VZCZCXRO4460
PP RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #0473/01 0530815
ZNR UUUUU ZZH
P 220815Z FEB 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 1927
INFO RUEKJCS/SECDEF WASHDC PRIORITY
RHEHAAA/THE WHITE HOUSE WASHINGTON DC PRIORITY
RUEAWJA/USDOJ WASHDC PRIORITY
RULSDMK/USDOT WASHDC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC//J5//
RHHMUNA/HQ USPACOM HONOLULU HI
RHHMHBA/COMPACFLT PEARL HARBOR HI
RHMFIUU/HQ PACAF HICKAM AFB HI//CC/PA//
RHMFIUU/USFJ //J5/JO21//
RUYNAAC/COMNAVFORJAPAN YOKOSUKA JA
RUAYJAA/CTF 72
RUEHNH/AMCONSUL NAHA 8629
RUEHFK/AMCONSUL FUKUOKA 6235
RUEHOK/AMCONSUL OSAKA KOBE 9902
RUEHNAG/AMCONSUL NAGOYA 4803
RUEHKSO/AMCONSUL SAPPORO 6840
RUEHBJ/AMEMBASSY BEIJING 1801
RUEHUL/AMEMBASSY SEOUL 7869
RUCNDT/USMISSION USUN NEW YORK 8464

UNCLAS SECTION 01 OF 13 TOKYO 000473 
 
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 02/22/08 
 
 
INDEX: 
 
(1) No end to antiterror war in sight (Asahi) 
 
(2) Ishiba increasingly isolated (Sankei) 
 
(3) Editorial: Aegis-equipped destroyer Atago's collision with 
fishing boat: SDF should not try to evade responsibility (Asahi) 
 
(4) LDP criticizes government's draft basic plan on ocean policy as 
showing no posture of trying to protect national interests (Sankei) 
 
(5) Marine admits to rape allegations (Okinawa Times) 
 
(6) Debate on bills on FY2000 budget, revision special taxation law 
to reach crucial stage at end of February; Ruling coalition planning 
to pass them through Lower House on Feb. 29, opposition camp seeking 
cautious debate (Nikkei) 
 
(7) Government eyes introduction of emissions trading system, in 
anticipation of creation of emissions-rights market by U.S (Asahi). 
 
(8) Interview with Keio University Professor Heizo Takenaka: Local 
areas have become impoverished because structural reforms have been 
insufficient (Ekonomisuto) 
 
(9) Interview with Eisuke Sakakibara: Carry out not reform but 
revolution to avoid ruin of Japan (Ekonomisuto) 
 
ARTICLES: 
 
(1) No end to antiterror war in sight 
 
ASAHI (Page 4) (Full) 
February 22, 2008 
 
Keiichi Kaneko, Northern Arabian Sea, Indian Ocean, and Akihiro 
Yamada 
 
The Maritime Self-Defense Force has now resumed its refueling 
mission in the Indian Ocean. Meanwhile, an MSDF Aegis ship collided 
with a fishing boat in waters off Chiba Prefecture, leaving its two 
crewmen missing. This accident seriously damaged the Defense 
Ministry's credibility as well as the Self-Defense Forces'. The 
government gave first consideration to its "international 
commitment," for which the ruling coalition went so far as to take a 
second vote in the House of Representatives for the first time in 57 
years and enacted a new special measures law with a majority of two 
thirds. The MSDF is now back in the Indian Ocean to resume its 
refueling mission after a hiatus of about four months. However, 
there are many challenges in store for its resumed refueling 
operation. 
 
"A destroyer will now resume the operation (in the Indian Ocean) 
with a supply ship. However, I wonder if they can really take 
appropriate action if and when they come under attack from 
terrorists." 
 
The ruling Liberal Democratic Party yesterday held a meeting of its 
defense-related divisions. In the meeting, Taku Yamasaki, a former 
secretary general of the ruling Liberal Democratic Party, pointed to 
 
SIPDIS 
the MSDF's insufficient watch that was brought to light with the 
 
TOKYO 00000473  002 OF 013 
 
 
Aegis collision. Yamasaki thereby voiced concern about the MSDF's 
refueling activities in the Indian Ocean for the war on terror. 
 
