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UNCLAS SECTION 01 OF 11 TOKYO 004042 
 
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 07/20/06 
 
INDEX: 
 
(1) Showa Emperor's statements in memo creating stir; May speed up 
debate over Yasukuni Shrine issue; Chief Cabinet Secretary Abe: 
"Decision to pay homage is up to the prime minister" 
 
(2) Interview with former Deputy Secretary of State Armitage: US, 
China should not interfere in Yasukuni issue 
 
(3) 2006 LDP presidential election: Fukuda's next move drawing 
attention 
 
(4) UNSC resolution and Japan's diplomacy: Japan stands up to North 
Korea's missile threat in earnest 
 
(5) Defense spending likely to trigger controversy in budget 
compilation 
 
(6) Window of the World column by Kazuo Ogura: Japan, US should 
cultivate universal values first at home 
 
(7) Preparations for beef exports to Japan underway at Creekstone 
Farms; Authorization to implement blanket cattle inspection has yet 
to be granted 
 
(Corrected copy) Budget request guidelines: Defense spending cut 1% 
; Government, ruling camp to treat expenses for USFJ realignment as 
exception 
 
ARTICLES: 
 
(1) Showa Emperor's statements in memo creating stir; May speed up 
debate over Yasukuni Shrine issue; Chief Cabinet Secretary Abe: 
"Decision to pay homage is up to the prime minister" 
 
NIHON KEIZAI (Top play) (Excerpts) 
Evening, July 20, 2006 
 
The memo kept by former Imperial Household Agency Grand Steward 
Tomohiko Tomita in which he recorded the words of the Showa Emperor 
(Hirohito) expressing strong displeasure with the enshrinement of 
Tokyo War Tribunal-branded Class-A war criminals at Yasukuni Shrine 
has created quite a stir in the government and political circles 
today. Chief Cabinet Secretary Shinzo Abe, asked about whether Prime 
Minister Junichiro Koizumi would continue to visit the shrine or 
not, stated, "It will the prime minister's own decision." Discussion 
of the propriety of enshrinement and the argument for separate 
enshrinement is likely now to speed up. 
 
Abe, asked by the press about the Showa Emperor having stopped 
visiting the shrine after the war criminals were enshrined, 
explained: "I understand that the matter was dealt with in the 
Imperial Household Agency after carefully considering various 
aspects, including the social situation at the time." He made this 
statement about the memo: "I received a report from the Imperial 
Household Agency that they were unfamiliar with its contents." 
 
Regarding his own feelings about visiting the shrine, Abe only 
repeated his stock response about wanting to pay respect to and pray 
for those who had died fighting for their country. Regarding the 
propriety of enshrinement of the war criminals and the argument to 
separate their souls from the shrine, Abe would not reply, saying it 
was not appropriate for the government to comment on such. Even on 
 
TOKYO 00004042  002 OF 011 
 
 
the notion of building a secular war memorial, he would only go so 
far as to say, "We must cautiously consider such, so that all the 
public can go along with it." 
 
The Liberal Democratic Party (LDP) General Council Chairman Kyuma 
stressed, "The enshrinement should never have happened." Koichi Kato 
also said, "This will give impetus to the argument for separating 
the enshrined souls. The best solution is for Yasukuni Shrine to 
decide on its own to un-enshrine those souls." 
 
Minshuto (Democratic Party of Japan) President Ichiro Ozawa stated, 
"(The Showa Emperor) seemed to strongly feel the war responsibility 
of those leaders." Minshuto Secretary General Yukio Hatoyama made 
this appeal: "At present, one of the reasons when the Emperor cannot 
pay homage at the shrine is because of the problem of war criminals 
enshrined there. We must have a national memorial facility where the 
Emperor can visit." 
 
Hiroshi Imazu, who chairs the LDP's junior Diet members' forum to 
support Yasukuni visits, sought to constrain the spreading of the 
argument for separate enshrinement by saying, "The souls cannot be 
un-enshrined. Even if the order is given, it is technically 
impossible." 
 
