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UNCLAS SECTION 01 OF 09 TOKYO 001609 
 
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 06/12/08 
 
 
INDEX: 
 
(1) Fierce battle over mounting priority policy issues in next 
extraordinary Diet session inevitable with eye on Lower House 
election (Nikkei) 
 
(2) Legislative branch of government: Weakening power of strongest 
trump card (Yomiuri) 
 
(3) In G-8 finance ministerial starting tomorrow, focus of attention 
is on whether Japan, U.S.; Europe can take joint steps in fighting 
inflation (Nikkei) 
 
(4) Interview with JETRO Chairman Yasuo Hayashi: Urges banks to 
inject capital for building of infrastructure in developing 
countries (Tokyo Shimbun) 
 
(5) METI urges firms not to adopt self-serving takeover defense 
measures, giving consideration to criticism for "lack of openness" 
(Nikkei) 
 
(6) Gap seen on base noise readouts (Ryukyu Shimpo) 
 
(7) LDP, Agriculture Ministry decide on additional 70 billion yen in 
aid for livestock, cattle farmers, given soaring feed prices 
(Nikkei) 
 
ARTICLES: 
 
(1) Fierce battle over mounting priority policy issues in next 
extraordinary Diet session inevitable with eye on Lower House 
election 
 
NIKKEI (Page 2) (Abridged slightly) 
June 12, 2008 
 
In the wake of the adoption by the Upper House of a censure motion 
against Prime Minister Yasuo Fukuda, the confrontational mood 
between the ruling and opposition blocs has now become even clearer. 
With an eye on the next Lower House election, the two camps are 
expected to lock horns from the beginning of the next extraordinary 
Diet session, possibly convened in late August. Discussions on a 
plethora of priority policy issues, such as an extension of the law 
governing the refueling operation in the Indian Ocean, which is to 
expire in January 2009, a bill establishing a consumer affairs 
agency, and sweeping tax reform, are certain to bog down. 
 
Members of the shadow cabinet of the Democratic Party of Japan met 
in the Diet building yesterday afternoon, about the same time the 
censure motion against the prime minister was submitted to the Upper 
House. The members discussed a consumer affairs agency-related bill, 
which the government is preparing for the next extra Diet session 
under the initiative of the prime minister. The meeting decided to 
speedily come up with a counterproposal. The DPJ is now set to take 
a clear adversarial stance against the government and the ruling 
bloc. 
 
DPJ Diet Affairs Committee Chairman Kenji Yamaoka said: "Once the 
ongoing Diet session is over, we will shift into election mode in 
accordance with President Ichiro Ozawa's order." 
 
The Indian Ocean refueling law, which was readopted in the Lower 
 
TOKYO 00001609  002 OF 009 
 
 
House in January this year, is expected to take center stage first 
in the next Diet session. The DPJ, which rejected the legislation in 
the Upper House, plans to oppose another extension. 
 
The government and the ruling coalition envisage using once again 
the constitutional rule allowing the Lower House to readopt the same 
bill 60 days after its first approval. In order to settle the 
refueling legislation before the budget compilation at the end of 
the year, the bill must pass the Lower House in early October. 
 
The opposition bloc is also set to object to a number of bills to be 
carried over, including one amending the government health insurance 
support special provisions law. 
 
There is some skepticism about how far the DPJ can uphold its 
hard-line stance after the current Diet session is over. Former 
Prime Minister Junichiro Koizumi predicted in a speech in Yokohama: 
"The ruling bloc will regret its presentation of the censure motion. 
The prime minister will neither dissolve the Lower House nor opt for 
resignation en masse." 
 
Taxation and fiscal reforms will be the biggest bones of contention 
before the compilation of the fiscal 2009 budget. The government and 
the ruling coalition have vowed to raise the government's 
contribution to the basic pension in fiscal 2009. This requires 2.3 
trillion yen. Hiking the consumption and cigarette taxes is being 
mentioned. 
 
Given the likelihood that the next Lower House election will take 
place before the term of the chamber expires in September 2009, the 
ruling camp is bound to become evasive regarding tax hikes. In 
yesterday's LDP fiscal reform council meeting, even Yuji Tsushima, 
who is relatively positive about tax hikes, asked the words "this 
fall" be removed from the party's plan for sweeping taxation 
reform. 
 
In the LDP, former Secretary General Hidenao Nakagawa's policy 
course is vying with former Chief Cabinet Secretary Kaoru Yosano's 
policy line. The prime minister's target of curbing the growth of 
social security spending by 220 billion yen is also drawing fire 
from within the LDP. Some LDP members are calling for altering the 
government's policy of cutting spending on education, as well. 
 