The accident was reported to the defense minister one and a half 
hours after its occurrence. This shows that the Defense Ministry was 
slack in its crisis management. In addition, the Defense Ministry 
changed its explanation again and again about the factual 
circumstances before and after the collision. The Diet was confused 
in its earlier proceedings over a number of issues, such as former 
Administrative Vice Defense Minister Moriya's bribery case, a U.S. 
warship's alleged diversion of MSDF fuel to military operations in 
Iraq, and the MSDF's cover-up of an error in the actual amount of 
fuel supplied to a U.S. warship. This time around, an MSDF ship hit 
and sank a fishing boat, damaging public faith in the Defense 
Ministry and the SDF. 
 
Concerning fuel diversion, Japan has exchanged official notes with 
countries whose vessels are to be provided with MSDF fuel, 
stipulating that their vessels will use MSDF fuel for "maritime 
interdiction operations" only. Japan has also sent a liaison officer 
to Bahrain, where the liaison officer will hear from these 
countries' officials about their vessels' operational plans before 
refueling them. 
 
However, Japan has no power to ask these countries about the 
destination of MSDF fuel. "We have no choice but to leave it to 
their goodwill," a senior official of the Defense Ministry said. It 
is hard to say that the problem has been completely cleared. 
 
The old Antiterrorism Special Measures Law required the government 
to ask for the Diet's approval of SDF activities planned for 
overseas missions. The government was required to recall the MSDF to 
Japan if the government's masterplan for SDF activities could not 
obtain parliamentary approval from both houses of the Diet. 
 
However, the Diet still remains divided, with the ruling coalition 
holding a majority of the seats in the lower chamber and the 
opposition parties controlling the upper chamber. The government did 
not incorporate that stipulation in its bill for the newly enacted 
special measures law. The Diet's role is now weaker than before, so 
there were objections from within the ruling and opposition 
parties. 
 
The governing parties took a second vote in the House of 
Representatives to enact the new special measures law with a 
majority of two thirds. The opposition parties denounced the ruling 
parties for such an unprecedented move, maintaining that sending SDF 
troops overseas under a law rejected in the House of Councillors, 
which reflects the nation's most recent judgment, is a problem from 
the perspective of civilian control. 
 
The government's worry is that the new special measures law is valid 
for one year only. 
 
In October last year, Prime Minister Fukuda stated before the House 
of Representatives Special Committee on Counterterrorism: "If the 
new law is set at one year, it's possible to fulfill Japan's 
cooperation in the international community by continuing the MSDF's 
refueling activities." 
 
However, the war on terror in the Indian Ocean is not expected to 
end in one year. A senior Defense Ministry official also said: "The 
 
TOKYO 00000473  003 OF 013 
 
 
maritime interdiction operation will inevitably be protracted. The 
one-year special measures law is not enough at all. We should 
consider a permanent legal framework for sealane defense." 
 
The resumed mission could have no way out. 
 
(2) Ishiba increasingly isolated 
 
SANKEI (Page 2) (Abridged slightly) 
February 22, 2008 
 
In the wake of a Maritime Self-Defense Force Aegis destroyer's 
collision with a fishing boat, opposition parties yesterday demanded 
Defense Minister Shigeru Ishiba's resignation, dangling the option 
of submitting a censure motion to the House of Councillors, where 
they hold a majority. Although Prime Minister Yasuo Fukuda flatly 
rejected the demand, some in the ruling camp have begun turning 
their backs on Ishiba. The defense minister now finds himself in the 
hot seat. 
 
Opposition camp demands resignation, ruling bloc reacts coldly 
 
Democratic Party of Japan Deputy President Naoto Kan, Secretary 
General Yukio Hatoyama and Japanese Communist Party Chairman Kazuo 
Shii all agreed yesterday to demand Ishiba's resignation. 
 
The Ministry of Defense (MOD) announced that an Aegis crewmember on 
lookout duty had spotted the ill-fated fishing boat 10 minutes 
earlier than it initially explained. Reporting to the Prime 
Minister's Office (Kantei) about the collision was also delayed. The 
three lawmakers decided that all those problems demand Ishiba's 
resignation. 
 
Hatoyama in particular harshly criticized MOD, saying: "The 
ministry's nature to cover up matters has not changed." He also 
implied the possibility of submitting a censure motion against 
Ishiba, noting: "It is quite possible for us to use our numerical 
superiority in the Upper House." 
 
The Diet affairs committee chairmen of four opposition parties also 
agreed that Ishiba should resign for the same reason. Additionally, 
they confirmed a policy course to continue pursuing Ishiba in Lower 
House Budget Committee sessions depending on his explanation before 
the Lower House Security Committee this morning. Deliberations at 
the Security Committee will be crucial for Ishiba. 
 
