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UNCLAS SECTION 01 OF 10 TOKYO 005512 
 
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 09/25/06 
 
 
INDEX: 
(1) Three new LDP executives all close to Abe: Hidenao Nakagawa will 
continue the Koizumi reforms; Niwa is a veteran politician; Shoichi 
Nakagawa represents generational change 
 
(2) Interview with Japan Business Federation Chairman Fujio Mitarai: 
Overcome "reform fatigue" 
 
(3) Nuclear fuel supply security initiative: "Nuclear haves" aiming 
for monopoly; Japan determined to counter with its own plan 
 
(4) Old friends, supporters talk of LDP President Abe: He speaks 
fast when he talks with friends; Dedicated person; Takes good care 
of others like older brother 
 
(5) Betrayal by a foreign "correspondent" In Japan 
 
(6) Study of Shinzo Abe: Inherits grandfather's genes regarding view 
of Japan-US alliance 
 
(7) Privatization of postal services: Shadow of foreign pressure - 
US keeping sharp watch on new postal insurance products 
 
ARTICLES: 
(1) Three new LDP executives all close to Abe: Hidenao Nakagawa will 
continue the Koizumi reforms; Niwa is a veteran politician; Shoichi 
Nakagawa represents generational change 
 
NIHON KEIZAI (Page 2) (Excerpts) 
Evening, September 25, 2006 
 
The newly appointed top three Liberal Democratic Party (LDP) 
executives, who will back up the Abe administration, form a lineup 
of individuals known for their being close to LDP President Abe. 
Policy Research Council Chairman Hidenao Nakagawa, who will shift 
over to be the party secretary general, has been carrying the flag 
of structural reform in the Koizumi government, created the trend 
that tilted the party toward supporting Abe as its favorite 
candidate and is known as Abe's guardian or protector.  Minister of 
Agriculture Shoichi Nakagawa also has many similarities to Abe in 
his political activities. The talented trio will make the case to 
domestic and foreign audiences that reform will continue under the 
Abe administration, and back up Abe's pet policy lines of 
educational reform and constitutional revision. 
 
Hidenao Nakagawa has been an advocate of budget reduction in the 
Koizumi administration, and played a role of consolidating views in 
the party on such. In the budget compilation for next fiscal year, a 
time when party policy cliques and government office will be calling 
for increased expenditures, the presence of Nakagawa as the 
secretary general will act as a constraint on extra spending. Being 
 
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53 years old, he will likely work closely with Shoichi Nakagawa to 
take the lead in policy debates in the run up to the Upper House 
election next summer. 
 
Shoichi Nakagawa is positioned in the party like Abe as part of the 
hawkish group. He is with Abe in lockstep on such issues as the 
textbooks and abductions of Japanese by North Korea. Abe has deep 
trust in him. He takes a consistently hard-line stance in China 
diplomacy, starting with the gas development issue in the E. China 
Sea. Being about the same age as Abe, he, too, can appeal to the 
public on the generational change front. The same context accounts 
for the appointment of Nobuteru Ishihara as acting secretary 
 
TOKYO 00005512  002 OF 010 
 
 
general. 
 
Veteran politician Yuya Niwa was appointed General Council chairman. 
His appointment has a strong aspect of being a reward for 
distinguished service, but there also is an aspect of his 
appointment being a conciliatory move toward the party. Niwa during 
the campaign announced that his faction would fully support Abe. 
Compared to the Tsushima faction, which split in the Upper House, 
the Niwa-Koga faction almost completely united for Abe, and was 
highly praised for it. Niwa is seen as a veteran in the party, and 
his appointment shows the balance that Abe tried to achieve in 
giving consideration to age, maturity, and youth. 
 
(2) Interview with Japan Business Federation Chairman Fujio Mitarai: 
Overcome "reform fatigue" 
 
NIHON KEIZAI (Page 3) (Full) 
September 22, 2006 
 
Fujio Mitarai, chairman of the Japan Business Federation and Canon 
Chairman, responded to an interview with the Nihon Keizai Shimbun on 
the evening of Sept. 20. 
 
