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UNCLAS SECTION 01 OF 13 TOKYO 000128 
 
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 01/17/08 
 
Index: 
 
1) Top headlines 
2) Editorials 
3) Prime Minister's daily schedule (Nikkei) 
 
4) Cabinet adopts action plan for new antiterrorism law; Defense 
chief Ishiba to issue order today dispatching MSDF to Indian Ocean 
to continue OEF mission  (Nikkei) 
 
Ozawa at the DPJ helm: 
5) Democratic Party of Japan (DPJ) President Ozawa calls the new 
antiterrorism law "unimportant" in justifying his skipping vote on 
bill in Diet  (Tokyo Shimbun) 
6) Ozawa says he will not apologize for his absence from the Diet 
during key vote  (Mainichi) 
7) Ozawa at DPJ convention says he will risk his political life to 
bring about a change to a DPJ-led government  (Yomiuri) 
8) Ozawa sets election goal of his party attaining a majority of 
Lower House seats  (Tokyo Shimbun) 
9) Commentary: Is Ozawa really all right?  (Mainichi) 
 
Fukuda in charge: 
10) Prime Minister Fukuda's draft "vision of Japan" sees cooperation 
with the opposition as essential, while DPJ plan aims at creating an 
Ozawa government  (Sankei) 
11) Fukuda meets with special envoy from ROK president elect, 
predicts new era in bilateral relations  (Sankei) 
 
12) CIRO official passed information to Russian embassy for a 
decade, for which he was remunerated and wined and dined  (Yomiuri) 
 
 
13) Koga, Tanigaki factions to merge in May  (Tokyo Shimbun) 
 
Economy shaking: 
14) Tokyo stocks continue to plummet, now at 13,504; Yen continues 
to rocket, now at 105 threshold  (Asahi) 
15) Fukuda blames U.S. sub-prime mess for sliding stock market 
(Yomiuri) 
16) 11 trillion yen losses by 21 banks, including Japanese 
institutions  (Yomiuri) 
17) Coordination to select Muto as new head of the Bank of Japan 
(Asahi) 
 
18) Prime minister mulling whether to announce at Davos Conference 
his plan for setting numerical targets for reducing greenhouse gases 
 (Asahi) 
 
Mekong plan: 
19) Japan to give five Mekong-area governments 4.4 billion yen in 
aid  (Yomiuri) 
20) Japan setting up a new framework for talks among the five Mekong 
countries  (Nikkei) 
 
Articles: 
 
1) TOP HEADLINES 
 
Asahi, Mainichi & Tokyo Shimbun: 
Japan Post says all five paper-manufacturing companies reported 
false blending rates of recycled paper used for New Year's 
 
TOKYO 00000128  002 OF 013 
 
 
postcards; Nippon Paper head to quit over scandal 
 
Yomiuri & Sankei: 
Ex-Mitsubishi president convicted over concealment of vehicle 
defect 
 
Nikkei: 
KDDI to buy Chubu Electric Power's optical networking system to 
counter NTT 
 
Akahata: 
MHLW comes up with guidelines for protection of day laborers 
 
2) EDITORIALS 
 
Asahi: 
(1) Falling stock prices and rising yen give us an opportunity to 
overcome "fragile" economy 
(2) Court ruling over defect Mitsubishi vehicle: CEO responsible for 
safety 
 
Mainichi: 
(1) Japan's lack of attractiveness for investment more serious than 
plummeting stock prices 
(2) Mitsubishi leaders lacked morality 
 
Yomiuri: 
(1) Every possible action against falling stock prices should be 
taken to avoid "March crisis" 
(2) How will DPJ demonstrate its capability to take the reins of 
government? 
 
Nikkei: 
(1) Vast losses in U.S. financial sector fueling concern 
(2) Mitsubishi urged to atone for wrongdoing 
 
Sankei: 
(1) Subprime meltdown: Pay close attention to government-affiliated 
funds 
(2) DPJ should win public's confidence instead of playing politics 
 
Tokyo Shimbun: 
(1) Ozawa-led DPJ should be more realistic 
(2) Ruling over Mitsubishi vehicle accident: Top corporate leader 
heavily responsible for defect 
 
Akahata: 
(1) Why do they obstruct moves to create treaty banning cluster 
bombs? 
 