(2) Interview with former Deputy Secretary of State Armitage: US, 
China should not interfere in Yasukuni issue 
 
SANKEI (Page 1) (Full) 
July 20, 2006 
 
Yoshihisa Komori, Washington 
 
In an interview with the Sankei Shimbun, former Deputy Secretary of 
State Richard Armitage categorically said that it was improper for 
the Chinese government to call on the Japanese prime minister to 
forgo visits to Yasukuni Shrine. He also said that the US should not 
comment on the Yasukuni issue. 
 
Armitage, who served as deputy secretary of state during the first 
term of the Bush administration, dismissed some Japanese people's 
view that visits by the prime minister to Yasukuni Shrine have 
strained relations between Japan and China. He said: 
 
"As commented on by President Bush, 'Japan-China relations are far 
more complicated than just visits to the shrine,' the controversy 
Yasukuni issue is not a cause for deteriorating the bilateral 
relations but a result of the strained relations." 
 
In reference to improvement in Japan-China relations, Armitage 
emphasized: "Not Japan but China should first consider what it 
should do." 
 
As the main cause for the strained relations between Japan and 
China, he cited this geopolitical view: Because Japan and China, 
neither of which was at advantage in terms of national power in the 
past, have begun to compete with each other on equal footing, 
friction has occurred between them. Armitage said: 
 
"Since two countries in Northeast Asia now have almost the same 
level of power for the first time in history, a number of problems, 
such as national security and territorial issues, have been 
generated." 
 
 
TOKYO 00004042  003 OF 011 
 
 
With reference to the prime minister's visits to Yasukuni Shrine, 
Armitage listed the following three key points: (1) Japan should 
determine how to commemorate its war dead, including Class-A war 
criminals, as even the bodies of criminals are also buried with 
dignity in the US; human beings cannot easily judge the value of the 
dead; (2) since China has made use of the Yasukuni issue as a 
material to pressure Japan, even if the prime minister stops 
visiting the shrine in response to its demand, China supposedly will 
pick an argument on another problem with Japan; and (3) although 
Prime Minister Koizumi stressed that he visits the shrine in the 
capacity of a private citizen, China does not recognize this 
concession; this stance underscores that that nation has not focused 
only on the Yasukuni issue. 
 
Armitage added: "The Chinese government should not urge the Japanese 
prime minister to give up visits to Yasukuni Shrine," labeling 
China's demand as improper. He further commented: 
 
"The chief of the government of one country who was elected through 
the democratic process should not yield to pressure from a 
non-democratic state. There will be no option for Prime Minister 
Koizumi to stop visiting the shrine as long as China continues to 
express opposition." 
 
Regarding Yushukan, the exhibit hall of Yasukuni Shrine, however, 
Armitage stated: "Descriptions attached to showpieces linked to the 
war are contradictory to the historical views accepted in Japan and 
hurt the feelings of Americans and Chinese." In reference to the 
United States' response, he suggested that the US should stay out of 
the Yasukuni issue, saying: 
 
"On the Yasukuni issue and how to commemorate the war dead, the US 
government should not make suggestions to Prime Minister Koizumi and 
his successor. Unofficial advice or opinions might be acceptable." 
 
(3) 2006 LDP presidential election: Fukuda's next move drawing 
attention 
 
MAINICHI (Page 5) (Abridged) 
July 20, 2006 
 
With the LDP presidential election only two months away, attention 
is focused on the activities of former Chief Cabinet Secretary Yasuo 
Fukuda, who is regarded as a strong rival to Chief Cabinet Secretary 
Shinzo Abe. But in recent months, Fukuda has rarely attended 
high-profile events, such as parties thrown by lawmakers, and he has 
kept silent about his candidacy. In contrast to Abe, who has been in 
the spotlight since North Korea launched its missiles, Fukuda abhors 
linking diplomatic activities to the presidential race. Veteran 
lawmakers of other factions supporting Fukuda are visibly 
perplexed. 
 
