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UNCLAS SECTION 01 OF 12 TOKYO 000832 
 
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 02/28/07 
 
 
1) Top headlines 
2) Editorials 
3) Prime Minister's daily schedule 
 
Visit of Deputy National Security Adviser Crouch: 
4) Deputy National Security Adviser Crouch in news conference says 
it will take time before North Korea can be removed from 
terrorist-supporting nation list 
5) Defense Minister Kyuma tells Deputy National Security Adviser 
Crouch that he envisaged "no problem" in the relocation of Futenma 
to an alternate site 
 
National security: 
6) Government panel finishes report on creating Japan-style National 
Security Council (JNSC), headed by prime minister and three cabinet 
members 
7) Prime Minister Abe orders new JNSC to study possibility of using 
right of collective self-defense 
8) Government to expand Cabinet Intelligence Council to make it the 
"control tower" over gathering, analyzing information on foreign and 
security affairs 
 
9) Russia's economic delegation arrives in Japan aiming at expansion 
of trade with Japan that is now far below that between Japan and 
South Korea 
 
China connection: 
10) Prime Minister Abe finds "no problem" with LDP policy chief 
Shoichi Nakagawa's remark about China's military buildup 
11) China reacts sharply to Nakagawa remark 
 
Political agenda: 
12) Opposition Minshuto (Democratic Party of Japan) to present bill 
designed to correct social and economic disparities in Japanese 
society 
13) Minshuto may "back" but not "sponsor" Asano as candidate to run 
against Ishihara in Tokyo gubernatorial race 
14) Abe trying to draw curtain on issue of his drive to reinstate 
postal rebel and friend Eto into LDP and support him as Upper House 
election candidate 
15) LDP's Yamasaki, Kato critical of Abe for giving priority to 
friend Eto by reinstating the postal rebel into LDP and backing him 
in Upper House election 
16) Reinstated postal rebel Eto will not run in Oita face, where he 
would have to face candidate of LDP coalition partner New Komeito 
 
17) US, European funds are major stockholders in Nikko Cordial 
 
18) Buying and selling of greenhouse-gas emission rights to start in 
Japan in June 
 
Articles: 
 
1) TOP HEADLINES 
 
Asahi: 
Details of suppression of the 3.1 Movement in 1919: Diaries of 
General Utsunomiya covering 15 years discovered; Massacre covered 
up; Rebellious Koreans killed 
 
Mainichi: Yomiuri: Sankei: Tokyo Shimbun 
Supreme Court for first time deems order to play national anthem is 
 
TOKYO 00000832  002 OF 012 
 
 
legal, does not infringe on freedom of conscience 
 
Nihon Keizai: 
Nikko Cordial Group to be delisted from Tokyo Stock Exchange; TSE to 
make final decision in April 
 
Akahata: 
Preferential securities tax system benefits those whose declared 
annual income tops 10 billion yen: Seven billionaires get tax cuts 
worth 20 billion yen 
 
2) EDITORIALS 
 
Asahi: 
(1) Supreme Court decides making teacher play national anthem is 
legal: Decision confirms compulsion 
(2) Japanese version of NSC is still half-baked 
 
Mainichi: 
(1) Court decision on national anthem: It should not be made 
official approval 
(2) Japanese equivalent of NSC: Just establishing a panel will not 
do 
 
Yomiuri: 
(1) Court decision on national anthem: No violation of freedom of 
conscience 
(2) Japanese version of NSC: Speed up efforts to create central 
command for national strategy 
 
Nihon Keizai: 
(1) Whether proposed Japanese equivalent of NSC will function or not 
depends on prime minister 
(2) Court decision on national anthem appropriate 
 
Sankei: 
(1) Japanese version of NSC: We expect panel to function as central 
command 
(2) National anthem ruling: Supreme Court decision only natural 
 
Tokyo Shimbun: 
(1) NSC: Concern about new system getting nowhere 
(2) Cut carbon dioxide emissions using more natural energy 
 
Akahata: 
(1) Dowa (antidiscrimination) management: Completely end illegal 
activities by members of Buraku Liberation League 
 
3) Prime Minister's Official Residence (Kantei) 
 
Prime Minister's schedule, February 27 
 
NIHON KEIZAI (Page 2) (Full) 
February 28, 2007 
 
08:28 
Met supporters of Lower House member Masatoshi Ishida in the Diet 
building. 
 