3) Prime Minister's Official Residence (Kantei) 
 
Prime Minister's schedule, January 16 
 
NIKKEI (Page 2) (Full) 
January 17, 2008 
 
09:31 
Attended the year's first tea ceremony at the Urasenke Tokyo studio 
in Ichigaya, along with former Prime Ministers Mori and Abe. 
 
10:59 
 
TOKYO 00000128  003 OF 013 
 
 
Met at the Kantei the special envoy of South Korean President-elect 
Lee Myung Bak. 
 
13:57 
Attended an LDP national secretaries' general meeting at party 
headquarters. 
 
14:37 
Met at the Kantei the foreign ministers of five Southeast Asian and 
Mekong countries, followed by Economic and Fiscal Policy Minister 
Ota and others. Ota stayed on. 
 
15:38 
Attended an LDP joint national convention of the youth and women's 
divisions at party headquarters. 
 
16:03 
Met at the Kantei Fuji Xerox advisor and New Japan-China Friendship 
Committee for the 21st Century Japanese Chair Yotaro Kobayashi and 
others, followed by private secretary to the foreign minister 
Kawano. 
 
17:05 
Met Internal Affairs and Communications Minister Masuda and 
Administrative Management Bureau Director General Hashiguchi. 
Afterward, attended a Security Council of Japan meeting, followed by 
an ad hoc cabinet meeting. 
 
17:48 
Met Vice METI Minister Kitahata, followed by former LDP Secretary 
General Nakagawa. 
 
20:04 
Returned to his official residence. 
 
4) Cabinet OKs MSDF masterplan 
 
NIKKEI (Page 2) (Full) 
January 17, 2008 
 
The government yesterday evening adopted a masterplan at a Security 
Council meeting and an ad hoc cabinet meeting for the Maritime 
Self-Defense Force's refueling mission to be resumed in the Indian 
Ocean under a special measures law promulgated and enforced 
yesterday. Prime Minister Yasuo Fukuda approved the masterplan for 
MSDF activities. Defense Minister Shigeru Ishiba is expected to 
issue orders on Jan. 17 to send an MSDF squadron. 
 
The MSDF will ready the Oumi, a supply ship, and the Murasame, a 
destroyer escort. The two MSDF vessels will head out next week and 
arrive in the Indian Ocean in about three weeks. The MSDF will 
resume refueling activities and water supply in mid-February for 
foreign naval vessels engaging in maritime interdiction operations 
to back up antiterror operations in Afghanistan. The MSDF, based on 
the masterplan, will send a total crew of up to 500. The MSDF 
squadron will be staged in the Indian Ocean up until the end of 
June. 
 
5) "New refueling law unimportant": Ozawa 
 
TOKYO SHIMBUN (Page 2) (Full) 
January 17, 2008 
 
TOKYO 00000128  004 OF 013 
 
 
 
The Diet enacted a new antiterrorism special measures law (new 
refueling law) in a second vote of the House of Representatives on 
Jan. 11. That day, Ichiro Ozawa, president of the leading opposition 
Democratic Party of Japan (Minshuto), left his seat in the lower 
chamber right before the vote. "I had promised to go to Osaka 
Prefecture to back a candidate running in the gubernatorial 
election," Ozawa said in a news conference yesterday after his 
party's convention. "A campaign promise must not be broken. I don't 
think the new refueling law is important for the people and the 
DPJ." So saying, Ozawa indicated that there was no problem. 
 
"If I think it's an important bill," Ozawa went on, "I will be there 
before doing anything else." Even so, Ozawa stressed: "We're going 
to take office. That's my role as the head of a political party. My 
role has priorities." In addition, Ozawa told reporters: "The prime 
minister and cabinet ministers do not attend every plenary session. 
Nevertheless, they are not criticized at all. I cannot understand 
this at all. I'm far busier. If you criticize me, you should 
criticize both of them, as well." 
 
6) DPJ President Ozawa: I offer no apology for abstaining from 
voting on new antiterrorism bill because supporting campaign was 
more important 
 
MAINICHI (Page 2) (Full) 
January 17, 2008 
 
When asked by reporters about his having left the plenary session on 
Jan. 11 of the House of Representatives where the ruling parties 
passed the new antiterrorism special measures bill by a two-third 
majority override vote, he responded yesterday: "As party head, not 
as a politician, I have more important matters to deal with." He 
indicated in his remark that he felt no need to offer an apology. 
Since Secretary General Yukio Hatoyama has repeatedly apologized for 
Ozawa's act, there are noticeable differences in attitudes toward 
the matter between the two DPJ executives. 
 
