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P 170735Z MAR 09
FM AMEMBASSY TOKYO
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RUEHUL/AMEMBASSY SEOUL 4321
RUCNDT/USMISSION USUN NEW YORK 4218

UNCLAS SECTION 01 OF 07 TOKYO 000588 
 
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 03/17/09 
 
INDEX: 
 
(1) Experts panel gets under way compiling additional economic 
stimulus package: Effective public spending urged; Creation of jobs 
in medical services and nursing-care areas (Nikkei) 
 
(2) Expert council meeting: Differences seen in views of 
participants on public works; Prime minister eager to expand public 
works in local regions (Nikkei) 
 
(3) Former Kajima Corp. executive served as coordinator for 
receiving orders; Ozawa side suspected to have given the "word from 
above" (Asahi) 
 
(4) DPJ Ozawa side uses party chapter as recipient for corporate 
donations to Rikuzan-kai (Tokyo Shimbun) 
 
(5) Shaky alliance (Part 3): To the sea of pirates; Antipiracy 
mission in tandem with diplomacy, U.S. also placing hopes on Japan 
(Yomiuri) 
 
ARTICLES: 
 
(1) Experts panel gets under way compiling additional economic 
stimulus package: Effective public spending urged; Creation of jobs 
in medical services and nursing-care areas 
 
NIKKEI (Page 3) (Full) 
March 17, 2009 
 
A council of experts to overcome the economic crisis, which the 
government has appointed in order to reflect views of private 
citizens in its additional economic stimulus package, began 
discussions on March 16. Specific proposals to stimulate the economy 
were made at the first session of the group, which consists 
primarily of private-sector economists. The participants confirmed 
that effective public spending would be necessary. However, when it 
came to specifics, views were divided. 
 
The government will intensively hold panel meetings until the 21st 
to hear views from a total of 83 experts on such themes as the 
financial system and social security. The government intends to 
include views presented at those meetings in an additional stimulus 
package to be readied possibly in April. 
 
The first meeting held on the 16th brought together eight experts, 
including economists from securities houses and university 
professors. Prime Minister Taro Aso at the outset of the meeting 
stated, "I would like to hear views not only from politicians and 
bureaucrats but also from economic experts. I would like to use 
their views for future policies." 
 
The participants by and large agreed that increased public spending 
was needed. But no one could agree on how the funds should be 
spent. 
 
Many participants cited employment measures as a means of producing 
immediate results. Ryutaro Kono of BNP Paribas Securities Japan Ltd. 
proposed providing 1.2 million yen to each jobless person. Proposals 
also included creating jobs through regulatory reform. Yuri Okina of 
the Japan Research Institute Ltd. called for creating jobs by 
improving the child-care and nursing-care areas. Robert Feldman of 
 
TOKYO 00000588  002 OF 007 
 
 
Morgan Stanley also called for reforming the agricultural sector to 
create jobs. 
 
Iwao Nakatani of Mitsubishi UFJ Research & Consulting urged the use 
of the tax system. He proposed introducing a sales tax attached with 
refunds designed to reduce the burden on poor people and to boost 
consumption. His scheme would raise the sales tax to 20 PERCENT  and 
refund 200,000 yen to each person from tax revenues that would 
likely come to 36 trillion yen. He indirectly criticized the 
structural reform policy line implemented by former Prime Minister 
Junichiro Koizumi, saying, "The Japanese society has lost its 
soundness over the past dozen years or so, as can be seen in the 
expanded income disparities." 
 
Participants also discussed ways to channel household savings to 
consumption. When Tokyo University Professor Motoshige Ito proposed 
a gift tax exemption plan as a temporary measure to be applied 
within a limited number of years, the prime minister asked whether 
such a measure would be effective. Mitsuhiro Fukao of the Japan 
Center for Economic Research explained a negative interest rate plan 
to impose taxes on savings and the possession of government bonds, 
with a prefacing remark that this would be a "powerful medicine." He 
said that under the proposed measure, savings would be shifted to 
risk assets, such as real estate and foreign currency savings. 
 
Points of proposals made by eight experts 
 
Motoshige Ito, Tokyo University professor 
? Encourage elderly people to give their financial assets to their 
descendants, by exempting them from the gift tax for a limited 
number of years. Domestic demand is expected to increase with the 
assets of elderly people being channeled to consumption 
 
Yuri Okina, executive director of the Japan Research Institute 
? Strengthen effort to create jobs in the child-care, medical 
services and nursing-care areas and expand domestic demand. In 
particular, improve services at child-care centers and build an IT 
network to provide heath information. 
 
Ryutaro Kono, chief economist at BNP Paribas Securities 
? Provide 1.2 million yen to each jobless person as livelihood 
support 
? Nurture medical services and nursing-care and education areas into 
growth industries through deregulation. 
 