-- What do you expect from the new Liberal Democratic Party (LDP) 
President Abe? 
 
The Koizumi administration broke up the bureaucracy-led regulated 
economy that was even called "modified capitalism" in the postwar 
period, and it created an environment for the private sector to be 
able to present ideas and take an active role. This can be cited as 
one of its achievements. I expect Abe add a freshness to the Koizumi 
reforms as he works to speed up the process. 
 
There are so many difficult challenges to clear before Japan can 
turn into a bright and shining country again in the era of expanding 
globalization. I expect Abe to manage his administration on a 
stable, long-term basis. There is no leeway for Japan to continue to 
engage in political battles. 
 
-- In the LDP presidential election campaign, the atmosphere of 
"reform fatigue" was pointed out, with the issue of income disparity 
focused on. 
 
The grip on reform should not be relaxed now. It has not been 
declared yet that deflation has been completely overcome. In 
addition, not every company has improved its business results. The 
government should not say it is tired but should instead continue to 
push ahead with reform. 
 
In the market economy, it is natural for those who compete fairly to 
attain wealth. Such a result provides incentives to other 
individuals. Certainly, there are income discrepancies between the 
center and local areas. These gaps must be rectified. I place great 
expectations on Mr. Abe's proposal for introducing a regional bloc 
system (Doshusei). 
 
-- Abe has insisted: "There will be no fiscal reconstruction without 
economic growth." What measures do you think the government should 
take to attain sustainable economic growth? 
 
Innovation serves as an engine to pull along the nation's economy. I 
would like to see the government play a role that the private sector 
cannot play, like promoting basic research or large-scale projects. 
 
TOKYO 00005512  003 OF 010 
 
 
The government should also continue to offer tax incentives for 
companies to invest more in research and development. It is also 
important to take into consideration the dynamism of the Asian 
economy, so I hope the new government will accelerate the speed of 
concluding free trade agreements with Asian countries. 
 
Educational reform is also essential. The recent trend of students 
staying away from science and technology is serious. I hope that 
universities and graduate schools will set up courses to train 
engineers. To prevent society from degenerating, it might also be 
necessary to review the educational curriculums at elementary 
schools and junior high schools to foster a sense of public morality 
among students. 
 
-- What do you think about a hike in the consumption tax? 
 
Even if the 2011 basic fiscal balance is brought to the plus column 
through spending cuts and a natural increase in tax revenues, the 
nation will continue to be saddled with debts that account for 
150-160 percent of gross domestic product (GDP). To maintain 
Japanese firms' competitive in the international market, it is vital 
to review the tax-revenue structure that greatly relies on such 
direct taxes as the corporation tax. 
 
Expenditures for social security have been on the increase. Even in 
view of this fact, securing new financial resources is necessary. 
This could be one option: The consumption tax be designated as a 
special tax for social security, and the tax rate be raised in 2009, 
when the rate of the burden that pensions place on the national 
treasury is to be raised. If tax revenues grew, the timeframe could 
be delayed. 
 
-- From your experiences as a CEO, do you have any advice about 
personnel appointments? 
 
I have no advice, but I have hopes. I want the new administration to 
establish a "working cabinet" by placing the right persons in the 
right posts. Faction-based appointments should be discontinued. 
 
(3) Nuclear fuel supply security initiative: "Nuclear haves" aiming 
for monopoly; Japan determined to counter with its own plan 
 
MAINICHI (Page 3) (Almost Full) 
September 25, 2006 
 
Full-fledged international discussions of a nuclear fuel supply 
assurances initiative aimed at strengthening the nuclear 
nonproliferation regime, which is visibly beginning to show its 
weaknesses, have gotten underway. During the International Atomic 
Energy Agency's (IAEA) plenary session, which lasted until Sept. 22, 
Japan presented its own plan, countering a proposal made by six 
nations, including the US, Russia, and European countries. Intense 
bargaining is expected. Chances are that amid a trend toward 
limiting nuclear fuel supply sources, Japan, which is enriching and 
reprocessing uranium in Rokkasyo Village, Aomori Prefecture, might 
find itself in a difficult position. 
 