Explaining that the reason for his abstention from voting was to 
support the DPJ-backed candidate's campaign in the Osaka 
gubernatorial election, he stressed: "It was committed from before 
to support the campaign. I could not break my election promise." 
Asked about the new antiterrorism special measures law, he stated: 
 
"It was not an important bill for the public and the DPJ. I had 
already expressed my opposition to the bill. The aim of the plenary 
session was to just to count numbers. We could predict the result. I 
cannot understand why you criticize me." 
 
Asked about the fact that the DPJ had required its legislators to 
attend the plenary session, Ozawa said: "As party head, I make my 
own priorities about my own duties." He argued: 
 
"I cannot understand that the prime minister and cabinet ministers 
are allowed to absent themselves from plenary sessions because of 
official duties, but I am not allowed. I am busier than them and I 
have a more significant role than them." 
 
In a meeting yesterday in Kyoto, however, Liberal Democratic Party 
(LDP) Secretary General Bunmei Ibuki criticized Ozawa's abstention 
from voting, saying: "Those who serve for national politics should 
put in every effort in order to give the public the assurance of 
 
TOKYO 00000128  005 OF 013 
 
 
relief and security." 
 
7) Ozawa at party convention vows to stake his political life on 
bringing about change in government, with eye on winning majority in 
next Lower House election 
 
YOMIURI (Page 2) (Excerpts) 
January 17, 2008 
 
The major opposition Democratic Party of Japan (DPJ or Minshuto) 
held yesterday a regular party convention at the Pacifico Yokohama 
in the city of Yokohama. In the session, President Ichiro Ozawa 
expressed his determination to stake his political life on bringing 
about a change of government through the next House of 
Representatives election. But he is under criticism for skipping a 
vote in a Lower House plenary session that readopted the 
government-sponsored antiterrorism special measures bill. His 
strategy to enlist greater public support remains unclear. 
 
Touching on the next regular Diet session to be convened tomorrow, 
Ozawa declared in his speech: 
 
 "Defining the upcoming session of the Diet as the session to lower 
gasoline prices, we will demonstrate activities in the Diet to 
abolish the provisional gasoline tax rates, while securing resources 
for local road projects. I promise you that I will devote myself to 
winning the next political battle. I also pledge that I will stake 
my political life on achieving two political goals: Bringing about a 
change in government through a general election this year in order 
to implement our livelihood-oriented policy, and enrooting 
parliamentary democracy in Japan. It is going to be my last battle 
as a politician." 
 
In a press conference after the convention, he also said about the 
victory-or-defeat line: "If the opposition bloc fails to win a 
majority, such would mean a defeat." 
 
8) DPJ President Ozawa: Aim is to gain majority of Lower House seats 
by opposition parties in next election 
 
TOKYO SHIMBUN (Page 2) (Full) 
January 17, 2008 
 
Referring in a speech delivered at the annual convention held 
yesterday afternoon in Yokohama to the next House of Representatives 
election, Democratic Party of Japan (DPJ or Minshuto) President 
Ichiro Ozawa expressed his determination: 
 
"I promise to stake my political career on taking over the reins of 
government. It will be the final battle for me as a politician. All 
the DPJ members as one body will win the political battle in 
cooperation with other opposition parties." 
 
At a press conference after the convention, Ozawa gave a low 
threshold for victory: 
 
"The best result would be that the DPJ alone holds a majority of the 
Lower House, but the aim is to have a majority by opposition 
parties. If that cannot be achieved, it will mean a defeat." 
 
Considering the next regular Diet session, which will open tomorrow 
and will focus on gasoline prices, Ozawa underscored a policy of 
 
TOKYO 00000128  006 OF 013 
 
 
abolishing the provisional tax rates. He clearly stated: "I think 
there is no possibility for holding consultations with the 
government and ruling parties on this issue." 
 
9) Is Ozawa all right? 
 
