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UNCLAS SECTION 01 OF 15 TOKYO 000065 
 
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 01/09/08 
 
 
INDEX: 
 
(1) Focus on U.N. authorization, weapons use for permanent SDF 
dispatch legislation (Sankei) 
 
(2) Defense Ministry marks first anniversary; Series of 
improprieties raise questions about civilian control (Nikkei) 
 
(3) Nagata-cho field note: Defense Ministry's fall from grace 
(Yomiuri) 
 
(4) Editorial -- Unsworn witness Akiyama's testimony deepened the 
mystery of defense interest-related scandals (Asahi) 
 
(5) Japan Bank for International Cooperation to create fund to help 
Asian countries combat global warming by introducing energy-saving 
technology (Nikkei) 
 
(6) Okinawa and agriculture ministers concerned about idea of 
establishing a consumer agency (Yomiuri) 
 
(7) METI to ask FTC to proactive in applying AML to foreign 
countries: Move in response to EU's rigorous punitive system 
(Nikkei) 
 
(8) Transport Ministry to restrict foreign investment in 
airport-managing firms to ensure security, public nature of airports 
(Sankei) 
 
(9) High crude oil prices, strong yen, low stock prices to continue: 
Japanese economy likely to become lost in fog in 2008 (Asahi) 
 
(10) Interview with Takeo Hiranuma: The reason why I'm now going to 
rally together genuine conservatives for a new party (Sapio) 
 
(11) Choice of government in 2008: No big vision shown by either LDP 
or DPJ for the future of Japan (Asahi) 
 
ARTICLES: 
 
(1) Focus on U.N. authorization, weapons use for permanent SDF 
dispatch legislation 
 
SANKEI (Page 2) (Abridged) 
January 9, 2008 
 
Chief Cabinet Secretary Nobutaka Machimura met with Defense Minister 
Shigeru Ishiba and Foreign Minister Masahiko Koumura yesterday at 
the prime minister's office. In the meeting, the three confirmed 
that once the newly introduced antiterror bill now before the Diet 
is enacted, the government would set about drafting a permanent 
legislative measure allowing Japan to send the Self-Defense Forces 
for overseas missions whenever necessary. The new antiterrorism bill 
is for temporary legislation with a one-year time limit. The 
government therefore fears that the issue of extending the Maritime 
Self-Defense Force's refueling activities in the Indian Ocean would 
become a political issue again in the Diet's extraordinary session 
to be called in the fall of this year. Prime Minister Yasuo Fukuda 
wants the permanent legislation discussed between the ruling and 
opposition parties. However, the ruling Liberal Democratic Party's 
coordination with its coalition partner, New Komeito, and with the 
leading opposition Democratic Party of Japan (Minshuto) is expected 
 
TOKYO 00000065  002 OF 015 
 
 
to face rough going. 
 
The LDP and New Komeito will launch a project team and will also 
call on the DPJ to join discussions. 
 
The SDF's overseas activities are conducted under a limited number 
of laws, such as the Law for Cooperation on United Nations 
Peacekeeping Operations or the so-called PKO Cooperation Law. The 
government therefore created time-limited ad hoc laws, such as the 
now-expired Antiterrorism Special Measures Law and the Iraq Special 
Measures Law. 
 
In August 2006, Ishiba worked out an international peace cooperation 
bill as the then chair of the Defense Policy Review Subcommittee of 
the LDP National Defense Division. Based on this draft bill, the 
government and the ruling parties are going to create a permanent 
law. 
 
Meanwhile, the DPJ has presented its counterproposal to the new 
antiterror bill. The DPJ-proposed legislation is intended to assist 
Afghanistan with its reconstruction to prevent and eradicate 
international terrorism. In this counterproposal, the DPJ also 
refers to permanent legislation. 
 
The LDP bill allows the SDF's overseas activities with no resolution 
from the United Nations. However, the DPJ bill conditions the SDF's 
overseas activities on the United Nations' authorization or its 
resolution, as DPJ President Ichiro Ozawa asserts. The two parties 
are like oil and water in their respective bills. The DPJ bill also 
requires the government to ask the Diet for its prior approval. This 
is also hardly acceptable to the LDP-led government. 
 
In the meantime, the LDP and New Komeito are poles apart over the 
pending issue of easing government-set standards for SDF personnel's 
use of weapons on their overseas missions. The Iraq Special Measures 
Law only allows SDF personnel to use weapons in order to defend 
those under their control. However, the LDP's Ishiba plan complies 
with U.N. standards and allows weapons use needed for the SDF to 
carry out its missions. 
 
(2) Defense Ministry marks first anniversary; Series of 
improprieties raise questions about civilian control 
 
NIKKEI (Page 2) (Abridged slightly) 
January 9, 2008 
 
Today marks the first anniversary of the establishment of the 
Ministry of Defense (MOD). The first year of MOD, which was actually 
upgraded from agency status at long last, has been marred by a 
series of scandals, such as a leak of pivotal data on the Maritime 
Self-Defense Force's Aegis vessels, the revelation of collusive ties 
between former Vice-Defense Minister Takemasa Moriya and a defense 
contractor and his arrest, and the problem of bill-padding by a 
defense trading house. Furthermore, the ministry has had a total of 
three defense chiefs in just one year, leaving uncertainty about 
thorough civilian control. MOD reform under the initiative of the 
Prime Minister's Official Residence (Kantei) is being challenged to 
strengthen checking functions and increase transparency. 
 