 
Measures to deal with black market 
 
Harvard University Professor Graham Allison during a special session 
pointed out that if a safety network for nuclear fuel supply were 
built, the number of countries that give up enriching or 
 
TOKYO 00005512  004 OF 010 
 
 
reprocessing uranium in view of economic rationality would 
increase. 
 
"Manufacturing Boeing 747 planes costs a country 50 times the amount 
needed to purchase them from a foreign country. Likewise, if a 
country enriches uranium on its own, it will cost five times the 
amount needed to purchase it." 
 
Since 2003, when North Korea, Iran, and Libya were found to have 
been secretly continuing nuclear development, momentum to constrain 
not only development of nuclear arms but also the proliferation of 
technologies to enrich uranium convertible for the development of 
nuclear arms and reprocess nuclear fuel has emerged. IAEA chief 
Mohamed ElBaradei in 2004 proposed a plan to control these 
facilities under an international framework. The US, Britain, 
France, Germany, Russia, and the Netherlands, which are in effect 
monopolizing the nuclear fuel supply market, this June proposed a 
plan that makes it a condition that countries wishing to join the 
envisaged safety network should abandon their nuclear enrichment and 
reprocessing programs. A skirmish between nuclear fuel "haves" and 
"have-nots" has begun. 
 
Iran's Vice-President for Atomic Energy Aqadadeh-Khoi, director 
general of the Atomic Energy Agency, criticized the proposal, 
noting, "We cannot accept a monopoly by industrialized countries." 
South Africa, which is also aiming to establish its own nuclear fuel 
cycle, expressed concern about the possibility of the right to the 
peaceful use of nuclear power being limited, while little progress 
has been made regarding nuclear disarmament, playing up the fact 
that the Nuclear Non-Proliferation Treaty (NPT) is a set comprising 
nuclear disarmament and the peaceful use of nuclear power. 
 
Japan's "exceptional position" at stake 
 
Japan was also pressed to change its nuclear power policy. Up until 
now, Japan has been allowed as an exception to possess a large 
quantity of plutonium, following that of Russia, the US, and France. 
However, if the six-nation proposal limiting supply sources to 
specific countries is implemented, the international community may 
question why Japan is allowed to possess facilities that are 
convertible into facilities for producing nuclear weapons or voice 
concern that it may intend to become nuclear-armed in response to 
North Korea. Should that occur, Japan might be pressed to give up on 
enriching and reprocessing uranium on its own. 
 
Defending its right to a nuclear fuel cycle, including enrichment 
and reprocessing, by any available means is a top agenda item for 
Japan, a country poor in natural resources. It compiled its own plan 
that awards the right to enrichment and reprocessing to a larger 
number of countries in about a month, according to the Foreign 
Ministry, and proposed it during the session. 
 
What about non-member nations? 
 
The initiative itself faces some challenges. Though discussions on a 
safety net have just started, chances are that some countries will 
not join, whichever plan is adopted. The initiative, therefore, will 
not be a decisive way of preventing North Korea or Iran from 
developing nuclear arms, though it may be effective, as a diplomatic 
source put it. 
 
Professor Allison pointed out, "Since the 1979 Iranian Revolution, 
it has been the US that has been giving any reason, such as human 
 
TOKYO 00005512  005 OF 010 
 
 
rights or Tehran's support for terrorism, to disrupt the flow of 
nuclear technology materials." He underscored that it is essential 
for the IAEA, a neutral international organization, to construct a 
mechanism for assuring nuclear fuel supplies. 
 
