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UNCLAS SECTION 01 OF 11 TOKYO 000743 
 
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 04/02/09 
 
INDEX: 
 
(1) Ruling parties to rush the handling of priority bills (Tokyo 
Shimbun) 
 
(2) Ruling parties might take lead in steering Diet business in 
latter half of session, aiming to pass fiscal 2009 extra budget, 
three key bills (Yomiuri) 
 
(3) Spring elections to choose heads of local governments (Asahi) 
 
(4) DPJ to go back on offensive over extra budget with eye on 
possible Lower House dissolution in May (Tokyo Shimbun) 
 
(5) DPJ lawmakers honestly looking forward to Okada becoming party 
head? (Asahi) 
 
(6) Confusion in DPJ (Part 2): DPJ unable to charter Lower House 
election strategy, with "face of the party" undecided (Nikkei) 
 
(7) Bank of Japan Tankan survey: End of tunnel not in sight (Asahi) 
 
 
(8) SDF's MD system now operational, with ground radar switched to 
operational mood (Sankei) 
 
ARTICLES: 
 
(1) Ruling parties to rush the handling of priority bills 
 
TOKYO SHIMBUN (Page 2) (Abridged slightly) 
April 2, 2009 
 
In the wake of Prime Minister Taro Aso's official announcement to 
present a fiscal 2009 supplementary budget bill to the Diet, the 
ruling parties will rush the handling of important bills this 
month. 
 
The Liberal Democratic Party and the New Komeito confirmed in 
yesterday's meeting of their secretaries general and Diet affairs 
committee chairman a policy course to make utmost efforts for the 
handling of important bills for the time being. 
 
The ruling parties regard three bills related to the establishment 
of the consumer agency as priority legislation. Besides them, 
priority legislation includes: a bill to raise the state's financial 
burden of the national pension scheme to one-half; a bill to amend 
the National Pension Law; anti-piracy legislation; a national civil 
service reform-related bill to establish the cabinet personnel 
affairs bureau; and the Japan-U.S. agreement to relocate U.S. Marine 
Corps form Okinawa to Guam. 
 
The consumer agency bill, along with a counter proposal from the 
Democratic Party of Japan (DPJ), has been discussed almost daily 
since March 17. The ruling bloc intends to enter into revision talks 
with the opposition camp. 
 
The ruling parties are aiming to smoothly discuss the pension bill 
and the Guam relocation agreement and to explain the anti-piracy 
legislation at a Lower House plenary session on April 9. 
 
Nevertheless, if a supplementary budget bill is presented after the 
 
TOKYO 00000743  002 OF 011 
 
 
Golden Week holiday period in May, it will take precedence over 
other bills, forcing deliberations on them to stall again. As such, 
the ruling parties want to get priority bills enacted or passed by 
the Lower House before the end of this month. 
 
(2) Ruling parties might take lead in steering Diet business in 
latter half of session, aiming to pass fiscal 2009 extra budget, 
three key bills 
 
YOMIURI (Page 4) (Full) 
April 2, 2009 
 
In the latter half of the ongoing Diet session, the Democratic Party 
of Japan (DPJ) has softened its confrontational stance toward the 
ruling coalition, in part because of the effect of the arrest of 
party president Ozawa's secretary over illegal political donations 
from Nishimatsu Construction Co. Many observers now anticipate that 
deliberations on key bills might proceed under the lead of the 
ruling coalition. 
 
In a meeting of ruling coalition members, including their 
secretaries general and policy research council chairmen, met at a 
Tokyo hotel yesterday, Liberal Democratic Party (LDP) Secretary 
General Hosoda expressed his confidence about an early passage of a 
fiscal 2009 supplementary budget bill. He said: "Since the 
supplementary budget bill is to finance economic stimulus measures, 
I do not think the opposition camp will raise objections. We would 
like to listen to views from as many people as possible and then 
work out an extra budget bill." Hosoda also indicated that the 
government would push ahead with preparations, aiming to submit the 
bill to the Diet prior to the Golden Week holidays in May. 
 
Focusing on the internal discord in the DPJ over whether the future 
course of President Ozawa and recovering public support ratings for 
the Aso cabinet, the ruling camp think it is now a good chance to 
take the initiative in the latter half of the current Diet session. 
Under its scenario, (1) an anti-piracy bill, a bill related to 
establishing a consumer agency, and a bill amending the National 
Pension Law to increase the government's subsidy rate for basis 
pension benefits to 50 PERCENT  would clear the House of 
Representatives in April; (2) deliberations would start in late 
April on the fiscal 2009 supplementary budget bill, tax-related 
bills and other key bills, with the aim of having them pass the 
Lower House and enacted in mid-May. 
 
