agency official said: "If the China 
pipeline is constructed before the Pacific pipeline, most of the oil 
will go to China. We cannot take part in such a plan." Japan has 
insisted that priority should be given to the Pacific route before 
crude oil deposits are ascertained. Russia, however, aims to expand 
its benefits as much as possible, comparing the advantage of dealing 
with Japan or with China. 
 
Informed sources are now paying attention to how far the situation 
will improve in the planned Japan-Russia summit on the sidelines of 
the G-8 summit. 
 
Amid the tight crude oil demand and supply in the world, energy 
resources have become a strategic tool to be used for political 
maneuvering. 
 
China has been conducting strong "resource diplomacy." In June Prime 
Minister Wen Jiabao traveled to six African countries. Japan has not 
had time to be complacent. Masahisa Naito, chairman and CEO of the 
Institute of Energy, Economics, Japan, pointed out: 
 
"The adoption of the New National Energy Strategy is just one step. 
It is necessary to formulate a specific action plan and to set up a 
system to implement the action plan under the prime minister's 
leadership." 
 
Japan National Oil Corporation was disbanded due to enormous 
deficits. Resources and Energy Agency Director General Kodaira said, 
"The government will thoroughly support the independent development 
of oil resources." It is uncertain whether Japan will be able to 
survive the global energy market where national interests crash. 
Japan is pressed to substantially review its strategy of securing 
energy, including the role-sharing of the government and 
private-sector. 
 
TOKYO 00003809  008 OF 008 
 
SUBJECT:  DAILY SUMMARY OF JAPANESE PRESS 07/07/06 
Part-2 
INDEX: 
(6)  Study of structural reform: Japan implements many US-proposed 
deregulatory measures; US now takes cooperative stance, stops 
high-handed approach 
 
 
SCHIEFFER