(4) Old friends, supporters talk of LDP President Abe: He speaks 
fast when he talks with friends; Dedicated person; Takes good care 
of others like older brother 
 
ASAHI (Page 35) (Slightly abridged) 
September 21, 2006 
 
Chief Cabinet Secretary Shinzo Abe was elected by a huge margin on 
Sept. 20 as the 21st president of the ruling Liberal Democratic 
Party (LDP), winning a landslide victory as expected. Abe has 
secured the LDP presidency that his father Shintaro Abe was unable 
to get (due to an early demise). He will become Japan's youngest and 
first postwar-born prime minister. He has walked a path that seems 
to have no connection with his advocacy of creating a society that 
would provide "a second chance" to business failures. Some expect 
much more from a person of high pedigree like him, while others are 
concerned about the extent of his political skills. 
 
"The torch of vision and reform has been passed to me," said Abe on 
the evening of Sept. 20 after he was elected LDP president. While 
watching Abe on a TV program, Koichi Ikeda, a 51-year-old company 
employee, said, "I see his determination." Ikeda was a classmate of 
Abe from his days at Seikei Elementary School all the way through 
Seikei University. They were good friends. 
 
Ikeda has an unforgettable anecdote about Shinzo Abe. When they were 
elementary school children, Shinzo said to him: "My father has just 
lost his job because he was defeated in the election. But he will 
become a consultant at a company of an acquaintance, so everything 
is OK." He made the remark with a calm face. 
 
At the time Abe's mother Yoko often was absent from home since she 
had to make the rounds of the election district to help his father 
get elected. Ikeda thought that being the family of a politician was 
tough. 
 
On the night of Sept. 1, when Abe formally announced his candidacy 
for the LDP presidency, several classmates from elementary school 
got together at a bar in the Ginza district. 
 
One of them called Abe's cell phone, and Abe answered while moving 
from one TV station to another one. Picking up the phone, Ikeda 
said, "Hello," Abe then asked, "Is that you, Ikeda?" "Please take 
good care of your health; hang in there," Ikeda said. "OK. I will. 
Thank you!" When Abe talks to his friends, he speaks much faster 
than when he talks to reporters. 
 
When Kazuhiro Bando, 51, who was Abe's classmate in 4th to 6th 
grade, opened a cake shop in Tokyo, Abe rushed to the shop to 
congratulate him. At the time, Abe was serving as chief cabinet 
secretary. But Bando is concerned about the aftermath of Abe's "big 
 
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win" in the presidential race. 
 
Yoichi Tominaga, 46, who leads a group of young supporters of Abe in 
Shimonoseki City, Yamaguchi Prefecture, said this of Abe: "Although 
Mr. Abe is a nondrinker, he will invite us to a grilled chicken shop 
and goes along with us bar hopping. He is good at remembering names. 
He will often call up me. I feel like he's my brother rather than a 
 
TOKYO 00005512  006 OF 010 
 
 
politician." 
 
Meanwhile, one supporter made a cool comment on him: "Since he was 
born and raised in Tokyo, he has done nothing for us." 
 
One company owner, who supported Abe's father Shintaro, said, "I 
thought that his book, Toward a Beautiful Country, lacked specifics. 
He has a nice personality, but I'm not sure about his political 
ability. Nobody knows as to whether his popularity will go up or 
down." 
 
(5) Betrayal by a foreign "correspondent" In Japan 
 
SANKEI (Page 7) (Abridged slightly) 
September 23, 2006 
 
By Yoshihisa Komori, Washington 
 
Reports from Tokyo by Western correspondents are often biased. It is 
natural for any Western leader to stress the importance of love of 
nation and national security. But if a Japanese leader like Shinzo 
Abe does that, the Western media label him a hawkish nationalist or 
even a dangerous militarist. The Western media clearly have a double 
standard and a political bias. 
 