Some members worry that the start of full-scale deliberations on the 
bill amending the National Pension Law might change the atmosphere 
in Diet deliberations on pension issues. Starting pension discussion 
has been an "unlucky exposure" for the LDP. The problem of pension 
negligence and pension record-keeping fiasco were focused on as the 
main campaign issue for the Upper House elections in 2004 and 2007, 
respectively. In these elections, the LDP experienced a uphill 
battle. These pension issues, which have yet to be resolved, good 
ammunition for the opposition bloc to attack the ruling parties. 
 
Furthermore, the ongoing investigation into illegal political 
donations by Nishimatsu to DPJ President Ozawa's office might spread 
to a political group linked to Economy, Trade and Industry Minister 
Nikai of the LDP. Many members are concerned that the Nikai scandal 
might become a source of trouble in the LDP. 
 
In a press conference on March 31, Prime Minister Aso referred to 
 
TOKYO 00000743  003 OF 011 
 
 
the possibility of dissolving the Lower House, depending on the 
DPJ's responses to the supplementary budget and other important 
bills. Meanwhile, the ruling coalition has indicated its willingness 
to flexibly respond to the opposition side's call for holding talks 
to revise the consumer agency bill. As it stands, the ruling side 
has begun to take a carrot-and-stick policy stance in the latter 
half of the current Diet session. 
 
(3) Spring elections to choose heads of local governments 
 
ASAHI (Page 4) (Full) 
March 31, 2009 
 
Ozawa-style election strategy no longer useful 
 
The main opposition Democratic Party of Japan (DPJ), which has been 
shocked and shaken by the donation scandal involving Nishimatsu 
Construction Co., is now being forced to come up with a fresh 
election strategy. DPJ President Ichiro Ozawa has his election 
strategy of carrying out campaigns by stumping nationwide and 
sending his secretaries across the nation. However, the Ozawa-style 
election strategy has now been stalled. In the wake of the defeat of 
the candidate recommended by the DPJ in the gubernatorial election 
on March 29 of Chiba Prefecture, dark clouds seem to be casing 
shadows over the results of local elections to take place in this 
spring, including the Akita gubernatorial election in April. 
 
When Ozawa visited on March 28 the election office of the candidate 
backed by the DPJ for the Chiba gubernatorial race, he was told by a 
female volunteer staff member that she received a number of claims 
by phone. Ozawa had no choice but to say: "I'm sorry for that." 
 
Ozawa was refraining from election support after his secretary was 
arrested on March 3. But after wavering, he decided to go to Chiba 
to support the candidate. However, he was welcomed at the election 
office of the DPJ-backed candidate for the Yamagata gubernatorial 
election in January, when he visited there two days before the 
election. The DPJ candidate won the election after running a close 
race. In his meeting on the night of March 30 with DPJ Secretary 
General Yukio Hatoyama, Deputy President Naoto Kan and Azuma 
Koshiishi, chairman of the DPJ caucus in the House of Councillors, 
Ozawa was suggested stumping nationwide but he was reluctant to do 
so, saying: "I want to refrain from going a stumping, since the 
prosecutors have yet to completed their investigations." 
 
The existence of Ozawa seems to negatively affect small-scale 
unified local elections to be held in April, prelude to the next 
general election for the House of Representatives. The DPJ will face 
uphill battles in such elections as the Akita gubernatorial race, 
since its election cooperation with the Social Democratic Party and 
Rengo (Japanese Trade Union Confederation) has now collapsed. 
 
The largest opposition party has fallen behind in its strategy of 
going into the general election. Before the donation scandal came to 
light, Ozawa had made his nationwide political tour, during which he 
held informal meetings with senior Rengo officials. He had even 
visited the offices of prospective candidates without advance 
notice. He had sent his secretaries to electoral districts to teach 
new-face candidates how to campaign. This is Ozawa's campaign method 
that brought a landslide victory to the DPJ in the 2007 Upper House 
election. After the revelation of the donation scandal, Ozawa went 
to only Chiba and Kanagawa prefectures. Some secretaries have 
 
TOKYO 00000743  004 OF 011 
 
 
returned to Ozawa's office. 
 