08:32 
Attended a cabinet meeting. Agriculture Minister Matsuoka stayed 
behind. Followed by METI Minister Amari. 
 
TOKYO 00000832  003 OF 012 
 
 
 
09:30 
Met Deputy Chief Cabinet Secretary Matoba at the Kantei. 
 
11:15 
Met Diet Affairs Committee Chairman Nikai. 
 
13:15 
Listened to a speech by Mongolian President Enkhbayar in the Upper 
House plenary session. 
 
14:15 
Met Ambassador to Russia Saito and Foreign Ministry's European 
Affairs Bureau Director General Harada at the Kantei, with Assistant 
Deputy Chief Cabinet Secretary Ando and others. 
 
16:54 
Met Special Advisor Nemoto. 
 
17:35 
Met former Finance Minister Shiokawa and Nippon Budokan Hall 
President Katsuhiko Aoki. 
 
17:42 
Attended a meeting on strengthening the Kantei's functions related 
to national security. 
 
18:04 
Attended a meeting of the Council on Economic and Fiscal Policy. 
 
19:42 
Met Japan IBM Supreme Advisor Takeo Shiina, Kikkoman Corp. Chairman 
Tomosaburo Mogi and others at the ANA Hotel. 
 
21:50 
Returned to his official residence. 
 
4) It "will take time" to remove DPRK from the list of state 
sponsors of terror: US deputy national security advisor 
 
MAINICHI (Page 2) (Full) 
February 28, 2007 
 
Takayasu Ogura 
 
Visiting US Deputy National Security Advisor Jack Crouch yesterday 
met with the press including the Mainichi Shimbun. Referring to the 
recent six-party agreement stating that the United States will begin 
the process for removing North Korea from the list of the state 
sponsors of terror, Crouch indicated it would take time to remove 
that country, noting: "In order to remove it from the list, we must 
satisfy our Congress. Frankly speaking, that is not an easy task." 
 
He continued: "There is not only a political problem but also a 
legal one. In order to remove North Korea from the list, North Korea 
and other state sponsors of terror (such as Iran and Cuba) must 
follow the same procedures. It will take time to do so." 
 
Meanwhile, on Japan's assistance to Iraq and Afghanistan, Crouch 
stated, "It's incorrect to think that I am visiting Japan in order 
to make a special request," but he added, "In Afghanistan, 
assistance for improving roads and power supply is necessary, in 
 
TOKYO 00000832  004 OF 012 
 
 
addition to the security area." He thus expressed the hope for 
Japan's aid in the area of infrastructure. 
 
5) "Don't worry" about Futenma relocation 
 
NIHON KEIZAI (Page 2) (Full) 
February 28, 2007 
 
Defense Minister Fumio Kyuma yesterday met with visiting US Deputy 
National Security Advisor Jack Crouch at the Defense Ministry. On 
the deadlocked issue of relocating the US Marine Corps' Futenma Air 
Station (in Ginowan City, Okinawa), Kyuma stressed, "The United 
States doesn't have to worry," and asked the US to watch and wait on 
the process of coordination with local residents. Touching on the US 
force transformation, Crouch stated, "We have placed more emphasis 
on the realignment of things relating to the Japan-US alliance than 
redeployment of forces." He thus called on Japan to implement the 
plans Japan and the US agreed last May as swiftly as possible. 
 
6) JNSC: Leaks subject to severe penalties 
 
ASAHI (Page 1) (Full) 
February 28, 2007 
 
A government panel released a report yesterday featuring a plan to 
launch a new body called the Japan National Security Council (JNSC), 
which is to build Japan's diplomatic and security strategies. The 
panel, with Prime Minister Abe presiding, has discussed measures to 
consolidate the functions of the prime minister's office (Kantei) on 
national security. The JNSC's planned establishment is a step to 
strengthen the Kantei's functions and is aimed at enabling the prime 
minister to make prompt policy decisions with a small number of 
cabinet ministers. In addition, the panel report also suggests the 
necessity of creating a law at an early date to protect secrets with 
severe punishment against leaking secrets related to national 
security. 
 