Major challenges for the Fukuda administration 
 
Road policy 
? Freeing up road-related revenues for general spending 
? Reviewing the road construction program 
 
Social security 
? Raising the government's contribution to the basic pension to 50 
PERCENT  of the total 
? Reviewing the medical insurance system for people aged 75 and 
older 
 
Taxation system 
? Sweeping reform of the taxation system, including the creation of 
an environmental tax and hiking the consumption tax 
 
Security 
? Extension of the Indian Ocean refueling law 
? Enacting a permanent law governing the overseas dispatch of the 
 
TOKYO 00001609  003 OF 009 
 
 
SDF 
 
Consumer policy 
? Enacting a consumer affairs agency establishment law 
 
Major bills to be carried over to the next extraordinary Diet 
session 
? Regional power revitalization corporation legislation 
? Bill amending the General Law of Independent Administrative 
Agencies 
? Government health insurance support special provisions bill 
? Bill amending the Organ Transplant Law 
? Bill amending the Antimonopoly Law 
? High quality durable housing dissemination and promotion 
legislation 
 
(2) Legislative branch of government: Weakening power of strongest 
trump card 
 
YOMIURI (Page 1) (Full) 
June 12, 2008 
 
In a plenary session yesterday afternoon of the House of 
Councillors, Democratic Party of Japan (DPJ) Diet Affairs Committee 
Chairman Susumu Yanase failed to wrap up the last passage of a 
speech. 
 
His draft went: 
 
"Mr. Prime Minister, are you going to remain in office with an 
attitude of unconcern without dissolving the House of 
Representatives and resigning en masse? That would be enough. 
Because half of the Diet expressed its view that you are not 
suitable for the prime minister's job and that will remain 
forever." 
 
The DPJ has insisted that a censure motion against the prime 
minister would lead to a Lower House dissolution and snap election 
since the politically divided Diet situation appeared due to the 
result of last year's House of Councillors election last July. The 
DPJ, the largest force in the Upper House, appears to have regarded 
a censure motion against Fukuda as the strongest trump card, but 
other opposition parties had their own motives. 
 
In a meeting yesterday of the secretaries general of four opposition 
parties, the Japanese Communist Party's Tadayoshi Ichida said: 
 
"The present situation is that we cannot expect the resignation of 
the cabinet and dissolution of the Lower House. By submitting a 
motion even though there will be no effect, we will lose an 
important means to attack the ruling camp." 
 
In a meeting yesterday of the Social Democratic Party, which has 
consistently argued the need for submission, Chairperson Mizuho 
Fukushima in high spirits said: "We will thrust the public's anger 
at the government." A People's New Party member stated: "I want the 
DPJ to disagree with the government's nomination for a Bank of Japan 
policy board member," using its cooperation for a censure motion as 
a bargaining tool. 
 
There has been a shift in the DPJ members' thinking of a censure 
motion. The reason is that Fukuda made clear his stance of ignoring 
 
TOKYO 00001609  004 OF 009 
 
 
the motion. 
 
This year, the ruling camp has resorted to its two-third majority in 
the Lower House to enact three bills extending the Maritime 
Self-Defense Force's refueling mission in the Indian Ocean, 
reinstating the provisional gasoline tax, and maintaining the tax 
revenues earmarked for road construction and maintenance. The DPJ 
looked into the possibility of submitting a censure motion against 
Fukuda on the grounds that he had ignored the Upper House and 
hesitated to submit the motion. 
 
Ozawa's aides discussed Diet strategies on April 28, a day after the 
DPJ's candidate had won the Lower House by-election to fill the 
Yamaguchi No. 2 constituency seat backed by public criticism of the 
new health insurance system for those aged 75 and older. At the 
time, one participant posed a question about the "idea of a censure 
motion having power," saying: 
 
"The reason for then Defense Agency Director General Fukushiro 
Nukaga having resigned his post (after he was censured in 1998) was 
not the power of the censure motion, but it was then Chief Cabinet 
Secretary Hiromu Nonaka's overreaction to try to protect Nukaga, who 
was a promising candidate from their faction." 
 
In a meeting on May 21 of a DPJ group to study of how the Upper 
House should be, former Upper House member Sadao Hirano pointed out: 
"Depending on a reason and purpose, the prime minister will have no 
choice but to resign. If (the DPJ) fails to give full consideration 
when submitting (a censurer motion), (public support) will go to the 
other side." 
 