Invaluable experience 
 
Defense Minister Shigeru Ishiba held a press conference yesterday, 
 
TOKYO 00000065  003 OF 015 
 
 
in which he summarized the ministry's one year in this way: 
 
"I cannot say that the year since the ministry was upgraded from 
agency status has been bright. But it was certainly an invariable 
experience for us to build a new Defense Ministry." 
 
Becoming independent of the Cabinet Office led by the prime 
minister, MOD is now allowed to seek budgets and present bills 
independently. At the same time, the ministry is now required to 
fulfill its accountability. The House of Councillors election last 
July has given the opposition bloc a majority in the upper chamber. 
MOD is now under the Diet's watchful eye. 
 
Under the opposition camp's undivided attention to the question of 
extending the Antiterrorism Special Measures Law, allegations that 
Japanese oil had been diverted for use in the U.S. military's Iraq 
operation extremely fatigued MOD officials responsible for the U.S. 
military, forcing them to take great pains to produce relevant data 
and Diet replies. It also became clear that the ministry had 
concealed the correct amount of oil (provided to a U.S. oiler) for 
about four years, raising questions about civilian control. 
 
Structure not improved 
 
MOD was also rocked by the arrest of former Vice-Defense Minister 
Moriya for allegedly giving favors to defense contactor Yamada Corp. 
in defense equipment procurement, having cozy ties with it. 
Takushoku University Professor Satoshi Morimoto took this view: 
 
"Armed with the defense equipment procurement and policy planning 
functions, the vice-defense minister was able to decide everything. 
(The Moriya scandal) exposed the fact that the Defense Agency was 
upgraded to a ministry before such structure was improved." 
 
It is ironical that the Ministry of Defense Reform Council composed 
of experts meets at the Kantei on Jan. 9, the first anniversary of 
the ministry upgrade. Lawmakers and the Diet will be required to 
play greater roles in overseeing the vice-defense minister who has 
tremendous authority. 
 
Interview with Defense Minister Shigeru Ishiba 
 
-- Specially, how are you going to reform the Ministry of Defense? 
 
"The Kantei-led MOD Reform Council is scheduled to come up with a 
reform direction in February. Then we are going to launch a reform 
promotion team composed of personnel from the internal bureaus and 
the Ground, Maritime and Air Staff Offices, and the Joint Staff 
Office to draw up plans. The function to assist the defense minister 
is not working at present and a sense of unity is lacking between 
MOD and those in the field and between officials not in uniform and 
those in uniform. The foundations of the Defense Ministry 
Establishment Law and the Self-Defense Forces Law must be 
reviewed." 
 
"The team will be tasked to produce basic plans in one year's time. 
On the agenda would be the establishment of a coordination council 
to promote cooperation between the Joint Staff Office, the Ground, 
Maritime, and Air Staff Offices, and the internal bureaus, and the 
appointment of uniformed officers as internal bureau division 
directors. I would like to totally integrate the staff offices and 
internal bureaus in the future to split the organization by 
 
TOKYO 00000065  004 OF 015 
 
 
function, such as building up defense capabilities, operation 
instructions and employment, and Diet affairs and public 
relations." 
 
-- Is it necessary to move up the current Midterm Defense Buildup 
Program (for fiscal 2005-2009) by one year based on the direction to 
be produced by the reform council? 
 
"Yes, it is necessary. Reforming MOD when the new Midterm Defense 
Buildup Program (for fiscal 2009-2013) is in effect while ensuring 
consistency with revisions to the National Defense Program Guideline 
would be ideal." 
 
(3) Nagata-cho field note: Defense Ministry's fall from grace 
 
YOMIURI (Page 4) (Full) 
January 9, 2008 
 
The Defense Ministry marks today the first anniversary of its being 
upgraded from the status of an agency. The mood in the ministry, 
however, has been gloomy due to the series of scandals involving it, 
including the bribery scandal involving former Administrative Vice 
Minister Takemasa Moriya, now under arrest, who pushed for the 
upgrade. 
 
Defense Minister Shigeru Ishiba indicated his mixed feelings, 
saying: 
 
"Last year was not at all a smooth one. There were a number of 
occurrences and criticisms, and we must consider how we can create a 
new Defense Ministry using these as a springboard. The key words of 
this year will be revival, rebirth, and restart." 
 
On Jan. 9, 2007, the ministry held a lavish ceremony inviting then 
Prime Minister Shinzo Abe. It decided, however, to forgo a ceremony 
this year. 
 
One ministry official lamented: "The Council on Reform of the 
Defense Ministry, set up in the Prime Minister's Official Residence, 
is expected to hold a meeting on the 9th. This is the only plan we 
have now. We have gone from heaven to hell." 
 