On the night of March 30, Ozawa and other DPJ executives reconfirmed 
that they would continue cooperating to prevent Ozawa's remaining in 
his party post from having a negative impact on the general 
election. According to participants, Ozawa said: 
 
"(Holding the snap election in) May would better. Even if the Lower 
House is dissolved after the expiration of the term of the lower 
chamber, we should make the party arrangement under which we can go 
into the election." 
 
However, party executives have openly expressed concern, with one 
member saying: "Our election ability has definitely weakened. 
(Ozawa's remaining in his post) has already produced negative 
effects." 
 
Heavyweights in distress over trend of voters abandoning LDP 
 
In the March 29 mayoral election in Komatsu City, Ishikawa 
Prefecture, the candidate who was the incumbent Komatsu mayor and 
who serves as chairman of the association of support groups for 
former Prime Minister Yoshiro Mori, 71, was defeated. Mayoral 
elections will be held in the home turfs of LDP Tax Research 
Commission Chairman Yuji Tsushima, 79, and former LDP Upper House 
Caucus Chairman Mikio Aoki, 74. Amid the LDP suffering the setback 
over the illicit donation scandal, there is a clear trend of voters 
abandoning the LDP in the home districts of those big-shot 
lawmakers. 
 
A Komatsu City Assembly member, secretary general of the election 
office of the incumbent candidate, 69, who sought a fourth-term in 
the Komatsu mayoral race, said: "The reason for the defeat was 
public criticism of multiple election rather than the aftermath of 
national politics." Some LDP members in the Komatsu City Assembly 
supported the new-face candidate, 57, a former construction machine 
company official, who won the race. 
 
The new-face candidate (who becomes new Komatsu mayor) is believed 
to have close ties to Mieko Tanaka, 33, who is expected to run as a 
DPJ new-face candidate backed by labor unions in the Ishikawa No. 2 
district for the next Lower House election, clashing with Mori, who 
has already been elected 13 times in this district. In order to 
avoid the mayoral election from becoming a proxy war of the general 
election, Mori sent telegrams to both candidates on the day when the 
official campaign for the election kicked off. He also had his 
secretaries attend the kick-off ceremonies of the two candidates. 
 
Mori's oldest son, a member of the Ishikawa Prefectural Assembly, 
attended the kick-off ceremony of the candidate, who was the mayor. 
 
In Tsushima's home district, where the Aomori City mayoral election 
will be held (on April 19), the incumbent mayor is suffering from 
being of an advanced age and criticism for his seeking multiple 
election. A 61-year-old Aomori Prefectural Assembly member and 
50-year-old Aomori City Assembly member will challenge the 
76-year-old incumbent mayor, who will seek his sixth-term. Tsushima, 
who is now serving in his 11th-term in the Diet, has close ties to 
the incumbent mayor. So, a senor LDP member said: "Criticism of the 
incumbent mayor links to criticism of Tsushima." 
 
Three persons -- the incumbent mayor, a former deputy mayor and 
 
TOKYO 00000743  005 OF 011 
 
 
former senior local newspaper company official -- have announced 
their candidacies for the mayoral election (April 12) in Izumo City, 
Shimane Prefecture, which is Aoki's home turf. Since the LDP Izumo 
chapter, which had recommended the incumbent mayor, is now 
supporting the former deputy mayor, the conservatives will likely 
enter the election split into two groups. 
 
Nagato City in Yamaguchi Prefecture, which is the home district of 
former Prime Minister Shinzo Abe, will hold a mayoral election (on 
April12). Yanagawa City in Fukuoka Prefecture, the home turf of LDP 
Election Strategy Council Chairman Makoto Koga will conduct a 
mayoral election (on April 12). Matsue City in Shimane Prefecture, 
LDP Secretary General Hiroyuki Hosoda's home constituency, will also 
hold a mayoral election (on April 19). The outcomes of those local 
elections will likely affect the timing of the Lower House 
dissolution. 
 
