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UNCLAS SECTION 01 OF 11 TOKYO 003844 
 
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 07/11/06 
 
 
Index: 
1) Top headlines 
 
2) Editorials 
 
3) Prime Minister's daily schedule 
 
4) Yomiuri poll: Koizumi Cabinet support rate at 50.2 PERCENT , 
while 46 PERCENT  support Abe as next prime minister, compared to 
Fukuda's 18 PERCENT 
 
5) Japan, US accept China's request to postpone UNSC vote on DPRK 
sanctions 
 
6) Japan, US watching carefully China's vice foreign minister's 
talks in Pyongyang 
 
7) US, Japan hold "sanctions card" in reserve, hoping North Korea 
will agree to return to 6-party talks 
 
8) ROK ambassador to Japan says statement that Japan overreacted to 
missile launches is not his government's policy line 
 
9) "Abe diplomacy" emerges with the North Korean missile launches, 
overrides Foreign Ministry soft-liners opposed to sanctions 
 
10) JDA chief Nukaga sets off debate by calling for study of strike 
capability against enemy bases 
 
11) Prime Minister Koizumi calls for "cautious study" of preemptive 
strike capability 
 
12) Asbestos victims working for Yokosuka Navy Base seek relief 
under the SOFA 
 
13) Prime Minister Koizumi begins his visit to tension-filled Middle 
East today 
 
14) Head of Taiwan's KMT party starts visit to Japan 
 
15) Sparks fly between cabinet ministers Takenaka and Yosano over 
deflation issue 
 
16) LDP Secretary General Takebe taking conciliatory stand toward 
postal rebels in Diet with eye on next year's Upper House election 
 
17) Minshuto (Democratic Party of Japan) sets presidential election 
for September 25 
 
Articles: 
1) TOP HEADLINES 
 
Asahi: Mainichi: Sankei: Tokyo Shimbun: 
UNSC postpones vote on draft resolution on North Korean sanctions; 
Japan, US agree to watch China's diplomatic effort 
 
Yomiuri: 
Mitsui Life Insurance, Sumitomo Life Insurance to join hands; Joint 
investment for establishment of new company that sell insurance 
products over the counter 
 
Nihon Keizai: 
 
TOKYO 00003844  002 OF 011 
 
 
NTT's new Internet Protocol (IP) network, including facilities, to 
be made open for use by other telecom carriers 
 
2) EDITORIALS 
 
Asahi: 
(1)World Cup was worth watching 
(2)Net reduction in public servants 
 
Mainichi: 
(1)Unified reform of revenues and expenditures: LDP presidential 
election that makes painful aspect of reform campaign issue 
(2)Lowering cap on interest rates on loans: Real value of consumer 
banking to be put to test 
 
Yomiuri: 
(1)Capability to attack enemy military bases: Discussion with eye on 
threat needed 
(2)Relief and rehabilitation system: Prevent emergence of repeat 
offenders through drastic reform 
 
Nihon Keizai: 
(1)Major stockholder calls for reorganization of GM 
(2)Deepen negotiations on gas field development in East China Sea 
 
Sankei: 
(1)Statement by defense agency director general: Time for discussion 
on propriety of Japan having attack capability 
(2)Gas fields in East China Sea: Do not allow China to buy time 
 
Tokyo Shimbun: 
(1)BOJ Governor Fukui's scandal could soil central bank's policy 
(2)Emergency earthquake announcement system should be utilized to 
the utmost 
 
3) Prime Minister's Official Residence (Kantei) 
 
Prime Minister's schedule, July 9 & 10 
 
NIHON KEIZAI (Page 2)  (Full) 
July 11, 2006 
 
-- 9th: 
Spent all day at Kantei. 
-- 10th 
12:02: 
Attended a government and ruling parties liaison council meeting at 
Kantei. Later, met METI Minister Nikai. 
14:05: 
Met Ambassador to Chile Ogawa. Later, met Internal Affairs and 
Communications Minister Takenaka. Followed by Cabinet Intelligence 
Director Mitani. 
15:20: 
Met with incoming and outgoing METI Vice Minister Kitahata and 
Sugiyama, and incoming and outgoing METI Deputy Vice Minister 
Kitamura and Kusaka. Followed by Deputy Foreign Minister Nishida and 
European Affairs Bureau Director General Harada. 
16:30: 
Met with Ghana Ambassador to Japan Adjei-Barwuah. 
18:15: 
Returned to his official residence. 
 