In the aftermath of North Korea's missile launches, Fukuda told his 
aides: "This is a national crisis. We must not discuss the 
presidential race at a time like this." Meanwhile, Abe has boosted 
his presence through his telephone conversations with White House 
National Security Adviser Stephen Hadley on the UN Security Council 
resolution and other issues. Opinion polls also clearly show that 
Abe is way ahead of the media-shy Fukuda. The view is prevalent in 
the LDP that Abe will win the presidency. 
 
Anti-Koizumi forces envisaging a prime minister Fukuda have begun 
doubting his eagerness to run in the race. Fukuda has been 
 
TOKYO 00004042  004 OF 011 
 
 
abstaining from attending any parties or lecture meetings since his 
visit to Indonesia in late June. Appearing on a TBS television 
program on July 18, former LDP Vice President Taku Yamasaki 
indicated that Fukuda in the end would not throw his hat into the 
ring. A senior Yamasaki faction member also ruled out the 
possibility of Fukuda running in the race, citing his lack of 
campaign funds. 
 
At the same time, the view is still strong in the LDP that Fukuda is 
just watching whether or not Prime Minister Koizumi visits Yasukuni 
Shrine on August 15. 
 
Fukuda, who turned 70 on July 16, told his aides: "I will take 
things easy." But former Defense Agency Director-General Seishiro 
Eto noted: "When Takeo Fukuda and Kiichi Miyazawa became prime 
minister, they were over 70. I think Mr. Fukuda will announce his 
candidacy around August 20." 
 
Abe to kick off nationwide tour on July 27 
 
Abe will visit various parts of Japan starting on July 27 to discuss 
with local business leaders the issue of their supporting his 
"second chance" initiative (by which people who failed in business 
or other ventures are given a second chance by society to become 
successful). 
 
The series of events will be sponsored by the Parliamentary League 
to Support a Second Chance, which Abe chairs. Abe will exchange 
views with local business leaders in Tokyo, Kyoto, Osaka, and 
Saitama for a total of five days until August 6. 
 
The league will also host a series of events to exchange views 
between Abe and local assemblymen at six places across Japan between 
July 28 and September 2. The first event will take place in Iwate, 
the home turf of Ichiro Ozawa, president of Minshuto (Democratic 
Party of Japan). 
 
Abe's book Toward a Beautiful Country (Utsukushii kunie) will come 
out today. He plans this to serve as the foundation of his political 
vision. 
 
(4) UNSC resolution and Japan's diplomacy: Japan stands up to North 
Korea's missile threat in earnest 
 
YOMIURI (Page 13) (Full) 
July 19, 2006 
 
Ryuichi Otsuka, New York 
 
On July 15, the United Nations Security Council (UNSC) adopted a 
North Korea resolution under Japan's initiative. Last year, Japan 
was frustrated in its bid for a permanent seat on the UNSC. What 
should Japan learn from the two contrasting experiences? 
 
"It would be fine if we could just get a strong statement from the 
chairman or a weak resolution." When North Korea was making 
preparations to fire missiles, a Japanese diplomat posted in New 
York had such an expectation. 
 
Eventually, the UNSC adopted a resolution of moderate severity. In 
Japan, some news companies reported that the UNSC had adopted a 
resolution condemning North Korea for its firing of missiles. 
However, the UNSC-adopted resolution calls on UN member countries to 
 
TOKYO 00004042  005 OF 011 
 
 
prevent missile-related materials and technologies from being 
transferred to North Korea and to stop money from flowing into that 
country. 
 
The UNSC resolution is close in substance to a sanctions resolution 
against North Korea. In fact, the US and European media called it a 
resolution of limited sanctions or weapons-related sanctions. 
 
Diplomacy is a game to find common ground. In this diplomatic game, 
one-sided victory or defeat is rare. It is true in particular in an 
arena of multilateral negotiations like the United Nations. If a 
country could get 60 points, that would be a good showing. This time 
around, it may safely be said that Japan got at least 70-80 points. 
The government can be proud of the result. 
 
Of course, we should abstain from attaching excessive expectations 
on a single resolution. It does not seem to me that North Korea will 
mend its ways at once. Even so, it is very significant that the UNSC 
or all its five permanent members (P-5) including China unanimously 
adopted a resolution. That is because China can no longer protect 
North Korea every time it does something reckless. 
 