Major local elections in April 
 
April 5 Kodaira City mayoral election (Tokyo) 
April 12 Akita gubernatorial election 
Izumo City mayoral election (Shimane Prefecture) 
Nagato City mayoral election (Yamaguchi Prefecture) 
April 19 Aomori City mayoral election 
Matsue City mayoral election 
Sanyo Onoda City mayoral election (Yamaguchi Prefecture) 
April 26 Nagoya City mayoral election 
Shimanto City mayoral election 
 
(4) DPJ to go back on offensive over extra budget with eye on 
possible Lower House dissolution in May 
 
TOKYO SHIMBUN (Page 2) (Abridged slightly) 
April 2, 2009 
 
Takayoshi Goto 
 
The Democratic Party of Japan (DPJ) decided yesterday to set up 
teams to examine such issues as the amakudari practice in which 
retired bureaucrats land postretirement jobs at entities connected 
to the ministries they worked, the question of unidentified pension 
accounts, and measures against unemployment, to pursue them at the 
Diet. The party will also formulate its counter proposals to the 
government plans. The main opposition party has been in the doldrums 
due to a Nishimatsu Construction Co. donation scandal involving a 
state-paid secretary to President Ichiro Ozawa. The party is trying 
to regain its fighting spirit with an eye on a rumor in the ruling 
camp that the House of Representatives might be dissolved in May. 
 
Prime Minister Taro Aso indicated (on March 31) that if opposition 
parties put up stiff resistance in deliberations on a fiscal 2009 
supplementary budget bill, he might dissolve the Lower House. With 
this in mind, DPJ Diet Affairs Committee Chairman Kenji Yamaoka in a 
party meeting yesterday provocatively said: "The prime minister 
talked big. He should make good on it." Yamaoka thus implied the 
possibility of pursuing the government and the ruling parties 
through Diet deliberations without responding to their call for the 
early enactment of the fiscal 2009 extra budget bill. 
 
The DPJ thinks the fiscal 2008 supplementary budget and the fiscal 
2009 budget are insufficient to jumpstart the economy. On April 2, 
the party will establish teams to probe (1) amakudari, (2) the 
 
TOKYO 00000743  006 OF 011 
 
 
question of unidentified pension premium payment records, (3) 
measures against unemployment, (4) the credit crunch by banks, and 
(5) the cash handout program. 
 
The DPJ's shadow cabinet decided yesterday to submit a small and 
medium-sized enterprises revitalization support organization bill in 
reaction to the government's regional economies revitalization 
organization bill. The party has also presented disabled people 
abuse prevention legislation in rivalry with the government and the 
ruling bloc. The largest opposition party is struggling to restore 
its fighting spirit that has weakened because of the scandal 
involving Ozawa's secretary. 
 
Prime Minister Aso is dangling the possibility of dissolving the 
Lower House to apply pressure on the DPJ. Remaining on the defensive 
might prompt the general public to raise questions about the DPJ's 
competence ahead of the next Lower House election. Secretary General 
Yukio Hatoyama stressed that the time has come for the DPJ to 
demonstrate its ability to formulate policies for the people. 
 
Further, the DPJ apparently wants to play up its confrontational 
stance against the ruling camp in a bid to divert its focus from the 
lingering calls for Ozawa's resignation to the Diet and policies. 
 
At the same time, saddled with the question of Ozawa's resignation 
issue, a matter of great concern to the public, the DPJ might end up 
being attacked instead by the ruling parties over the issue of 
politics and money. There is concern in the DPJ over a possible 
mudslinging contest, with one saying, "The ruling parties might 
pursue the question of President Ozawa and the provision of funds 
form pyramid scheme operators." 
 
(5) DPJ lawmakers honestly looking forward to Okada becoming party 
head? 
 
ASAHI (Page 4) (Full) 
April 2, 2009 
 
While Democratic Party of Japan (DPJ) President Ichiro Ozawa has 
been suffering from the criticism of his decision to continue 
serving as party leader, Vice President Katsuya Okada, 55, is 
regarded as the most likely candidate to succeed Ozawa. Okada, who 
acts as if he has a zipper on his mouth, has been reluctant to 
continue stumping nationwide, as well as carrying out discussion on 
political reform. Even so, there still remains the rumor that Okada 
might become party leader again after Ozawa resigns. The newspaper 
has probed into the rumor. 
 
Okada had distributed an email newsletter, titled "The female owner 
of a boarding house (geshuku no obasan)," on March 26, the day 
before the DPJ held a meeting of its House of Representatives 
members regarding the indictment on March 24 of Ozawa's secretary. 
Okada's newsletter drew attention, but it was about the story that 
he had visited a nursing home in which the female owner of the 
boarding house in which Okada lived when he was a college student. 
His story had no connection with the political situation. 
 
