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UNCLAS SECTION 01 OF 06 TOKYO 003538 
 
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 12/31/08 
 
Index: 
 
1) Prime Minister Aso's packed diplomatic schedule for 2009 may be 
sideswiped by Diet turmoil  (Nikkei) 
 
2) Japanese government frustrated by lack of progress in 
negotiations with China over joint development of gas fields in the 
¶E. China Sea  (Mainichi) 
 
3) Government to create new panel of experts next month to revise 
the National Defense Program Outline  (Nikkei) 
 
4) Yen in 2008 rose from 109 to 87 yen to the dollar: How far will 
yen appreciation go in 2009?  (Yomiuri) 
 
Politics as usual: 
5) Nishimatsu Construction Co. provided 478 million yen in illegal 
political donations through shady political organizations to key 
figures in LDP, DPJ  (Yomiuri) 
6) Liberal Democratic Party (LDP) works out new arrangement to back 
New Komeito election candidates running in certain Tokyo wards 
(Sankei) 
7) LDP's Taku Yamasaki denies he will form a new party prior to the 
next general election  (Sankei) 
8) Democratic Party of Japan (DPJ) cutting costs on party 
convention, commercials in order to devote all resources to 
preparing for next election  (Yomiuri) 
 
Articles: 
 
1) Prime Minister Aso walking a tight rope in setting his diplomatic 
schedule for 2009, with pressure to place priority on Diet affairs 
 
NIKKEI (Page 2) (Abridged) 
December 31, 2008 
 
The diplomatic schedule of Prime Minister Taro Aso for 2009 is 
developing into a balancing act in which the maneuvers of the 
opposition camp in the regular session of the Diet have to be 
factored.  The prime minister at the beginning of the year will make 
a hurried trip to South Korea to actively carry out summit 
diplomacy, the hope being to use this visit to boost the cabinet's 
sagging popularity at home. However, the ruling camp has taken a 
stance of all-out confrontation during budget deliberations and 
other Diet encounters. For the time being, the reality is that the 
prime minister has no choice but to give precedent to the Diet over 
diplomacy. 
 
Unclear outlook until April 
 
The prime minister around Jan. 10 is planning to meet with South 
Korean President Lee Myung-bak. This is to be the chance to restart 
a shuttle diplomacy that had been cut short by the territorial issue 
centering on claims to Takeshima (Dokdo in Korean). However, with 
the exception of this visit, the rest of the schedule for bilateral 
meetings has yet to be clearly set. 
 
The opposition camp has taken the position of seeking thorough 
deliberations on such bills as the national budget, having in mind 
the forcing of an early Lower House dissolution. As a result, the 
outlook for fixing Aso's diplomatic schedule until April remains 
difficult to predict. 
 
TOKYO 00003538  002 OF 006 
 
 
 
The prime minister has indicated his strong desire to attend the 
Davos Conference in Switzerland, an annual international economic 
forum that will be held in late January. However, this timeframe 
overlaps with the start of full-scale deliberations on the next 
fiscal year's budget in the Diet. Already, there have been 
complaints heard in the ruling Liberal Democratic Party, with a 
senior member of the Diet Affairs Committee saying, "The level of 
priority (the prime minister is giving to the Diet) is too low." 
 
The schedule has been set for February 24-26 for the ASEAN-plus-3 
summit conference -- postponed due to unrest in Thailand -- and the 
East Asian Summit Conference. However, this timeframe, too, it is 
feared, will overlap with the lower-house passage of the budget 
bill. The Japanese side is seeking an adjustment of the schedule. 
 
On the other hand, what the prime minister's aides are calling the 
top-priority agenda item now is the prime minister's attendance at 
the second G-20 financial summit meeting that will be held in 
England April 2. The prime minister by attending hopes to explain to 
the G-20 leaders and others that Japan has been tackling the issues 
proactively, and by this, demonstrate his presence in the group. 
 