Meanwhile, Prime Minister Fukuda, who is suffering from low approval 
ratings, wants to avoid Ishiba's resignation, which would damage the 
foundation of his administration. 
 
The prime minister had this to say last night about the opposition 
bloc's demand for Ishiba's resignation: "The current situation does 
not allow us to think about such a matter. Mr. Ishiba is playing a 
central role in reform of the Defense Ministry, so he needs to deal 
with the situation firmly." 
 
A senior LDP lawmaker also said: "If a person doesn't make any 
mistakes in exercising his authority, he does not have to resign." 
Ishiba energetically took action yesterday, visiting the city of 
Katsuura in Chiba Prefecture in the afternoon to offer apologies to 
the family of the two missing fishermen. 
 
 
TOKYO 00000473  004 OF 013 
 
 
Prior to this, Ishiba attended a Lower House Security Committee 
meeting, in which he indicated his intention to make utmost efforts 
to integrate the internal bureaus (non-uniformed group) and the SDF 
staff offices (uniformed group) into an enhanced system, saying: "I 
believe implementing a sweeping reform plan is the way to restore 
public trust in the Defense Ministry." 
 
An Ishiba aide commented: "The defense minister thinks that if he 
resigns at this point, the MOD reform plan will become toothless due 
to bureaucratic resistance." 
 
Some in the ruling camp have begun pointing to MOD's blunders after 
the accident, especially the change in the time the Aegis destroyer 
first spotted the fishing boat. An LDP lawmaker connected with 
national defense said: "The ministry changed its explanation to 
serve its own interests." A former Defense Agency director general 
warned: "MOD must not unveil information lightly that has yet to be 
verified." 
 
A New Komeito executive, too, gave Ishiba the cold shoulder, saying: 
"Being in the ruling camp, it's not appropriate for us to urge Mr. 
Ishiba to resign. At the same time, we don't want to be regarded as 
defending him, either." 
 
(3) Editorial: Aegis-equipped destroyer Atago's collision with 
fishing boat: SDF should not try to evade responsibility 
 
ASAHI (Page 3) (Full) 
February 22, 2008 
 
The standard procedure any organization that makes a blunder 
undergoes to regain trust is to correctly determine what happened, 
immediately have a report submitted, and release it. The 
Self-Defense Forces (SDF) have not followed this most important 
procedure in dealing with the Aegis-equipped destroyer's collision 
with a fishing boat. 
 
On the contrary, the SDF has changed its accounts later on, with 
inconvenient facts coming out later. Under these circumstances, it 
cannot be helped if people think that they are trying to shirk their 
responsibilities by hiding inconvenient information. 
 
It has been learned that the crew on watch aboard the Maritime 
Self-Defense Force's Aegis-equipped destroyer Atago, which struck 
and scuttled the small fishing boat Seitoku Maru, had spotted a 
light of the fishing vessel 12 minutes before the collision. 
 
This contradicts the explanation the SDF gave on the day of the 
accident that the Atago spotted the fishing boat two minutes before 
the collision and took evasive action one minute later. 
 
When it spotted the fishing boat is extremely important in 
investigating the cause of the accident. It is hard to understand 
why such vital information was not revealed immediately. 
 
The moves of the Aegis destroyer after spotting the fishing boat are 
even more unbelievable. If it had spotted the fishing boat 12 
minutes before the collision, it means that the Seitoku Maru was 
several kilometers away. It should have been fully possible for the 
Aegis destroyer to avoid the collision. However, it neither changed 
course nor slowed down. The destroyer was left on autopilot until 
immediately before the collision. This flies in the face common 
 
TOKYO 00000473  005 OF 013 
 
 
sense. 
 
There were some more fishing boats ahead of the destroyer Atago. The 
Seitoku Maru was in convoy along with its fellow fishing boats. The 
Aegis-equipped destroyer plowed into the convoy. 
 
What were crew members aboard the state-of-the-art SDF ship doing 
then? Did the crew on watch who spotted the fishing boat convey that 
to duty officers and radar monitors? Did they continue to monitor 
the moves of the fishing boat? 
 
It appears that the time of the collision coincided with the time 
the crew on watch were relieved. They could have neglected the watch 
due to the takeover procedure. 
 
The SDF has yet to reply to such basic questions. It has also yet to 
reveal the situation in the ship before and after the collision. 
 