Okada must have known about the fact that there is expectation in 
the DPJ that he would become party leader. On March 4, the next day 
following the arrest of Ozawa's secretary, when asked by the press 
corps about the mood favoring his becoming DPJ leader, Okada brushed 
aside the question, saying: "I can't believe what a stupid question 
 
TOKYO 00000743  007 OF 011 
 
 
you are asking." He has played up the unity of the party in his 
nationwide stumping tour. 
 
We wonder why DPJ lawmakers have expectations of Okada. A person 
close to Okada pointed to such reasons as his image of being clean 
with money, honest, and adamant. A senior Japan Business Federation 
member highly evaluated him, noting: "He has studied well, and he 
has a good sense of balance." A mid-level DPJ member in the Upper 
House said: 
 
"He is a unique person who does not like to factions. He is a quite 
different from other politicians. He is a person suitable to serve 
as prime minister of a DPJ government." 
 
Some among Ozawa aides predict that Ozawa considers Okada his 
successor. Okada described in a book he considered Ozawa, with whom 
he left the DPJ in 1993, as his father in the political world. The 
fact that Ozawa entrusted Okada with the handling of discussion on 
the issue of whether to completely ban donations from corporations 
and organizations has given rise to speculation that it is a 
strategic move to name him as his successor. 
 
However, some members in the DPJ have begun raising a question, with 
one member saying: "Is it all right for Okada to so easily replace 
Ozawa?" The coalition of three opposition parties -- the DPJ, the 
Social Democratic Party, and the People's New Party -- is an 
obstacle. Should the DPJ gain a sole majority in the Lower House, it 
will not be able to hold a majority in the Upper House without the 
SDP and PNP. In the case that Okada replaces Ozawa, who has placed 
importance on the alliance with the two opposition parties, there is 
concern that the cooperative relations with the two parties would 
collapse because Okada lacks flexibility. 
 
Many DPJ members predict that Ozawa would not take any risks. 
Although the number of the requests of his approval of using his 
pictures for making campaign posters has boosted after the arrest of 
Ozawa's secretary, Okada has turned down those requests. A person 
close to Okada said: "He had not accepted such a request even before 
Ozawa's secretary was arrested." A junior lawmaker, however, 
remarked: "He is too attentive to be viewed that he vies with 
Ozawa." DPJ lawmakers, who have distanced themselves from Ozawa, are 
concerned about Okada in this way: If he strengthens criticism of 
Ozawa, he would have to take (joint responsibility) as a member of 
the party executives who agreed to Ozawa's decision to remaining in 
his party post. 
 
(6) Confusion in DPJ (Part 2): DPJ unable to charter Lower House 
election strategy, with "face of the party" undecided 
 
NIKKEI (Page 2) (Abridged) 
April 2, 2009 
 
On March 26, Hirohisa Fujii, a supreme advisor to the Democratic 
Party of Japan (DPJ), called on Kozo Watanabe, another supreme 
advisor, at his room in the Diet Member's No. 2 Office Building of 
the House of Representatives. The two lawmakers know well about 
party president Ichiro Ozawa, who had announced his intent to stay 
on just two days before. 
 
Fujii said: "His secretary probably will be found not guilty, but I 
think he should resign as party president for now." Watanabe 
replied: "I share your view 100 PERCENT ," but he added: "He is 
 
TOKYO 00000743  008 OF 011 
 
 
almost like a person who refuses to do what he is told but do what 
he is told not to do." 
 
Judging that Ozawa will inevitably come under heavy fire from the 
public over illegal political donations, Watanabe has begun to take 
the view since the arrest of his secretary that a change of 
president will be unavoidable, disclosing to his aides an idea of 
appointing Katsuya Okada as party president and Ozawa as election 
strategy headquarters chief. He fears that if calls for Ozawa's 
early resignation grow louder, Ozawa could make an angry response 
and that disarray would be caused in the party. Watanabe told Vice 
President Seiji Maehara, former Policy Research Council Chairman 
Yoshito Sengoku and other party members close to mid-ranking and 
junior members who expect Ozawa to step down to calmly watch the 
development of the situation for the time being. 
 
The DPJ is also slow to move to put up a successor to Ozawa. On the 
night of March 18, before Ozawa's secretary was arrested, Okada 
showed up in a meeting held at a Chinese restaurant in Yanoh Park 
Tower in Nagata-cho by DPJ lawmakers who have been elected to the 
Lower House six times, including Vice President Yoshiaki Takagi. 
Many mid-ranking and junior members hope that Okada will assume the 
presidency. 
 
