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UNCLAS SECTION 01 OF 11 TOKYO 000628 
 
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 03/11/08 
 
Index: 
 
1) Top headlines 
2) Editorials 
3) Prime Minister's daily schedule (Nikkei) 
 
4) Japanese police identify North Korean organization, directly 
under Kim Il Sung, responsible for two of the abductions  (Asahi) 
 
China connection: 
5) Chinese government accuses Japanese diplomats of being spies 
(Yomiuri) 
6) Tokyo's improving relations with Beijing could be shaken by 
China's charges of spying by Japanese diplomats  (Yomiuri) 
 
7) New Komeito head Ota meets South Korean President Lee  (Yomiuri) 
 
 
Defense affairs: 
8) Japanese government tells U.S. that Futenma relocation project 
faces eight-month delay due to environmental impact assessment 
(Yomiuri) 
9) Defense Ministry's project team readies report on strengthening 
procurement system to prevent further corrupt practices  (Asahi) 
 
Diet agenda: 
10) After week at a standstill, the Diet is expected to normalize 
tomorrow and return to deliberations on legislation  (Nikkei) 
11) Very difficult to pass tax-related bills this fiscal year (by 
end of March) with opposition parties adamantly opposed and ready to 
boycott deliberation  (Mainichi) 
12) Upper House is now deliberating the national budget bill but 
ruling and opposition camps not talking the same language  (Tokyo 
Shimbun) 
13) Democratic Party of Japan (DPJ) not budging an inch in opposing 
appointment of Muto as Bank of Japan governor, with Muto testifying 
in Diet today  (Sankei) 
14) While most of DPJ hard-lined toward Muto as BOJ governor, some 
members willing to compromise  (Nikkei) 
15) In meeting of four opposition parties, Japanese Communist Party 
blasts DPJ for boycotting strategy instead of deliberating bills in 
the Diet  (Tokyo Shimbun) 
16) Watered down version of plan for cabinet personal agency 
creating internal tensions in Fukuda cabinet  (Mainichi) 
 
17) Japan woefully behind other advanced countries in inward foreign 
direct investment, revealing need to further ease restrictions on 
foreign capital  (Tokyo Shimbun) 
 
Articles: 
 
1) TOP HEADLINES 
 
Asahi: 
Names of two senior officials of North Korean intelligence agency 
floated as allegedly involved in abductions of Chimura, Hasuike 
floated, according to investigation by police: Under direct control 
of general secretary 
 
Mainichi: 
Internal investigation of ShinGinko Tokyo avoids question of 
responsibility of Tokyo governor: Seeking compensation from former 
 
TOKYO 00000628  002 OF 011 
 
 
management personnel under consideration 
 
Yomiuri: 
Chinese court closed to public rules that "Japanese diplomats are 
spies" 
 
Nikkei: 
Nikkei Stock Average closes at lowest level in two and half years at 
12,532 yen: View that U.S. economy has entered recession phase gains 
ground 
 
Sankei: 
Report on investigation into ShinGinko Tokyo blames former president 
as responsible for sloppy lending practices; Likely to be charged 
with criminal and civil liability 
 
Tokyo Shimbun: 
Report on investigation into ShinGinko Tokyo: 35 borrowers suspected 
of having window-dressed their accounts statements, revealing sloppy 
screening 
 
Akahata: 
Japanese Communist Party's Agricultural Revitalization Plan hailed 
 
2) EDITORIALS 
 
Asahi: 
(1) We want to see dialogue on whaling issue deepen 
(2) Amendment to Anti-monopoly Law: Focus should be placed on 
boosting Fair Trade Commission's capability to crack down on illegal 
trading practices 
 
Mainichi: 
(1) Reallocation of road funds: It is absolutely necessary to 
reexamine special account system 
(2) Marathon runners chosen for Olympics 
 
Yomiuri: 
(1) Foreign currency reserves top 1 trillion yen: Huge amount poses 
risk 
(2)  Order to pay administrative surcharges given to three NHK 
reporters who engaged in insider stock trading: NHK needs outside 
investigation 
 