I have recently experienced a quintessential case of a double 
standard involving a Tokyo-based foreign journalist, who was not 
only politically biased but also totally ignored the media rules. 
His technique was cunning, and I totally played into his hands. It 
all started this way: 
 
I was temporarily back in Tokyo in late August. One day I received a 
request through the Sankei Shimbun for an interview by a person 
named David McNeal, a Tokyo-based correspondent of the British 
daily, Independent. I was told that he was interviewing a wide range 
of people about Yasukuni Shrine for his article. With my departure 
for Washington approaching, my timetable was tight, but I decided to 
accept the request from the journalist with a major UK newspaper 
anyway. I sensed something awkward in McNeal's tone on the other end 
of the line, however. He sounded he had interest in a topic other 
than Yasukuni Shrine. 
 
On Aug. 23, I called on McNeal, a lean middle-aged English man, at 
the Foreign Correspondents Club of Japan in Yurakucho. Although he 
spoke good Japanese, the interview was conducted in English. The 
on-record interview began following a basic confirmation that it was 
for the Independent's article on the Yasukuni issue. The recording 
was for McNeil to take notes for his planned article. 
 
But I soon realized that McNeal's questions were centered on the 
Japan Institute of International Affairs' (JIIA) English-language 
website articles rather than on the Yasukuni issue. 
 
In mid-August, the Sankei Shimbun ran my article questioning the 
appropriateness of a government-financed research institute website 
carrying a series of English-language articles criticizing and 
ridiculing government policies. In reaction, JIIA speedily suspended 
its website articles, admitting its poor judgment. 
 
But Western academics and journalists criticized my column as an act 
that led to the suppression of free speech. They rapped my column 
that had simply questioned the appropriateness of JIIA articles, 
calling it a rightist threat. Criticizing my opinion from such a 
 
TOKYO 00005512  007 OF 010 
 
 
perspective, McNeal also urged me to write a letter to JIIA asking 
it to resume posting commentaries on its English language website. 
As if to administer an additional litmus test, he asked my views on 
such matters as the Nanjing Massacre, the comfort woman issue, an 
the International Military Tribunal for the Far East. His negative 
comments about love of country also perplexed me. The interview 
ended in about 50 minutes, leaving behind a bad aftertaste. 
 
Two weeks later in Washington, I learned from a friend of mine that 
my comments on historical issues have been posted on a net forum run 
by NBR, a Japan affairs research institution. I was surprise to find 
a report by David McNeil titled "The Struggle for the Japanese Soul: 
Yoshihisa Komori, Sankei Shimbun, and the JIIA controversy," 
originally contributed to Japan Focus, an e-journal and archive on 
Japan and the Asia-Pacific. 
 
I also found out later that McNeil had used the interview with me 
solely for Japan Focus and not for the Independent. He also 
transcribed my comments, which were supposed to be for taking memos, 
without obtaining my approval. 
 
Playing up my frank and crude words, the report was a diatribe 
against me with a focus only on JIIA commentaries instead of 
Yasukuni Shrine. Depicting me as a staunch defender of revisionist 
historical views, it was clear that McNeil posted his report on net 
forums to have Western leftists lash out at me. 
 
McNeal set me up. According to an American scholar who has long 
stayed in Japan, reporting is only part of what McNeil does, for he 
is a well-known leftist researcher and activist. He contributes 
articles to the Independent only occasionally. Anyone is free to 
express one's political views and speeches, but breaking a promise 
and setting someone up is unethical. 
 
I have been in this business a long time, and it did not occur to me 
that I would fall into a trap by another foreign "correspondent." 
Based on this bitter experience, I would like to remind fellow 
journalists to remain alert at all times. 
 
(6) Study of Shinzo Abe: Inherits grandfather's genes regarding view 
of Japan-US alliance 
 
TOKYO SHIMBUN (Page 2) (Full) 
September 22, 2006 
 
Terumasa Nakanishi, currently professor at Kyoto University, was 
invited as a lecturer to a study session of foreign policy hosted by 
Shintaro Abe about 20 years ago. He still remembers that he received 
a profound question from a participant that went: 
 
"Don't you agree that the reason that Britain was able to move 
closer to the Soviet Union during the Cold War even though it is an 
ally of the United Stated was the result of its thorough 
intelligence gathering and analysis?" 
 