(4) Editorial -- Unsworn witness Akiyama's testimony deepened the 
mystery of defense interest-related scandals 
 
ASAHI (Page 3) (Slightly abridged) 
January 9, 2008 
 
"That's not true." "I have no recollection." Naoki Akiyama, 
executive director of the Japan-U.S. Center for Peace and Cultural 
Exchange thus repeatedly made denials as an unsworn witness before 
an Upper House committee session. He denied the allegations that he 
received money from the defense contractor Yamada Corp, which is 
accused of bribery in the defense scandal. 
 
Akiyama is portrayed as a playing liaison role between Japanese and 
American defense industries and politicians. The Center run by 
Akiyama has had former Defense Minister Fumio Kyuma and former 
Defense Agency Director-General Fukushiro Nukaga as directors of its 
board. The ostensible purpose of the organization is to promote 
Japan-U.S. exchanges, but the actual role it played is apparently as 
an intermediary between politicians, bureaucrats, and the munitions 
 
TOKYO 00000065  005 OF 015 
 
 
industry. 
 
It was anticipated that Akiyama's testimony might shed light on 
those allegations, but the testimony ended in a half-baked manner 
owing to lawmakers' inability to prepare definite evidence. We urge 
the Diet to summon those involved as sworn witnesses at an 
appropriate time and continue its investigation into the defense 
scandal. 
 
A task force of the Tokyo District Public Prosecutors Office, which 
raided the Japan-U.S. Center and is investigating the trail of money 
offered to Akiyama and his aides, must find out the truth. 
 
The name of Akiyama cropped up in the testimony before a Diet panel 
given by former Administrative Vice Defense Minister Takemasa 
Moriya, who has been indicted for bribery. Moriya testified that he 
had been invited by Akiyama to join a dinner along with former 
Defense Minister Kyuma. Akiyama denied attending the party, but he 
admitted he had joined another banquet with Kyuma and other 
politicians. 
 
The bribe-taking allegations involving Akiyama surfaced in the 
testimony given by suspects and the records of money deposited in 
banks. 
 
One is related to the government-sponsored project intended for 
disposing of poison-gas shells left by the former Imperial Japanese 
Army. Yamada Corp., which served as a sub-contractor of the project, 
was asked by Akiyama to pay him money for local measures with some 
100 million yen changing hands. 
 
At one point Yamada Corp. was on the verge of having its license as 
an agent of U.S. defense equipment manufacturer being snatched by 
another company. In order to defend the license, Yamada Corp. asked 
a Diet member backing the defense industry in the ruling Liberal 
Democratic Party (LDP) to work on a former high-level U.S. 
government official to advise the U.S. manufacturers not to change 
the agent. In this connection, Yamada Corp. is suspected of having 
offered money to Akiyama. 
 
Akiyama denied all those allegations. Meanwhile, when he was asked 
if a U.S. corporation affiliated with him received a total of some 
100 million yen as a consultancy fees from Japanese and American 
munitions makers, Akiyama avoided offering a clear-cut answer, by 
citing "confidentiality." As a result, the allegations have now 
further deepened. 
 
The money Yamada Corp. allegedly offered to Akiyama is reportedly to 
have been disbursed from the company's slush funds. A portion of the 
money seems to have been used to offer a bribe to Moriya. The money 
might also have been offered as a bribe to politicians. 
 
Additional bribery indictment was filed against Moriya and others on 
charges of having received bribes in addition to their being 
entertained by golf outings. The defense scandal is now assuming an 
even more serious aspect. 
 
(5) Japan Bank for International Cooperation to create fund to help 
Asian countries combat global warming by introducing energy-saving 
technology 
 
NIKKEI (Page 5) (Full) 
 
TOKYO 00000065  006 OF 015 
 
 
January 9, 2007 
 
The Japan Bank for International Cooperation (JBIC) has decided to 
create an environment fund through joint capital investment with 
leading banks. The fund will be used for projects designed to 
construct power generations with high energy-conservation 
performance in Asian countries. The investors, while earning a 
certain level of profits, will urge Asian countries to take positive 
measures to contain global warming. The pooled money will also be 
poured into energy-conservation projects to be carried out in Asia 
by trading companies. As it stands, the new fund will indirectly 
support global environmental projects by Japanese companies or 
financial institutions. 
 
Planned indirect or direct investment through the new fund will be 
made in multiple projects, starting in fiscal 2008. Several hundreds 
billion yen is likely to be disbursed to finance these projects over 
the next five years. Of the total amount, the JBIC plans to shoulder 
about 10 PERCENT  to 20 PERCENT . In response to requests from 
private firms or financial institutions, the JBIC will select in 
which funds or projects investment through the fund should be made. 
 
Envisioned are projects designed to install flue gas desulfurization 
at old-type thermal power plants and to introduce a waste heat 
recovery system at iron mills, etc. As for UN-authorized projects, 
the JBIC will also consider selling emission quotas generated 
through the projects to companies or other countries as emission 
credits. 
 
Coordination is underway on a plan in which the JBIC would invest in 
a fund to be set up to finance measures to combat global warming by 
such financial institutes as Mizuho Corporate Bank and the 
Export-Import Bank of China, a Chinese government-affiliated 
financial institution. The JBIC will also study the possibility of 
investing in other funds than this. 
 