Nikkei: 
(1) Stock market alert to slowdown of U.S. economy 
(2) Revival of Imperial-style press conferences, in which only 
convenient information is presented, by Defense Ministry 
unacceptable 
 
Sankei: 
(1) Marathon runners chosen for Olympics: Preparation for Beijing 
needed 
(2) Scandal involving Ministry of Land, Infrastructure and 
Transport 
 
Tokyo Shimbun: 
(1) Age of majority: Flexible discussion needed 
(2) Shooting at divinity school in Israel: Break cycle of violence 
 
Akahata: 
(1) Agricultural revitalization plan: Policy proposal to address 
 
TOKYO 00000628  003 OF 011 
 
 
crisis 
 
3) Prime Minister's Official Residence (Kantei) 
 
Prime Minister's schedule, March 10 
 
NIKKEI (Page 2) (Full) 
March 11, 2008 
 
10:00 
Met at the Kantei with Chief Cabinet Secretary Machimura, Deputy 
Chief Cabinet Secretary Futahashi, Assistant Deputy Chief Cabinet 
secretaries Saka and Ando. Machimura stayed behind. 
 
SIPDIS 
 
11:00 
Met Vice Defense Minister Masuda. Followed by Economic and Fiscal 
Policy Minister Ota. 
 
12:17 
Met Machimura. 
 
14:25 
Met Environment Research Committee Chairman Kawaguchi. 
 
15:00 
Met Vice Health, Labor and Welfare Minister Edogawa. Followed by 
Consumer Administration Promotion Minister Kishida. 
 
16:55 
Handed official nomination certificate to potential candidate for 
the by-election in Yamaguchi 2nd District for a Lower House seat, 
with Secretary General Ibuki and others present. Attended an 
executive meeting. 
 
17:20 
Arrived at the Kantei. 
 
18:39 
Returned to his official residence. 
 
4) Two senior North Korean agents under Kim Jong Il's direct control 
surface in connection with abductions of Chimura, Hasuike, police 
reveal 
 
ASAHI (Top play) (Excerpts) 
 
Police authorities identified yesterday two senior North Korean 
agents suspected of having had a hand in the abductions of Yasushi 
Chimura (52) and his wife and Kaoru Hasuike (50) and his wife, and 
that the two agents had belonged to the North Korean Research 
Department for External Intelligence (currently called No. 35 
Office). Police authorities believe that those two senior agents 
were aides to North Korean leader Kim Jong Il. This is the first 
time that senior agents who were directly under Kim have been linked 
to the series of abductions of Japanese nationals by North Korean 
agents. The police are carrying on their investigation in order to 
build a case. This discovery is likely to have a significant impact 
on diplomatic normalization talks between Japan and North Korea, in 
which Japan has called for progress on the abduction issue. 
 
According to informed sources, the two senior agents are Li Wan Gi, 
former director of the Research Department for External 
 
TOKYO 00000628  004 OF 011 
 
 
Intelligence, and Kang Hae Ryong, former deputy director of that 
department. The allegations are that when the two served as director 
and deputy director respectively around 1978, they schemed to abduct 
Japanese nationals and instructed their staff to do so. The two 
senior officials are suspected of instructing suspect Sin Gwang Su 
(78) and suspect commonly called Che Sunchol to abduct couples. Sin 
Gwang Su is suspected of having abducted Yasushi Chimura and his 
wife and also Tadaaki Hara, and another suspect commonly called Che 
Sunchol, who is placed on the international wanted list, is 
suspected of having abducted Kaoru Hasuike and his wife. 
 