MAIHICHI (Page 2) (Abridged slightly) 
January 17, 2008 
 
By Masao Yora, editorial writer 
 
Immediately after the Democratic Party of Japan's (DPJ or Minshuto) 
overwhelming victory in last summer's House of Councillors election, 
I wrote in this column: "Above all, it is unclear if DPJ President 
Ichiro Ozawa is aiming at becoming the prime minister." 
 
The DPJ confirmed in its party convention yesterday that it will aim 
at an Ozawa administration. But doubts again crept into my mind as I 
watched Ozawa leave the Jan. 11 House of Representatives plenary 
session before it took a vote to readopt the government-sponsored 
new antiterrorism special measures legislation in order for him to 
stump for the DPJ candidate running in the Osaka gubernatorial 
race. 
 
An election comes ahead of an historical vote. Reportedly, some DPJ 
members had feared from days before that Ozawa might skip the vote. 
He could have delayed the time to leave for Osaka. Ozawa seemingly 
wants to say that he has no reason to be criticized by the media. 
But Ozawa is a person who might become the prime minister. In my 
view, it was his responsibility to send a clear message to the 
people that day. An increasing number of people are having doubts 
about Japan's decision to resume the refueling operation in the 
Indian Ocean. Ozawa is to blame for making such people wonder, "What 
was this Diet all about?" 
 
Some observers think that Ozawa deliberately avoided the vote in 
order to secure a free hand with an eye to forming a grand coalition 
in the future. If that is true, the rebellious act by the party head 
is even more serious. 
 
Ozawa will reportedly not take the floor to question the government 
in the next regular Diet session. Although his obsession to bring 
about a change in government is clear, Ozawa seems to be thinking 
that he is cut out for doing the spadework behind the scenes rather 
than for becoming the prime minister. 
 
At one point in the past, the Liberal Democratic Party discussed 
selecting different persons as the prime minister and the LDP 
president. By the same token, I believe the DPJ could have a 
separate prime ministerial candidate and party president. 
 
10) Draft revealed of Fukuda's policy vision: Stresses cooperation 
with the opposition camp 
 
SANKEI (Page 1) (Excerpts) 
January 17, 2008 
 
This newspaper learned yesterday of the contents of a draft policy 
statement, the Fukuda Vision, which Prime Minister Yasuo Fukuda is 
not preparing as a set of domestic and foreign policy guidelines to 
use from now on. The catchphrase in the statement is "building a 
nation that is independent and can coexist." The draft has such 
 
TOKYO 00000128  007 OF 013 
 
 
statements as "building a nation that is secure and safe," and 
contains such policy stances as giving diplomatic emphasis to Asia, 
as well as having a "policy line of cooperation with the opposition 
parties" in managing the Diet. 
 
The prime minister, after vetting the draft, apparently is 
considering presenting the vision himself at the Liberal Democratic 
Party (LDP) convention on Jan. 17 and then in his Diet policy speech 
on the 18th. 
 
The draft was compiled in mid-December last year mainly by former 
Justice Minister Masatate Sugiura at the National Strategic 
Headquarters, a body directly under the LDP president. It is 
organized into five chapters: 1) Diet and administration; 2) 
Economic society strategy aimed at independence and coexistence; 3) 
Creating a country in which the culture, traditions, nature, and 
history are treasured; 4) Building a country that is secure and 
safe; and 5) foreign relations. 
 
In the chapter on Diet and administration, the draft categorizes the 
current lopsided upper and lower houses as being "a danger to 
parliamentary democracy." It stresses a policy line of cooperation 
with the opposition parties, stating, "There is no other way to 
break the deadlock other than by straightforward and sincere talks 
with the opposition camp on important political items." It 
categorizes as essential to change the tendency of favoring 
government-submitted bills, and cited the need to increase bills 
submitted under political leadership that went along with the will 
of the people. 
 
11) Meeting with ROK president-elect's special envoy, Prime Minister 
Fukuda says, "I feel a new age is coming" 
 
SANKEI (Page 3) (Full) 
January 17, 2008 
 
Prime Minister Yasuo Fukuda yesterday met at the Prime Minister's 
Official Residence with South Korean Special Envoy Lee Sang Deuk, 
deputy speaker of the National Assembly and South Korean 
president-elect's elder brother, and conveyed his willingness to 
attend the inauguration ceremony for the president on Feb. 25. Tokyo 
is highly hopeful that the new South Korean administration will 
depart from the Roh Moo Hyun administration's policy line, which has 
been described as "being anti-Japanese, anti-America, and pro-DPRK," 
as one former foreign minister put it. 
 