Although what to do if Ozawa resigns as party head was also 
discussed, but Ozawa made cautious remarks, such as: "It is 
necessary to solidify the party unity." Since Ozawa announced that 
he would stay on as party president, Okada has expressed his support 
of Ozawa and has not expressed what view he has taken. A lawmaker in 
favor of Okada becoming party president grumbled: "Even if we asked 
him to stand as a candidate for the party presidency, he might 
decline our request." 
 
Ozawa has begun to indicate that he would put off his decision on 
whether to resign up until just before the Lower House is dissolved. 
Last night, upon making an apology during a meeting with the party's 
secretary general and deputy secretaries general, Ozawa emphasized: 
"I will never be beaten by prosecutors." 
 
It will have a great influence on the election if the party remains 
unable to select the "face of the DPJ." If Ozawa resigned, the party 
would review its current pork-barrel policy measures when the party 
forms its policy manifest for the next general election. A senior 
Policy Research Council member claimed: "We will have trouble if he 
decides to resign just before the election. 
 
On the night of March 30, Deputy President Naoto Kan, Secretary 
General Yukio Hatoyama and party caucus in the House of Councillors 
Chairman Azuma Koshiishi met with Ozawa at a sushi restaurant in 
Tokyo. When Kan asked him to visit local electoral districts as much 
as you can," Ozawa expressed his eagerness, even while saying: 
"Prosecutors are moving actively. I am feeling somewhat restless." 
 
Ozawa has stressed the effectiveness of a grassroots door-to-door 
election campaign. But such voices are heard among mid-ranking and 
junior members that if he comes to our electoral districts, there 
might be an adverse effect. 
 
If Ozawa continues to watch the situation, dissatisfaction in the 
party might build up. Supreme advisor Tsutomu Hata, who seceded from 
the LDP with Ozawa, has begun to make this remark to his aides 
recently: "I will tell him what I should say when it becomes 
 
TOKYO 00000743  009 OF 011 
 
 
necessary for the sake of Mr. Ozawa and the party." 
 
(7) Bank of Japan Tankan survey: End of tunnel not in sight 
 
ASAHI (Page 2) (Full) 
April 2, 2009 
 
According to the Bank of Japan's March Tankan survey, business 
confidence of leading companies marked the worst-ever record since 
the survey was started in 1974. With foreign demand sharply 
dropping, companies are making a frantic effort to reduce excessive 
stocks. Economic recovery cannot be hoped for. The negative 
synergetic inter-action between banks and companies is imminent. 
 
Mountains of hidden stockpiles surfacing: Raw materials purchased 
when prices were high affecting 
 
The initial feature of the ongoing economic recession was a quick 
decline in demand. Corporate managers are now fearful about the 
economic slump becoming protracted. 
 
Showa Denko manufactures aluminum and plastics for automobiles. 
President Takahashi asked the company's business partners when he 
made New Year's calls, "When can we expect orders from your 
company?" 
 
Many of the company's business partners, such as automakers and 
electronic manufacturers, replied, "It will take six more months." 
The operation rate of production lines for tinfoil used for digital 
consumer electronics briefly dropped to 10 PERCENT . 
 
Companies usually hold back on placing orders to reduce stockpiles. 
It took two to three months for companies to finish the hard part of 
inventory adjustment in the past recessions. In the ongoing 
recession, companies started major production cuts during the 
October-December quarter last year, and yet the inventory adjustment 
is not yet over. 
 
President Takahashi asked an executive of a certain electronic parts 
manufacturer about the reason for that. This executive gave an 
unexpected reply: "We looked into reasons and found that there were 
stockpiles more than we had realized in the distribution and 
production fields." 
 
A major feature of Japanese manufacturing companies is constraining 
raw materials in stock to the minimum, as seen in Toyota's 
production method. However, companies had feared that they might 
become unable to manufacture goods due to a shortage of raw 
materials, because the global economy had been booming for the past 
several years. 
 
The rise in the prices of crude oil and steel materials up until the 
first half of the previous year has compounded companies' lax stock 
management. Takahashi said, "Many companies appeared to have thought 
that if they bought raw materials before their prices rose further, 
they could lower costs." 
 
