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UNCLAS SECTION 01 OF 05 TOKYO 007051 
 
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 12/19/06 
 
 
INDEX: 
 
(1) Takeovers of Japanese companies by foreign companies: Types of 
business subject to notification to be increased; METI plans measure 
to prevent conversion of civilian goods into military usage 
 
(2) Abductions by North Korea violate human rights: Government urged 
to hammer out strategy to deal with North in cooperation with other 
countries 
 
(3) North Korea's kidnapping constitutes violation of human rights: 
First International conference on abduction issue held in Tokyo 
 
(4) Kasumigaseki confidential: Kantei (Prime Minister's Official 
Residence) vs. Finance Ministry 
 
ARTICLES: 
 
(1) Takeovers of Japanese companies by foreign companies: Types of 
business subject to notification to be increased; METI plans measure 
to prevent conversion of civilian goods into military usage 
 
NIHON KEIZAI (Top Play) (Almost Full) 
December 19, 2006 
 
Regarding takeovers of Japanese companies by foreign companies, the 
Ministry of Economy, Trade and Industry (METI) has started looking 
into the possibility of expanding types of business subject to the 
system requiring notification to the government. The envisaged 
measure is based on the Foreign Exchange and Foreign Trade Control 
Law intended to prevent the outflow of key technologies that could 
be used for military purposes or terrorist attacks. METI intends to 
expand the coverage of the system from the current weapons and 
aircraft industries to related fields, such as high-tech materials 
and machine tools, which are convertible into military use. It wants 
to strengthen a monitoring system in preparation for an increase in 
international M&As, while maintaining a stance of encouraging 
investment by foreign countries with a regulation that is more 
moderate than that of the US, which targets all industrial sectors. 
 
High-tech materials, machine tools 
 
METI will shortly set up a study group consisting of persons 
representing industrial circles and academia. It wants to compile a 
report around next June and revise ordinances of related ministries 
as early as next year, along with the Finance Ministry, with which 
it has jurisdiction over related laws. 
 
The Foreign Exchange and Foreign Trade Control Law obligates that in 
the event of a foreign company trying to obtain shares of a Japanese 
company, it notify in advance that the envisaged takeover of the 
target company could damage Japan's national security, provided that 
the target company is a listed company, and its stake in it exceeds 
10% . If it is determined that the technologies of the target 
Japanese company could flow into foreign countries, endangering 
Japan, the METI minister and the Finance Minister can recommend or 
order the alteration or suspension of the takeover bid. 
 
European and US governments also regulate direct investment by 
foreign countries. Moves to strengthen such regulations are also 
spreading, following the terrorist attacks on the US in 2001. The 
Japanese regulation is less strict compared with European countries 
and the US. METI views that it is essential for Japan to strengthen 
 
TOKYO 00007051  002 OF 005 
 
 
its monitoring system in order to fulfill its international 
responsibility, such as prevention of terrorist attacks. 
 
In the revision, METI will first expand the types of business 
subject to notification. It will consider the possibility of adding 
such categories of industry as special steel and high-tech carbon 
materials, and machine tools used to process those high-tech 
materials to the list of business types subject to the regulation. 
Those materials are all convertible for the manufacturing of 
missiles. 
 
At present, takeovers of operating companies by foreign companies 
are subject to the notification system, but after the revision, 
takeovers of holding companies will also become subject to 
notification. Purchases of shares Japanese companies issue abroad 
will also be subject to the regulation. The aim is to prevent 
foreign companies from using loopholes with the diversification of 
corporate forms and the development of the capital market on a 
global scale in mind. 
 
METI is also considering strengthening the penalty system. The 
existing law stipulates that prison terms of no longer than three 
years or fines of no more than 1 million yen be imposed on companies 
that fail to observe the notification obligation or violated an 
order to suspend investment. A plan to extend prison terms to no 
more than five years has been floated with the aim of boosting the 
efficacy of the law. 
 
A triangular merger system that allows a foreign company to wholly 
own a Japanese company using its own stock as the merger 
consideration will come into effect next May. The growing view is 
that M&As by foreign companies will increase in Japan. METI will 
therefore adopt a system that will enable it to carry out detailed 
checks on security matters. 
 