In the talks, Fukuda said, "I have feeling that a new age is 
coming," and he expressed his hopes for the president-elect. On the 
North Korean issues, the two confirmed the importance of 
strengthening the unity of Japan, the United States, and South 
Korea. Special Envoy Lee noted: "We must not put aside the abduction 
issue." 
 
Japan is in a mood of welcoming the next South Korean 
administration. At the beginning of the year, former Prime Minister 
Yoshiro Mori, Administrative Vice Foreign Minister Shotaro Yachi, 
and other government officials visited South Korea in succession to 
coordinate a visit to Japan by the ROK president-elect this spring. 
 
Behind this welcoming mood is Tokyo's sense of relief in part 
because the president-elect indicates he will attach importance to 
relations with Japan and also because the period of the Roh 
 
TOKYO 00000128  008 OF 013 
 
 
administration, during which bilateral ties were strained, has come 
to an end. Unlike President Roh, who fanned the flames of 
anti-Japanese sentiments over historical issues and the Takeshima 
(Tokdo in Korean) islands dispute, "the new administration will not 
clamor at us as the Roh administration had done," a Japanese Foreign 
Ministry official noted. 
 
However, a senior official explained, "The South Korean public has 
become pro-North Korea during the tenures of the Kim Dae Jung and 
Roh administrations." The past presidents of South Korea declared 
building a "future-oriented relationship" with Japan immediately 
after they came to power, but later they intensified an 
anti-Japanese mood. At a press briefing yesterday, Chief Cabinet 
Secretary Nobutaka Machimura said, "My impression is that there may 
 
SIPDIS 
be a slight difference from the Roh administration," but he added: 
"We must carefully assess the situation." 
 
12) CIRO employee possibly got several million yen from Russian 
counterparts in return for info 
 
YOMIURI (Page 39) (Full) 
January 17, 2008 
 
A 52-year-old male employee of the Cabinet Intelligence and Research 
Office (CIRO or Naicho for short), is alleged to have provided the 
government's in-house information to a 38-year-old second secretary 
of the Russian Embassy in Japan. In this case, the CIRO employee is 
suspected of having given information to the second secretary and 
several intelligence agents from the Russian government, sources 
revealed. The official is believed to have received money and have 
been treated to the extent of several million yen in total. The 
in-house information was excerpted from CIRO reports and other files 
prepared for the organization to plan key policies. The Tokyo 
Metropolitan Police Department's Public Security Bureau is 
investigating what was contained in the information that went to 
Russia. 
 
The CIRO employee in question is currently assigned to the 
administrative section as a researcher and analyst of the domestic 
political situation, according to MPD Public Security Bureau 
sources. About 10 years ago, this employee was assigned to an 
organization affiliated with the Cabinet Office. In those days, he 
was a researcher and analyst of overseas developments. 
 
The CIRO employee got to know the Russian Embassy second secretary 
and those Russian intelligence agents at that time through persons 
he knew, the MPD sources said. The employee used to provide 
information to them, and in return, received several tens of 
thousands of yen each time or was wined and dined. Such payoffs are 
seen to have added up to several million yen. 
 
The employee took out his handwritten transcriptions of CIRO files, 
including reports on the domestic political situation, according to 
the sources. He met with his Russian counterparts at restaurants in 
Tokyo or elsewhere and handed those transcripts to them. 
 
13) LDP's Koga and Tanigaki factions agree on merger in May 
 
TOKYO SHIMBUN (Page 2) (Excerpts) 
January 17, 2008 
 
Liberal Democratic Party (LDP) Election Committee Chairman Makoto 
 
TOKYO 00000128  009 OF 013 
 
 
Koga, who heads an LDP faction, and Policy Research Council Chairman 
Sadakazu Tanigaki, who also heads another faction, held a meeting 
yesterday in a Tokyo hotel, in which the two faction heads reached 
an agreement on a plan to merge their factions by the end of May. 
They will hold a political fund-raising party on May 15 in Tokyo and 
announce the inauguration of a new faction. 
 