 
TOKYO 00003844  003 OF 011 
 
 
4) Poll: Abe leads Fukuda in post-Koizumi race 
 
YOMIUIRI (Page 2) (Full) 
July 11, 2006 
 
The Yomiuri Shimbun conducted a face-to-face nationwide public 
opinion survey on July 8-9, in which respondents were asked to pick 
who they thought would be most appropriate as Prime Minister 
Koizumi's successor. Among five listed lawmakers in the ruling 
Liberal Democratic Party, Chief Cabinet Secretary Abe stood at 46 
PERCENT , topping all others for the sixth month in a row since 
February. 
 
Yasuo Fukuda, one of Abe's predecessors in the CCS post, ranked 
second at 18 PERCENT . Abe marked a lead of 27 percentage points 
over Fukuda. Abe's lead is wider than the preceding month's 24 
points. Among other LDP lawmakers, Foreign Minister Aso was at 4 
PERCENT  and Finance Minister Tanigaki at 2 PERCENT , both leveling 
off from last month. 
 
The approval rating for the Koizumi cabinet was 50.2 PERCENT , down 
1.8 points from last month. The Koizumi cabinet's support rate went 
down for the third month in a row. In the breakdown of public 
support for political parties, the ruling Liberal Democratic Party 
stood at 38.6 PERCENT , down 1.9 points from last month. The leading 
opposition Democratic Party of Japan (Minshuto) was at 14.6 PERCENT 
, down 0.2 points. 
 
5) UNSC postpones vote on draft resolution on North Korean sanctions 
at 11th hour with Japan, US agree to China's proposal out of concern 
over its using veto right 
 
SANKEI (Top Play) (Excerpts) 
July 11, 2006 
 
The United Nations Security Council (UNSC) yesterday decided to put 
off a vote on a resolution on North Korean sanctions presented by 
Japan and other countries. Chances are that the vote may be put on 
hold until the G-8 Summit (St. Petersburg Summit) starting on the 
15th. As Vice Foreign Minister Wo Dawei is now visiting Pyongyang, 
China strongly called for postponing a vote on the resolution while 
it is pursuing talks with North Korea. Japan and the US agreed to 
postpone the vote. 
 
Upon receiving China's request, Foreign Minister Taro Aso and Chief 
Cabinet Secretary Shinzo Abe talked with Stephen Hadley, Assistant 
to the President for National Security Affairs, separately and 
discussed how to deal with the issue. 
 
As a result, they agreed to (1) seek the adoption of a sanctions 
resolution at the UNSC, (2) not to put the draft resolution to a 
vote while China is continuing diplomatic efforts toward North 
Korea; (3) and immediately put the draft resolution to a vote, if 
China's effort fails. As conditions for avoiding the vote, the US 
called on North Korea to unconditionally return to the six-party 
talks and pledge to indefinitely postpone the test launching of 
missiles. 
 
Japan and the US had been determined to put the draft resolution on 
a vote on the 10th, but China and Russia strongly opposed it. In 
particular, China hinted at exercising its veto power. 
 
 
TOKYO 00003844  004 OF 011 
 
 
Aso told reporters at the Foreign Minister early this morning: "We 
have given time for China to persuade North Korea, but there is no 
change in our policy of putting the sanctions resolution to a 
vote." 
 
Regarding the draft resolution on North Korean sanctions at the 
UNSC, Japan and the US had intended to put it to a vote on the 10th, 
while assuming a possible use of veto power by China. However, they 
stopped the move. They will now watch China's effort to persuade 
North Korea for a while, but if its effort falls through, Japan and 
the US will once again put the draft resolution to a vote. Chances 
are, however, that the settlement of the issue may become further 
off due to the change of direction at the 11th hour. 
 
