VZCZCXRO0172
PP RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #1252/01 1550715
ZNR UUUUU ZZH
P 040715Z JUN 09
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 3444
INFO RUEKJCS/SECDEF WASHDC PRIORITY
RHEHAAA/THE WHITE HOUSE WASHINGTON DC PRIORITY
RUEAWJA/USDOJ WASHDC PRIORITY
RULSDMK/USDOT WASHDC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC//J5//
RHHMUNA/HQ USPACOM HONOLULU HI
RHHMHBA/COMPACFLT PEARL HARBOR HI
RHMFIUU/HQ PACAF HICKAM AFB HI//CC/PA//
RHMFIUU/USFJ //J5/JO21//
RUYNAAC/COMNAVFORJAPAN YOKOSUKA JA
RUAYJAA/CTF 72
RUEHNH/AMCONSUL NAHA 6705
RUEHFK/AMCONSUL FUKUOKA 4370
RUEHOK/AMCONSUL OSAKA KOBE 8171
RUEHNAG/AMCONSUL NAGOYA 1968
RUEHKSO/AMCONSUL SAPPORO 4901
RUEHBJ/AMEMBASSY BEIJING 9637
RUEHUL/AMEMBASSY SEOUL 5658
RUCNDT/USMISSION USUN NEW YORK 5399

UNCLAS SECTION 01 OF 11 TOKYO 001252 
 
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 06/04/09 
 
INDEX: 
(1) U.S. focusing on period following determination of Kim Jong Il's 
successor; Plans to maintain pressure approach to prevent the 
North's provocative acts (Nikkei) 
 
(2) Dangers of advocating a capability to attack enemy bases, using 
DPRK's outrageous behavior as excuse: Evil cycle of countering 
military force with military force (Akahata) 
 
(3) LDP Lower House member Taku Yamamoto: "Quite a number of 
signatures collected" for campaign to advance presidential election 
(Sankei) 
 
(4) LDP's Nikai faction received 30 million yen when it was formed 
from political organization made up of ocean construction firms 
(Akahata) 
 
(5) Debate on fiscal reconstruction starts between ruling, 
opposition parties (Asahi) 
 
(6) Amended Antimonopoly Law with broader fines enacted in response 
to changes in industrial structure (Nikkei) 
 
(7) Japanese companies rely on Asian markets for record 36 PERCENT 
of fiscal 2008 operational profits (Nikkei) 
 
ARTICLES: 
 
(1) U.S. focusing on period following determination of Kim Jong Il's 
successor; Plans to maintain pressure approach to prevent the 
North's provocative acts 
 
NIKKEI (Page 6) (Abridged slightly) 
June 4, 2009 
 
Masanori Yamaguchi, Seoul 
 
The United States has begun making moves to work in close 
cooperation with countries concerned, based on the view that North 
Korea's saber-rattling, such as its nuclear tests and missile 
launches, is designed to solidify the country's internal system that 
is linked to accelerated developments in determining the successor 
to General Secretary Kim Jong Il. The U.S. strategy is to focus its 
attention on the North after it has obtained prospects for its 
post-Kim Jong Il system without rushing to resume dialogue. At the 
same time, the United States intends to apply pressure by using such 
means as UN Security Council discussions on possible sanctions to 
prevent the North from taking reckless actions. 
 
Long-term strategy 
 
"No matter what action North Korea takes, we will look for effective 
means to have that country abandon its nuclear programs in close 
cooperation with countries concerned." 
 
U.S. Deputy Secretary of State James Steinberg, now on an Asian 
tour, held talks in Seoul on June 3 with Foreign Affairs and Trade 
Minister Yu Myung Hwan and other South Korean leaders. While playing 
up the United States' plan to work closely with Japan, China, and 
South Korea, Steinberg explained, "In talks this time around, we are 
focused on a long-term strategy." 
 