However, there is a high probability at this point that the bills 
connected to next fiscal year's budget bill that will back up Aso's 
economic stimulus plan will not be passed without the cooperation of 
the opposition camp. 
 
Effect of the twisted Diet 
 
The schedule for Aso's first meeting with the new U.S. president, 
Barack Obama, has still not been coordinated. Aides are considering 
an Aso visit to the U.S. as soon as possible after the new 
administration is launched on Jan. 20. At the latest, a meeting 
could be set up in the spring. However, there is strong feeling that 
the meeting "will be at Washington's convenience," according to a 
senior Foreign Ministry official, since the U.S. president's 
post-inauguration schedule is already packed. 
 
2) Tokyo frustrated by stagnation in gas talks with Beijing 
 
MAINICHI (Page 2) (Abridged) 
December 31, 2008 
 
Japan and China agreed in June to jointly develop gas fields in the 
East China Sea. However, the Japanese and Chinese governments will 
likely see the old year out, while remaining unable to make a treaty 
that will present in concrete terms, for example, the shared 
interests (of the two countries). The joint development project is 
positioned as a symbol of better relations and strategic reciprocal 
relations between the two countries, but bilateral talks have been 
stagnant. The Japanese government says that is because China has 
changed its attitude toward a negative stance. The two governments 
have been unable to find out a way out of the impasse. As it stands, 
the Japanese government is growing irritated. "It's not good for 
both countries to put off negotiations," a senior Foreign Ministry 
official complained. 
 
Prime Minister Taro Aso: "We want to hold talks at an early stage to 
translate our political agreement into action." 
 
Chinese Prime Minister Wen Jiabao: "We want to continue our 
 
TOKYO 00003538  003 OF 006 
 
 
communications at the working level." 
 
In the Dec. 13 Japan-China summit meeting, Aso urged Wen to enter 
into talks for a treaty based on the bilateral agreement on gas 
field development. However, Wen was brusque. 
 
Tokyo and Beijing saw no progress in their prior working-level 
coordination. The Japanese government hoped to see something in the 
two leaders' meeting but got the cold shoulder. 
 
In 2003, China went ahead with its gas development near the 
'equidistance line' that Japan maintains as the boundary line. The 
development of gas fields has since been a bilateral issue. China 
insisted on a boundary line that enters Japan's boundary from the 
equidistance line. This boundary issue has become a major point at 
issue over a conflict of interests for natural resources. 
 
Under such circumstances, Japan and China reached the June 
agreement. That is because both Tokyo and Beijing wanted to make an 
appeal on their cooperation, with Japan scheduled to host the Group 
of Eight (G-8) summit at Lake Toya in Hokkaido and with the Beijing 
Olympics also scheduled ahead for China. The boundary issue was 
shelved in that agreement. However, the Japanese government took it 
as a settlement along with Japan's claim to set the equidistance 
line. "It was not too bad," a senior Foreign Ministry official 
said. 
 
In China, however, the agreement was criticized as a "unilateral 
concession." Anti-Japanese activists made demonstrations in front of 
the Japanese embassy in Beijing. The Chinese government is 
apparently concerned that entering into talks for a treaty may 
arouse anti-Japanese nationalism. 
 
3) New panel eyed for defense plan revision 
 
NIKKEI (Page 2) (Abridged) 
December 31, 2008 
 
The government will set up a new advisory panel at the prime 
minister's office in January next year ahead of revising the 
National Defense Program Guidelines, which sets a basic course of 
action for Japan's defense policy. The government will appoint Tokyo 
Electric Power Co. Chairman Tsunehisa Katsumata as panel chair. The 
panel is to discuss such issues as: 1) coping with Chinese and 
Russian military expansion; 2) reviewing the Ground, Maritime, and 
Air Self-Defense Forces' setup; 3) screening for the follow-on 
fighter jet model (FX) and other hardware selections; 4) using outer 
space for defense; and 5) the advisability of Japan's three 
principles on weapons exports. The government is going to make a 
cabinet decision late next year to adopt a new version of the NDPG. 
 