The government will introduce a package of relevant legislative 
measures to the Diet during its current session, including a bill to 
revise the Security Council of Japan (SCJ) Establishment Law. The 
government eyes launching the JNSC in April next year. Meanwhile, 
another government panel, chaired by Chief Cabinet Secretary 
Shiozaki, has been discussing how to strengthen the government's 
intelligence-gathering functions. This panel is also expected to 
work out a report today and recommend measures, such as creating 
rules to provide information to the JNSC. 
 
In its report, the Abe panel proposes reorganizing the current SCJ 
and establishing the JNSC as a new body for a small number of 
members. The JNSC is to be made up of the prime minister and three 
cabinet ministers: the chief cabinet secretary, the foreign 
minister, and the defense minister. The panel first considered 
including the finance minister, but the finance minister is not 
included. The JNSC will discuss diplomatic and security strategies 
and will also consult on how to deal with emergency situations, such 
as an armed attack against Japan. The outcome of JNSC meetings will 
constitute the government's course of action with cabinet 
endorsement. 
 
The JNSC is to call in the prime minister's special advisor for 
national security affairs. In addition, other cabinet ministers and 
the Self-Defense Forces' joint staff office chief are also to attend 
 
TOKYO 00000832  005 OF 012 
 
 
JNSC meetings as needed. The JSC's framework will be retained to 
discuss Japan's national defense program guidelines (NDPG) and other 
matters. 
 
The JNSC's secretariat will be staffed with 10-20 persons, including 
SDF officers and private-sector experts. A special advisor to the 
prime minister can concurrently serve as chief of the JNSC's 
secretariat. Two assistant chief cabinet secretaries, one for 
 
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foreign affairs and the other for security and crisis management, 
are to serve concurrently as deputies to the chief of the JNSC's 
secretariat. In addition, the report also specifies the necessity of 
 
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creating a law to strictly punish those who leak secrets, saying it 
is one of the most important tasks in protecting information. The 
report seeks new legislation, suggesting the necessity of 
establishing safeguards to protect secrets, such as obligating JNSC 
officials to protect secrets with particularly heavy 
confidentiality. 
 
SIPDIS 
 
In this connection, the prime minister told reporters at his office 
yesterday evening: "We will discuss whether the Diet can enact the 
bills into law during the current session, but we should remain 
cautious in our discussion on legislating measures to protect 
secrets." 
 
SIPDIS 
 
7) Abe suggests that JNSC will study collective self-defense right 
 
TOKYO SHIMBUN (Page 2) (Full) 
February 28, 2007 
 
Prime Minister Shinzo Abe last night indicated that the 
Japanese-style National Security Council (JNSC) would look into the 
issue of Japan exercising the right to collective self-defense, 
which is now prohibited under the government's interpretation of the 
Constitution. "The NSC might study it, as necessary," he said. 
 
Nobuo Ishihara, chairman of the council to strengthen the Prime 
Minister's Official Residence's (Kantei) national security 
functions, which just produced a report on the Japanese-style NSC, 
also indicated that the JNSC would discuss this matter ahead of 
other issues. Abe and Ishihara were responding to questions from 
reporters at the Kantei. 
 
8) Cabinet Intelligence Council to be expanded 
 
NIHON KEIZAI (Page 2) (Full) 
Eve., February 27, 2007 
 
A government panel to step up the government's 
intelligence-gathering capability will make public its interim 
report this week. According to the report revealed yesterday, the 
panel, chaired by Chief Cabinet Secretary Yasuhisa Shiozaki, 
proposes expanding the Cabinet Intelligence Council's functions and 
members. The CIC currently meets twice a year or so for information 
exchanges at the subcabinet level. In the report, the CIC is 
positioned as a control tower of intelligence functions and is to 
direct government ministries and agencies to collect and analyze 
information needed for the government's policy planning. 
 
The CIC, chaired by the chief cabinet secretary, is made up of vice 
ministers from four central government offices, including the 
Foreign Ministry and the Defense Ministry, and reports domestic and 
international situations. However, each of the CIC member offices is 
 
TOKYO 00000832  006 OF 012 
 
 
prone to report extremely important information directly to the 
prime minister or the chief cabinet secretary. The CIC cannot 
necessarily integrate or share necessary information, according to a 
government official. 
 
The panel has therefore made a fundamental review of the CIC's 
character. Meanwhile, the panel report suggests the need for the CIC 
to expand its members, including the chief of the secretariat to the 
Japan National Security Council (JNSC), a newly planned body to be 
tasked with planning foreign and security policies. The panel will 
also study a system under which the CIC can meet frequently. 
 