5) Japanese diplomats were spies: China 
 
YOMIURI (Top play) (Lead paragraph) 
March 11, 2008 
 
The Higher People's Court of Beijing Municipality of China, in a 
final ruling handed down in September 2006, concluded that two 
Japanese diplomats were spies for the Intelligence and Analysis 
Service of Japan's Foreign Ministry, which the court ruled was an 
espionage organization, informed sources in Tokyo revealed 
yesterday. According to the sources, the ruling said a senior 
Foreign Ministry official, who had worked at the Intelligence and 
Analysis Service, and a secretary of the Japanese Embassy in Beijing 
were spies. China's court trial is under a two-instance system. The 
ruling was part of the Beijing higher court's decision to uphold a 
first-instance sentence of life imprisonment imposed on a Chinese 
man, 48, who had met with the two Japanese diplomats. It is 
extremely unusual for a Chinese court ruling to describe an 
organization of Japan's Foreign Ministry as an espionage 
organization and Japanese diplomats as spies to be made public. The 
ruling reflects China's deep-seated wariness of Japan during the 
then administration of Prime Minister Junichiro Koizumi, when 
bilateral relations had reached a nadir. 
 
6) Commentary: China's judiciary affected by politics 
 
YOMIURI (Page 2) (Full) 
March 11, 2008 
 
The Higher People's Court of Beijing Municipality of China 
(corresponding to a high court) concluded in its final ruling handed 
down in September 2006 that two Japanese diplomats were spies, and 
the court also imposed a sentence of life imprisonment on a Beijing 
man. The ruling reflects the facts about China's judiciary that is 
placed under the guidance of its communist party and is inevitably 
subject to political influence. In addition, the ruling might have 
strongly mirrored bilateral relations that wavered in recent years. 
 
The ruling described the two Japanese diplomats, including a 
high-ranking official of the Foreign Ministry, as spies. This was a 
decisive factor to affect charges for the Chinese man, who was 
sentenced to life imprisonment. According to informed sources, 
however, the ruling did not specify the two Japanese diplomats' 
espionage. 
 
According to the informed sources, the ruling did not prove that the 
Chinese man had known that the two Japanese diplomats were spies, 
nor did it specify when, where, and how often the two Japanese 
diplomats met with the Chinese man and what they ordered the man to 
do. These are critical points that affect a court in its judgment of 
criminal facts and in its determination of appropriate punishment. 
 
TOKYO 00000628  005 OF 011 
 
 
However, the ruling left these points ambiguous and imposed a 
sentence of life imprisonment on the Chinese man. 
 
In China, whose judiciary is under the guidance of its communist 
party, investigations and court trials are easily affected by the 
political situation. 
 
The Chinese man was detained in the spring of 2005, when Japan-China 
relations had fallen into their worst-ever state since the two 
countries normalized ties. Then Prime Minister Koizumi paid homage 
at Yasukuni Shrine, and bilateral relations went from bad to worse 
thereafter with no prospects for repair. There were large-scale 
anti-Japan demonstrations in China. 
 
China's public security authorities could likely arrest a "dangerous 
figure" who has contact with Japan, without fearing any negative 
impact of the man's arrest on bilateral relations. 
 
7) New Komeito leader meets with ROK president 
 
YOMIURI (Page 4) (Full) 
March 11, 2008 
 
Masakazu Hamasuna, Seoul 
 
New Komeito Representative Ota yesterday afternoon met with South 
Korean President Lee Myung Bak at the Blue House. On the question of 
whether to grant permanent foreign residents local election voting 
rights, Lee told Ota, "South Korean residents in Japan have strongly 
desired such rights over the years. I ask for your cooperation to 
move the matter forward." In response, Ota said, "I will strive to 
move the issue forward." 
 
In the dialogue, Lee mentioned North Korean issues and indicated his 
intent to proactively address the abduction issue by noting: "The 
previous administration paid little attention to the human rights 
issues, but our understanding is that they need to be resolved. In 
fact, not only Japanese nationals but also more than 400 South 
Koreans have been abducted." 
 
8) EIA for relocation of Futenma airfield expected to be delayed by 
up to eight months 
 
YOMIURI (Page 4) (Full) 
March 11, 2008 
 
The Japanese government conveyed to the United States government 
that an environmental impact assessment (EIA) of a coastal area on 
Camp Schwab, a location planned for an alternate facility of the 
U.S. Marine Corps Air Station Futenma in Okinawa Prefecture, will be 
delayed by up to eight months from the initial schedule. According 
to the initial schedule, the EIA was supposed to be completed at the 
end of July 2009. In Japan-U.S. working-level talks held in the 
prefecture on March 6, the Japanese side briefed the U.S. side on 
this delay. 
 