 
TOKYO 00001252  002 OF 011 
 
 
North Korea's series of reckless actions, such as the missile 
launches and nuclear tests, had been regarded as intended to push 
Washington to engage in direct dialogue with Pyongyang, but the 
situation has taken a new turn recently. Rekindled rumors of the 
deterioration of Kim Jong Il's health condition and reports on the 
North Korean leadership rushing to build a post-Kim Jong Il system 
have resulted in a widespread view that the recent acts reflect the 
North's own circumstances. Pyongyang's intention is to flaunt its 
nuclear and missile technologies to avoid a decline in Kim Jong Il's 
grip on power and to tighten the reins on the inner circle. 
 
Making hasty compromises not an option 
 
A senior U.S. official said on June 2, "Once a system for the 
succession (of General Secretary Kim) is established, North Korea 
will return to the negotiating table," indicating that the United 
States has no intention of making hasty compromises just to engage 
in dialogue with the North. The judgment is that the North will 
return to the dialogue once it has concluded that it would be able 
to control the turmoil with an eye on the succession structure. 
Conveying to its Asian partners the U.S. administration's stance of 
not seeking an early resumption of dialogue is the objective of 
Steinberg's Asian tour, according to a source connected with the 
Six-Party Talks. 
 
At the same time, the United States is urging the UN Security 
Council to adopt a strong resolution, including cargo inspections 
and financial sanctions. Washington is set to continue applying 
pressure on any move running counter to the denuclearization goal. 
Steinberg has in fact confirmed a policy course with Japan and other 
countries to increase pressure on the North. 
 
China shares U.S. view 
 
China shares the U.S. view that North Korea's hard-line stance 
originates from its own circumstances rather than from its 
diplomatic strategy. China, which has close ties with North Korea, 
is set to take harsh measures, as seen in its intention to 
effectively call off a program of reciprocal visits by their 
high-level officials this year as part of events to mark the 60th 
anniversary of diplomatic ties. 
 
Beijing, however, is cautious about the UNSC adopting additional 
sanctions for fear that they might result in turmoil and more 
provocative acts. Striking a balance is essential when applying 
pressure. The United States understands China's standpoint. In their 
telephone conversation on June 3, President Barack Obama and his 
Chinese counterpart, Hu Jintao, are believed to have confirmed their 
policy direction and future plans for cooperation. 
 
U.S. fine-tuned its North Korea policy 
 
Hiroshi Maruya 
 
During a Japan-U.S.-ROK defense ministerial held earlier in 
Singapore, U.S. Secretary of Defense Robert Gates underlined the 
need to employ both pressure and dialogue. His speech was viewed as 
reflecting the Obama administration's basic stance toward North 
Korea. "The secretary's speech was carefully worked out by the White 
House, the Pentagon, and the State Department," a senior U.S. 
official noted. 
 
 
TOKYO 00001252  003 OF 011 
 
 
The U.S. government, which thinks Pyongyang might launch more 
missiles to raise tensions to solidify its internal system, believes 
talks are the only option available for the North. 
 
The United States, which puts top priority on nuclear 
nonproliferation, firmly believes that the Six-Party Talks are the 
best framework. The U.S. also believes there will be a chance to 
make progress with the North Korean nuclear issue after a 
cooling-off period. 
 
(2) Dangers of advocating a capability to attack enemy bases, using 
DPRK's outrageous behavior as excuse: Evil cycle of countering 
military force with military force 
 
AKAHATA (Page 3) (Full) 
June 4, 2009 
 
Takeshi Takeshita 
 
Using North Korea's repeated nuclear tests and missile launches as 
an excuse, the National Defense Division of the Liberal Democratic 
Party (LDP) drew up a final draft of its recommendation on 
"possessing the capability to attack enemy bases" on June 3. 
Meanwhile, there have also been statements from the Democratic Party 
of Japan (DPJ) regarding the possession of such a capability as a 
matter of course. 
 
Following the firing of a rocket in April and its nuclear test in 
May, North Korea continues with its abnormal behavior of preparing 
to even fire mid-range ballistic missiles. 
 
The international community has criticized North Korea's actions 
harshly, and the UN Security Council is discussing a sanctions 
resolution. At the same time, the United States has sent a 
delegation consisting of its deputy secretary of state and other 
officials to Japan, China, the ROK, and Russia to roll out its 
diplomatic efforts. It is important that the international community 
makes a unified response. 
 