The JBIC so far allocated approximately 6 billion yen in annual 
reserves, but most of the amount was left unused. By increasing this 
amount to 15 billion yen in next fiscal year's budget bill, the bank 
is willing to make investment in a positive manner to offer 
financial aid to have the government attain the goal set in its 
program to help developing countries reduce greenhouse gas emissions 
as part of efforts to contain global warming. 
 
(6) Okinawa and agriculture ministers concerned about idea of 
establishing a consumer agency 
 
YOMIURI (Page 4) (Full) 
January 9, 2008 
 
In their press conferences yesterday after a cabinet meeting, 
Minister for Okinawa Fumio Kishida and Agriculture, Forestry and 
Fisheries Minister Masatoshi Wakabayashi took a cautious stance 
toward the idea of establishing a "consumer agency," which has come 
up in the ruling Liberal Democratic Party (LDP). The idea is 
intended to merge consumer administrations, which Prime Minister 
Yasuo Fukuda aims at. Kishida, who is also charged with the 
livelihoods of people, stated: "Enhancing the functions is important 
above anything else. Naming a new office alone will fail to achieve 
results." Wakabayashi expressed his concern, saying: "The idea could 
enlarge government offices and obscure where responsibility lies." 
 
 
TOKYO 00000065  007 OF 015 
 
 
(7) METI to ask FTC to proactive in applying AML to foreign 
countries: Move in response to EU's rigorous punitive system 
 
NIKKEI (Page 5) (Full) 
January 9, 2008 
 
The Ministry of Economy, Trade and Industry (METI) has decided to 
ask the Fair Trade Commission (FTC) to proactively make 
extraterritorial applications regulated under Japan's Anti-Monopoly 
Law (AML) to unlawful business practices carried out by foreign 
companies. The European Union (EU) has toughened its stance of 
cracking down on price cartels. As a result, huge amounts of fines 
have been imposed on many Japanese companies. METI's decision is in 
response to industrial circles' call that the FTC should crack down 
on foreign firms more strictly. It will also compile a set of 
guidelines Japanese companies should take into consideration in 
order to avoid being involved in business activities violating host 
countries' anti-monopoly laws. 
 
METI will set up a study group on the international implementation 
of a competition law consisting of academic experts, business 
leaders and attorneys before the end of January. The FTC will also 
take part in the envisaged panel as an observer. It will determine 
what approach it would make, based on proposals to be made by 
April. 
 
Proposals will likely include the positive application of the AML to 
foreign companies. METI will ask the FTC to call on foreign 
companies to revise their business plans or pay fines, by making 
extraterritorial applications of the AML, in the event in which 
sales prices go up or Japanese companies are placed in a 
disadvantageous situation as a result of price cartels or M&As by 
foreign companies. 
 
The FTC in December last year decided to issue an order to five 
manufacturers, including Bridgestone, a British, French and Italian 
companies, to eliminate their international price cartel on marine 
hose pipes used for marine oil transportation. This is the first 
application of the AML to foreign companies. The FTC is also 
conferring with EU officials for a joint investigation into leading 
British and Australian resources companies' corporate purchase plan 
with the application of the AML in mind. However, compared with 
European and U.S. authorities, there have been overwhelmingly fewer 
cases of the FTC applying the AML to foreign companies. 
 
The panel would also map out guidelines aimed at enabling to help 
Japanese companies avoid violating U.S. and European anti-monopoly 
laws. Many Japanese companies operating abroad have insufficient 
knowledge and understanding regarding business practices that 
constitute violations of the anti-monopoly laws of their host 
countries. As such, the envisaged panel would analyze Japanese, U.S. 
and European legal systems and clarify main points of their 
antimonopoly laws, which Japanese companies operating overseas must 
bear in mind. It would also show examples of cases that could be 
suspected of being activities violating their antimonopoly laws, 
including a case example in the EU, in which one Japanese company 
was determined as having taken part in a price cartel just because 
one of their employee took part in a chat on prices at a meeting of 
companies in the same line of business. 
 
METI will ask the FTC to apply the AML to foreign companies in a 
proactive manner. It will also map out guidelines concerning 
 
TOKYO 00000065  008 OF 015 
 
 
European and U.S. anti-monopoly laws. This is because the EU adopts 
martinetism in dealing with business practices violating their 
antimonopoly law. Dissatisfaction with the EU's stance or calls on 
the FTC also to adopt a hard-line stance toward foreign companies 
are growing among business circles. 
 
In the process of having the panel analyze European and U.S. 
antimonopoly laws, METI will take samplings of rules on procedures 
stipulated their antimonopoly laws and the implementation of such 
that could be problems from a perspective of the conventional wisdom 
and notions of the international community. It will consider the 
possibility of calling on the EU to correct such rules at 
ministerial meetings or through the FTC. It also plans to propose 
that Japan and the EU adopt common antimonopoly rules in the 
future. 
 