6) Japan, US carefully watching North Korea visit by Chinese Vice 
Foreign Minister Wu 
 
ASAHI (Page 2) (Full) July 1, 2006 
 
Japan, the United States, Britain, France, and other countries have 
jointly submitted to the United Nations Security Council a 
resolution calling for sanctions against North Korea for its missile 
launches. But voting on the resolution has been delayed, because the 
US and other countries, out of consideration for China, which chairs 
the six-party talks, have judged it better to ascertain the outcome 
of a visit to North Korea by Chinese Vice Foreign Minister Wu Dawei. 
Concerned that China might take a step to roll back, Japan had hoped 
for a vote on the resolution on July 10 while working on China and 
Russia to abstain from voting, but it had to follow Washington's 
lead. 
 
In a discussion program on a major US TV network on July 9, Under 
Secretary of State Burns stated about Washington's moves over North 
 
SIPDIS 
Korea's missile launches: "The US has conducted multilateral 
diplomacy." He cited as factors to determine its future moves Wu's 
visit to North Korea, in addition to developments at the UN and 
visits to countries concerned by US Assistant Secretary of State 
Christopher Hill. 
 
Wu arrived in Pyongyang on July 10, but it seems unlikely that he 
will wind up his schedule that same day. Burns stated: "Once we see 
the outcome of the Chinese delegation's visit to North Korea, we can 
guess how things will develop in the UNSC." He also said: "We would 
like to take a vote in several days," adding: "We hope China will 
apply pressure to and exert influence over North Korea." 
 
Japan, in an attempt to bring about an early vote on the resolution, 
called on China and Russia to abstain or be absent from voting, with 
a senior government official criticizing these two countries: "Do 
they remain opposed because their political systems are similar to 
North Korea's?" Regarding Wu's visit to North Korea, Chief Cabinet 
Secretary Abe stated in a press conference yesterday: "The UNSC 
 
SIPDIS 
resolution has nothing to do with the planned negotiations between 
China and North Korea in principle. It is important for the 
international community to play up its reaction to North Korea's 
missile launches." 
 
Foreign Minister Aso also told Hill: "The Japan-US alliance is being 
put to a test. It is of importance for the two countries to take 
joint steps." 
 
If the Japanese government forces a vote before convincing China and 
 
TOKYO 00003844  005 OF 011 
 
 
Russia to change their position, they might veto the resolution. 
 
Some government officials suggest that separate from the UN 
framework, sanctions by a coalition of the willing composed of the 
US, Japan, and other countries should be considered in the event 
that the resolution fails. But Washington gives priority to the 
unity of the international community in dealing with North Korea. 
Under such circumstances, things are unlikely to proceed as Japan 
hopes. 
 
7) Japan, US save "sanctions card" for later use with vote on 
resolution for sanctions against North Korea postponed, expect North 
Korea to return to six-party talks 
 
NIHON KEIZAI (Page 3) (Excerpts) 
July 11, 2006 
 
The Japanese and US governments yesterday accepted a delay in the 
vote on a resolution imposing sanctions against North Korea at the 
United Nations Security Council (UNSC), being determined to closely 
watch what will happen to coordination by Chinese Vice Foreign 
Minister Wu Dawei and other officials with North Korea. Wu is now 
visiting North Korea. Japan and the United States, saving the 
"sanctions card" for later user, hope that North Korea will return 
to the six-party talks as quickly as possible. If a vote on the 
resolution is forced through, China may use its veto right. In 
addition, Britain and France, co-sponsors of the resolution, have 
stated their disagreement with taking a vote that day, some 
observers remarked. 
 
The new situation developed late at night on July 10. US 
Presidential Assistant for National Security Affairs Stephen Hadley 
told Chief Cabinet Secretary Shinzo Abe on the phone that China had 
asked for a delay in the vote and asked Japan to accept the request. 
Foreign Minister Taro Aso and US Secretary of State Condoleezza Rice 
held a teleconference. 
 
The Ministry of Foreign Affairs' (MOFA) position until then was that 
a vote on the resolution should be taken on July 10 and that 
delaying a vote was unnecessary, noting, "China-North Korea 
consultations and the UN resolution are two different matters." On 
the evening of July 10, US Assistant Secretary of State Christopher 
Hill met with MOFA's Asian and Oceanian Affairs Bureau Director 
General Kenichiro Sasae and other officials at a restaurant in 
Tokyo. After the meeting, one participant said, "MOFA's position 
remains the same, namely, a vote should be taken on July 10, local 
time." But at the time, the momentum for postponing a vote was 
already gathering. 
 