Furthermore, Japan, declaring the incident a direct threat to its 
national security, made desperate efforts for the UNSC's adoption of 
a resolution. In the long run, this experience might be even more 
significant in itself. 
 
In its draft resolution, Japan referred to Chapter 7 of the UN 
Charter. Chapter 7 would pave the way for UN members to use armed 
force. I thought of it then as Japan using this warning as part of 
its negotiating tactics. Meanwhile, Chief Cabinet Secretary Abe and 
Foreign Minister Aso continued with their hard-line remarks. Even 
diplomats on the front could not see their true intent. They grew 
impatient, thinking that Japan might miss a chance to make a deal. 
As a result, however, Tokyo made Beijing compromise time and again. 
If Abe and Aso pretended to be tough in their remarks, I must say 
their performance was amazing. 
 
Japan has never experienced such developments on the diplomatic 
front with China over such a serious issue in the security area. It 
was propped up by the strong determination and will of politicians 
with the Japanese people standing behind them. 
 
However, Japan has failed to become a permanent UNSC member. In this 
case, there was something different behind the scenes. 
 
The strategic reason for Japan's frustration is now clear. 
 
The UNSC is used by the United States to negotiate issues affecting 
its national security, including the Iraq war of three years ago, 
the Lebanese situation at present, and Iran's nuclear program. As a 
permanent UNSC member, the United States is usually engaged in a 
hard offensive and defensive battle-as in the case of Japan standing 
up to North Korea's missile firing. 
 
Japan, in its proposal to expand the UNSC's membership, advocated 
electing countries representing various regions and called on the 
P-5 to accept its proposal. The United States, however, will not 
accept such overtures. For one thing, a country that may affect the 
United States' national security might be elected as a permanent 
member on the UNSC. The United States would resolutely exercise its 
veto to kill such an idea. 
 
 
TOKYO 00004042  006 OF 011 
 
 
In my view, Japanese politicians and diplomats, as well as Japanese 
media people including myself, might not have been fully aware of 
such a severe situation. Moreover, Japan was not ready to go for it. 
Of course, Japanese diplomats on the front made desperate efforts. 
Even in the Foreign Ministry, however, at least one official was 
critical of Japan's approach. Prime Minister Koizumi would not take 
advantage of his relations with President Bush, and he did not 
appear enthusiastic enough to make the United States become serious 
about Japan's UNSC reform proposal. 
 
If that is the case, it is impossible for Japan to become a 
permanent member of the UNSC. As Ambassador to the United Nations 
Kenzo Oshima tends to say, it is as difficult as making a camel to 
go through the eye of a needle. 
 
However, as Ambassador Oshima has noted, the challenge of North 
Korea's missile firing this time reminded me of how important it is 
for Japan to be seated on the UNSC as its member. Japan's term as a 
nonpermanent UNSC member will expire at the end of this year. After 
that, Japan will have no choice but to ask the United States to 
present resolutions and it will need to ask for information about 
what was discussed in the P-5's closed-door talks. Even so, there is 
no telling what the US would do. In other words, the United States 
does not always help Japan in real earnest. 
 
The missile challenge of North Korea can be an opportunity for us to 
rethink the meaning of becoming a permanent UNSC member. Of course, 
Japan, if and when it becomes a permanent UNSC member, will have to 
commit itself to a crisis in faraway countries, such as the Sudan 
and Lebanon. Is Japan ready to face up to such difficult situations? 
There will be no way as long as Japan does not make up its mind at 
its grassroots level. 
 
(5) Defense spending likely to trigger controversy in budget 
compilation 
 
NIHON KEIZAI (Page 2) (Abridged) 
July 20, 2006 
 
Defense spending for fiscal 2007 is likely to spark controversy in 
the budget compilation process. The Finance Ministry has presented a 
plan to reduce the defense budget by 1% from the current fiscal year 
against the trend of frontloading the US force realignment cost and 
deploying a missile defense system in the wake of North Korea's 
missile launches. Calls for setting up a budget slot apart from the 
regular defense spending are likely to gain momentum in the process 
of making arrangements between the government and the ruling 
coalition. 
 