A different government position 
 
In response, the moves of the LDP and the DPJ have become highly 
noticeable. Former Prime Minister Shinzo Abe has stated repeatedly: 
"There is a discussion of whether we should possess the capability 
to attack enemy bases. I think of course, we should" (speech in 
Tokyo on May 15). DPJ member of the House of Councillors Keiichiro 
Asao (defense minister in the "Next Cabinet") has also said: "If 
North Korea comes to possess nuclear weapons or Nodong (mid-range 
ballistic missiles), the argument will come out for Japan to also 
possess the capability to attack enemy bases'" (May 27 issue of 
Asahi Shimbun). 
 
In its proposal on June 3, the LDP clearly calls for the "possession 
of the capability to attack the operational base (enemy bases) under 
the Japan-US cooperative arrangements." It is poised to demand the 
inclusion of this in the new National Defense Program Guidelines 
(NDPG) that the government will adopt in late 2009. 
 
"Attack on enemy bases" refers to attacking with cruise missiles and 
such other weapons the bases of another country that is about to 
attack Japan with ballistic missiles and other weapons. The 
government's position so far has been that such an attack is 
 
TOKYO 00001252  004 OF 011 
 
 
"legally possible" but the actual possession of the capability to 
attack enemy bases "runs counter to the spirit of the 
Constitution." 
 
U.S. Forces as the "spear," SDF as the "shield" 
 
At the same time, Japanese administrations over the years have 
promoted Japan-U.S. military integration and the reinforcement of 
U.S. military bases on the pretext that the U.S. Forces serve as the 
"spear" (offensive capability) and the Self-Defense Forces (SDF) 
serve as the "shield" (defensive capability) under the Japan-U.S. 
security arrangements. 
 
In this context, (then) Defense Agency Director General Shigeru 
Ishiba (incumbent minister of agriculture, forestry and fisheries) 
stated for the first time at the House of Representatives Committee 
on Security on March 27, 2003 that "(the possession of enemy base 
attack capability) should be discussed." This created a great stir. 
At that time, former DPJ president Seiji Maehara questioned him 
repeatedly about: "Will the possession of the capability to attack 
(enemy bases) not undermine the relationship of trust with the 
United States?" and "Tell us if this should be discussed in the 
future." 
 
Reservations even in the government 
 
While the call for "attacking enemy bases" keeps surfacing every 
time North Korea conducts a nuclear test or fires a missile, 
actually, there are also strong reservations in the government. 
 
At his news conference on April 10, Defense Minister Yasukazu Hamada 
commented on the "capability to attack enemy bases": "I am very 
doubtful about writing this into the NDPG or the Mid-Term Defense 
Buildup Program." 
 
A senior government official also said: "Attacking (North Korea's) 
nuclear or missile experiment facilities does not make any sense. 
This will only aggravate tension not only with North Korea but also 
with China and South Korea, giving them an excuse to build up 
arms." 
 
Professor Satoshi Morimoto of Takushoku University also pointed out 
during a NHK TV program on May 31: "If you give no thought to the 
scenario after (attacking the enemy bases) and merely talk about 
destroying the enemy's facilities, what will happen?" He expressed 
doubts about such a line of thinking. 
 
Moreover, a senior government official has said: "In the first 
place, there is no way the U.S. will allow it." For those who regard 
the Japan-U.S. alliance as sacred, this will mean a drastic review 
of the division of labor between Japan and the U.S. as "spear and 
shield," and they fear that this may create rifts in the alliance 
under certain conditions. 
 
For this reason, the LDP proposal also includes a passage on "the 
need to build an even stronger Japan-U.S. cooperation system in 
conjunction with the U.S. Forces' intelligence and offensive 
capabilities." 
 
Strictly banned under UN Charter 
 
In any case, at a time when the international community needs to 
 
TOKYO 00001252  005 OF 011 
 
 
cooperate in responding to the North Korea issue, being taken in by 
North Korea's provocation and prioritizing a military response is 
the worst possible course of action, since this may start a 
dangerous evil cycle of "countering military force with military 
force." Above all, "This is an attempt to embark on using North 
Korea's nuclear test to advocate a preemptive attack, which is 
strictly prohibited by the UN Charter and is, needless to say, a 
violation of the Constitution" (Japanese Communist Party Chairman 
Kazuo Shii). 
 