A government official revealed: "We were informed by the Prime 
Minister's Official Residence that 'other countries, including 
Britain and France, are concerned about Japan's rushing into the 
resolution.'" 
 
"It was not a prearranged matter to (take a vote) on July 10." This 
remark came from a senior MOFA official late at night on July 10 
when senior MOFA officials gathered together at the foreign 
minister's office to examine the situation. 
 
8) South Korean ambassador to Japan: South Korean Presidential 
Office's statement criticizing Japan for "overreacting" is not the 
government's policy line 
 
TOKYO 00003844  006 OF 011 
 
 
 
TOKYO SHIMBUN (Page 2) (Full) 
July 11, 2006 
 
South Korean Ambassador to Japan Na Jong Il met yesterday with 
Administrative Vice Foreign Minister Shotaro Yachi. In the meeting, 
referring to a statement issued by the South Korean Presidential 
Office, saying, "There is no reason for Japan to overreact," Na told 
Yachi: "The statement neither expressed the government's position 
nor criticized the Japanese government." 
 
The South Korean ambassador responded to the Japanese vice foreign 
minister's claim that issuing this kind of statement at present is 
not productive. 
 
9) DPRK missile launches: Abe at forefront of Japan's diplomacy 
while Prime Minister Koizumi quietly watches the situation 
 
MAINICHI (Page 2) (Full) 
July 11, 2006 
 
Naoyuki Inukai 
 
Japan has taken an unusually hard-line stance in dealing with North 
Korea's missile launches. Standing at the forefront of Japan's 
diplomacy now is Chief Cabinet Secretary Shinzo Abe, known for his 
tough stand toward North Korea. Those who are backing Abe are 
Foreign Minister Taro Aso and Administrative Vice Foreign Minister 
Shotaro Yachi. Prime Minister Junichiro Koizumi is just watching 
what will happen, giving the impression that "Abe diplomacy" has 
already begun. 
 
"Some 13 of the 15 United Nations Security Council members favor the 
resolution. Under this situation, if only China and Russia object, 
they will embarrass themselves," an official at the Prime Minister's 
Official Residence (Kantei) said, adding, "As we experienced a 
similar case in dealing with the postal bills last year, there is a 
big difference between opposition and abstention." 
 
Referring to the Kantei's victory over opponents of postal reform 
last year, this remark stresses the progress that Japan has made to 
this point. 
 
Following the missile launches, Abe's made a number of prominent 
moves. His first move was the decision for Japan to impose sanctions 
on North Korea, including a ban on port calls by North Korea's ferry 
Man Gyong Bong. On the evening of July 4, the day before the missile 
launches, Abe and a senior Cabinet Office official exchanged the 
following views: 
 
Senior official: "I think it would be difficult to prohibit the Man 
Gyong Bong from entering Japanese ports if North Korea launched only 
a Rodong missile, whose range is shorter than that of the Taepodong 
missile." 
 
Abe: "Japan is within the range of the Rodong, so it poses a real 
threat to Japan." 
 
Overridden by Abe, Japan's Security Council decided on a set of 
sanctions, including the ban on port calls. Aso teamed up with Abe. 
Meeting the press separately, the two indicated their intention to 
aim to get a punitive resolution adopted at the UNSC by using the 
 
TOKYO 00003844  007 OF 011 
 
 
same language: "The international community should condemn it 
harshly." Aso has undertaken an aggressive diplomatic offensive. 
 
At one point, MOFA was of the view that adopting a punitive 
resolution would be difficult, but Abe instructed MOFA officials: 
"Japan cannot accept a chairman's statement (that has no binding 
force)." Afterward, no senior MOFA officials expressed hesitant 
views. 
 
Abe maintains a tough stance, while Koizumi has been flexible and at 
times emphasized the importance of dialogue with North Korea. An 
aide to Koizumi explained the role sharing between Koizumi and Abe: 
"By putting front-stage diplomacy in the hands of Mr. Abe and Mr. 
Aso, the prime minister is watching how they act, taking a seat in 
the gallery. This attitude would give the public a sense of 
relief." 
 