Akihiko Tanaka, Tokyo University professor 
? Review the scholarship system to secure excellent foreign 
students. Expand the fixed number of high school students to be 
recommended for universities and speed up recruitment of foreign 
students and screening. 
 
Iwao Nakatani, executive director of Mitsubishi UFJ Research & 
Consulting 
? Hike the sales tax rate to 20 PERCENT . Refund 200,000 yen to each 
person. 
? Abolish prefectures and introduce 300 provinces. Contract the 
central government agencies' functions. 
 
Mitsuhiro Fukao, executive director of the Japan Center for Economic 
Research 
? Introduce a negative interest rate system, under which a 2 PERCENT 
 tax is imposed on government-guaranteed financial assets. 
 
TOKYO 00000588  003 OF 007 
 
 
? Intensive public spending for employment measures. Prompt the 
transfer of human resources to the medical services and nursing-care 
areas. 
 
Richard Koo, chief economist of the Nomura Research Institute 
? Continuous public spending until the balance sheet improves 
? Boost consumption and maintain household assets with the promotion 
of the provision of long-lasting housing 
 
Robert Feldman, managing director of Morgan Stanley 
? Improve productivity in the agriculture and medical and financial 
services sectors and generate demand. 
? Familiarize preventive medical services. Collect surcharges from 
smokers under the national insurance scheme. 
 
(2) Expert council meeting: Differences seen in views of 
participants on public works; Prime minister eager to expand public 
works in local regions 
 
NIKKEI (Page 3) (Full) 
March 17, 2009 
 
Prime Minister Aso and Finance Minister, State Minister for 
Financial Services and State Minister for Economic and Fiscal Policy 
Kaoru Yosano actively led discussions at a meeting of experts on 
March 16. The prime minister took an interest in the size of public 
spending needed to compile an additional stimulus package. There 
were some differences with experts in the understanding of public 
works. However, he wound up the meeting, by putting together 
discussions in a slightly high-handed manner, 
 
"How much money do we need?" 
 
When a question-and-answer session started after participants stated 
their views, the finance minister said: "The economy has fallen. The 
situation is so serious that it is impossible to tell how far it 
will continue to fall, if it is left unattended. However hard the 
government tries to push it up with policies, it would be impossible 
to do so completely." 
 
The prime minister followed: "We will increase public spending to 
make up for a gap between supply and demand. However, how much money 
do we need to fill the gap? The gap is reportedly 20 trillion yen. 
Does the government have to fill half that amount?" 
 
The prime minister at the first meeting sought participating 
economists to indicate the size of public spending needed to prevent 
the economy from bottoming out. That is because the size of public 
spending that can earn high scores from experts is a key element 
when looking into an additional stimulus package. However, the 
experts did not come up with any clear-cut reply. 
 
Generally speaking, experts are positive toward public spending. 
However, many experts called for employment measures, such as 
vocational training and unemployment benefits, and intensive 
expenditures for nursing-care, child-care and education areas. 
Mitsuhiro Fukao of the Japan Center for Economic Research pointed 
out: "Public investment is worth implementing, but it involves 
maintenance costs. It is important to construct meaningful 
facilities." Tokyo University Professor Motoshige Ito said, "We 
should not think of public spending only in terms of filling the 
supply-demand gap. Money should be spent in order to turn sagging 
 
TOKYO 00000588  004 OF 007 
 
 
sectors into growth sectors." 
 
Richard Koo, chief economist at the Nomura Research Institute, who 
is said to be an advisor to the prime minister, was the only 
participant who called for large-scale public spending. He 
maintained: "The economic decline is beyond imagination. Various 
stimulus measures should be carried out on a priority basis, even if 
they look unnecessary. It would be too late to do so, once the 
damage spreads." 
 
Unprecedented summary by prime minister 
 
The prime minister at the end of the meeting summed up the 
discussions. Touching on the point that the consolidation of road 
systems in local regions has been constrained, he pointed out, 
"Project plans have almost been completed in local regions. What 
they lack is money." He emphasized: "It is no good just to build 
buildings. However, if road systems are patchy, they cannot become 
operative." Regarding waiting lists of children to enter day-care 
centers, the prime minister noted, "It is impossible in local 
regions. Such a problem is centered in urban areas." He thus 
repeatedly stressed his desire to shore up local economies with 
public works. 
 