After the study session ended, Nakanishi exchanged business cards 
with the questioner, who said, "My name is Shinzo Abe, a secretary 
(to Shintaro Abe)." Nakanishi then handed him a report on a British 
intelligence organization. Abe showed a strong interest in the 
report. At a later date, he sent Nakanishi a letter. At the end of 
the letter, Abe wrote that he would show the report to his father. 
 
In engaging in foreign policy, securing the intelligence about the 
 
TOKYO 00005512  008.3 OF 010 
 
 
weak points of other party is most important. Japan has not been 
good at that. Nakanishi was impressed by Abe and still remembers 
that he thought here was a person with an instinct about diplomacy. 
 
After assuming the prime minister's post, Abe intends to set up a 
Japanese version of the US National Security Council so that the 
government will be able to centralize the control of intelligence 
gathering and analysis. According to Nakanishi, Abe has had this 
idea for about 20 years. 
 
In 1960, Japan was wavering over revising the US-Japan Security 
Treaty (Ampo). At that time Abe's grandfather, Nobusuke Kishi, was 
prime minister. The six-year old Abe asked his grandfather, "What is 
the Ampo?" Kishi reportedly replied, "It is a treaty under which the 
United States protects Japan." Abe introduced this episode in his 
book Toward a Beautiful Country, which was recently published. 
 
The issue of revising the security treaty split public opinion in 
the country into two camps. Kishi was assaulted by a thug and badly 
wounded. Politician Kishi's reputation has yet to be established. 
His grandson Shinzo Abe, however, believes that Nobusuke Kishi was a 
politician who devoted his life to his country. 
 
Koji Akiho, Abe's classmate at Seikei University, remembers that Abe 
often said that his father was great. At his residence in Gotenba, 
Shizuoka Prefecture, Kishi welcomed Akiho and his grandson with 
gentle smile completely different from his image of being a "specter 
of the Showa era," which took root in the mass media. 
 
Of the 403 Diet members, 125 or about 30 PERCENT  have relatives who 
were lawmakers. Of them, 29, including Abe, are third-generation 
politicians. 
 
Many of the 29 lawmakers tend to make an idol of their grandfathers, 
who knew more about politics than their fathers. Taro Aso often 
talks about his grandfather, former Prime Minister Shigeru Yoshida, 
and Kunio Hatoyama often speaks of his grandfather, former Prime 
Minister Yukio Hatoyama. They do not talk about their fathers. 
 
Abe certainly inherits Kishi's DNA genes in the area of foreign 
policy and security. 
 
Kishi made the prototype of unilateral Japan-US alliance under which 
the United States protests Japan. Abe intends to develop that 
alliance into a true bilateral one, which his grandfather was unable 
to bring about. He also intends to establish Japan's diplomacy and 
security by reinforcing intelligence units. 
 
Abe calls this "advocacy diplomacy." However, many are concerned 
about his diplomatic stance. Many also are worried that Abe's 
hawkish policy is dangerous. Whether such a concern will end up 
being a groundless fear is uncertain. 
 
(7) Privatization of postal services: Shadow of foreign pressure - 
US keeping sharp watch on new postal insurance products 
 
ASAHI (Page 11) (Excerpts) 
September 23, 2006 
 
Postal services will be privatized in October next year. The Postal 
Privatization Committee will serve as the watchdog of the privatized 
firms. In order to judge the extent of new services to be offered by 
such firms, the panel has listened to views from private firms, 
 
TOKYO 00005512  009 OF 010 
 
 
which will become the rivals of the privatized postal firms. Its 
members include Naoki Tanaka, an economic critic, and those from 
various circles, such as governors and university professors. 
 