The index of industrial inventories stood at 96.1 in January 2004 
before the sharp rise in raw materials kicked into high gear. 
However, such an index rose to 107.6 in September 2008. Hidden 
stockpiles were exposed at a burst due to the economic crisis with 
the index marking 103.7 in February 2009. It is impossible for 
 
TOKYO 00000743  010 OF 011 
 
 
companies to reduce stockpiles in proportion to sales drops. 
 
Production has sharply slowed and capital investment has come to a 
standstill with demand remaining sluggish and stockpiles remaining 
undisposed. All Tankan indexes marked a historic decline. The big 
three goods manufactures -- manufacturers of automobiles, 
engineering machines and electric machines -- have all collapsed. 
 
Some companies expect a pause in production cuts in the future. 
Toyota Motors plans to increase its domestic output per day in May 
from about 8,000 units up until April to more than 10,000 units. In 
the Tankan diffusion index, leading companies projected that 
business conditions will slightly pick up in three months' time. 
Mitsui Bussan President Iijima took a view that there have appeared 
some bright indications, such as housing start-ups have taken an 
upward turn in the U.S. 
 
However, even if the downtrend touches bottom, there is a 
deep-rooted sense of alarm among business managers that the L-shaped 
economic downturn might continue. Nippon Steel Corporation President 
Muneoka noted, "Chances are that the low production level will 
continue over the next 1-2 years." An executive of Hitachi said, "I 
had estimated that demand would recover in fiscal 2009. However, the 
case would be the other way round." 
 
The fix of the export-oriented industry is beginning to affect the 
domestic demand-oriented industry and the non-manufacturing industry 
through the declining employment and consumption. Asahi Breweries 
President Ogita said, "The downturn of consumer mind is pronounced. 
Customers are becoming selective." 
 
(8) SDF's MD system now operational, with ground radar switched to 
operational mood 
 
SANKEI (Page 1) (Slightly abridged) 
April 1, 2009 
 
The Defense Ministry switched the Air Self-Defense Force's (ASDF) 
latest-model ground radar system, FPS-5, from test to operational 
mood early this week, according to informed sources yesterday. This 
radar system, with significantly upgraded detecting and tracing 
capabilities, is capable of monitoring the entire sky over North 
Korea. The SDF has already mobilized Aegis-equipped destroyers and 
Patriot Advanced Capability-3 (PAC-3) missiles to prepare against 
North Korea's planned launch of a long-range ballistic missile which 
the North claims a satellite. With the switch of FPS-5 to 
operational mood, Japan has now completed preparations to intercept 
an expected incoming missile from North Korea, with its missile 
defense (MD) system. 
 
A prototype of the FPS-5 was competed in fiscal 2003 and has been 
used since then for operational research at facilities of the 
Defense Ministry in Asahi City, Chiba Prefecture. The SDF had 
planned to disassemble the prototype in fiscal 2006 but changed its 
mind, keeping in mind North Korean missile threat. Japan has decided 
to deploy FPS-5 missiles in four locations across the nation from 
fiscal 2008 through fiscal 2011. The first radar was installed on 
Shimo-Koshiki Island in Kagoshima Prefecture on March 31. 
 
The FPS-5 is a key component of the radar network to intercept 
ballistic missiles, together with Aegis-equipped destroyers carrying 
the high-performance SPY-1 Radar. Since the start of this week, the 
 
TOKYO 00000743  011 OF 011 
 
 
FPS-5 system has been switched to the mood of detecting a ballistic 
missile. The system is now ready to intercept an incoming object 
from North Korea in the state of its irradiation distance 
lengthened. 
 
The FPS-5 is capable of detecting and trailing even a small-sized 
ballistic missile, which fall down at a high speed with small 
radar-cross section. Its detectable range is nearly two times longer 
than that of the FPS-3. The FPS-5 system succeeded in trailing 
various types of flying objects in operations research. A senior SDF 
official proudly said: "The system will be able to detect any 
missile flying over Japan, without fail." 
 
If North Korea launches a missile, the FPS-5 radar system on 
Shimo-Koshiki Island will independently trail it, because it is 
still uncertain whether the system can be connected to an 
information transmission system. 
 
The X-band Radar system installed by the U.S. military in Aomori 
Prefecture will also be used. This system's detectable range is 
longer than that of the FPS-5, so it is capable of monitoring 
long-distance places. It can identify even the shape of missiles, 
but its radio waves weaken due to rain and clouds. Given this, Japan 
will use the X-band Radar and the FPS-5, which is less affected by 
the weather, with both playing complementary roles. 
 
ZUMWALT