In addition, the panel also proposes setting up intelligence analyst 
posts in the Cabinet Intelligence and Research Office. The 
intelligence analysts, including those from the private sector, will 
be positioned under the director of cabinet intelligence. They are 
to evaluate information in a report to the CIC and other government 
offices on various themes, such as the issue of North Korea's 
nuclear weapons programs. 
 
9) Russia's presidential mission focuses on practical gains, 
sidestepping "territorial issue," aims to expand trade 
 
TOKYO SHIMBUN (Page 2) (Full) 
February 28, 2007 
 
Shohei Yoshida 
 
Russia's Premier Fradkov arrived in Japan yesterday, together with a 
group of his country's entrepreneurs. Ahead of him, Industry & 
Energy Minister Khristenko and his group arrived in Japan on Feb. 26 
and are now here in Japan. Combining that group, Russia has 
dispatched a "grand economic mission" of some 200 persons to Japan. 
A top-level Russian official's visit to Japan followed the one by 
President Putin in 2005. Russia places emphasis on practical gains, 
putting aside the northern territories issue, as it did before. 
 
It is often the case with Russia that it prioritizes economic 
affairs over the territorial issue. In fact, when Putin visited 
Japan, some 140 Russian business leaders, along with him, visited 
Japan. The Japan Business Federation (Nippon Keidanren) hosted a 
forum for them. 
 
In Russia, foreign and security policies are under the jurisdiction 
of the president. Fradkov is number two in Russia following the 
president, but he is in charge of trade and economic affairs. His 
mission is accordingly more economic-oriented. 
 
According to Fradkov's itinerary, he is to meet with Prime Minister 
Abe, to speak at the Japan-Russia investment forum to be attended by 
400 business leaders from the two countries, and also to meet 
separately with leaders of Japanese companies. Russia apparently is 
using this mission as leverage to expand economic and trade ties 
with Japan. 
 
The trade value between Japan and Russia has been on the rapid 
increase over the past three years. Economic affairs going ahead of 
other matters between Japan and Russia have become evident even in 
statistics since Putin's visit to Japan in 2005. 
 
In 2002, the number of the member firms of the Japan Chamber of 
Commerce and Industry in Moscow totaled 60, but the membership has 
 
TOKYO 00000832  007 OF 012 
 
 
increased 2.5 times to 153 (as of February 2007). Japan's direct 
investment in Russia also doubled from the year earlier and reached 
10.6 billion yen in 2005. 
 
However, in a comparison in Japan's trade value between Russia and 
South Korea, which is on the same GDP scale as Russia, the trade 
value between Russia and Japan is only one-sixth of that between 
South Korea and Japan. Personnel exchanges between Japan and Russia, 
too, are a mere 150,000 or so, much fewer than that with other trade 
partners. 
 
Japan and Russia are still far away from each other, just as the gap 
over the territorial issue remains wide. 
 
10) Abe sees no problem in Nakagawa's remarks on China's military 
buildup 
 
ASAHI (Page 4) (Full) 
February 28, 2007 
 
In a speech, Liberal Democratic Party Policy Research Council 
Chairman Shoichi Nakagawa said in view of China's rapid military 
buildup: "Japan might become a Chinese province." Touching on this 
statement, Prime Minister Shinzo Abe said yesterday: "People used to 
say that Japan would become America's 51st state. It is meaningless 
to take out part of a speech and discuss it." Abe was talking to a 
group of reporters at his official residence. 
 
Nakagawa said in the speech in Nagoya on Feb. 26: 
 
"(The economy) of a major power across from the narrow strip of the 
sea has grown 10% annually. Its military spending has been growing 
at a pace of 15% to 18%. If something happens to Taiwan in the next 
15 years, Japan might become a Chinese province over the next two 
decades." 
 
11) China rebuts Nakagawa's statement 
 
ASAHI (Page 4) (Full) 
February 28, 2007 
 
Yusaku Yamane, Beijing 
 
In reaction to Liberal Democratic Party Policy Research Council 
Chairman Shoichi Nakagawa's statement underlining the need to keep 
tabs on China's rapid military buildup, Chinese Foreign Ministry 
spokesman Qin Gang said in a press conference yesterday: 
 
"What is the true purpose of constantly making a big fuss over China 
as if it is a threat. Japan's landmass is 25 times smaller than that 
of China, and its population is 10 times smaller. Despite that, 
Japan's military spending is enormous, which is absurd. China's 
military spending is 67% of Japan's, and only 7% per capita." 
 