Investment by foreign companies will be approved if it is determined 
after screening that there is no concern about the outflow of 
technology. However, the abuse of the system could hamper free 
investment. How to secure transparent standards for government 
recommendations or orders to suspend investment will likely be a 
future agenda item. 
 
(2) Abductions by North Korea violate human rights: Government urged 
to hammer out strategy to deal with North in cooperation with other 
countries 
 
SANKEI (Page 30) (Full) 
December 19, 2006 
 
"North Korea hates to see the abduction issue becoming an 
international issue," a Foreign Ministry official told the relatives 
of abduction victims after the talks held between Japan and North 
Korea in February. 
 
Video testimony by Choi Un-hee, a South Korean actress abducted by 
North Korea, and Charles Jenkins, the husband of Japanese abductee 
Hitomi Soga, were shown in an international conference on North 
Korea's abductions held in Tokyo recently. Their revelations turned 
the abduction issue into an international problem. 
 
Jenkins said that the wife of another US Army deserter was a Thai 
citizen abducted by North Korea named Anocha Panjoy. He claimed that 
she had told him she was grabbed in the summer 1978 in Macau, where 
 
TOKYO 00007051  003 OF 005 
 
 
she was working, and taken by boat (to North Korea). Thai newspapers 
prominently reported on this verified case, prompting the Thai 
government to launch an investigation to find out the truth. 
 
Immediately after Jenkins' testimony, an English newspaper in Hong 
Kong also filed this report: "Two ethnic Chinese women also 
disappeared in Macao on the same day Anocha was kidnapped." Jenkins 
said that Anocha had told him, "There were other Asian women" beside 
her in the ship. 
 
Choi in custody talked with one of the two missing Chinese women, 
Ms. Hong, in Pyongyang many times. Choi quoted Hong as saying, "I 
was taken by boat to offshore and then by large ship to North 
Korea." Her relatives met with Hong in Seoul in March and confirmed 
that she had been abducted by North Korea. 
 
Jenkins also spoke about a Rumanian abductee. Choi also gave 
information about victims abducted from Jordan, France, and 
Malaysia. 
 
In the past, a Lebanese abduction victim who escaped from North 
Korea referred to victims abducted from France, Holland, and Italy. 
North Korea is now suspected to have kidnapped citizens from at 
least 12 countries. 
 
Representatives from the National Association for the Rescuing of 
Japanese Kidnapped by North Korea and the Association of the 
Families of Victims Kidnapped by North Korea visited New York last 
month and provided information about abductions to the Office of the 
UN. Now that North Korea has continued to decline Japan's proposal 
for talks on the abduction issue, it is necessary for the Japanese 
government to learn about the results of investigations conducted by 
various countries based on such information from Japan and hammer 
out a strategy to deal with North Korea in cooperation with these 
countries. 
 
(3) North Korea's kidnapping constitutes violation of human rights: 
First International conference on abduction issue held in Tokyo 
 
SANKEI (Page 30) (Full) 
December 14, 2006 
 
Such groups as the Association of the Families of Victims Kidnapped 
by North Korea and the National Association for the Rescuing of 
Japanese Kidnapped by North Korea held a first international 
conference on the abduction issue at a Tokyo hotel yesterday. 
Families of abduction victims and government officials from 
countries involved, as well responsible UN officials reported on 
their abduction cases in detail. The participants affirmed the need 
for the countries concerned to work together in settling the 
abduction issue. 
 
In a speech at the outset of the conference, Kyoko Nakayama, special 
advisor to the prime minister (for the Abduction Issue), claimed in 
a strong tone, "The kidnapping of citizens from a number of 
countries, including Japan, constitutes a violation of human 
rights." 
 
In a session to explore ways to resolve the abduction issue, North 
Korea Freedom Coalition Vice Chairman Suzanne Scholte said, "It 
probably will be impossible to resolve the abduction issue while the 
Kim regime remains in power," adding, "We must not yield on to the 
North until all abduction victims return to their home countries. We 
 
TOKYO 00007051  004 OF 005 
 
 
should call on the US government to take sanctions against the North 
in order to pursue the responsibility of Kim Jong Il." 
 