(8) Transport Ministry to restrict foreign investment in 
airport-managing firms to ensure security, public nature of 
airports 
 
SANKEI (Page 2) (Excerpts) 
January 9, 2008 
 
The Ministry of Land, Infrastructure and Transport decided yesterday 
to limit the ratio of investment by foreign capital in a company 
that maintains and runs an international hub airport, like Narita 
International Airport, to less than one-third of the total share. 
The decision stems from a desire to restrict foreign firms' 
involvement in the management of airport companies in an effort to 
ensure the security and public nature of such facilities. The new 
regulation will also be applied to airport terminal firms under 
direct government control, such as Haneda. The ministry intends to 
submit a bill amending the Airport Maintenance Law, which includes 
restrictions on foreign investment, to the ordinary Diet session 
this year. Under the new legislation, the focus will be shifted from 
the current maintenance of airports to management. 
 
There are an increasing number of cases in which major airports 
abroad have been taken over by investment funds of other countries. 
This fact is behind the ministry's decision to restrict foreign 
investment. Some observers fear that foreign Investment funds, if 
they acquire Japanese airports, may raise landing charges there with 
the aim of earning profits in a short period of time. Keeping such a 
possibility in mind, the Transport Ministry judges that "it will be 
undesirable to leave hub airports defenseless (from foreign 
capital)," according to an official of the Civil Aviation Bureau. 
 
Under the amendment, the ministry will restrict the ratio of foreign 
investment in the following three companies that manage and run 
airports to one-third of the total share: Narita International 
Airport, which aims to list its stock on the stock exchange in 2009, 
and Kansai International Airport and Chubu International Airport, 
both of which are likely to be listed in the future. In part because 
of the discovery that an Australian investment fund possesses about 
20 PERCENT  of the share issued by Japan Airport Terminal Co., which 
operates the passenger terminal building at Haneda Airport, the 
Transport Ministry has decided to place similar foreign-investment 
restrictions on passenger or container terminal companies. 
 
The Transport Ministry was looking into introducing a "golden share" 
that gives the government the right of decisive vote to enable it to 
prevent a certain shareholder from acquiring a large portion of the 
 
TOKYO 00000065  009 OF 015 
 
 
share or from selling important propriety. But the ministry decided 
to give up the introduction, based on the judgment that the measure 
would lead to decline people's motivation to invest and eventually 
could undermine the liquidity of shares. 
 
(9) High crude oil prices, strong yen, low stock prices to continue: 
Japanese economy likely to become lost in fog in 2008 
 
ASAHI (Page 2) (Slightly abridged) 
January 8, 2008 
 
The New Year got off to a rocky start for the Japanese economy. That 
is because triple shocks of high crude oil prices, strong yen and 
stock plunges stemming from the Subprime loan issue have hit the 
economy right from the beginning of the year, casting a dark cloud 
over the global economy. Many business leaders are concerned about 
the future of the economy. However, some are holding out hope that 
it will pick up in the latter half of the year. Their responses with 
bullishness mixed with bearish sentiments were an omen that the 
coming year would be unpredictable. 
 
Business circles: Expectations on latter half of year 
 
 The Japan Business Federation (Nippon Keidanren), the Japan 
Association of Corporate Executives (Keizai Doyukai)  and the Japan 
Chamber of Commerce and Industry (JCCI) hosted a New Year's Party at 
a Tokyo hotel on the afternoon of Jan. 7. Economic outlook for 2008 
provided by participants was a mix of pessimism and optimism. 
 
Asahi Kasei Corporation President Shiro Hiruta categorically said, 
"It would not be possible to maintain the vibrant trend of 2007." 
Mizuho Financial Group President Terunobu Mizuho noted, "Crude oil 
prices are too high. I am worried that the high crude oil prices 
could lead to sluggish personal consumption." 
 
Leaders in the retailing industry made harsh comments with Lawson 
President Takeshi Niinami saying, "There are no rosy factors. The 
industry has neglected efforts to expand domestic demand" or Seven & 
i Holdings Chairman Toshifumi Suzuki noting, "The future of the 
economy is cloudy. Domestic demand is saturated." Behind their harsh 
remarks is the fact that there are no elements that could dispel 
such worries as the Subprime loan issue, the high crude oil prices 
and the low stock prices. 
 
Though a number of business leaders expressed their perception that 
the economy would be in a slump in the first half of the year, as 
Nippon Steel Corporation Honorary Chairman Takashi Imai put it, 
there were strong voices pinning high hopes on the latter half of 
the year. 
 
Toyota Motors Chairman Fujio Cho said, "The economy would stay flat 
in the first half of the year, but it would pick up in the latter 
half of the year. Many measures would be taken in the latter half of 
the year." Seibu Holdings President Takashi Goto viewed that the 
economy would be in a slump with housing investment dropping due to 
the amendment to the Building Standard Law, but it could pick up in 
the latter half of the year. NYK Line President Koji Miyahara 
expressed expectation, "There will be the Beijing Olympic Games in 
China and the presidential election in the U.S. In view of those 
events, the economy will get better at the end of the year." 
 
JCCI President Tadashi Okamura during a press conference of the top 
 
TOKYO 00000065  010 OF 015 
 
 
leaders of the Big Three expressed his hope, "Though there is 
uncertainty about European and U.S. economies, there will be demand 
from newly emerging countries, such as China, as they are expected 
to grow. We want to secure 2 PERCENT  growth. I think that the 
economy will grow in the second and third quarters." 
 