12) Minshuto drafts bill correcting social disparities, readying 
education and Iraq countermeasures 
 
NIHON KEIZAI (Page 2) (Slightly abridged) 
February 28, 2007 
 
The main opposition party, Minshuto (Democratic Party of Japan), 
yesterday drafted the outline of an emergency measures bill to 
 
TOKYO 00000832  008 OF 012 
 
 
correct the social divide, featuring a hike in the minimum wage to 
an average of 1,000 yen nationwide. Minshuto has set the narrowing 
of the income gap in society as the main issue at the current 
session of the Diet. In a bid to make a clear distinction between 
the party's position and that of the government of Prime Minister 
Shinzo Abe with the July House of Councillors election in mind, the 
largest opposition party intends to submit to the Diet measures 
against the government-sponsored bills on education reform and Iraqi 
reconstruction assistance. As the ruling parties have strengthened 
criticism of Minshuto's such an election strategy as impracticable, 
heated debate will likely occur at the Diet. 
 
"Deliberations on the budget at the House of Representatives are 
crucial, and we will face real debate after the deliberations," 
Minshuto Acting President Naoto Kan said in a strong tone yesterday 
at the beginning of a meeting of the project team to deal with the 
social disparities. 
 
Countering the Abe administration, which has positioned 
constitutional reform as the main campaign issue for the July Upper 
House race, Minshuto has come up with a strategy of placing priority 
on policies that deal with the daily lives of the people. In 
addition to a hike in the minimum wage, Minshuto's social-gap 
correction bill includes: (1) realization of the same wage for the 
same labor, (2) promotion of the status of part-time workers to that 
of permanent workers, (3) a ban on age-discrimination when 
advertising and hiring and regarding with an eye on a huge number of 
retirements of baby boomers. 
 
Prime Minister Abe is negative about the idea of raising the minimum 
wage across the board, and he commented: "We should be careful so as 
not to bring pressure on small businesses." Liberal Democratic Party 
(LDP) Secretary General Hidenao Nakagawa also cast a doubt toward 
the idea in a party yesterday in Tokyo. He said: "Smaller companies 
will not pay a minimum wag of 1,000 yen." 
 
Minshuto President Ichiro Ozawa, since assuming his current post, 
has five times adopted the strategy of boycotting Diet debate, 
including one against the ruling coalition's voting on the bill 
revising the Basic Education Law without the presence of opposition 
parties, as well as an all-out boycott against the ruling camp's 
rejection to its call for dismissing Health, Labor and Welfare 
Minister Hakuo Yanagisawa. However, he has failed to reflect his 
party's policies in the government-sponsored bills through 
deliberations with the ruling parties, even though his party 
submitted counterproposals to the education reform bill and other 
legislation. 
 
13) Asano starts coordination, with eye on running in Tokyo 
gubernatorial election; Minshuto may support but not endorse him 
 
TOKYO SHIMBUN (Page 1) (Excerpts) 
February 28, 2007 
 
Shiro Asano, 59, former governor of Miyagi Prefecture, has started 
coordination with an eye to running in the Tokyo gubernatorial 
election in April. Asano told reporters after delivering a speech in 
Fuchu, Tokyo, yesterday, "Although I am confused (about the upsurge 
of calls among citizens for my candidacy), I have to make a response 
in an adult way." 
 
Asano has been sounded out by Minshuto (Democratic Party of Japan) 
 
TOKYO 00000832  009 OF 012 
 
 
as a potential candidate. But in a public meeting in Tokyo on Feb. 
25, he said in response to participants' calls for his candidacy, "I 
am so moved, I don't know what to say." Asano appears intent on 
winning broad support without showing any political coloring. In a 
press conference yesterday, Minshuto President Ichiro Ozawa 
indicated an understanding of Asano's intention, remarking, "We do 
not mean that we must absolutely make him our party's own 
candidate." 
 