4) Yen grew stronger against dollar in 2008 
 
YOMIURI (Page 3) (Full) 
December 31, 2008 
 
The yen grew stronger against the dollar in Tokyo in 2008 as markets 
lost confidence in the dollar due to the U.S.-triggered financial 
crisis. The U.S. dollar briefly fell to 87 yen, the lowest level in 
13 years. The yen's effective exchange rate also marked a record 
high in November since 1973, when Japan adopted the floating 
exchange rate system. The sharp gain in the yen's exchange value 
 
TOKYO 00003538  004 OF 006 
 
 
seriously aggravated the business performance mainly of 
export-oriented companies, dealing a serious blow to the Japanese 
economy. 
 
The dollar was traded at 109 yen early this year, but the rate began 
to fall in mid-March. The financial difficulty of the leading 
securities company Bear Stearns seriously impaired U.S. financial 
institutions' credit, bringing down the dollar to the 95 yen level. 
Further, in the aftermaths of the downfall of Lehman Brothers, the 
financial crisis became more serious in mid-October. Since then, the 
dollar has been under strong selling pressure against the yen. The 
dollar dropped to 87.19 yen, the lowest level this year, on Dec. 
¶18. 
 
While the Japanese economy was sinking deeper into recession, a 
yen-buying frenzy was evident. Behind this trend is the view that 
the Japanese financial market is considerably more stable, compared 
with U.S. and European markets. The euro has also fallen by 38 yen 
annually. 
 
An executive of a leading trust bank commented: "It is feared that 
the financial crisis will be protracted, and the future of the yen 
remains unpredictable." Many in the market take such a view. Maki 
Fukui of Mizuho Corporate Bank takes a severe view: "If markets are 
disappointed at the incoming U.S. Obama administration's economic 
policy, the dollar could sink to the 79.75 yen level." 
 
5) Nishimatsu Construction allegedly donates 478 million yen to 
Ozawa, Mori and other politicians through shady political groups 
 
YOMIURI (Top Play) (Excerpts) 
December 31, 2008 
 
Nishimatsu Construction Co., based in Tokyo, made illegal donations 
to ruling and opposition politicians through shady political 
organizations headed by former company executives. The company 
listed its employees as members of the political organizations and 
had them pay membership fees to the groups. Donations were paid to 
the politicians through the groups. The company covered the 
employees' membership fees by making special payments to them as 
bonuses. The amount of donations exceeds 400 million yen, and the 
company designated the destinations of donations. 
 
Of the total amount of about 478 million yen in donations, 26 
million yen went to the fund management groups of six politicians 
from 2004 through 2006. The six include Democratic Party of Japan 
President Ozawa (who received 14 million yen), former Finance 
Minister Koji Omi of the Liberal Democratic Party (4 million yen), 
and former Prime Minister Yoshio Mori (3 million yen). 
 
6) LDP to launch campaign headquarters to support New Komeito Ota 
 
SANKEI (Page 4) (Excerpts) 
December 31, 2008 
 
Liberal Democratic Party Headquarters and the Tokyo Metropolitan 
Federation of Chapters decided yesterday to launch the party's 
campaign headquarters to support New Komeito President Akihiro Ota 
in Tokyo No.12 constituency. This decision is based on an agreement 
among Election Strategy Committee Chairman Makoto Koga and senior 
members of the federation. It is unprecedented for one political 
party to set up a campaign headquarters for another party's 
 
TOKYO 00003538  005 OF 006 
 
 
candidate, although the LDP initially decided to support Ota in the 
No.12 district. 
 
Meanwhile, LDP Koga and New Komeito Secretary General Kazuo Kitagawa 
agreed in September on the view that the LDP would not call the 
voters to vote for the New Komeito in the representational portion 
of the election. In early December, Koga indicated that the party 
would review the conventional way of cooperation in the 
representational portion, saying: "Is it all right to give 180 
proportional-representation seats to the New Komeito?" 
 