The defense budget for fiscal 2006 is 4.8 trillion yen, of which 45% 
are labor costs, leaving little latitude. The US force realignment 
costs up to fiscal 2012 is estimated at 3 trillion yen in total, or 
500 billion yen annually. 
 
There is an estimate that the deployment of the missile defense 
system will cost over 1 trillion yen. The government is considering 
deploying the ground-to-air PAC-3 and the sea-based MS-3 missile 
systems ahead of original schedule. A shorter deployment period 
means greater single-year cost. 
 
Financing those systems with the regular defense budget would 
necessitate the major realignment and streamlining of the 
Self-Defense Forces' conventional equipment. Defense Agency 
 
TOKYO 00004042  007 OF 011 
 
 
Director-General Fukushiro Nukaga has repeatedly asked for a 
separate budget slot, saying that the country's security concerns 
not only the Defense Agency. 
 
The Finance Ministry is dismissive of Nukaga's request, thinking 
that allowing an exception to defense spending would spoil the 
overall spending-cut plan, which is necessary for restoring fiscal 
health. The government regards fiscal 2007 as the first year of 
fiscal reconstruction, aiming to turn the basic fiscal balance into 
the black in fiscal 2011. The government has set guidelines for 
budgetary requests for fiscal 2007 lower than those of fiscal 2006, 
judging that spending cuts would affect future consumption tax hike 
debates. 
 
US force realignment and the threat of North Korea are directly 
linked to the country's security. Making adjustments may not go 
smoothly. The opinion is being heard in the ruling coalition that 
putting finances ahead of national security is preposterous. Chief 
Cabinet Secretary Shinzo Abe pointed out the need for the Finance 
Ministry and the Defense Agency to discuss the matter first. 
 
The Defense Agency is determined to seek a separate budget in 
anticipation of backing from the US government. The matter is not 
simple enough to reach a settlement at the administrative level. The 
post-Koizumi administration will be pressed to come up with answers 
to three major challenges: fiscal reconstruction, economic growth, 
and national security. 
 
(6) Window of the World column by Kazuo Ogura: Japan, US should 
cultivate universal values first at home 
 
ASAHI (Page 15) (Slightly abridged) 
July 19, 2006 
 
By Kazuo Ogura, president of the Japan Foundation 
 
"Japan and the United States stand together... for the advancement 
of core universal values." 
 
This phrase is found in the first paragraph of the Japan-US joint 
statement released on June 29.  According to that statement, 
universal values are freedom, human dignity and human rights, 
democracy, market economy, and rule of law. 
 
A large number of people would agree that Japan and the US share 
those values. But I wonder whether the two countries are qualified 
to proudly declare they will advance them in other countries. Their 
relations with Asian countries in this regard are problematic. 
 
"Asia's historic transformation is underway, creating a region that 
increasingly embraces the universal values of democracy, freedom, 
human rights, market economy, and rule of law," the joint statement 
declares. 
 
I wonder if that is true? Democracy and market economy, from a 
long-term perspective, seems to be making progress in Asia. But 
young people in South Korea see the US, not North Korea, as the 
overwhelming threat. And China may become a stakeholder, but it 
falls far short of a country that can share values with Japan. In 
addition, Japan's self-reflection on its past colonial rule and its 
war responsibility are essential if it intends to share values with 
the rest of Asia. 
 
 
TOKYO 00004042  008 OF 011 
 
 
Despite these complex circumstances, Japan and the US appear to be 
trying to deal with Asia only with the theory of advancing freedom, 
democracy, and market economy in the region. Well then, what methods 
are necessary if they actually plan to do so? In order for them to 
share values with Asian countries, I think it is indispensable for 
them to do at least two things. 
 
First, Japan, China, and South Korea should make more efforts to 
share many more perceptions. China needs to advance democratization 
and respect human rights, and South Korea should break with 
authoritarianism and ethnocentrism, and Japan should deeply reflect 
on the past. Japan must refrain from assuming a hypocritical 
attitude in Asia. 
 