9) Defense Ministry to continue procurement via trading houses 
 
ASAHI (Page 4) (Full) 
March 11, 2008 
 
A Defense Ministry project team has studied how to improve the 
 
TOKYO 00000628  006 OF 011 
 
 
Defense Ministry's procurement of defense equipment for the 
Self-Defense Forces in the wake of a bribery case involving its 
former administrative vice minister, and the project team yesterday 
finalized a report featuring a plan to check procurement in order to 
prevent trading companies' bill-padding practices. Defense Minister 
Ishiba had initially implied his intent to abolish the Defense 
Ministry's current procurement system of importing defense equipment 
through trading companies, noting that there are problems with such 
a procurement system. However, the Defense Ministry will maintain 
the system. 
 
The project team will work out and release a report late this 
month. 
 
The draft report suggests the need for the Defense Ministry to 
establish an import control division under the Equipment Procurement 
and Construction Office (EPCO) in fiscal 2009. The Defense Ministry 
will employ certified public accountants, trading company retirees, 
and others with expertise for that division to heighten its function 
of overseeing trading companies. 
 
The Defense Ministry will also inquire of foreign manufacturers 
about all estimates submitted by trading companies, beginning in the 
new fiscal year. In this connection, the Defense Ministry will post 
seven more officials in the United States for a total of 10 import 
procurement officials to enhance its overseas fact-finding surveys. 
Furthermore, the Defense Ministry will add up to a penalty for 
overbilling. The draft report also says the Defense Ministry will 
enter into more direct contracts with overseas manufacturers by 
providing information in English about its procurement plans. 
 
10) Stalled Diet session expected to return to normal tomorrow or 
later 
 
NIKKEI (Page 2) (Full) 
March 11, 2008 
 
The House of Councillors Budget Committee discussed in its executive 
meeting yesterday the issue of starting deliberations on the budget 
bill for FY2008, but the ruling and opposition parties failed to 
find common ground. As a result, the Diet session is expected to 
return to normal tomorrow or later. In the meeting, the ruling camp 
proposed starting deliberations today, but the Democratic Party of 
Japan (DPJ) refused to set any specific date for starting 
deliberations, saying that the ruling side has presented a proposal 
that cannot be accepted over the nomination for the post of Bank of 
Japan (BOJ) governor. 
 
In their Diet Affairs Committee chairmen's meeting on March 7, the 
LDP and the DPJ agreed on normalizing the Diet session, starting 
with the executive meeting on March 10. 
 
However, the DPJ demanded in the meeting yesterday apologies by 
Chairman Yoshitada Konoike for holding the meeting by exercising his 
authority and (his) severe criticism of the DPJ. Konoike said in a 
press conference yesterday: "It is outrageous to discuss the 
selection of a new BOJ governor and Japan's budget at the same level 
as a political issue." 
 
In the House of Representatives, the secretaries general of the DPJ, 
the Japanese Communist Party, the Social Democratic Party, and the 
People's New Party met yesterday afternoon. They confirmed that they 
 
TOKYO 00000628  007 OF 011 
 
 
would (1) urge the ruling camp to deeply reflect on its way of 
having passed the budget bill through the Lower House; (2) make 
utmost efforts to set conditions for thorough deliberations in the 
Upper House; and (3) continue to pursue Defense Minister Ishiba's 
responsibility. 
 
11) Bill amending Special Taxation Measures Law unlikely to clear 
Diet within current fiscal year; Opposition camp refuses to begin 
deliberations at Upper House Budget Committee 
 
MAINICHI (Page 5) (Excerpts) 
March 11, 2008 
 
The directors of the ruling and opposition parties of the House of 
Councillors Budget Committee met for the first time in a week to 
discuss deliberations on the fiscal 2008 budget bill. The session 
broke off with the opposition camp refusing to respond to the ruling 
bloc's call for swift deliberations, citing the ongoing process to 
determine a new Bank of Japan governor, which requires confirmation 
by both chambers of the Diet. The committee is also still unable to 
begin deliberations on a bill amending the Special Taxation Measures 
Law, including the provisional gasoline tax rate. The government and 
ruling bloc are increasingly finding it difficult to realize their 
plan to enact those bills within the current fiscal year. 
 