(3) Former Kajima Corp. executive served as coordinator for 
receiving orders; Ozawa side suspected to have given the "word from 
above" 
 
ASAHI (Page 1) (Abridged) 
March 17, 2009 
 
Nishimatsu Construction Co., a second-tier general contractor, has 
been accused of providing illegal political donations to 
Rikuzan-kai, the fund-management organization of Democratic Party of 
Japan (DPJ) President Ichiro Ozawa. In connection with that case, 
Nishimatsu allegedly set up a bid-rigging operation in the Tohoku 
region that made moves in compliance with the Ozawa office's wishes. 
A former executive of a Tohoku branch of Kajima Corp., a leading 
general contractor, was also allegedly involved in the bid-rigging 
scheme. 
 
The former executive reportedly took the Ozawa office's reference to 
the companies it wanted to see receive project contracts as "the 
word from above." That executive is believed to have served as the 
coordinator for receiving the orders. The Tokyo District Public 
Prosecutors Office special investigation team seems to have grasped 
the facts through questioning of Nishimatsu employees. 
 
Nishimatsu is believed to have funneled donations to the Ozawa side 
via (its dummy political organizations) since around 1995. Through 
past investigations, allegations have also surfaced that three major 
general contractors -- Shimizu Corp., Obayashi Corp., and Taisei 
Corp. -- and one second-tier general contractor -- Toda Corp. -- 
funneled donations to the Ozawa office, as well. The special 
investigation team has given high priority to uncovering the 
relationship between Kajima and the Ozawa office, believing those 
companies made donations in return for the Ozawa office's lobbying 
efforts on their behalf with the bid-rigging body. 
 
According to sources in the general contractor, activities by the 
bid-rigging organization that coordinated which companies would win 
contracts prior to the tenders for a large public works project 
 
TOKYO 00000588  005 OF 007 
 
 
involving six prefectures in the Tohoku region winded down after the 
arrests in 1993 of the Sendai mayor and executives of general 
contractors over bribery charges. The Kajima Tohoku branch also 
stopped serving as coordinator. Several years later, the former 
executive of Kajima's Tohoku branch allegedly became the new 
coordinator and served in the post until around 2006. 
 
In determining which companies would win contracts, the bid-rigging 
organization attached importance to receiving the "word from above," 
meaning the wishes of the party connected to those putting out bids. 
For this reason, general contractors worked upon the bid-rigging 
body to receive such instructions from that party. 
 
According to accounts of informed sources, general contractors 
regarded the Ozawa office as the source of the "word from above" 
regarding public works projects in Iwate Prefecture and other 
places. There was a case in which the former Kajima executive 
presented the Ozawa office's wishes and arrangements were made in 
accordance with them, the sources said. 
 
After a bid-rigging scheme was exposed in 2004, Fukushima Prefecture 
issued a ruling that exposed a Kajima executive's role in rigging 
bids in line with the "word from above." According to the Tokyo 
District Court's definitive judgment in February 2007 on a former 
Tokyu Corp. executive, who was charged with obstructing a 
competitive bidding over this case, the manager who received the 
"word from above" from the ordering party informed Kajima, the 
coordinator, and other parties concerned. Bids were rigged 
constantly through Kajima's coordination to determine winners among 
general contractors in accordance with such instructions from 
above. 
 
(4) DPJ Ozawa side uses party chapter as recipient for corporate 
donations to Rikuzan-kai 
 
TOKYO SHIMBUN (Page 1) (Full) 
March 17, 2009 
 
In investigating the case of huge donations made to politicians by 
Nishimatsu Construction Co., a second-tier general contractor, 
prosecutors have found that Democratic Party of Japan (DPJ) 
President Ichiro Ozawa's political fund-managing group, Rikuzan-kai, 
had used a DPJ chapter as the recipient for corporate donations to 
it and that the chapter had channeled some of the money to the 
group. The group began to adopt this mechanism in 2000, in which 
corporate donations to politicians' fund-management groups were 
banned under the revised Political Funds Control Law. 
 
The revision of the said law in 1999 was aimed to prevent collusive 
relations from being built between politicians and companies. But 
the Ozawa organization is now suspected of having continued to 
receive corporation donations in effect by means of flowing money 
between political groups. 
 
According to its political-funding reports, Rikuzan-kai had received 
about 100 million yen in donations every year up until 1999, but 
since 2000, donations to the group have reduced to zero. 
 
Meanwhile, the financial reports of the Jiyuto's (Liberal Party) 
Iwate No. 4 Constituency Chapter (the DPJ's Iwate No. 4 Constituency 
Chapter since 2003) record donations totaling 1.48 billion yen in 
1998 and 1.55 million yen in 1999. In 2000, however, the amount 
 
TOKYO 00000588  006 OF 007 
 
 
skyrocketed to 107.4 million yen. The chapter collected 
approximately 100 million to 30 million yen annually even 
afterward. 
 