Investors: Increased uncertainties likely to give rise to selling 
spree 
 
Daiwa Securities Group Head Office President Shigeharu Suzuki during 
a business leaders party made a bullish comment: "Stock prices 
plunged early in the new year. However, after rain comes fine 
weather. Corporate performances are not bad. The Nikkei Average 
Price Index of Stocks could top 20,000 yen." 
 
It is said at Kabuto-cho, Nihonbashi, Tokyo, home to many securities 
houses, that the year of the Rat is the year of thriftiness and 
prosperity. As a matter of fact, stock prices in the years of the 
Rat rose more than 40 PERCENT  on an average since 1949, when the 
Nikkei Average Stock Prices were calculated for the first time, 
ranking first, outdistancing the years of the Dragon, which marked 
29 PERCENT  growth. 
 
However, the situation early in the new year appears different. The 
closing price of the Nikkei index was 14,500.55 yen, down 190.86 yen 
from the last weekend. This is the lowest price in about a year and 
a half. The Nikkei Stock Average fell four consecutive operating 
days since the end of last year. The loss during this period topped 
1,100 yen. 
 
The drop in stock prices is attributable to low U.S. stock prices, 
the strong yen, the weaker dollar and the high crude oil prices 
stemming from the Subprime loan issue. Foreign investors, such as 
hedge funds, who account for 60 PERCENT  of trading on the Tokyo 
Stock Exchange, are selling stocks on the TSE as well, following 
global stock plunges. Drops in the profits of export-oriented 
companies due to the strong yen and increased costs of raw materials 
stemming from the high oil prices are jeopardizing the only hope 
that Japanese companies are performing well, prompting the selling 
trend. 
 
Domestic individual investors are becoming increasingly concerned 
about the future of stock prices. One executive of an Internet-based 
securities house lamented, "The situation is such that individual 
investors find it difficult to purchase stocks actively." Some 
individual investors who are borrowing money from securities houses 
with guarantee deposits as collateral have to pay additional 
deposits due to a shortage of such money because of latent losses 
caused by drops in stock prices. One security house said that the 
number of individual investors who paid additional guarantee 
deposits grew 17-fold, compared with a month earlier. 
 
According to a poll the Nomura Securities Financial and Economic 
Affairs Research Center conducted on individual investors in 
December last year, the largest number of respondents since the poll 
was started in April 2006, replied that the impact of the domestic 
economy and corporate earnings on the stock market over the last 
three months was "slightly negative." 
 
Nomura Securities Strategist Kengo Nishiyama said, "Changes may be 
unfolding in the past view that the economy is recovering slowly and 
that corporate performances are solid." 
 
TOKYO 00000065  011 OF 015 
 
 
 
(10) Interview with Takeo Hiranuma: The reason why I'm now going to 
rally together genuine conservatives for a new party 
 
SAPIO (Page 3) (Full) 
January 23, 2008 
 
Takeo Hiranuma, House of Representatives member 
 
"Establish a new party for genuine conservatives." This kind of 
request is now coming to me via e-mail from many voters across the 
nation. 
 
What lies behind that is the current lopsidedness of the Diet. The 
ruling parties hold a majority of the seats in the House of 
Representatives, while the opposition parties now dominate the House 
of Councillors. The balance between the lower and upper chambers is 
distorted in this way. There are issues that should be resolved for 
the sake of Japan and its people. Yet, the Diet remains unable to 
resolve these pending issues. Above all, many conservative voters 
were disappointed by the selection of Prime Minister Yasuo Fukuda 
from the Liberal Democratic Party (LDP). He then met with Democratic 
Party of Japan (DPJ or Minshuto) President Ichiro Ozawa, and the two 
talked about a "grand coalition" of the LDP and the DPJ. Ozawa was 
quoted as saying Japan should send the Self-Defense Forces overseas 
to participate in antiterrorist operations based on the United 
Nations' authorization. Fukuda reportedly accepted Ozawa's 
overtures. In the end, their talks broke down. The LDP has advocated 
establishing Japan's own constitution. I have also strongly insisted 
on the need for Japan to do so. However, the two politicians' deal 
was a far cry from my idea of Japan writing a constitution on its 
own. Those true conservative voters stand behind me. They are 
pushing me to restore genuine conservatism. I feel encouraged as a 
politician. 
 
I preside over a cross-party group of conservative lawmakers. In 
December last year, I became a supreme advisor to an LDP 
interfactional conservative policy study group that was launched 
under the initiative of former LDP Policy Research Council Chairman 
Shoichi Nakagawa. This study group is a gathering of 59 like-minded 
lawmakers. In the meantime, I often meet with the DPJ's promising 
middle-standing and junior lawmakers. We are teaming up to rally 
genuine conservatives. 
 
However, we must not be in a hurry to establish a new party. The 
Diet is now distorted. We will surely see a new turn of the 
political situation after the next election for the House of 
Representatives. We can launch a new party, but that is one of the 
options in that event. 
 