As a result, the DPJ's choice was to submit a motion at the end of 
the current session, which gives the party minimum time to boycott 
Diet deliberations, which will keep a negative impact to minimum. 
 
In the process of the "strongest trump card" losing its power, it 
gave the impression that the power of the trump card would 
completely change depending on the political situation. 
 
(3) In G-8 finance ministerial starting tomorrow, focus of attention 
is on whether Japan, U.S.; Europe can take joint steps in fighting 
inflation 
 
NIKKEI (Page 5) (Full) 
June 12, 2008 
 
Finance chiefs from the Group of Eight (G-8) will discuss how to 
cope with the risk in world inflation triggered by soaring oil 
prices and the depreciation of the dollar. But it is difficult for 
Japan and the U.S., both of which are strongly concerned about 
recession, to fall in step with Europe, which wants to give priority 
to commodity price stabilization by raising the interest rate. If 
Japan, the U.S., and Europe fail to come up with an effective 
message about their policy coordination, market players may point 
out a lack of unity among them. 
 
Japan, U.S. unlikely to fall in step with Europe eager to raise 
interest rates 
 
There is an increasing possibility that a period of inflation 
combined with stagnation - the so-called stagflation - may be set 
in. The European Central Bank (ECB) is now eager to raise interest 
 
TOKYO 00001609  005 OF 009 
 
 
rates, while the U.S. has hinted a policy switch, as seen from its 
verbal intervention in the market with the aim of pushing up the 
value of the dollar. Many observers however see it difficult for 
Japan, the U.S., and Europe to come up with concerned anti-inflation 
measures. 
 
The greatest cause for concern in the Eurozone is the problem of 
skyrocketing commodity prices. The rate of increase in consumer 
prices in May, compared with the same month a year ago, reached 3.6 
PERCENT , marking the highest level since the debut of the Euro. 
Working out anti-inflation measures is thus becoming a major 
political challenge. Under such a situation, ECB President 
Jean-Claude Trichet announced in a press conference on June 5 that 
his bank would raise the interest rate. His remark, however, drew 
little criticism from the governments in the Eurozone. In the 
upcoming G-8 finance ministerial, as well, Europe is expected to 
insist on the need for anti-inflation measures. 
 
The U.S. Federal Reserve Bank (FRB) also began to take 
anti-inflation measures. Given growing concern that the weak dollar 
and high oil prices could incur inflation around the world, the U.S. 
has judged it necessary to approach the ECB, which prioritizes price 
stabilization. But the unemployment rate remains high, and the 
housing market is still stagnant in the U.S. 
 
It will be difficult to raise the interest rate unless the domestic 
economy and financial market remain firm. Even so, if it fails to 
take some measures, an expanded difference in interest rates between 
the U.S. and Europe may push down the dollar's value further. 
 
Although the Bush administration has made a "strong dollar" 
commitment, it has tolerated the weak dollar. The weak dollar has 
contributed to increasing exports and underpinning its economy. The 
funds that have nowhere to go began to be poured into the oil 
market, resulting in shooting up its prices. There is now an 
increasing fear that inflation may hit the heart of the global 
economy. Alarmed at the current situation, the Department of the 
Treasury and the FRB are ready to unprecedentedly step into the 
market to prevent a further weakening of the dollar. 
 
Also in Japan, the Cabinet Office indicated the possibility that the 
economy has started on a downward slope. The Domestic Corporate 
Goods Price Index in May posted its highest record in about 27 
years. Although the effect of rising oil prices has been gradually 
spreading, the Bank of Japan finds it difficult to take action. 
 
On the occasion of Black Monday in 1987, West Germany raised the 
interest rate to tame inflation despite growing concerns about a 
weaker dollar. The retrenched gap in interest rates between the U.S. 
and Germany led to growing concern about a plunge in the dollar, 
resulting in confusing the market and shedding a huge value in a 
short period. As it stands, a lack of unity among major 
industrialized countries caused the havoc. Some observers point out 
the "point in common" between the current situation and that at the 
time of Black Monday. 
 
(4) Interview with JETRO Chairman Yasuo Hayashi: Urges banks to 
inject capital for building of infrastructure in developing 
countries 
 
TOKYO SHIMBUN (Page 9) (Full) 
June 12, 2008 
 
TOKYO 00001609  006 OF 009 
 
 
 
Finance ministers from Group of Eight (G-8) Nations will discuss on 
June 13-14 the impact of the steep rise in crude oil and food prices 
on the global economy.  The Tokyo Shimbun asked Yasuo Hayashi, 
chairman of the Japan External Trade Organization (JETRO), a former 
director general of the Small and Medium Enterprise Agency who has 
many contacts in oil-producing Middle East nations, about the 
backdrop of the steep rise in resources prices and discussion themes 
that should be pursued at the G-8 financial ministerial. 
 