Japan and the US have taken a tough line against North Korea for its 
missile launches, and this attitude is only natural and a matter of 
course. The North's missile launching is a menace to the peace and 
security of the Far East. That country's attitude also dampens the 
international efforts to grapple with the nuclear proliferation 
issue. More importantly, the North's missile launches and its 
response to the abduction issue absolutely go against Japan's creeds 
of pacifism and democracy, the values Japan has fostered in 
reflecting on World War II. That's why Japan and the US can assume a 
tough posture toward North Korea. 
 
Given the present-day international situation, it is almost 
self-evident that concluding a strategic alliance between Japan and 
the US is effective and beneficial. It is also self-evident that 
such an alliance is one that can defend democracy and freedom. But 
the two countries must deepen those values internally first before 
further sharing them. 
 
The US has made no self-examination on its disregard for human 
rights at the Guantanamo Bay facility, and Japan has failed to 
cultivate the values of democracy and human rights while reflecting 
on its past. If these two countries declare they share those values, 
what they call common values would be viewed as a cloak to conceal 
the nature of their military alliance or viewed as hypocrisy. 
 
I think the sharing of the values will be advanced only through the 
sharing of an experience. 
 
 
Kazuo Ogura: has served in such posts as ambassador to South Korea 
and ambassador to France; is a special guest professor of Japanese 
diplomacy at Aoyama Gakuin University; is a member of the Asahi 
Shimbun think tank, Asia Network; and is 67 years old. 
 
(7) Preparations for beef exports to Japan underway at Creekstone 
Farms; Authorization to implement blanket cattle inspection has yet 
to be granted 
 
TOKYO SHIMBUN (Page 3) (Excerpts) 
July 20, 2006 
 
Inspections of meatpackers by Japanese government officials are now 
underway in various parts of the US. The aim of such inspections is 
to check whether cattle are being properly processed. The 
inspections are expected to be completed on July 21. If no problems 
are found, US beef imports will likely resume as early as this 
month. The reporter visited the actual scene where the cattle are 
slaughtered. 
 
 
TOKYO 00004042  009 OF 011 
 
 
Creekstone Farms is located in Kansas, which is known as a major 
livestock state. Preparations for resuming beef exports to Japan are 
now underway there. 
 
Since shortly after the embargo was placed on US beef exports this 
January, the company has increased its on-the-job training, 
including the removal of specified risk materials (SRM), such as 
vertebral columns, which are believed to be a BSE disease risk. It 
is doing its utmost to make its employees familiar with conditions 
for exporting products to Japan. 
 
Japanese inspectors visited the plant on July 11 and 12. Two 
inspectors each from the Ministry of Health, Labor and Welfare and 
the Ministry of Agriculture, Forestry and Fisheries, joined by 
officials from the US Department Agriculture (USDA), examined the 
method of slaughtering and shipment records. They checked 
antibacterial measures against colon bacilli and salmonella, and the 
method of removing SRM. CEO John Stewart was confident in his 
management of the plant, noting: "The inspectors did not make any 
special comment, but I got the impression that the inspections went 
smoothly. I am optimistic about the outcome." The embargo was placed 
in December 2003, following the discovery of a BSE infected cow in 
the State of Washington. Before that, the company had exported more 
than 20% of its products to Japan. 
 
The company decided to carry out blanket cattle testing similar to 
the one adopted in Japan. It invested a total of 1 million dollars 
(approximately 17 million yen) to introduce an inspection system, 
including the cost of employing inspectors and constructing 
inspecting facilities. 
 
However, the US government, which insisted in trade resumption 
negotiations with Japan that there are no scientific grounds for 
blanket cattle inspections, firmly turned down the company's 
application for implementing such an inspection method. The company 
then brought a lawsuit against USDA, seeking authorization for the 
implementation of blanket testing. Steward is trying hard to regain 
trust in US beef in the belief that it is the best way to eliminate 
anxieties harbored by Japanese consumers. Creekstone is trying to do 
business in a manner that caters to Japanese consumers. However, 
such a company is an exception in the US. The top four companies 
that are estimated to manufacture more than 80% of processed beef 
products in the US are opposed to the idea of implementing voluntary 
blanket cattle testing. 
 