If it claims that it is not possible to report what happened in the 
vessel, it means there were no discipline at all. Can we entrust 
such an organization with Japan's security? 
 
To begin with, if the MSDF is unable to avoid a fishing boat 
operating in front of it, how can it defend Japan? We are concerned 
that the morale and discipline of the SDF might have declined. 
 
The SDF should reveal every detail of the accident without disguise. 
It is unforgivable for it to defend itself on the strength of the 
importance of national defense. 
 
Defense Minister Ishiba's responsibility is weighty. If he cannot 
comprehend the actual state of SDF units, civilian control will be 
impossible. The accident this time has also put Japan's democracy to 
the test. 
 
(4) LDP criticizes government's draft basic plan on ocean policy as 
showing no posture of trying to protect national interests 
 
SANKEI (Page 5) (Excerpts) 
February 22, 2008 
 
The Liberal Democratic Party's Special Committee on Ocean Policy, 
chaired by Seiji Nakamura, held a meeting at party headquarters 
yesterday to discuss a draft basic plan on marine policy compiled by 
the government's marine policy task force, headed by Prime Minister 
Yasuo Fukuda. The government plans to adopt it in a cabinet meeting 
in mid-March, but criticism is mounting of the plan, with one 
committee member claiming: "The government's eagerness to protect 
marine resources and its interests cannot be detected in the plan." 
 
The basic plan is to provide for the nation's basic marine policy 
and measures to ensure the safety of the lives of its people. 
 
On the dispute between Japan and China over gas exploration rights 
in the East China Sea, however, the draft uses such an roundabout 
expression as "problems have been caused over resource development 
because the areas (whose development are being) asserted by the 
other side straddles the Japan-claimed exclusive economic zone." In 
the meeting, many participants criticized this part. One member 
claimed: "The key point of how to protect Japan's rights and 
interests in the East China Sea is not included. Such a vague 
expression as 'the other side' should not be used." Another 
 
TOKYO 00000473  006 OF 013 
 
 
assailed: "The government's office gave excessive consideration to 
China in drafting the plan." 
 
(5) Marine admits to rape allegations 
 
OKINAWA TIMES (Page 1) (Full) 
February 22, 2008 
 
In connection with a recent rape that took place in the middle part 
of Okinawa's main island, Okinawa prefectural police have now 
arrested Tyrone Hadnott, a 38-year-old U.S. Marine Corps staff 
sergeant belonging to Camp Courtney in Okinawa, on suspicion of 
raping a junior high school girl. Hadnott has fully admitted to his 
allegations, investigative sources said yesterday. He had denied his 
allegations, maintaining that he fondled her but did not rape her. 
However, his statement differs in part from the girl's explanation. 
The prefectural police are carefully investigating the incident. 
 
According to investigations, Hadnott allegedly raped the girl in a 
car parked on a road along a park in the middle part of Okinawa's 
main island at around 10:33 p.m., Feb. 10. She was freed before 
11:00 p.m., and police put her under protective custody when she was 
lying low in the park. She asked her friends for help over her 
cellphone. 
 
Prefectural police authorities searched Hadnott's house, where they 
confiscated a vehicle and a motorbike that are believed to have been 
used for the crime. The police are now searching for further 
evidence, including DNA analysis. 
 
Meanwhile, another sexual assault took place on Feb. 18. In this 
case, an Okinawa-based U.S. Army corporal in his 20s is alleged to 
have raped a Philippine woman. The suspect, currently under U.S. 
military custody, has denied his alleged rape, maintaining that it 
was "consensual," the investigative sources said yesterday. The 
prefectural police are now questioning the corporal and the victim 
through her acquaintances. The police will seek an arrest warrant as 
soon as his allegations are confirmed. 
 
(6) Debate on bills on FY2000 budget, revision special taxation law 
to reach crucial stage at end of February; Ruling coalition planning 
to pass them through Lower House on Feb. 29, opposition camp seeking 
cautious debate 
 
NIKKEI (Page 2) (Full) 
February 21, 2008 
 
A tug-of-war is now intensifying between the ruling and opposition 
camps over the fiscal 2008 budget bill and a bill amending the 
Special Taxation Measures Law, which includes measures to retain the 
current provisional tax rates for road construction. Although the 
ruling parties aim to pass the bills through the House of 
Representatives on Feb. 29, the opposition camp is reacting strongly 
against the ruling coalition's plan, calling for cautious 
deliberations. The ruling camp wants to avoid provoking the 
opposition in order to get their approval of its appointments of a 
new governor and vice governor of the Bank of Japan. The ruling bloc 
is now being forced to steer a difficult course in overcoming the 
politically divided Diet. 
 