Koga will head the new faction and Tanigaki will become No. 2 man in 
it. The new faction will not file a presidential candidate for the 
time being. The total membership of the new faction will be 61 -- 45 
Koga faction members, 14 Tanigaki faction members and Koga and 
Tanigaki, who a now belong to no factions as they serve in LDP 
leadership posts. The membership of 61 will make the new faction the 
third-largest faction in the LDP, following the Tsushima faction, 
which has 68 members. 
 
After the meeting, Koga told reporters: "I want to place importance 
on our agreement for the LDP and our country's politics." Tanigaki 
stated: "The two factions share a policy of giving priority to the 
daily lives of people and to foreign policy toward Asia." 
 
The Koga and Tanigaki factions were derived from the former Miyazawa 
faction, which also included the Kono group, which left the Miyazawa 
faction in 1998. The Kono group is now headed by Taro Aso and is 
called the Aso faction. Moreover, due to the so-called Kato 
rebellion in 2000, in which Koichi Kato called on then Prime 
Minister Yoshiro Mori to step down, the Kato faction, which was also 
derived from the former Miyazawa faction, split into the Ozato 
faction, currently the Tanigaki faction, and the Horiuchi faction, 
currently the Koga faction. 
 
14) TSE continues free fall, with Nikkei closing at 13,504 yen: Yen 
rises sharply, testing 105 yen against dollar 
 
ASAHI (Page 1) (Full) 
January 17, 2007 
 
The benchmark Nikkei Stock Average on the Tokyo Stock Exchange 
yesterday fell nearly 500 yen but narrowly avoided crashing through 
the 13,500 point barrier. In the meantime, the yen rose to 105 
against the dollar, the highest level in two years and eight months. 
Uncertainties about the future of the U.S. economy triggered by the 
subprime loan issue have spread commotion to markets in many 
countries. In particular, stock prices are plunging, and the yen is 
making big gains on the Tokyo Stock Exchange (TSE). 
 
The Nikkei Stock Average ended at 13,504.51 yen, down 468.12 points 
from the previous day, marking the fourth consecutive decrease. The 
margin of decline reached 1,094 yen. TOPIX (Tokyo Stock Exchange 
Stock Price Index), indicating the movement of prices of stocks 
listed on the First Section of the TSE, was at 1,203.37 yen, down 
47.83 points from the previous day. Stock prices fell across the 
board, with prices of 90 PERCENT  of stocks listed on the First 
Section of the TSE taking a beating. Trading volume stood at 3.02 
billion shares. 
 
Meanwhile, the yen exchange on the Tokyo Foreign Exchange Market hit 
between 106.28 yen and 106.31 yen against the dollar, up 1.3 points 
from the same time the previous day. 
 
Many market insiders are calling for structural reforms, such as 
deregulation, and fiscal reconstruction. However, they are 
 
TOKYO 00000128  010 OF 013 
 
 
disappointed at the Fukuda administration, noting that the reform 
drive has stalled. This is accelerating the sell-off of Japanese 
stocks. 
 
Moves to withdraw invested money are gathering momentum in stock 
markets throughout the world. In Asia, indexes in Singapore and 
Shanghai dipped about 3 PERCENT  from the previous day's level. 
India also saw a 2 PERCENT  drop, compared with the previous day. 
Stock prices in Britain also slid 1.9 PERCENT . Stock prices in 
Germany temporarily dropped 1.5 PERCENT . 
 
In the past, there have been cases in which Japan-selling brought 
about lower stock prices and a weaker yen, and an economic recovery 
caused a higher yen and higher stock prices. This time, however, yen 
carry trade, in which foreign investors borrow low-interest yen to 
change it into dollars and invest it in high-interest overseas 
assets, increased before the yen began to rise. However, judging 
that the investment risk has increased, those investors are now 
buying yen in order to pay back the yen loans, thus driving the yen 
higher. 
 
15) "Impact of subprime loan crisis yet to be determined": Fukuda 
 
YOMIURI (Page 9) (Full) 
January 17, 2008 
 
Following the plunge on the Tokyo Stock Exchange yesterday, a number 
of government officials made statements that the plunge is 
attributable not to weakness in the Japanese economy but mainly to 
the subprime loan issue. 
 