-- What impact will the sharp rise in crude oil and food prices have 
on the global economy? 
 
"Famine is spreading in developing countries. It will become more 
serious than the income disparity issue. Industrialized countries' 
economies are slowing due to the subprime mortgage crisis. In the 
meantime, if the current pace of price hikes accelerates, 
stagflation could occur. Measures to deal with inflation are needed. 
At the same time, it is also necessary to firmly support economic 
growth. Monetary policy steering will be very difficult." 
 
-- What do you think are the causes of the high crude oil and food 
prices? 
 
"The impact of the demand side on the current prices rise is great. 
Demand for crude oil among emerging countries, such as China and 
India, is increasing due to rapid economic development. The 
increasing meat consumption is significantly pushing up demand for 
grain. That is because raising farm animals for human consumption 
requires feed grains four to five times greater than the amount 
needed when eaten as is by humans. 
 
"However, Middle East countries say that demand for crude oil has 
not increased in proportion to the price rise. It may be true in a 
way. It is certain that speculative funds are pushing up prices more 
than demand is." 
 
-- What makes speculators able to continue invest a great amount of 
fund? 
 
"That is because there is a glut of money throughout the world due 
to industrialized countries' low-interest rate policy. It cannot be 
helped to some extent that market players pursue short-term 
benefits. However, it is not good for them to do so excessively. 
The five-nation energy ministerial on June 7 issued an unusual joint 
statement, determining that the current high crude oil prices are 
abnormal. It may be difficult to curb market movements, but I would 
like the finance ministerial to issue a message seeking restraint 
from the market." 
 
-- What would be the desired form of fiscal and financial polices? 
 
"The role of financial services is to inject money into the real 
economy. There are many countries in the world that need roads, 
railways, ports and harbors. Investment in energy-saving areas is 
also sought due to the global warming issue. If there is a glut of 
money, banks should use more capital for such projects. 
 
"Some African countries have achieved high economic growth. If 
developing countries' economies grow, the global economy would 
develop more. I want policy officials of industrialized countries to 
back banks so that they invest capital in those areas." 
 
TOKYO 00001609  007 OF 009 
 
 
 
(5) METI urges firms not to adopt self-serving takeover defense 
measures, giving consideration to criticism for "lack of openness" 
 
NIKKEI (Page 2) (Excerpts) 
June 11, 2008 
 
A study group of the Ministry of Economy, Trade and Industry (METI) 
has produced a report specifying under what conditions companies are 
allowed to adopt anti-takeover measures. The report urges corporate 
managers to make an appropriate response, defining the current 
formula of entrusting a judgment on the propriety of taking 
preventive measures to a vote by shareholders as "aimed to avoid 
responsibility." It also says that hostile takeover bids could 
generate positive effects in some cases as they may lead to an 
improvement in corporate governance, noting that anti-takeover 
measures aimed at trying to protect management's own interests 
should not be allowed. 
 
The study group on corporate values will finalize its report today. 
The group, chaired by Tokyo University Graduate School Professor 
Hideki Kanda, is composed of academics, institutional investors, and 
legal experts. The members has produced the report, based on a 
recent change in legal judgments, as seen from the case of a U.S. 
investment fund's takeover bid for Bulldog Sauce. Although the 
report has no binding power, the report will serve as a guideline 
for corporate managers in adopting anti-takeover measures. 
 
In 2005, the study group produced its initial report. Based on the 
report, METI and the Justice Ministry presented guidelines, and 
about 500 companies have adopted anti-takeover measures in 
accordance with the guidelines. However, in order to adopt 
self-serving protective measures, some companies have stretched the 
expression that "shareholders' interests will be apparently 
undermined" inserted in the guidelines. Investors often criticize 
increasing cases of Japanese companies adopting anti-takeover 
measures as aimed to exclude institutional investors from the 
Japanese market and showing its closed nature. Keeping such 
criticism in mind, the panel inserted in the latest report stricter 
conditions for adopting preventive measures. 
 
The report specifies that hostile takeovers may (1) correct the 
discipline in companies; and (2) improve shareholders' interests. It 
also says that anti-takeover measures may lead to depriving 
shareholders of a chance to sell their shocks. 
 