During unofficial talks held in the spring of last year in 
preparation for finalizing the Japan-US Enhanced Initiative on 
Deregulation and Competition, the United States government 
unofficially asked Japan to include foreign insurance companies in 
the Postal Privatization Committee as members. 
 
The Japanese government speculates the US request as reflecting its 
desire to shackle the postal insurance business before it is 
privatized. Over the past several years, the US frequently asked 
Japan to ban Japanese firms from offering new products as long as a 
level playing field is not readied (for both American and Japanese 
firms). 
 
In May 2004, Assistant US Trade Representative Wendy Cutler called 
on the Ministry of Internal Affairs and Communications. Citing a 
newspaper article in which Japan Post President Masaharu Ikuta 
expressed a desire for his company's access to the medical insurance 
sector, Cutler asked: "Is this an established fact or just a trial 
balloon?" 
 
Medical insurance is categorized as the third sector, which is a 
gray zone between life and non-life insurance. In this sector, 
American insurers have a strong presence. 
 
Hearing a senior ministry official replying: "I heard the president 
cited it as just an example," Cutler said: "I want you to keep it in 
mind that we, as your trade partner, are carefully checking your 
moves. I ask you to tell that the president or the staff under him 
should take a 'cautious' approach." 
 
The request from the US government is linked to American insurers' 
great interests in the Japanese market. 
 
In 1974, American Family, a small insurer in Georgia, was allowed to 
do business in Japan, and its cancer insurance policy became a great 
success. Teruo Asatai, 79, who had headed the First Insurance 
Division at the Finance Ministry at that time, said: "We were of the 
opinion that bringing in foreign capital would be desirable in order 
to destroy the lock-step formula in the industry." The leading 
American insurance company AIG also achieved good business results 
here. 
 
American firms had initially served as the role of resuscitating the 
market, but foreign firms began to enjoy their monopoly in the third 
sector as a special deregulation district for them in effect. In 
1999, a plan to allow Japanese firms to take part in the third 
sector was finally put on the negotiating table, but the US side 
kept calling for continued preferential treatment to American 
insurers. 
 
Then Finance Minister Kiichi Miyazawa said to US Secretary of the 
Treasury Rubin: "This is an issue to which Japan unusually has taken 
a morally proper response." Even so, since the US remained stubborn, 
Japan had to delay the day of liberalizing the third sector beyond 
the initial schedule. 
 
As measures to keep a lid on trade friction, some in Japan Post Co., 
and Japan Post suggest giving favorable treatment to American 
insurers again. 
 
TOKYO 00005512  010 OF 010 
 
 
 
Behind this queer proposal is this calculation: If American insurers 
are allowed to sell their products over the counter at post offices 
after the postal services are privatized, the US government might 
become quiet. An official of Japan Post said: "Even if Japanese 
companies release insurance policies, the US might try to obstruct 
their sales efforts." 
 
Even so, a great business opportunity will inevitably be given to 
trade partners in the privatized postal businesses. If excessive 
political consideration is taken in, competitive conditions will be 
relaxed. 
 
In a meeting of the House of Councillors' General Affairs Committee 
on Aug. 29, New Komeito member Yuji Sawa said: "I am concerned that 
foreign financial institutions might try to take over the Japanese 
postal savings and insurance businesses." 
 
In the political world, there is a view that the privatized postal 
insurance company may be placed under the wing of foreign capital in 
the future. Some keep in mind many cases occurred in the latter half 
of the 1990s in which a failed life insurance company was taken over 
by a foreign firm. 
 
Asked about the possibility of an American insurer's buyout of the 
postal insurance company, a senior member of the US Chamber of 
Commerce in Japan replied: "The postal insurance business is huge. 
It is not a matter taken up seriously." 
 
A senior member of a certain leading life insurer stated: 
 
"It is inconceivable that American life insurers are preparing a 
takeover scenario. Their purpose supposedly is to prevent Japanese 
firms' attempt to enter the third sector. I guess they will consider 
the possibility when they fail to attain this purpose." 
 
SCHIEFFER