In a meeting yesterday of the Lower House Financial Affairs 
Committee, Prime Minister Yasuo Fukuda stressed the need for 
 
TOKYO 00000473  007 OF 013 
 
 
enacting the bill revising the Special Taxation Measures Law before 
the end of this fiscal year. He stated: "In order also for promoting 
fiscal soundness, the provisional tax rates have to be retained." 
 
The ruling coalition plans to hold ad hoc subcommittee meetings, 
which are preconditions for taking a vote on the budget bill at the 
Lower House Budget Committee, on Feb. 27 and 28. They are also 
determined to push the budget bill and the bill amending the tax law 
through the Lower House on Feb. 29. 
 
LDP Upper House Caucus Chairman Hidehisa Otsuji told reporters 
yesterday in Fukuoka City: "The Upper House will become the main 
battle field. Revising the bills will become a topic of discussion 
after they are sent to the Upper House." 
 
The ruling camp's source of retribution is the agreement between the 
ruling and opposition blocs on Jan. 30 through the good offices of 
Lower House speaker and Upper House president. The agreement 
stipulates that a certain conclusion should be reached by the end of 
the current fiscal year (March) on the budget and revenue-related 
bills. The ruling camp interprets the phrase that the bills should 
be sent to the Upper House before the end of February to secure time 
for deliberations. 
 
The main opposition Democratic Party of Japan (DPJ or Minshuto), 
however, opposes the ruling coalition's plan. DPJ President Ichiro 
Ozawa discussed the matter yesterday with Upper House Caucus 
Chairman Azuma Koshiishi, Diet Affairs Committee Chairman Kenji 
Yamaoka, and Policy Research Committee Chairman Masayuki Naoshima. 
They reached an agreement that their party itself would not call for 
a revision of the bill to amend the Special Taxation Measures Law, 
but that it would step up its pursuit of the government. 
 
The DPJ will likely forgo its plan to submit its counterproposals. 
Secretary General Yukio Hatoyama told reporters yesterday in 
 
SIPDIS 
Shizuoka City confidently: "It is not necessary at all to present 
compromise proposals. As time goes by, the ruling parties will 
become frustrated with themselves." 
 
The DPJ's basic strategy is to abolish the provisional tax rates at 
the end of March by thwarting the enactment of the revision bill 
before that time. The party is determined not to respond to a vote 
on the bill at the Lower House in early March, seeking cautious 
deliberations. Yesterday it had the Lower House Financial Affairs 
Committee discontinue its deliberations for the reason that the 
Finance Ministry did present sufficient documentation. 
 
(7) Government eyes introduction of emissions trading system, in 
anticipation of creation of emissions-rights market by U.S. 
 
ASAHI (Page 8) (Full) 
February 21, 2008 
 
The government has decided to fully study the possibility of 
introducing a domestic emissions trading system in order to 
significantly reduce the nation's greenhouse gas emissions. This 
issue will be high on the agenda in meetings of an experts' panel 
that will be set up under the prime minister by the end of this 
month. The European Union (EU) is aiming to create an international 
emissions-rights market. Based on the judgment that the next U.S. 
administration, not only the EU, will surely make a policy switch to 
introduce the system, the Japanese government has finally begun to 
 
TOKYO 00000473  008 OF 013 
 
 
take action. Although economic circles, mainly the electricity and 
steel industries, are still putting up strong resistance, there are 
signs that they are becoming flexible about the introduction of the 
system. 
 
In a press conference yesterday, Chief Cabinet Secretary Machimura 
said: "It is likely that an administration that takes a different 
approach to the environment from the Bush administration will be 
established." He thus indicated that the next U.S. government will 
accelerate the implementation of measures to contain global warming, 
including an introduction of an emissions-trading system. The three 
major candidates for the upcoming U.S. presidential election, 
Republican front-runner John McCain, Democrat Hillary Clinton, and 
Democrat Barack Obama, have expressed their support for introducing 
an emissions-trading system. The two Democratic candidates have set 
forth the numerical target of reducing their country's gas emissions 
by 80 PERCENT  from 1990 levels by 2050. 
 