(3) LDP Lower House member Taku Yamamoto: "Quite a number of 
signatures collected" for campaign to advance presidential election 
 
SANKEI ONLINE (Full) 
13:19, June 4, 2009 
 
House of Representatives member Taku Yamamoto, who has initiated a 
signature campaign in the Liberal Democratic Party (LDP) to demand 
that the party's presidential election - currently scheduled for 
September -- be held before the next Lower House election, told 
reporters at a hotel in Tokyo at midday on June 4 that, "Quite a 
number of signatures have been collected." However, he would not 
reveal how many people are supporting his campaign, saying: "If 
something like this is reported, this will cause problems for the 
cabinet." 
 
The group "association for advancing the presidential election" led 
by Yamamoto sent a fax on June 2 to all LDP Diet members, including 
Prime Minister Taro Aso, to ask for their signature in support of 
the proposal. Since Yamamoto belongs to the Machimura faction, which 
supports the Aso administration, senior faction officials were 
furious and have moved to apply pressure on faction members not to 
sign the document. A senior faction official strongly suspects that 
"former secretary general Hidenao Nakagawa and others are behind 
Yamamoto," but Nakagawa denies the allegation. 
 
LDP Secretary General Hiroyuki Hosoda has stated at a meeting with 
senior ruling party officials on the morning of June 3 that "he 
(Yamamoto) seems to be acting alone," indicating that he thinks the 
signature campaign will not go very far. 
 
(4) LDP's Nikai faction received 30 million yen when it was formed 
from political organization made up of ocean construction firms 
 
AKAHATA (Page 1) (Full) 
June 4, 2009 
 
Akahata learned on June 3 that Atarashii Nami (New Wave), a fund 
management organization headed by Economy, Trade, and Industry 
Minister Toshihiro Nikai, had received 30 million yen in donations 
from a political organization, which was a dummy entity set up by 
those who were related to ocean construction companies. This 
occurred when Nikai's fund-raising organization was established in 
¶2003. Sources related to the dummy entity have admitted that the 
Nikai faction demanded donations. Suspicion has now surfaced that 
the money from the dummy political organization was used for the 
formation of the Nikai faction. 
 
The dummy entity called "Koeikai" changed the name to "Sansoukai" in 
¶2006. Sansoukai has been headed by executives of Toa Corporation 
(Chiyoda Ward, Tokyo) and Penta-Ocean Construction (Bunkyo Ward, 
Tokyo) and by advisers to the two construction companies. 
 
TOKYO 00001252  006 OF 011 
 
 
 
According to Nikai's fund management organization's political funds 
report for fiscal 2003, the New Wave received 30 million yen on Aug. 
29 from Koeikai. 
 
The address of Koeikai at that time was its treasurer's home address 
in Chiba City. Koeikai was headed by a Penta-Ocean Construction 
executive. Nikai rejoined the ruling Liberal Democratic Party (LDP) 
in 2003 from the now defunct New Conservative Party (NCP). Nikai 
changed the NCP's fund management organization's name from the NCP 
Association to the New Wave in November 2003 and he became its 
chairman. This means that he started operations of the New Wave as 
an LDP faction after receiving the money from Koeikai. 
 
A person connected with Sansoukai admitted that the Nikai side had 
requested the donations. The person said: "We contributed the money 
because we were asked. It is hardly possible that we told them to 
take the money because we had a lot of money." The person said: 
 
"The (30 million yen) was actually contributed by several ocean 
construction companies and we made the donation with the hope of the 
money leading to harbor constructions. Donations from one company 
cannot be competed with those from a major general construction 
firm." 
 
The Political Funds Control Law allows only the political parties' 
headquarters and their regional chapters to receive corporate 
donations. The law prohibits such political organizations as the New 
Wave from taking corporate donations. 
 