10) Focus again on enemy base strike 
 
MAINICHI (Page 2) (Abridged) 
July 11, 2006 
 
In the wake of North Korea's recent firing of ballistic missiles, 
some in the government and the ruling Liberal Democratic Party are 
beginning to call for enabling the Self-Defense Forces to strike 
enemy bases. That is because Japan has no means to defend itself in 
case another country fires a warheaded missile at Japan at this 
point when Japan has yet to deploy a missile defense (MD) system. 
However, Japan has not acquired long-range missiles or any other 
weapons intended to strike enemy bases. This is because of Japan's 
defense-only posture. Reviewing this line of national policy would 
incur strong backlashes at home and from neighboring countries, so 
the hurdle is very high. 
 
The problem was kick-started by Defense Agency Director General 
Fukushiro Nukaga's advocacy. "It's only natural to have the limited 
capability (of striking an enemy country) for national security," 
Nukaga said on July 9. Chief Cabinet Secretary Shinzo Abe also said 
yesterday, "We need to study this matter at all times from the 
perspective of what to do for national security." LDP Secretary 
General Tsutomu Takebe has also suggested the need for positive 
studies. 
 
The government has so far taken the position that Japan is 
constitutionally allowed to strike an enemy country only when it 
would be unavoidable to do so in self-defense. In the meantime, the 
government has also taken the position that it would be 
unconstitutional for Japan to acquire intercontinental ballistic 
missiles, long-range strategic bombers, and attack aircraft carriers 
while regarding them as offensive weapons to be used solely for the 
purpose of destroying a foreign country. 
 
In 2003, North Korea declared its secession from the Nuclear 
Nonproliferation Treaty (NPT). At the time, the then defense chief, 
Shigeru Ishiba, suggested the need to study the possibility of 
enabling the SDF to strike an enemy country, with government 
officials and LDP lawmakers insisting on introducing Tomahawk 
long-range cruise missiles. In 2004, the Defense Agency moved to 
study long-range precision guided missiles. However, the agency gave 
up because the New Komeito, an LDP-allied coalition partner, raised 
a strong objection. Officials in the agency, aware of the high 
hurdle, welcome Nukaga's advocacy. They are poised to fast-track MD 
 
TOKYO 00003844  008 OF 011 
 
 
introduction. 
 
11) Cautious study needed for enemy base strike capability: Koizumi 
 
YOMIUIRI (Page 2) (Full) 
July 11, 2006 
 
In connection with North Korea's recent firing of missiles, Prime 
Minister Koizumi said yesterday evening that it would be all right 
to study whether to enable Japan to strike enemy bases while 
theoretically anticipating various cases. Koizumi also noted that it 
would be difficult to judge whether a specific country intends to 
attack Japan. In this context, he pointed to constitutional problems 
about whether Japan is allowed to use armed force. "We will have to 
think about this matter in a cautious manner," he added. He was 
replying a question from reporters at his office. 
 
12) Government gives relief to former US base asbestos victims in 
accordance with SOFA 
 
TOKYO SHIMBUN (Page 1) (Excerpts) 
July 11, 2006 
 
In accordance with the Japan-US Status of Forces Agreement (SOFA), 
the government has paid a total of 56 million yen in compensation to 
four former Japanese employees of US Yokosuka Naval Base who sued 
the government seeking compensation for suffering from 
pneumoconiosis and other illnesses from inhaling asbestos, sources 
revealed yesterday. 
 
It was the third case for the government to pay compensation in 
accordance with the SOFA. The Defense Facilities Administration 
Agency paid compensation to three former base workers suffering from 
pneumoconiosis in 1997 and two last year. After going through three 
stages, the last case came to an end in May last year with the court 
deciding in favor of the plaintiffs. 
 
Compensation has been paid for reconciliation after court rulings in 
the past. The government's payment of compensation based on the 
court ruling in accordance with the SOFA is likely to swiftly pave 
the way for the relief of base employees suffering from damage to 
their health from asbestos. 
 
The four former employees ranging in age from 63 to 76 worked at the 
Yokosuka Base's vessel repair plant for 27 to 40 years as mechanics 
and welders. 
 