The EU, which has come up with the goal of reducing emissions 20 
PERCENT  from 1990 levels by 2020, announced in late January that it 
would review its current regional trading system. The EU proposed 
revising the way the cap is set and adopting an auction formula, 
applying pressure on the Japanese and U.S. governments, both of 
which are negative about setting up an emissions-rights market. 
 
A senior government official said: "The government has become 
positive about emissions trading in response to moves by the U.S. 
and Europe. Japan might open an emissions-rights market four or five 
years from now." 
 
The prime minister wants to give a boost to his administration by 
stepping up efforts against global warming. Meanwhile, the 
Democratic Party of Japan (DPJ) is already working on a bill to 
introduce an emissions trading system. The prime minister is set to 
counter the DPJ by setting up by the end of this month an experts' 
panel tasked with crafting a strategy to establish a low-carbon 
society in accordance with the commitment he made in his policy 
speech in January. 
 
Toyota Motor Corp. Advisor Hiroshi Okuda will head the new panel. He 
was appointed as special advisor on global warming in line with the 
prime minister's strong desire. The government aims to gradually 
solicit approval from economic circles by drawing Tokyo Electric 
Power President Tsunehisa Katsumata and Nippon Steel Corporation 
President Akio Mimura into the panel from the electricity and steel 
industries, which are said to be "the toughest forces of 
resistance," as said by a senior government official. 
 
(8) Interview with Keio University Professor Heizo Takenaka: Local 
areas have become impoverished because structural reforms have been 
insufficient 
 
EKONOMISUTO (Page 26) (Full) 
February 26, 2008 
 
-- The observation has been growing that Japan's economic foundation 
is sinking. 
 
"The phenomenon is symbolically reflected in the falling stock 
prices. Even in the U.S., where the subprime loan crisis occurred, 
stock prices have gone up 6 PERCENT  over the past year. 
Expectations of Japan have apparently withered. What happened in 
 
TOKYO 00000473  009 OF 013 
 
 
2005 is in sharp contrast with the current situation. Postal 
services were privatized, following the dissolution of the Lower 
House and the snap election. Stock prices shot up 40 PERCENT  that 
year, boosting the expectation that Japan would change. Japan has 
both bright and dark aspects. By that, I mean Japan can be very 
strong when something has to be done. 
 
-- State Minister for Economic and Fiscal Policy Hiroko Ota gave a 
speech in the Diet that the Japanese economy can no longer be called 
one of the best due to the decline in per-capita GDP in the world. 
 
"It is unacceptable for the government to make such a statement 
without fully implementing the reform drive. The government's role 
is to show its resolution that even though some may say that the 
Japanese economy is no longer one of the best, it will bounce it 
back to the first-class level. Since the government has not said so, 
expectations of the Japanese economy are further declining." 
 
Summing up of Upper House election in July last year by LDP is 
mistaken 
 
-- Do you think that Japan is heading for a decline? 
 
"I think that Japan is in a situation where it can go either way, 
get better or get worse. It is regrettable that some think that 
Japan has declined. However, given the fact that it was only three 
years ago that stock prices rose 40 PERCENT , it is possible to turn 
the present tide. 
 
Japan has many strong points, such as technology. Measures to combat 
climate change are on the global agenda. Japan's energy efficiency 
is the highest in the world. It is twice that of the U.S. and nine 
times that of China or India in terms of CO2 emitted for every 
dollar generated in GDP. Japan has such a high technology. 
 
In the meantime, the world is concerned that Japan could fall into a 
situation similar to the 'lost decade' it experienced in the 1990s 
when its reform momentum lost steam. I do not think that the 
Japanese economy will go back to those days. The economy was indeed 
helped thanks to the disposal of non-performing loans held by banks. 
The Japanese economy will not suffer such a major setback again. 
However, the government finds itself unable to fully display its 
leadership at a time when Japan has to gather steam to boost its 
economy." 
 
-- The Diet is divided between the Lower House and the Upper House 
as a result of the Upper House election last year, causing a 
political deadlock. 
 