Upper House Budget Committee Chairman Yoshitada Konoike of the 
Liberal Democratic Party in a press conference yesterday said: "It's 
like wiping a fogged glass with your hand. You cannot see tomorrow." 
At the directors meeting, the Democratic Party of Japan remained 
determined to continue to protract the confusion, with one member 
saying, "Because the government has presented at this particular 
time a BOJ personnel plan that is hardly acceptable, we cannot 
discuss a timetable." 
 
Even if the Upper House does not put the budget bill to a vote, it 
is certain to be enacted within the current fiscal year under the 
Constitution. Given the situation, the DPJ is set to apply pressure 
on the government and ruling coalition by blocking the Special 
Taxation Measures Law revision bill from clearing the Diet within 
the current fiscal year. Appearing on an NHK program on March 9, DPJ 
Deputy President Naoto Kan said: "(The prime minister) should 
dissolve the Lower House for a snap general election over the 
road-related tax revenues. At this point, a decision must be made by 
the public instead of by party interests." 
 
Even if the Diet returns to normal within this week, a rocky path 
lies ahead of the enactment of the Special Taxation Measures Law 
revision bill by March 31. 
 
Customarily, discussions on a budget-related bill begin when 
deliberations on a budget bill reach a certain stage. The outlook is 
that the Upper House Financial Affairs Committee will not discuss 
the special taxation law revision bill until next week or later. In 
view of the committee's timetable to meet on Tuesdays and Thursdays, 
it can discuss the bill two or three times before the current fiscal 
year ends. 
 
12) Ruling, opposition camps fail to reach agreement on convocation 
of deliberations on FY2008 budget bill 
 
TOKYO SHIMBUN (Page 2) (Full) 
March 11, 2008 
 
TOKYO 00000628  008 OF 011 
 
 
 
The ruling and opposition parties discussed in a directors meeting 
yesterday afternoon of the House of Councillors Budget Committee the 
question of when to launch deliberations on the fiscal 2008 state 
budget and budget-related bills. 
 
However, the discussion ended with the gulf remaining wide because 
the opposition camp insisted that they could not decide on a 
timetable for deliberations as the direction of appointments of 
governor and deputy governors of the Bank of Japan have yet to be 
decided, although the ruling coalition sought to start them on March 
¶11. 
 
In a meeting on March 7 of their Upper House Diet affairs committee 
chiefs, the ruling Liberal Democratic Party (LDP) and largest 
opposition Democratic Party of Japan (DPJ or Minshuto) reached a 
basic agreement to normalize Diet business on March 10, taking the 
day's consultation as the opportunity. But chances are that 
deliberations on the state budget and budget-related bills will be 
delayed to the latter half of this week or later. 
 
The opposition bloc has demanded that Upper House Budget Committee 
Chairman Yoshitada Konoike make clear responsibility for repeatedly 
exercising his authority in setting timetables for committee 
sessions. The opposition also has demanded that Konoike take 
responsibility for criticizing its strategy as a defeatist spirit in 
their idea. The opposition parties agreed in a meeting yesterday of 
their Diet affairs committee chairmen to set an apology by Konoike 
as a condition for normalizing the Diet. 
 
13) DPJ remains opposed to government's plan to nominate Muto as BOJ 
governor 
 
SANKEI (Page 3) (Full) 
March 11, 2008 
 
The Diet is scheduled to hold hearings with the candidates the 
government has nominated for the posts of Bank of Japan (BOJ) 
governor and deputy governor and then hold question-and-answer 
sessions in both chambers at their steering committees today. The 
Democratic Party of Japan (DPJ) will formally determine today its 
opposition to the government's proposal for promoting former 
Administrative Vice Finance Minister Toshiro Muto to the 
governorship. Meanwhile, Prime Minister Yasuo Fukuda yesterday 
emphasized that he would not change the government plan and 
indicated a willingness to hold talks with DPJ President Ichiro 
Ozawa. The ruling camp has insisted on holding plenary session votes 
in both chambers of the Diet on March 14, but the DPJ, the Japanese 
Communist Party and other two opposition parties plan to hold 
tomorrow a plenary session in the House of Councillors, which the 
opposition bloc now controls, to take a vote with the aim of 
blocking the nominations. 
 