Commenting on the growing subprime loan fiasco, Prime Minister 
Fukuda told reporters at the Prime Minister's Office (Kantei): "We 
have yet to determine how much impact the issue will have on the 
future of the Japanese economy. I believe that this situation will 
continue for some time to come. I want the U.S. to deal with the 
matter properly." Regarding the falling stock prices, however, he 
took the view that the falling stock prices do not reflect the 
Japanese economy. 
 
Some market insiders have pointed out that one reason for the 
falling stock prices is the Fukuda administration stepping back from 
the reform drive. However, Chief Cabinet Secretary Machimura 
underscored, "If you tell me which policy of the Fukuda 
administration has affected stock prices, it would be very 
helpful." 
 
16) Losses incurred by 21 Japanese, U.S., and European banks from 
subprime loan fiasco reach 11 trillion yen: 470 billion yen by six 
Japanese banks 
 
YOMIURI (Page 1) (Full) 
January 17, 2008 
 
According to the tally worked out by Yomiuri Shimbun, based on the 
amounts released by leading 21 Japanese, U.S. and European banks, 
losses incurred by those banks since last year from nonperforming 
subprime loans, U.S. housing loan targeting low-income earners, 
totaled 107.8 billion dollars or approximately 11.4 trillion yen. 
Since leading U.S. banks and securities houses will release further 
calculation results through late January, losses are expected to 
expand. There is now a strong possibility of losses incurred 
 
TOKYO 00000128  011 OF 013 
 
 
throughout the world amounting to close to 300 billion dollars as 
projected by the Organization for Economic Cooperation and 
Development (OECD). 
 
Citigroup, the largest bank in the U.S., sustained the largest loss 
of 2.86 billion. Its loss had increased from 6.4 billion dollars in 
the July-September quarter last year to 22.2 billion dollars in the 
October-December quarter the same year. 
 
Morgan Stanley reported a loss of 1.5 billion dollars in the 
June-August quarter last year, but the amount increased in the 
September-November quarter. Its losses are expanding as time goes 
by. Though the prices of stocks it holds are continuing to fall, the 
company has been unable to sell them, resulting in a sharp increase 
in appraisal losses. Among Japanese banks, losses sustained by six 
companies, including Mizuho Financial Group and Nomura Holdings, 
totaled approximately 4.5 billion dollars, or 477 billion yen. 
 
17) Government starts coordination to select new BOJ governor, 
looking at Vice Governor Muto 
 
ASAHI (Page 4) (Full) 
January 17, 2008 
 
The government and the ruling camp yesterday started the process of 
picking a successor to Bank of Japan (BOJ) Governor Toshihiko Fukui, 
whose term is to expire on March 19. Diet approval is needed for the 
appointment of a new BOJ governor, so the government hopes to obtain 
approval from the Democratic Party of Japan (DPJ) and other 
opposition parties beforehand. The government has in mind a plan to 
promote Vice Governor Toshiro Muto, but the opposition bloc opposed 
his promotion in the spring of 2003. The appointment of a new 
governor is likely to face roadblocks. 
 
Liberal Democratic Party Diet Affairs Committee Chairman Tadamori 
Oshima met DPJ Diet Affairs Committee Chairman Kenji Yamaoka at a 
Tokyo hotel yesterday and exchanged views on who should be picked as 
the new governor, though he did not cite the name of Muto. The 
government and the ruling camp plan to present their personnel 
proposal in a meeting of representatives from both chambers' 
steering committees as early as early next month. 
 
However, if the House of Councillors, which the opposition camp 
controls, turns down the government's plan, the post of governor 
will be left vacant. Last November, appointment plans for three 
posts, including Transport Council membership, were rejected for the 
first time in 56 years. Given this, the government may come up with 
a plan to select someone whose appointment the DPJ is expected to 
approve, someone other than Muto. 
 
Muto retired from the post of administrative vice finance minister 
in 2003 and assumed the BOJ vice governorship. Since then, he has 
been viewed as a likely candidate to succeed Fukui. He supported the 
governor in an important phase over such policy switches as the 
removal of money-easing and zero-interest policies. He served as 
vice finance minister when Prime Minister Fukuda was chief cabinet 
secretary. 
 