The biggest political mistake last year was the Liberal Democratic 
Party's conclusion reached after the Upper House election. Summing 
up the election result, the LDP believed that the ruling camp had 
lost the election due to disgruntlement harbored by rural areas hit 
by the structural reforms. However, that conclusion was 
fundamentally incorrect. To begin with, reforms were carried out in 
urban areas. Sufficient reform has yet to be carried out in rural 
areas. The ruling parties lost seats in rural areas where reform has 
yet to be carried out. However, they were not defeated in urban 
areas, where reform was already carried out. It is true that rural 
areas have become impoverished. That is because reforms have not 
been fully implemented there. Structural reforms in the agricultural 
sector have yet to be carried out. Decentralization has not taken 
 
TOKYO 00000473  010 OF 013 
 
 
place yet. The wrong choice - namely, to end structural reforms -- 
is gaining ground. 
 
CEFP taken over by bureaucrats 
 
-- The Council of Economic and Fiscal Policy (CEFP) played the role 
of the control tower during Prime Minister Junichiro Koizumi's 
reform drive. 
 
In my view, the CEFP is heavily responsible for the situation that 
occurred after the Koizumi administration. Looking back on the past 
year and six months, the panel has only come up with slogans. It has 
no action programs on the agenda. They say that it is necessary to 
boost the economy and revitalize education. However, they are just 
issuing slogans. Nobody opposes such slogans. But when it comes to 
what should be done, it has no easy-to-understand agenda. 
 
When foreigners ask, "What has Japan done since it carried out such 
reforms as the disposal of bad loans and postal privatization?" no 
one can answer. Although the role of the CEFP is to set strategic 
agenda, the council has not done so yet. 
 
Regarding the management of the CEFP, private-sector members (four, 
including International Christian University Professor Naohiro 
Yashiro, Japan Business Federation Chairman Fujio Mitarai) are 
responsible for presenting papers at meetings. But bureaucrats 
dictate their tasks. Symbolically, a report noting that the 
consumption tax rate must be raised read as if it was written by the 
Finance Ministry, but it was presented in the name of the 
private-sector members. Surprisingly, the CEFP has been totally 
taken over by bureaucrats. 
 
It is of no use pinning hopes on civil servants or Diet policy 
experts, because their behavior is motivated by the desire to secure 
vested rights and interests. That is why private citizens should be 
involved in the policy-making process. Various experts councils have 
private citizens on them but unfortunately, those representing the 
private sector have not produced many results.  At present, there is 
no virtuous cycle of politics displaying leadership and private 
citizens bravely challenging the systems. Unless there is such a 
cycle, policies will not turn around. 
 
-- Isn't it difficult to carry out reform under the present 
political climate? 
 
"Even so, Japan has sophisticated technology and strong elements in 
various fields. There is a strong possibility of the status of the 
Japanese economy being elevated, if it reshapes the reform 
initiative and correctly sets the agenda. If the situation is left 
unattended, I am pessimistic about the future of the Japanese 
economy. However, there are other paths to follow. 
 
Our society as a whole lacks a sense of crisis. Though Japan's 
per-capita GDP has slipped to fourth place, daily life is not so bad 
from a global standard. Alhough we may not be bad off now, our 
children or grandchildren might be in a lot of trouble. We need to 
have such a sense of alarm. 
 
(Interviewer: Naoki Ogawa of the editorial office) 
 
(9) Interview with Eisuke Sakakibara: Carry out not reform but 
revolution to avoid ruin of Japan 
 
TOKYO 00000473  011 OF 013 
 
 
 
EKONOMISUTO (Page 27) (Full) 
February 26, 2008, issue 
 
-- In your recent book, Fall of Japan (Nihon no botsuraku), you 
reiterate that the future of Japan is at risk. Where have you seen 
such signs? 
 
Companies have begun to turn inward looking; organizations have 
become bureaucratized; and dynamism is being lost. For instance, 
many countries now have growing interest in India and are eagerly 
making inroads into its market. Japan, however, seems to be 
following after them. Companies must expect some risk involved In 
investing in India, but Japanese firms seem unable to assume any 
risk. 
 
Given that there are no strict regulations on compliance and 
governance, corporate executives have been pouring excessive energy 
into their own companies. As a result, their mind-set is 
considerably introspective. Another factor is that once a company 
causes an accident or has a scandal, television tends to severely 
criticize it. 
 
Japanese companies are still capable of earning profits and have 
abundant capital, so they should be able to proactively move toward 
M&As (merger and acquisition) with foreign companies. But they are 
trying to protect themselves from being bought (by foreign 
companies). 
 
-- There are many companies dominating the global market with their 
high environment-protection technology. 
 