13) Koizumi off to Middle East today in tense atmosphere; 
Immediately return home if North Korea launches another missile 
 
SANKEI (Page 5) (Abridged slightly) 
July 11, 2006 
 
Prime Minister Junichiro Koizumi will make a five-day visit to 
Israel, the Palestinian region, and Jordan starting today. The 
region is becoming tense with Israel sending troops to the Gaza 
Strip in the Palestinian Authority. Koizumi intends to play up 
Japan's commitment in an effort to put the receding peace process 
back on track. But he might have to cut short his trip if North 
Korea launches another missile. Koizumi begins his Middle East trip 
today in a tense atmosphere. 
 
 
TOKYO 00003844  009 OF 011 
 
 
Koizumi will depart for the Middle East as scheduled, concluding 
that North Korea would not launch another Taepodong-2 missile for 
the time being, despite its declaration to continue missile 
launches. But a source connected with the Prime Minister's Official 
Residence (Kantei) noted: "If a North Korean missile landed in 
Japanese territory or Japanese waters during the prime minister's 
Middle East trip, he will immediately return home." 
 
After the Middle East tour, Koizumi will attend the G8 summit to be 
held in St. Petersburg from July 15. Koizumi wants to increase his 
voice regarding the Palestinian issue during the summit. But how 
much he can display Japan's influence and Japan's presence remains 
to be seen. 
 
Intense armed conflict 
 
Koizumi will visit Israel and the Palestinian Authority as the first 
Japanese prime minister since former Prime Minister Tomiichi 
Murayama 11 years ago. Koizumi's Middle East trip was originally 
scheduled for January, but it was postponed due then Israeli Prime 
Minister Ariel Sharon's grave condition. Consequently, Israel has 
installed Ehud Olmert as prime minister. The peace process has 
stalled with the Islamic fundamentalist group Hamas having strong 
control over the cabinet of the Palestinian Authority. Last month, 
Israel also sent troops to the Gaza Strip to secure the release of a 
captive Israeli soldier, causing an intense armed conflict. The 
peace process has bogged down. 
 
Koizumi will become the first major international leader to visit 
Israel and the Palestinian Authority under such circumstances. A 
Foreign Ministry official explained: "The tour provides a timely 
diplomatic stage. Even if the trip ends in failure, the prime 
minister has nothing to lose politically." 
 
In his talks with Israeli Prime Minister Olmert on July 12, Koizumi 
is expected to express his concern over the use of force against 
Palestinians, urging Israel to resume dialogue with the Palestinian 
Authority. On July 13, Koizumi is scheduled to meet with Palestinian 
leader Mahmound Abbas in which he is expected to underline the need 
to settle the situation quickly and return to peace talks. Koizumi 
intends to urge the two leaders to push ahead with the Middle East 
roadmap and aimed for confidence building. 
 
A clear distinction with the US and EU 
 
Following the establishment of the Hamas-controlled Palestinian 
cabinet in March, the United States, which has designated Hamas as a 
terrorist organization, and the European Union have frozen their 
financial assistance to the Palestinian Authority. But making a 
clear distinction with the US and the EU, Koizumi plans to convey 
Abbas Japan's policy to continue providing financial support for 
creating jobs and ensuring security for Palestinian people. 
 
Through the Middle East tour, Koizumi intends to play up Japan's 
unique commitment to peace and complement the Middle East strategy 
of the US, which has been leading the peace process. But a Middle 
Eastern diplomatic source took this view: "Japan has been taking a 
lukewarm position toward Israel and the Palestinian Authority. There 
are limitations to how much Japan can wield its influence on the two 
sides. Koizumi's visit might be taken as a mere performance." 
 
14) Taiwan's Nationalist Party Chairman Ma visits Japan 
 
TOKYO 00003844  010 OF 011 
 
 
 
ASAHI (Page 4) (Full) 
July 11, 2006 
 
Taiwan's main opposition Nationalist Party Chairman Ma Ying-jeou 
arrived in Japan yesterday. He is energetic to strengthen 
communication channels to Japanese political circles. He already met 
with former Chief Cabinet Secretary Yasuo Fukuda and Liberal 
Democratic Party (LDP) Secretary General Tsutomu Takebe. Ma called 
at LDP headquarters immediately after arriving in Tokyo. He 
underscored that he would strengthen relationships with Japan and 
the United States, sharing the sense of values of democracy and 
human rights, while pushing ahead with efforts to repair relations 
with the Chinese Communist Party. 
 