Backed by the beef industry's powerful political clout, the Senate 
has heightened its pressure on Japan. As part of such a move, it 
adopted a retaliatory tariff intended to increase levies on Japanese 
products in the event beef trade does not resume by the end of 
August. 
 
Interview with Creekstone CEO Stewart 
 
-- Why is the USDA negative toward carrying out voluntary 
inspections? 
 
"The government sometimes becomes too close to those it regulates, 
and its thinking becomes about the same as that of the industry. The 
leading four beef producers, which dominate more than 80% of the 
market, do not want to implement voluntary inspection, and the USDA 
listened to them. That is because such inspection costs are high." 
 
-- How much would it cost? 
 
TOKYO 00004042  010 OF 011 
 
 
 
"It is said that profits a beef processing company makes per head 
are 170 dollars (approximately 20,000 yen) on average. The 
production cost is approximately 150 dollars. There would be no 
profits if a processing company carried out a voluntary inspection, 
because it would cost 20 dollars per head. 
 
Creekstone thinks that it needs to please its customers. We know 
that our customers are willing to share that cost. The export share 
of our products is high, while that of those four companies is low. 
Their target is the domestic market. It appears that domestic 
customers are not yet ready to accept blanket testing." 
 
-- How do you intend to guarantee Japanese customers the safety of 
your products until the lawsuit is over? 
 
"We are searching for every measure except for blanket testing. We 
are certain we will win the lawsuit. We intend to continue to seek 
approval of voluntary blanket testing. We can start tests within a 
week after the court hands down its decision. We will be able to 
ship self-inspected products to Japan in early November." 
 
(Corrected copy) Budget request guidelines: Defense spending cut 1% 
; Government, ruling camp to treat expenses for USFJ realignment as 
exception 
 
MAINICHI (Page 2) (Almost Full) 
July 20, 2006 
 
The government and the ruling parties yesterday agreed to cap the 
fiscal 2007 general account budget at 46.8 trillion yen. According 
to the guidelines, growth in social security expenditures will be 
held to 550 billion yen. Defense-related spending and subsidies to 
private schools will also suffer a 1% cut from the previous year. 
Other spending items, such as discretionary expenditures and 
public-works-related spending, will be slashed 3% from the previous 
year. As a result, the overall increase over the previous year's 
budget will be held to 440 billion yen. As part of a plan to jointly 
reform revenue and expenditures, certain budgetary items have been 
slated for cuts over the next five years, meaning that the budget 
request guidelines for fiscal 2007 have been set in a more detailed 
manner than in the past. 
 
The guidelines set a 220 billion yen cut in public works 
expenditures from the preceding year and a 140 billion yen reduction 
in other expenditures, though 200 billion yen was allocated to cover 
the cost of the Upper House election next summer and 50 billion yen 
for priority spending items. As a result, general account 
expenditures will expand by 440 billion yen from the previous year, 
but the Finance Ministry intends to further cut expenditures in the 
budget compilation process at the end of the year. 
 
For the promotion of efficiency and prioritization of spending 
items, the guidelines incorporated a 1% cut in subsidies to public 
utility corporations, standardizing discretionary contracts with 
public utility corporations, and reducing subsidies to local 
governments. 
 
As exceptions to the budgetary cap, the government and the ruling 
camp will discuss expenses for the USFJ realignment and a revision 
of child allowances as part of measures to deal with the declining 
birthrate in a separate framework in the run-up to the year-end 
budget compilation. 
 
TOKYO 00004042  011 OF 011 
 
 
 
The government will present the budget request guidelines to the 
Council on Economic and Fiscal Policy, which is to meet on the 20th, 
and adopt it at a cabinet meeting on the 21st. Each government 
agency will submit budgetary requests by the end of August. 
 
SCHIEFFER