Actually, we may not necessarily have to create a new party. Even in 
this case, it is well significant to launch a tertiary group of 
conservatives from both the LDP and the DPJ. Japan has its own 
traditions, culture, history, and other areas that should be 
protected. We should maintain what we should maintain. That's my way 
of thinking about conservatism. Politicians will reach out across 
party lines if they have something that reverberates with their 
ideals or spirits. Of course, we, as conservatives, will speak out 
about establishing Japan's constitution on its own and revising the 
Fundamentals of Education Law. The Diet is now in a mood to say 
something like this: "If you do not talk about reforms, you are not 
a politician." However, there are also some things that are good. We 
 
TOKYO 00000065  012 OF 015 
 
 
do not have to change those. 
 
What the Koizumi-Takenaka reforms brought to Japanese society is an 
economic system that falls under the category of "globalism" and 
that is convenient to America. As a result, the Koizumi 
administration carried out postal privatization. Moreover, in the 
business scene, they pushed ahead with mergers and acquisitions, 
introducing triangular mergers to comply with demands from America. 
The nation's rural districts are falling apart, and the social 
divide has spread. Former Prime Minister Shinzo Abe had a 
conservative spirit, but he followed the Koizumi policy line. As a 
result, the LDP suffered a crushing defeat in July's election for 
the House of Councillors. 
 
The LDP as a political party has become too weak. It has long 
depended on its coalition with the New Komeito. Furthermore, the LDP 
has fallen into a bad pattern of using populism to boost its public 
ratings as an immediate goal. The LDP has lost sight of those 
principles and ideals that are of paramount importance for political 
parties. The DPJ also lacks unity as a mixture of former LDP 
conservatives and former Japan Socialist Party liberals. Voters 
instead are hoping for genuine conservatism. They may wonder which 
political party is the right party to put their faith and trust in. 
In the last election for the House of Councillors, there were 
probably some people who voted for the DPJ to teach a lesson to the 
LDP. However, voters will choose a political party that can grab the 
reins of government. They will be even more careful in the next 
election for the House of Representatives. If the voting behavior 
varies with the lower and upper chambers, the Diet's distortion will 
continue for more than nine years, not six years. 
 
That's why they need a third force that is imbued with a healthy 
conservatism. If we form a group that embodies national interests 
and national wealth, we will be free from the Diet's distortion, and 
we can communicate our conservative standpoint. I am an independent 
member of the House of Representatives, so it's my job to bridge the 
LDP and the DPJ. The question is if that will become a third 
political party or if that will dissolve the dilemma over passing 
critical laws. We will need to thoroughly watch the political 
situation from now on. 
 
(11) Choice of government in 2008: No big vision shown by either LDP 
or DPJ for the future of Japan 
 
ASAHI (Page 3) (Slightly abridged) 
January 8, 2008 
 
Tetsuya Itagaki 
 
Debates on political reform aimed at realizing policy-oriented 
election stimulated political parties, particularly the leading 
ruling Liberal Democratic Party (LDP) and the major opposition 
Democratic Party of Japan (DPJ), to compete by issuing manifestos 
(sets of campaign pledges) in national elections. A Lower House 
election is anticipated to take place in 2008, but neither of the 
two major parties has come out with policies that show different 
answers to the question of what kind of society Japan should aim at 
being." This question involves how social welfare will look in the 
future and how it will be financed. Can a two major-party system 
that can give the public an opportunity to choose the government 
they want actually take root in Japan? 
 
 
TOKYO 00000065  013 OF 015 
 
 
On Dec. 5, 2007, the DPJ's think tank hosted a symposium in Tokyo. 
At the conference, Kazuhiko Nishizawa, senior economist at the Japan 
Research Institute, asked this about the DPJ's pension reform plan, 
as revealed in the Upper House election last summer: "What specific 
cases are there in which a minimum pension would not be 
guaranteed?" 
 
Nishizawa posed the question because details of the DPJ's pension 
reform plan had not become clear even after party leader Ozawa said 
in the party-heads debate in the Diet immediately before the Upper 
House election: "We need to ask those who have an annual salary of 6 
million yen or more to put up with (not receiving a minimum of 
guaranteed pension)." 
 
The DPJ came out the winner in the 2004 Upper House election by 
vowing to impose a 3 PERCENT  consumption tax for pension purposes, 
but when Ozawa assumed the top party post in April 2006, he turned 
around the party's election pledge and said, "We will not hike the 
consumption tax for the time being." Nishizawa expressed concern: 
"Discussion of how to design a new pension system has stopped 
because debate on how to finance the pension system has now been 
spiked." In fact, in the symposium, House of Councilors member 
Kouhei Otsuka of the DPJ's Pension Research Council reiterated in 
response to questions: "We are discussing it in the party." 
 
The pension system has been an issue in other elections. But 
attention has been always paid on the problems of unpaid pension 
premiums and slack records of pension premium payments. The DPJ's 
former Policy Research Council Chairman Yoshito Sengoku, who served 
as deputy chair of the joint conference on pension reform of lawyers 
from both chambers of the Diet in 2005, expressed concern: "The 
party is in the mood of pursuing scandals and hitting the other 
party's weak points. How can the DPJ change the (pension) system if 
it comes to power? We should discuss that point fully." 
 
The ruling bloc likewise tends to avoid debate about the question of 
raising the public's burden. 
 