Many Nationalist Party members are concerned that their 
communication channels to Japanese political circles have rapidly 
narrowed since they handed over the reins of power to the Democratic 
Progress Party in 2000. The main purpose of Ma's Japan visit is to 
build the relationship of trust with Japan with an eye on regaining 
the political reins in the 2008 general election. 
 
15) Takenaka, Yosano at odds over deflation 
 
MANICHI (Page 11) (Full) 
July 11, 2006 
 
State Minister for Financial, Economic, and Fiscal Policy Kaoru 
Yosano and Minister of Internal Affairs and Communications Heizo 
Takenaka have often been at loggerheads over the issue of fiscal 
reconstruction during meetings of the Council on Economic and Fiscal 
Policy, chaired by Prime minister Junichiro Koizumi. This time, 
sparks are flying between them over the perception of deflation. 
 
In a press conference after a cabinet meeting on July 4, Takenaka 
said: "Deflation has yet to be overcome," citing declining growth in 
total money supply as the main reason. Yosano offered a 
counterargument in a NHK TV program on July 9: "Mr. Takenaka's 
argument is in line with monetarists' theory (that an increase in 
monetary supply will improve the economy). It has been proved over 
the past 10 to 15 years that this theory does not apply to the 
current Japanese economy. The Bank of Japan (BOJ) has not taken this 
view, either." Yosano criticized Takenaka's stance of giving 
priority to money supply in containing deflation, ironically calling 
him "Professor Takenaka." 
 
Many economists in the private sector support Yosano's view, as 
Dai-ichi Mutual Life Insurance Research Institute Chief Economist 
Naomi Iizuka said: "The slow growth of total money supply reflects 
the fact that people, in anticipation of price hikes with the end of 
deflation, have shifted funds from deposits to policies bearing a 
good return." Nomura Securities Financial and Economic Research 
Institute Senior Economist Kiuchi said: "The Takenaka remark might 
be intend to pressure the BOJ to end its zero-rate policy. 
 
16) LDP Secretary General Takebe: Whether lawmakers who rebelled 
against LDP in vote on postal bills can rejoin LDP depends on how 
much they will cooperate with the party in next Upper House 
election 
 
ASAHI (Page 4) (Full) 
July 11, 2006 
 
TOKYO 00003844  011 OF 011 
 
 
 
Referring to House of Representatives members who left the Liberal 
Democratic Party (LDP) after voting against the government's 
sponsored postal-privatization legislation in last year's regular 
Diet session, LDP Secretary General Tsutomu Takebe stated in a press 
conference yesterday: "It is important for them to make efforts for 
our party's candidates in the House of Councillors election. What is 
important is how they will take action." 
 
He indicated in his remark that he would allow the rebels to rejoin 
the LDP even though he had previously rejected that option. 
 
Takebe stressed: "We must appeal to unaffiliated voters in next 
year's Upper House election that the LDP is the responsible party." 
 
He then added: 
 
"Those who worked with us as politicians have similar views. 
Needless to say, there are political realignment moves afoot since 
we called for even Minshuto (Democratic Party of Japan) to form a 
grand alliance." 
 
17) Minshuto to hold presidential election on Sept. 25 
 
ASAHI (Page 4) (Full) 
July 11, 2006 
 
Yukio Hatoyama, secretary general of the main opposition party 
Minshuto (Democratic Party of Japan), presented to a meeting 
yesterday with President Ichiro Ozawa and Acting President Naoto Kan 
a plan that the party will announce on Sept. 12 the start of the 
official campaign period for its presidential election and conduct 
the election on Sept. 25. The plan was approved. 
 
The expectation is that Hatoyama will report the plan to a standing 
secretaries meeting today and to a meeting of the party's all 
 
SIPDIS 
lawmakers. After that, the plan will be formally decided. 
 
The ruling Liberal Democratic Party (LDP) will hold its presidential 
election on Sept. 20 by its Diet members. Minshuto has decided to 
hold the election after the LDP presidential race in order for its 
new leader to come up with policy after ascertaining the new LDP 
president's policy stance. 
 
SCHIEFFER