The LDP's move reflects its concern about an expected severe outcome 
of the next election for the LDP. As one LDP lawmaker said, "The New 
Komeito also used in local elections the list of supporters that the 
LDP gave to its coalition partner for the previous Lower House 
election," there is discontent toward the New Komeito in the Tokyo 
federation. 
 
Even so, since the LDP cannot dissolve the LDP-New Komeito 
cooperative line, the party has decided to totally support Ota in 
the No.12 district, in which no LDP candidate will run, in an 
apparent aim of demonstrating election cooperation between the two 
ruling parties. 
 
7) Yamasaki emphasizes no intention of forming new party before 
Lower House election 
 
SANKEI (Page 4) (Excerpts) 
December 31, 2008 
 
It has been reported that Taku Yamasaki, former vice president of 
the Liberal Democratic Party, would launch a new study group with 
former Secretary General Koichi Kato as early as January, keeping in 
mind the possibility of forming a new political party prior to the 
next House of Representatives election. Yamasaki denied this 
conjecture yesterday. 
 
In reply to a question by a reporter in Fukuoka, Yamasaki said: "I 
am not thinking about a new party for now. I am determined to do my 
best to bring about a victory to the LDP and make it the leading 
party in realigning the political world." 
 
According to informed sources, Kato proposed to Yamasaki forming a 
study group in the LPD, and they have begun looking into the 
possibility, but its members have yet to be decided. 
 
8) DPJ economizing first 
 
YOMIURI (Page4) (Abridged) 
December 31, 2008 
 
The leading opposition Democratic Party of Japan (Minshuto) is now 
trying to cut expenses in preparation for the next general election 
for the House of Representatives. There is no foreseeing when the 
election will take place. As it stands, the DPJ is holding down its 
party convention and commercial publicity spending for the election 
battle. 
 
The DPJ will hold a party convention on Jan. 18 at Mielparque Tokyo 
in Shiba Koen, Tokyo. Meanwhile, the ruling Liberal Democratic 
Party's convention is also slated for that day. However, the DPJ has 
decided not to do anything showy like a music band's performance. 
 
TOKYO 00003538  006 OF 006 
 
 
The agenda for the DPJ's party convention will be minimized to the 
party's budget and its settlement of accounts. The DPJ will have its 
lawmakers attend the convention. However, the DPJ will not seek 
participation from its prospective new-face candidates and former 
lawmakers who are going to run in the next election for the House of 
Representatives, as the party leadership thinks they should prepare 
themselves for the election. 
 
The venue for the DPJ's party convention used to be Yubin Chokin 
Kaikan or Postal Savings Hall. The cost there is about one-fourth to 
one-fifth of the cost at a famous hotel, according to the DPJ. One 
party executive explains, "We held a party convention when DPJ 
President Ozawa was elected this fall, so we don't have to make it 
big." 
 
The DPJ will have its TV commercials aired across the nation around 
the turn of the year but will make them plain and simple with some 
cuts from Ozawa's stumping tour photos and some catchphrases for 
"people's safe living" and "political tasks." Most of the photos 
were used for TV commercials aired in September. The DPJ says the 
party used almost no money to produce the commercials. 
 
The DPJ is trying to economize on its spending because the party has 
no major revenue sources but political party subsidies unlike the 
LDP that will collect big money for its political funds with 
corporate donations and fundraising parties. Many of the DPJ's 
lawmakers have been elected a few times, so their individual 
fundraising power is not so strong. 
 
Prime Minister Aso has now forgone the general election for the 
House of Representatives. One LDP lawmaker says, "If the election is 
long away, the DPJ will run out of the money." In other words, the 
DPJ needs to economize on its usual party activities in order to 
save money for election campaigning. 
 
ZUMWALT