However, Sansoukai has made a large amount of contributions to the 
fund management organizations of LDP lawmakers with close ties to 
land, infrastructure and transport affairs, under the pretext of a 
real political organization. There is a possibility that if Nikai's 
fund management organization received the money with the knowledge 
that it came from ocean construction firms, it means that the Nikai 
side violated the Political Funds Control Law. 
 
The New Wave's told Akahata: "We do not answer to questions by the 
political party's organ newspaper." 
 
(5) Debate on fiscal reconstruction starts between ruling, 
opposition parties 
 
ASAHI (Page 2) (Excerpts) 
June 4, 2009 
 
A discussion on how to put the nation's public finances on a sound 
footing has started in the Diet. The Liberal Democratic Party (LDP) 
and the New Komeito are willing to reflect a consumption tax-hike 
scenario in their policy manifestos as "responsible parties." They 
set economic upturn as the precondition for the scenario. Meanwhile, 
the Democratic Party of Japan (DPJ) has already sealed off a 
discussion on tax increases. The main opposition party instead has 
insisted on the need for eliminating the waste of taxpayers' money. 
The two parties might stop short of presenting any specific roadmap 
on fiscal reconstruction in their policy manifestos for the next 
general election, although the voters will select in the election 
one of these parties as the next political party in power. 
 
LDP wants to demonstrate "responsibility" by presenting consumption 
tax-hike scenario, but unlikely to specify timing in 2009 
 
TOKYO 00001252  007 OF 011 
 
 
guidelines 
 
In a meeting yesterday of the Council on Economic and Fiscal Policy 
to work out the government's annual economic and fiscal policy 
guidelines for 2009, Prime Minister Taro Aso said: "Putting up a new 
goal (for fiscal reconstruction), the government needs to show its 
willingness to make fiscal reconstruction efforts." 
 
The government set forth the policy goal of achieving a primary 
balance surplus in fiscal 2011 in its annual economic and fiscal 
policy guidelines for 2006 under the Koizumi administration. In the 
meeting yesterday, the panel decided to shift this goal into a 
target of curbing the ratio of public debt in the 2009 guidelines. 
With this, the targeted year for achieving fiscal rehabilitation has 
become ambiguous. 
 
Reallocation of fiscal revenues is vital in achieving fiscal 
soundness. In the meeting yesterday, a private-sector member 
presented a report including expressions that indicated a hike of 
the consumption tax, such as: "the stable securing of fiscal 
resources in the social security sector." Aso also emphasized in the 
meeting: "Premised that we make utmost efforts to put the economy 
back on its feet, we will steadily implement drastic reform of the 
tax system, including a hike of the consumption tax." 
 
With an eye on the next general election, Aso wants to build the 
image that the LDP does not side step tax increases as a responsible 
political party and wants to underscore a difference from the DPJ's 
stance of sealing off a discussion on the consumption tax. The prime 
minister apparently is aiming at placing the LDP to an advantage 
with this approach. 
 
In the debate between Aso and DPJ President Hatoyama on May 27, Aso 
apparently focused his attention on the ability to hold the reins of 
government, as shown in this remark: "We are facing a 
once-in-a-century economic crisis. The most important task for the 
government in these days is to map out measures in accordance with 
actual circumstances." In line with Aso's view, LDP members are 
eager to underline that the DPJ has no vision, as Deputy Secretary 
General Nobutaka Ishihara said: "(The DPJ's stance) is to avoid 
replying to a question about where the financial resources to fund 
the nursing, medical and pension programs will come from." 
 
In a discussion that is to start on the 10th, the LDP intends to 
reflect the measures in the 2009 guidelines in its policy manifesto 
and promise to raise the consumption tax in the future. 
 
But the mid-term program adopted late last year to show a roadmap 
for drastic tax reform cited fiscal 2011 as the targeted year for 
raising the consumption tax, with economic recovery as the major 
precondition. Although many members of the New Komeito and the LDP, 
eyeing the next general election, were negative about tax hikes, 
they stopped opposing the plan, because consensus was formed in the 
ruling coalition on the view that "the consumption tax will be 
raised if business perks up," as said by former Chief Cabinet 
Secretary Nobutaka Machimura, as a result of giving priority to 
measures to recover the economy for the time being. 
 