Asked who will be held responsible if a vacancy in the post of BOJ 
governor is created, Ozawa said yesterday in a press conference in 
Iwakuni City, Yamaguchi Prefecture: "The responsibility will 
naturally rest with the government." He added that whether to hold a 
meeting with Fukuda will hinges on a judgment by the party's 
secretary general, Diet Affairs Committee chairman, and executive 
 
SIPDIS 
members. 
 
Prime Minister Fukuda told reporters at his official residence 
 
TOKYO 00000628  009 OF 011 
 
 
yesterday: "We have submitted the plan, believing that it is the 
best choice, looking at the current economic and financial 
situations." Asked about the possibility of party head talks, he 
replied: "We will hold talks if necessary." 
 
The prime minister also said the same day: "There is no need to 
think about a resubmission (of the government's plan for the 
nomination of Muto)." 
 
But Upper House Steering Committee Chairman Takeo Nishioka (DPJ) 
indicated in a press conference that if the government resubmits its 
plan, he would not approve holding a plenary session in the Upper 
House. 
 
14) Tug-of-war continuing between ruling and opposition camps over 
dates of vote on nominations of BOJ governor, deputies 
 
NIKKEI (Page 2) (Excerpts) 
March 11, 2008 
 
A tug-of-war is continuing between the ruling and opposition parties 
over the date of votes in both Diet chambers on the government's 
nominations for the Bank of Japan (BOJ) posts of governor and 
deputies to the new governor. The opposition bloc has proposed 
holding a plenary session vote tomorrow, following hearings with the 
candidates on their policy stances and a question-and-answer session 
to be held today. In an effort to seek the understanding of the 
opposition side toward the Muto plan, the ruling camp 
unprecedentedly has been calling on the opposition side to conduct a 
careful discussion, sensing the opposition camp's maneuvers to 
quickly reject the government's nominations and propose 
alternatives. 
 
Liberal Democratic Party Diet Affairs Committee Chairman Tadamori 
Oshima reportedly grumbled to his counterpart of the Democratic 
Party of Japan, Kenji Yamaoka on the phone yesterday morning: "I 
will contact you if views in the party are coordinated. Prospects 
are quite gloomy." 
 
Later, Oshima called on Yamaoka with New Komeito Diet Affairs 
Committee Chairman Yoshio Urushibara and said: "It is not proper to 
take a vote the day after the hearings. It is desirable to reach a 
conclusion by taking votes in both Diet chambers on the same day." 
He stressed that it would be desirable to take plenary session votes 
in both chambers in the Diet on March 14, the day of a regular 
plenary session. 
 
15) JCP in four-party meeting criticizes DPJ 
 
TOKYO SHIMBUN (Page 2) (Full) 
March 11, 2008 
 
In a meeting yesterday of the secretaries general of four opposition 
parties from the two Diet chambers, the Japanese Communist Party 
criticized the Democratic Party of Japan's (DPJ or Minshuto) 
strategy of boycotting deliberations in the Upper House Budget 
Committee, saying: 
 
"The DPJ also has responsibility for taking a stance of skipping 
deliberations for a week. The method of delaying deliberations on 
the state budget bill will not be supported by the public." 
 
 
TOKYO 00000628  010 OF 011 
 
 
Although DPJ Secretary General Hatoyama called out to other 
opposition parties for unity in managing Diet affairs, DPJ Chief of 
the Secretariat Tadayoshi Ichida turned the guns not only on the 
ruling Liberal Democratic Party but also on the DPJ over the 
stalemate in the Diet. 
 
In the recent extraordinary Diet session, the opposition parties 
failed to unit in a crucial stage, for example, the decision to 
summon witnesses before the Diet, which was made under the 
initiative by the DPJ, was returned to square one due to objections 
from other opposition parties. 
 