There are many superior companies, such as Toyota Motors., Nippon 
Steel, and Matsushita Electric. Although I wrote about a possible 
fall of the state, I did not mean such would occur this year or next 
year. Japan might go under 10 years or 20 years from now. General 
Motors of the U.S. (which was overtaken by Toyota in terms of 
output) was performing strongly a decade ago. 
 
I wonder if Japanese firms will be able to maintain a significant 
lead in terms of technical prowess over China and India, which are 
emerging remarkably. It is necessary for Japan to cultivate 
excellent engineers, but the government and companies are not eager 
about it. Japanese industries are actually living on what they had 
accumulated in the past 
 
-- Under the current political situation, in which the opposition 
camp controls the House of Councillors and the ruling bloc holds a 
majority in the House of Representatives, both camps seem overly 
preoccupied with political maneuvering. 
 
What must be done now is to change the nature of this nation with a 
change of government. There might be no other means but to let the 
Democratic Party of Japan (DPJ) assume political power for the time 
being in order to carry out the change. 
 
Over the past decade, the LDP, starting with the government of 
Ryutaro Hashimoto through the Junichiro Koizumi government, worked 
out many reform plans but then failed to implement them. Most of the 
plans proposed by the Koizumi administration ended up as mostly 
empty slogans. In the case of privatizing the Japan Highway Public 
Corporation, the company was changed for the worse. The so-called 
 
TOKYO 00000473  012 OF 013 
 
 
triple reform plan - reducing national subsidies, transferring tax 
revenues to local governments, and reforming the grant-in-aid system 
- also resulted in widening regional income disparities. We don't 
know what will become of postal services now. The education system 
is getting worse, and problems related to the pension system are 
erupting. The medical system is collapsing. 
 
It is necessary to change the current relationships between the 
central and local governments and to promote decentralization. The 
Health, Labor and Welfare Ministry and the Education, Culture, 
Sports and Science and Technology Ministry are basically unnecessary 
for the central government. The government should devote itself to 
diplomatic, defense and financial affairs. Authority for handling 
projects should be handed over to local governments. I have also 
suggested establishing about 300 corporate towns, with a population 
of 300,000 in each, through mergers. This system should be different 
from the regional system but like the one in which there were 
300,000 clans in the Edo period. The central government should stop 
controlling local governments in various forms and fully perform its 
own duties. The current public servant system, too, should be 
changed. 
 
The government should also ease restrictions on the educational 
system. The regulations imposed by the Education Ministry are overly 
strict. It is necessary to prepare the minimum standards for 
compulsory education, but more flexibility is necessary for 
university education. What is needed now is to cultivate elites. 
Japan has not produced a class of elites, in the good meaning of the 
word. The government should establish boarding junior high schools, 
high schools, and colleges that would accommodate even poor students 
if they make efforts. By taking such measures, Japan should nurture 
those who could display leadership. 
 
-- Is the DPJ capable enough to assume the reins of government? 
 
I don't know. But a change of government would slash away at vested 
interests and the new administration could be expected to change 
(conventional systems) significantly. Since the government's various 
systems have become complementary, it is difficult to partially 
change them. The network of vested interests has put up resistance 
and has watered down things in the end, as seen in the reform of the 
Japan Highway Public Corporation. 
 
-- In the Meiji Restoration, the arrival of the black ships enhanced 
a sense of crisis among low-level samurai. Is there a sense of 
crisis among Japanese people at the present time? 
 
The black ships are actually coming in. Signs of Japan about to 
collapse are appearing all over the place, so we must have a sense 
of alarm. A bloodless revolution should be carried out by changing 
government. What is needed is not partial reform but revolution or 
renovation. 
 
Unless revolution or renovation is carried out, society could fall 
into a state of turmoil in various ways. Crime might increase, 
safety would be threatened, social disparities could widen, and 
those suffering by hunger and poverty would increase. Such a state 
could bring about political disarray. Japanese companies would be 
defeated in global competition, and the Japanese economy would 
weaken. Wages would drop, and job opportunities would be reduced. If 
the state falls into ruin, such phenomena will appear. 
 
 
TOKYO 00000473  013 OF 013 
 
 
During the high economic growth period, everything seemed to improve 
speedily, but the situation could turn around. It will be very hard 
to achieve results even if reform is carried out, once the state is 
in ruins. Japan must be significantly changed on a trial basis over 
the next five years or so. If we are resolved to bring about a major 
change, we will not need to be pessimistic. Since Japan has yet to 
go under, there is still enough room for rebuilding the nation. 
 
SCHIEFFER