In 2001, the chapter began to make donations to Rikuzan-kai. By 
2007, 22 million yen annually, or approximately 230 million yen in 
total, flew between the chapter and Rikuzan-kai. 
 
It has also been revealed that Nishimura's dummy companies, headed 
by ex-Nishimatsu executives, also contributed a total of 29 million 
yen to the DPJ chapter between 2000 and 2006. 
 
It is now apparent that after the law was revised, the Ozawa side 
was using the party chapter, instead of its fund-management 
organization, as the recipient for corporate donations. 
 
It has also been disclosed that Nishimatsu and other general 
contractors had asked subcontractors to make donations to Ozawa. The 
said chapter is suspected of having received about 500,000 yen in 
donations every year from such subcontractors. 
 
(5) Shaky alliance (Part 3): To the sea of pirates; Antipiracy 
mission in tandem with diplomacy, U.S. also placing hopes on Japan 
 
YOMIURI (Page 1) (Full) 
March 17, 2009 
 
On March 10, pirates attacked a Panamanian-registered freighter 
chartered by an affiliate of Nihon Yusen Kaisha or NYK Line in 
waters off the eastern African coast of Somalia. The freighter had a 
narrow escape from the attack. However, its captain was wounded in a 
shootout. 
 
Maritime Self-Defense Force destroyers have recently set sail, 
heading for Somalia waters to engage in an antipiracy mission based 
on an action invoked for maritime security operations under the 
Self-Defense Forces Law. If the mission had started there, the 
pirates might have given up attacking the cargo ship. 
 
On the same day, the ruling Liberal Democratic Party gave the 
go-ahead for the introduction of an antipiracy bill to the Diet. The 
MSDF was belatedly sent out. That is primarily because Defense 
Minister Hamada and other government leaders preconditioned the 
MSDF's deployment to Somalia waters on the legislation in an attempt 
to make it clear that the MSDF's dispatch for maritime security 
operations is an emergency measure. "Why did we take such a long 
time?" So saying, Prime Minister Aso complained to Gen Nakatani, an 
LDP lawmaker and a former director general of the Defense Agency, 
now the Defense Ministry. It was nearly five months after Aso 
clarified his intention to study antipiracy measures in reply to a 
Diet interpellation posed by Akihisa Nagashima, a House of 
Representatives member of the opposition Democratic Party of Japan 
(Minshuto). 
 
So far, Japanese merchant ships have asked not only U.S. naval 
forces but also Chinese and Greek naval forces to escort them. 
Hiroshi Sekine, a managing director of NYK Line, welcomes the MSDF 
dispatch, underscoring the significance of sending out MSDF vessels 
to protect Japanese commercial ships. 
 
Japan was late to send out the MSDF for an antipiracy mission. Even 
so, the international community welcomes Japan's participation in 
 
TOKYO 00000588  007 OF 007 
 
 
antipiracy operations. In January, the United Nations held a meeting 
to discuss how to deal with pirates in waters off Somalia. In that 
meeting, the United States gave high marks to Japan's decision to 
join in the antipiracy operations as "very good news." That is 
because the MSDF's embarkation will reduce the burden on U.S. naval 
forces. However, that is not the only reason. 
 
Isami Takeda, a professor of international political science at 
Dokkyo University, also notes: "Drugs made in Afghanistan are 
brought into Somalia by way of Pakistan, and the money paid for the 
drugs goes into the hands of Taliban or someone else. If there are 
more naval vessels deployed from various countries to waters off 
Somalia, they will find it difficult to continue trafficking in 
drugs." 
 
The Japanese government intends to focus on its Africa aid policy, 
deeming it impossible to root out the pirates as long as Somalia, 
which has been in a state of anarchy, is not reconstructed as a 
country. In addition, the government is planning to help Yemen and 
other neighboring countries improve their maritime security 
capabilities through such measures as training their personnel and 
providing patrol boats. In a way, the MSDF's presence and Japan's 
diplomacy toward Africa will contribute to the war on terror. The 
U.S. Obama administration, which is concerned about Afghanistan, is 
attaching great expectations on Japan in this area as well. 
 
Military power and diplomatic power are both indispensable for 
antipiracy operations. The MSDF, however, will have to operate under 
some legal constraints. For example, the MSDF, when engaged in 
maritime security operations in Somalia waters, will not be allowed 
to protect foreign ships that have nothing to do with Japan. The 
antipiracy legislation is intended to change this constraint. 
Nagashima and former DPJ President Seiji Maehara have expressed 
their approval for this legislation. However, the DPJ has yet to 
shape its consent. The legislation is therefore not expected to be 
enacted into law. Japan's political initiative is being called into 
question from the perspective of international contributions 
appropriate for its national strength. 
 
This is the last of a three-part series. 
 
ZUMWALT