14) Eto submits to LDP letter asking for reinstatement; Prime 
Minister Abe hurries to put end to the matter 
 
NIHON KEIZAI (Page 2) (Full) 
February 28, 2007 
 
Seiichi Eto, a postal rebel and a former House of Representatives 
member, yesterday submitted to the ruling Liberal Democratic Party 
(LDP) a letter asking the LDP to let him rejoin. His submission of 
the letter seems to be in line with the intention of Prime Minister 
Shinzo Abe, who aims to draw a curtain on the matter. However, some 
LDP lawmakers are unhappy with Eto's sudden reinstatement into the 
party since the party had originally decided to let him join after 
the House of Councillors election in July. The LDP will likely 
reinstate Eto into it in early March and endorsed as an official 
candidate (for the Upper House race). There is also a view in the 
LDP calling on the party not to endorse him as a candidate for the 
election, just allowing him to return to the party. 
 
Abe told reporters last night: "I think a final timing for the Upper 
House election is approaching. Mr. Eto is the only person who 
submitted a letter to the party. But nothing has been decided." Eto 
submitted the letter to the LDP just four days after Abe had 
revealed his intention to let him rejoin. This move stemmed from the 
judgment that the prolongation of the issue might weaken political 
impetus, as well as lower the cabinet support rates. 
 
Another reason is that LDP Secretary General Hidenao Nakagawa, who 
had been reluctant to let Eto rejoin, was forced to change his 
policy, intertwined with his remark calling on the cabinet 
ministers' "loyalty" to the prime minister. In his meeting with 
Lower House member Seishiro Eto, chairman of the LDP Oita 
prefectural chapter, Nakagawa conveyed the party's conditions for 
the reinstatement and endorsement of Seiichi Eto: (1) the party will 
follow the prefectural chapter's policy and (2) an election office 
will be set outside the prefecture. 
 
Most LDP members are critical of Abe's decision. In a meeting 
yesterday Takeshi Noda pointed out that the party's standards for 
reinstating and endorsing former Lower House members were unclear. 
Taku Yamasaki and Koichi Kato in their meeting last night agreed on 
the perception that it is not desirable that the prime minister made 
that decision because Eto is his friend." 
 
As senior member of the Machimura faction, who senses the mind of 
the New Komeito, which is concerned about a negative impact on 
election cooperation with the LDP, stressed: "The party should 
reconsider whether to field him as a proportional representation 
candidate even though it will allow him to rejoin." A government 
source said, "There will be no" reaction by voters, but many 
observers are concerned about an adverse effect on the election. 
 
15) Yamasaki, Kato complain about prioritizing friendship 
 
TOKYO 00000832  010 OF 012 
 
 
 
TOKYO SHIMBUN (Page 2) (Full) 
February 28, 2007 
 
Former Liberal Democratic Party Vice President Taku Yamasaki, former 
Secretary General Koichi Kato, and others met in Tokyo last night 
 
SIPDIS 
and shared the view that the question of reinstating former Senior 
Vice Health Minister Seiichi Eto, a postal rebel, must not be 
resolved based on friendship ties. 
 
One participant commented on party management: "The air of free 
discussion in the party has diminished. The party leadership must 
realize that members may look obedient on the surface but they are 
rebellious inside." Another member noted about Secretary General 
Hidenao Nakagawa's remarks calling for loyalty to Prime Minister 
Shinzo Abe: "Such will create a bad image as if we were living in a 
country like North Korea." 
 
The participants included 11 senior members of the Asia policy and 
security vision study group led by Yamasaki. 
 
16) Eto presents letter asking LDP to allow him to return 
 
ASAHI (Page 4) (Excerpts) 
February 28, 2007 
 
Ruling Liberal Democratic Party (LDP) Secretary General Hidenao 
Nakagawa asked Party Ethics Committee Chairman Takashi Sasagawa to 
discuss the issue of whether to reinstate Seiichi Eto, a postal 
rebel who lost his House of Representatives seat in the 2005 
election. The expectation is that the LDP will endorse Eto as a 
proportional representation candidate for the House of Councillors 
election after the committee decides to let him rejoin the party. 
Giving consideration to concerns of the Oita prefectural chapter and 
New Komeito that the decision would have an negative impact on 
cooperation between the LDP and New Komeito in the Upper House 
election campaign, the LDP leadership has made it a condition that 
Eto will not campaign in Oita Prefecture. 
 