The day after the symposium, the LDP's Group to Think about Social 
Welfare met at the Lower House Building. In the meeting, Keio 
University Prof. Yoshikazu Kenjoh stressed: "Nothing will start 
unless someone brings up the question of an increase in the public's 
burden in order to protect the social welfare system." Participants 
argued that it was too risky politically to touch on a burden 
increase before the Lower House election as Kenjoh expected. 
 
When the Fukuda administration came into being, the LDP's Council to 
Study Financial and Political Reform led by former Chief Cabinet 
Secretary Kaoru Yosano suggested converting the consumption tax into 
 
SIPDIS 
a social welfare tax and hiking the tax rate. But after the idea of 
forming a grand coalition between the two major parties faltered and 
now that confrontation between the LDP and the DPJ is intensifying, 
a cautious view about raising the tax rate has rapidly spread in the 
ruling bloc. 
 
Kenjoh said: "No one is willing to discuss how to finance the social 
welfare system and no one realizes that a strong constituency lies 
there. Under such a situation, two major parties with policies that 
differ substantively will never emerge." 
 
Key lies in new redistribution method 
 
 
TOKYO 00000065  014 OF 015 
 
 
The idea of forming a grand coalition between the LDP and the DPJ 
cropped up last year just at the time when politicians were 
reluctant to discuss the question of increasing the public's burden. 
Many in the ruling bloc are of the opinion that the ruling and 
opposition parties need to work together on such important themes as 
a tax increase. 
 
But this way of thinking has been met by objections. Chiba 
University Prof. Yoshinori Hiroi said, "Political parties should 
present their respective social models over the two issues: 
"distribution of wealth" related to the question of which to choose, 
a big or small government, and "size of wealth" related to the 
question of which to prioritize, economic growth or the 
environment. 
 
At a meeting of the DPJ's Saitama chapter's "political school" held 
in last November in Saitama City, Prof. Hiroi emphasized the 
importance of divergence in policies. He advocated: "Social welfare 
involves a fundamental philosophy concerning distribution. If two 
major parties move closer to each other without any clear difference 
in policies, they will become submissively supportive of each other 
and result in narrowing a range of options for the public to 
choose." 
 
When Japan had an ample amount of finances thanks to high economic 
growth, no in-depth debate on redistribution took place. The 
conflicting views among political parties under the so-called 
1955-year system (http://en.wikipedia.org/wiki/55-year system) was 
related to protection of the Constitution and national security. But 
the confrontation over them disappeared with the end of the Cold War 
and the socialist-party led Murayama government's approval of the 
existence of the Self-Defense Forces (SDF). 
 
Jiro Yamaguchi, professor at Hokkaido University's Graduate School 
and author of the book Posuto-Sengo Seiji Eno Taikoujiku 
(Conflicting Views in Postwar Politics), said the reason why policy 
differences are not clear among the political parties is in part 
attributable to the decline of left-wing forces and the political 
parties' failure to properly debate poverty and social welfare, 
having become satisfied with the redistribution that had come as a 
consequence. 
 
Instead, politicians focused their energies on competing to promote 
reforms. As prescriptions to destroy the bureaucracy's rule and 
special interest-driven politics, they advocated the principles of 
market competition. Politicians (not only in the LDP) but also in 
the DPJ competed to best realize small government. This also has 
made it difficult to tell what the policy differences were between 
the LDP and the DPJ. 
 
Yamaguchi told Ozawa: "Instead of rehashing the so-called Koizumi 
reforms, you should declare that the DPJ will create a society where 
people who work honestly for a living will be happy." 
 
In the Upper House election last year, the DPJ advocated removal of 
social disparities and emphasized the importance of prioritizing 
working people and made a big leap to become the first party in the 
Upper House. Meanwhile, the LDP is returning to where it was before 
the Koizumi reforms. 
 
In order for political parties to have differing views, "they need 
to come up with their own policy visions that illustrate the future 
 
TOKYO 00000065  015 OF 015 
 
 
of Japan, including fiscal resources," Yamaguchi said. 
 
"The point is whether they can establish a system that is highly 
transparent and fairly redistributes resources by making a clear 
distinction from the pork-barrel politics of the past. Can Japan 
establish a two major party system that meets the world standard? 
The next national election will be a crucial test for Japan in this 
regard," Yamaguchi concluded. 
 
Comments by Keio University Prof. Heizo Takenaka, who served as 
minister in charge of economic policy and minister of internal 
affairs in the Koizumi administration: 
 
What lay behind the idea of forming a grand coalition (between the 
LDP and the DPJ) that cropped up last year was the question of 
whether to hike the consumption tax. My advice is not to form a 
grand coalition just to deal with tax problems. The reason is 
because taxes are in themselves the foundation of politics. The 
first matter that parliamentary democracy handles is what to do 
about taxes. If the idea of establishing a grand coalition had been 
floated to dodge criticism for tax increases, but such would have 
been the same as discarding politics. I think it is bad for 
political parties to think that if every party agrees to hike the 
consumption tax, there's nothing to be afraid of. 
 
The respective banners that the LDP and the DPJ have raised are not 
the same. One major point in the next Lower House election would be 
whether these two major parties will be able to come up with unique 
banners. The public that chooses politicians will also be tested. 
The issue would be which to choose: small government or big 
government. This question will logically be linked to the tax 
issue. 
 
DONOVAN