Yesterday's meeting was held to make up for that, but the uneasiness 
has remained instead. 
 
16) Government to submit bill specifying establishment of cabinet 
personnel affairs agency, which could become toothless 
 
MAINICHI (Page 2) (Abridged slightly) 
March 11, 2008 
 
The government decided yesterday to submit to the current Diet 
session a national civil service system reform bill clearly 
specifying the establishment of the cabinet personnel affairs 
agency. Prime Minister Yasuo Fukuda has accepted Administrative 
Reform Minister Yoshimi Watanabe's view. But the system is still 
designed to allow each cabinet minister to draft personnel plans on 
senior posts. The plan to establish the personnel affairs agency 
solely responsible for personnel affairs might become toothless at 
the stage of working out specifics. 
 
Chief Cabinet Secretary Nobutaka Machimura revealed in a press 
conference yesterday that the decision has been made by the prime 
minister. In a meeting on March 7, the prime minister reportedly 
presented Watanabe with a memo listing three points: (1) the chief 
cabinet secretary is to be responsible for the personnel affairs 
agency, (2) each cabinet minister is to draft personnel affairs 
plans, and (3) the option of expanding the basic labor rights to 
cover civil servants is to be studied, as before. 
 
The Watanabe plan was designed to allow the personnel affairs agency 
to directly control appoints of senior officers with the aim of 
eliminating harmful effects resulting from bureaucratic interests. 
Keeping effectively each minister's power of personnel affairs 
intact is equivalent to allowing the personnel affairs agency to 
strengthen only the current personnel affairs council composed of 
the chief and deputy chief cabinet secretaries and the Cabinet 
Affairs Office. 
 
The prime minister gave consideration to strong criticism in the 
government of the Watanabe plan, while endorsing his plan to 
establish the personnel affairs agency. Watanabe indicated to the 
press yesterday that he would follow the prime minister's 
instruction, saying: "There might be cases in which cabinet 
ministers select senior officials based on plans worked out by the 
personnel affairs agency." The system of the personnel affairs 
agency must be specified in separate legislation. Watanabe also 
indicated that he would keep a close watch on the process so that 
the plan will not be watered down. 
 
17) Stagnant investment in Japan: Easing foreign capital 
restrictions urgently needed 
 
TOKYO 00000628  011 OF 011 
 
 
 
TOKYO SHIMBUN (Page 10) (Full) 
March 11, 2008 
 
Amid economic globalization creating a borderless capital market, 
Japan remains unable to lure inward foreign direct investment. The 
government aims at doubling the ratio of inward foreign direct 
investment to GDP to 5 PERCENT .  Removing the closed nature of the 
domestic market and various barriers, such as strict foreign 
investment restrictions, will likely become conditions for realizing 
its goal. 
 
The outstanding balance of inward foreign direct investment in Japan 
stood at 12.8 trillion yen as of the end of 2006. Its ratio to GDP 
is 2.5 PERCENT , which is one-eighteenth of the level of Britain and 
one-third of that of South Korea. 
 
The driving force of the Japanese economy is mainly exports. Its 
exports to the U.S., and Asia, including China, have increased. 
However, growth dependent on foreign demand tends to become 
unstable. Other leading industrialized countries have also seen 
increased exports, but they have also accepted inward foreign direct 
investment to shore up domestic demand. In order for Japan with a 
dwindling population to continue stable growth, it needs to 
introduce foreign capital more than other industrialized countries. 
 
In reality, however, Japan is keeping foreign investment away from 
it. U.S. hedge fund Steel Partners last year tried to buy out 
Bull-Dog Sauce. However, the Bull-Dog Sauce side won a court battle, 
taking countermeasures against the takeover bid. The government 
policy has also become inward-looking, following the ruling parties' 
crushing defeat in the Upper House election last year. It is taking 
an incongruous response, as can be seen in the fact that it decided 
to dissolve the Experts Council on Inward Foreign Direct Investment 
under the Prime Minister's Office (Kantei) last December. 
 
SCHIEFFER