The report also stresses the importance of the role to be played by 
boards of directors and protection of shareholder interests. It 
calls on corporate managers not to adopt self-serving protective 
measures by citing interests of persons concerned other than 
shareholders, such as employees or clients, as well as not to 
prolong the period of studying buyout plans. The report also 
requires a judgment on the propriety of anti-takeover measures to be 
made at a board of directors meeting. This measure is based on the 
view that companies should not pay compensation to takeover planners 
when the companies adopt protective measures. 
 
(6) Gap seen on base noise readouts 
 
RYUKYU SHIMPO (Page 27) (Abridged) 
June 12, 2008 
 
 
TOKYO 00001609  008 OF 009 
 
 
The Defense Ministry Okinawa Defense Bureau's readouts of noise 
levels are lower than the Okinawa prefectural government's readouts 
in their monitoring of aircraft noise around the Kadena base and 
Futenma airfield, the Ryukyu Shimpo has found. Except some 
monitoring spots, the weighted equivalent continuous perceived noise 
level (WECPNL), as well as the frequency of noise, is low in the 
government's monitoring. In some areas, the frequency of noise 
marked a fivefold difference. The government's readouts of noise 
levels are used as noise data for its environmental assessment of an 
alternative facility for Futenma airfield. Kozo Hiramatsu, a 
professor of acoustic environmentology at Kyoto University and an 
expert on noise problems, notes: "The Okinawa prefectural 
government's monitor proves to be more efficient in noise 
monitoring, so I think that's why there is a difference in the 
frequency of noise." The actual levels of noise around the two bases 
could be taken as lower. 
 
The Defense Ministry's Okinawa bureau and the Okinawa prefectural 
government monitor noise at three spots near Kadena Air Base and at 
four spots near Futenma Air Station, and their monitoring spots are 
closely situated. To compare their data over the past three years, 
the prefectural government's WECPNL readouts were higher than the 
government's readouts, except in some areas. Fiscal 2006's data 
shows that the WECPNL at Sunabe in the town of Chatan was 79.8 in 
the government's monitoring and 90.5 in the prefectural government's 
monitoring, leaving a difference of 10.7 points. In areas near the 
southern end of Futenma airfield's runway, the government's WECPNL 
readout was 75.8 at Ojana, and the prefectural government's readout 
was 80.7 at Ueojana, showing a difference of 4.9 points. 
 
In the frequency of noise as well, the Okinawa prefectural 
government's average readout was 1.9 times higher than the Defense 
Ministry's at spots near the Kadena base and 2.2 times higher at 
spots near Futenma airfield. There was a difference of up to 5 times 
at Chibana in the city of Okinawa. The government's monitoring 
benchmark is over 70 decibels, so noise levels lower than that, 
particularly the low-pitched sounds of Futenma-based choppers, can 
hardly be monitored. 
 
Furthermore, in the Okinawa prefectural government's noise 
monitoring, the annual frequency of noise totals more than 30,000 
times in Kadena Town's Yara area. This frequency of noise is harder 
than that at all other monitoring spots. Ginowan City's Nodake area, 
which is near the northern end of Futenma airfield's runway, shows 
the third hardest frequency of noise in the city. These two areas, 
however, are not included in the government's monitoring spots. 
 
Numerical data from the government's noise monitoring in the Ojana 
area of Ginowan City is used in the government's aircraft noise 
forecast report that was presented in an environmental survey of the 
Futenma replacement facility's site. The assessment report is based 
on data that is lower than the Okinawa prefectural government's 
data. 
 
(7) LDP, Agriculture Ministry decide on additional 70 billion yen in 
aid for livestock, cattle farmers, given soaring feed prices 
 
NIKKEI (Page 5) (Full) 
June 12, 2008 
 
In response to skyrocketing feed prices due to the worldwide steep 
rise in grain prices, the Liberal Democratic Party (LDP) and the 
 
TOKYO 00001609  009 OF 009 
 
 
Ministry of Agriculture, Forestry and Fisheries (MAFF) decided 
yesterday to implement a package of emergency measures worth 70 
billion yen for livestock and cattle farmers. The necessary money 
will be doled out of the funds possessed by Agriculture & Livestock 
Industries Corporation, an independent administrative corporation 
under the jurisdiction of MAFF. The package includes a measure to 
raise the amount of subsidies for finished milk producers. MAFF will 
present the package in deliberations to be held today by external 
knowledgeable persons. 
 
The government decided this February to provide cattle farmers 
suffering from business slump affected by soaring feed prices with 
aid totaling 187.1 billion yen. Given skyrocketing corn prices due 
to an increase in demand for the product to be used to make biofuel, 
the government has decided to implement additional measures. 
 
SCHIEFFER