Eto handed to Nakagawa a written pledge expressing his intention to 
support postal privatization. Nakagawa told Eto that he should move 
his address from Oita Prefecture and that he should not campaign in 
Oita. Eto accepted these conditions. Nakagawa set out the conditions 
in order to maintain election cooperation with the New Komeito. 
 
17) European, US investment funds occupy upper echelon of list of 
Nikko Cordial Group's stockholders: Battle being fought with eye on 
reorganization of the group 
 
ASAHI (Page 2) (Full) 
February 28, 2007 
 
Moves in the financial services industry are heating up with eye the 
delisting of Nikko Cordial Group, the third largest securities 
houses in Japan from the Tokyo Stock Exchange (TSE). 
 
If Nikko were delisted, it would lose even more customers, resulting 
in curtailed business activities and a decline in business 
performances. Chances are that in the event its delisting becomes 
certain and its stocks are put in the liquidation post at the TSE, 
domestic and foreign investment funds would purchase its stocks 
through a takeover bids at low prices and sell Nikko's group 
 
TOKYO 00000832  011 OF 012 
 
 
companies at the highest prices. 
 
Several European and US investment funds have already purchased 
Nikko stocks with eye on the group's reorganization. They now have 
about 6% stake in the company, occupying the top three positions in 
the list of its stockholders, overtaking the CitiGroup, a leading US 
financial institution, and the Mizuho Financial Group - both have 5% 
stake in NIkko. It is viewed that leading financial groups will 
purchase Nikko stocks through a takeover bid for the purpose of 
selling the acquired stocks at the highest price. Executives of the 
Nikko Cordial Group are increasingly alarmed about the move with one 
saying, "If our stocks are delisted, they will be traded at bargain 
prices." 
 
Assuming the worst-case scenario, Nikko has searched for the 
possibility of going under a wing of a leading financial group or 
entering a business tie-up. Leading domestic and foreign financial 
groups have informally offered help to Nikko. 
 
The CitiGroup, which has invested in Nikko since the late 1990s, is 
considering placing Nikko under its umbrella to use it as its base 
in Japan. It is now coordinating views with the possibility of 
raising its stake to over 33.3% so that it can have a veto on key 
issues at stockholders meetings. It is also considering the 
possibility of wholly owning Nikko if it is delisted. 
 
The Mizuho Financial Group is also pressing ahead with efforts to 
expand its securities business, as can be seen its plan to merge 
Mizuho and Shinko Securities Houses - both are its group companies - 
next January. It has started looking into the possibility of bailing 
out Nikko. If Mizuho's plan realizes in the form of not countering 
the CitiGroup but extending helping hand jointly with it, chances 
are that the two leading Japanese and US financial institutions will 
seal a tie-up deal with Nikko in between. The Mitsubishi UFJ 
Financial Group has also sounded out the possibility of extending 
cooperation to Nikko with the aim of recovering from its late start 
in the securities business. There is no knowing how the competition 
over Nikko will develop. 
 
18) Trade in greenhouse gas emission credits to start in Japan in 
June 
 
TOKYO SHIMBUN (Page 8) (Full) 
February 28, 2007 
 
The nation's first exchange for countries and companies to trade 
greenhouse gas emission rights will be established in June. 
 
Preparations for opening the exchange are being pushed mainly by the 
Japan Bank for International Cooperation and the Cho Mitsui Trust 
and Banking Company. The two banks expect to officially announce 
this plan. They are also calling on other major trust and banking 
companies to participate. 
 
A number of countries have introduced emissions trading. By 
establishing an exchange, Japan aims to make it easy to purchase 
foreign emission credits from developing countries as part of 
efforts to meet its target set in the Kyoto Protocol. 
 
The Kyoto Protocol, which set its signatories' targeted reductions 
in greenhouse gas emissions, allows the countries to purchase 
emission rights from other countries or foreign companies. 
 
TOKYO 00000832  012 OF 012 
 
 
 
The planned exchange is a virtual one with no specific place or 
organization. Under the plan, buyers and sellers open bank accounts, 
sellers deposit their emission credits as a trust asset, while 
buyers purchase the rights. 
 
Japan will make it possible for foreign companies to open bank 
accounts and call on companies in potential seller countries, such 
as China and India, to take part in the exchange. The Japan Bank for 
International Cooperation, which has know-how on emissions trading, 
will offer assistance in managing the exchange. 
 
DONOVAN