SIPDIS 
 
Financial authorities now find it difficult to steer financial 
policy in the face of the financial market turmoil, set off by the 
U.S. subprime loan problem, and growing fears of the slowing down of 
the global economy. Market players have express hope that the 
 
TOKYO 00000128  012 OF 013 
 
 
experienced Muto will succeed Fukui. If Muto assumes the post of BOJ 
governor, he will be the first governor with experience in the 
Finance Ministry since Yasuo Matsushita in 1994. 
 
18) Whether to refer to numerical targets for emissions cuts in 
Davos speech left to prime minister's judgment 
 
ASAHI (Page 4) (Full) 
January 17, 2008 
 
Prime Minister Fukuda is scheduled to deliver a speech on Japan's 
policy on reducing greenhouse gas emissions at the Annual Assembly 
of the World Economy Forum (Davos Conference) in Switzerland later 
this month. On the question of whether to include numerical targets 
in the speech, since views were split at a ministerial meeting to 
discuss measures to fight global warming held at the Prime 
Minister's Official Residence yesterday, it was decided to leave the 
issue to the prime minister's judgment. 
 
In the meeting, Environment Minister Kamoshita said: "I do not mean 
that we should follow the policy of the European Union, but Japan 
should clarify at least its country-specific targets." He indicated 
that Japan should demonstrate its stance of accepting a tougher 
target than that set in the Kyoto Protocol and aim to introduce a 
domestic emission-trading system. But Economy, Trade and Industry 
Minister Amari fiercely reacted to it, contending that Japan's 
announcement on introducing numerical targets may result in "giving 
a good excuse for major emitters opposed to reduction obligations, 
such as the United States and China, and collapsing a new 
framework." He persisted with the stance of giving top priority to 
having all major emitters join a post-Kyoto framework. 
 
Chief Cabinet Secretary Machimura said in a press conference after 
the ministerial meeting: "It is necessary for the government to deal 
with the issue in unity. We will fully discuss what expression 
should be used." 
 
19) Government to extend 4.4 billion yen in financial aid to five 
Mekong countries 
 
YOMIURI (Page 2) (Full) 
January 17, 2008 
 
The first Japan-Mekong foreign ministerial was held yesterday at the 
Foreign Ministry's Iikura Guesthouse in Tokyo's Azabudai between the 
foreign ministers of Japan, Thailand, Burma, Cambodia, Laos, and 
Cambodia. In the session, the Japanese government announced that it 
would extend about 40 million dollars (approximately 4.4 billion 
yen) in financial cooperation for the East-West Corridor expressway 
project and the 2nd East-West Corridor distribution system 
improvement project. Japan will contribute the 40 million dollars in 
a grant aid through the Japan-ASEAN fund. 
 
20) Japan convenes Mekong foreign ministerial with five Southeast 
Asian countries to counter China 
 
NIKKEI (Page 2) (Full) 
January 17, 2008 
 
Foreign Minister Masahiko Koumura held a first Japan-Mekong foreign 
ministerial meeting with five Southeast Asian countries, including 
Vietnam and Laos, in Tokyo yesterday. This represents a new 
 
TOKYO 00000128  013 OF 013 
 
 
framework for cooperation between Japan and Southeast Asia. Japan 
promised to provide the region with non-reimbursable aid totaling 40 
million dollars, or approximately 4.4 billion yen, to help it to 
fight poverty and promote infrastructure construction for 
distribution of goods. By setting up the new framework, Japan aims 
to counter China, which is stepping up its diplomatic offensive in 
Southeast Asia. 
 
Japan proposed the forum in order to support the development of the 
Mekong region. Thailand, Burma, and Cambodia also took part. Prior 
to the meeting, Foreign Minister Koumura met Laotian Deputy Prime 
Minister and Foreign Minister Thongloun and signed a bilateral 
investment accord. 
 
According to the chairman's statement issued by Foreign Minister 
Koumura after the conference, Japan will accept about 10,000 
students and trainees over the five years starting in 2008. Japan 
also promised to increase the amount of its official development aid 
(ODA) disbursements to the five countries over the next three 
years. 
 
In the conference, the participants agreed to cooperate in 
containing infectious diseases like new strains of influenza, 
terrorism, and drug trafficking. They also confirmed a stance of 
urging North Korea to resolve the nuclear and abduction issues. 
 
DONOVAN