Many relatives of abductees from overseas called for Japan's 
cooperation and stressed the need for cooperation among all the 
countries concerned. Chairman Choi of the South Korean Association 
of the Families of Victims Kidnapped by North Korea said: "(In South 
Korea,) the problem of North Korea's nuclear programs has come into 
focus, with the abduction issue put on the backburner and about to 
be forgotten. We hope the issue of South Korean abduction victims 
will also be discussed in the six-party talks (starting on Dec. 
18)." A nephew of Anocha Panjoy, a Thai abduction victim, 
emphatically said, "We want to know how (their relatives) are living 
in North Korea," asking for assistance to be offered to the families 
of abductees in Japan and South Korea. 
 
Sakie Yokota, 70, the mother of Megumi, who was abducted at the age 
of 13, said: "We want to appeal that there are persons who need help 
across the world. All parents of the abductees are getting older. 
Unless a settlement is reached at an early date, reunion will become 
impossible." 
 
(4) Kasumigaseki confidential: Kantei (Prime Minister's Official 
Residence) vs. Finance Ministry 
 
BUNGEI SHUNJU (Page 235 &236) 
January 2007 
 
The Finance Ministry has finally taken action after watching 
carefully moves of the Abe cabinet, which has strong tinge of being 
antagonistic toward it. 
 
The ministry was surprised at Prime Minister Abe's appointment of 
Junzo Matoba as deputy chief cabinet secretary, the highest post in 
the bureaucracy. Matoba is a former Finance Ministry official, who 
joined the ministry in 1957. Matoba still has hard feelings toward 
the ministry because he was unable to become administrative vice 
minister, even though he considered himself as the best candidate 
among those who had joined the ministry when he did. The rumor is 
that Matoba has no intention to work with the Finance Ministry as 
one of their own. 
 
Osaka University Prof. Masaaki Honma, who buried the idea of a sales 
tax, was appointed as chairman of the government's Tax Commission 
under the prodding of Chief Cabinet Secretary Yasuhisa Shiozaki. The 
appointment of Honma shocked the ministry. With his appointment, the 
ministry was forced to go on the defensive soon after the Abe 
cabinet was formed. In an attempt to recover the government's 
confidence in it, the ministry decided to cut new government bond 
issues in a supplementary budget for fiscal 2006 because of an 
expected increase in tax revenues (in fiscal 2007). 
 
The method of slashing government bond issuances for a supplementary 
budget has been used from long ago. The reasons for cutting new 
government bonds -- to rebuild government finance, to reduce annual 
expenditures, or to use surplus funds for an additional fiscal 
stimulus -- are deeply related to the image a government wants to 
project at the time. In short, the Finance Ministry suddenly 
presented such a policy that could determine the fate of the Abe 
government. The ministry this time around had its collective eye on 
both a cut in expenditures and a policy emphasis on economic 
growth. 
 
 
TOKYO 00007051  005 OF 005 
 
 
Assistant Deputy Chief Cabinet Secretary Atsuro Saka, who joined the 
ministry in 1970, and Kazuho Tanaka, secretary to the prime 
minister, entered the ministry in 1979, took the initiative in 
compiling the supplementary budget. It was easy for them to predict 
that tax revenues would top 50 trillion yen. Saka earlier took the 
lead in coming up with measures for the "second chance" policy under 
then Chief Cabinet Secretary Abe. Tanaka served in such posts as 
budget examiner in charge of the Ministry of Health, Labor and 
Welfare, as well as Secretariat Division director, and he has his 
own channels of communication to the ministry's mainstream. 
 
As a result, they compiled a typical Finance Ministry-style 
supplementary budget. Expecting a further increase in tax revenues, 
they plan to bring the policy slogan, "emphasis on economic growth," 
to the fore in compiling the budget for fiscal 2007. 
 
Over the past decade, when the Finance Ministry drafted budgets 
under the Hashimoto, Obuchi and Koizumi governments, respectively, 
it placed emphasis on fiscal reconstruction, cuts in expenditures, 
or fiscal stimulus by combining tax revenues, expenditures, and 
government bond issuances. Whenever Finance Ministry officials 
presented the indices for government bond issuances, politicians who 
don't know about the system never failed to fall into ministry 
officials' trap. The question is whether the Abe government, which 
plans to stand up against the Finance Ministry, will follow in 
former governments' steps or whether it will be able to block the 
ministry's offensive, seeing through the bond issuance mechanism. 
 
SCHIEFFER