State Minister for Economic and Fiscal Policy Kaoru Yosano has 
announced a plan to change the mid-term program in the process of 
drawing up the 2009 guidelines, but the dominant view in the ruling 
camp is that a specific timing for a consumption tax hike should not 
 
TOKYO 00001252  008 OF 011 
 
 
be mentioned. 
 
If the ruling parties, while stressing the need for a consumption 
tax hike, give no specific roadmap for fiscal reconstruction, 
leaving the timing and an increased rate vague, the catchphrase 
"responsible parties" might fizzle out. 
 
DPJ defers discussion on tax hikes to election after next, instead 
puts forth need to eliminate waste, but without presenting total 
sum 
 
The DPJ, which defines the Aso administration's economic stimulus 
measures as "pork-barrel," has yet to prepare its own policy 
vision. 
 
In the first meeting yesterday of the party's committee to study a 
manifesto for the next Lower House election, Policy Research council 
Chairman Masayuki Naoshima said: "We are calling for an early Lower 
House dissolution for a general election. There is no much time 
left. We might have to work hard up until late at night every day, 
but we would like to produce a fine manifesto and grab political 
power." 
 
The manifesto includes a number of costly policy measures, such as 
programs to offer 26,000 yen as a monthly allowance for child and 
family support and subsidies to individual farmers. But the party is 
unlikely to discuss a consumption tax hike. That is because 
President Yukio Hatoyama has taken over former president Ichiro 
Ozawa's policy of sealing off tax-hike debate. 
 
Hatoyama said: "(If the LDP and the New Komeito continue to take the 
helm of the nation,) the consumption tax will be surely raised in 
two years." Secretary General Katsuya Okada, who promised to boost 
the consumption tax by 3 percent to secure financial sources for the 
pension program when he was assuming the presidency, also said: "We 
will not take the option of raising the consumption tax in the next 
four years." 
 
The drastic tax reform action program, compiled by the party's tax 
system research commission late last year, specified that the party 
will take up tax increases in general election campaigning. Given 
this, the party has decided to seek the voters' judgment for tax 
hikes in the general election after the next. 
 
How is the DPJ going to implement policies and restore fiscal 
soundness simultaneously without depending on tax hikes? In 
exchanging views with senior members of the Japan Business 
Federation on June 1, Hatoyama said: "We are having difficulty 
securing financial sources without relying on debt as much as 
possible." 
 
The main opposition party has called for eliminating the waste of 
taxpayers' money. As specific measures to that end, the party has 
started checking about 3,000 projects in the fiscal 2009 initial 
budget to judge which projects should be abolished and which should 
be entrusted to the private sector. 
 
In a meeting of the Fiscal and Financial Department yesterday, 
participants criticized expenses for housing for civil servants. The 
party has presented which projects are considered to be waste but 
has not given specific amounts. It seems difficult for the party to 
clarify how to secure funds for measures it has pledged to implement 
 
TOKYO 00001252  009 OF 011 
 
 
if it takes over political power. 
 
The DPJ has also advocated the goal of a primary balance surplus by 
fiscal 2011, but Hatoyama recently indicated an intention to put the 
goal on hold, saying: "Under the current economic situation, it is 
considerably difficult to include the goal (in the manifesto)." The 
party has not promoted discussion on an alternative target, either. 
 
(6) Amended Antimonopoly Law with broader fines enacted in response 
to changes in industrial structure 
 
NIKKEI (Page 4) (Full) 
June 4, 2009 
 
The amended Antimonopoly Law with a broader scope of fines was 
enacted on June 3. It will now be easier to apply the law widely to 
rampant price cutting competition in the retail industry. In light 
of the increasing weight of the service industry in the industrial 
structure, the antimonopoly authorities have made clear their 
intention to demand transparency in business practices not only in 
the major manufacturing and construction industries, but also in all 
businesses, regardless of size and line of business. Some people are 
concerned about the growing powers of the antimonopoly authorities. 
 
The amended law widens the scope for imposing fines, which have so 
far been virtually limited to cases of bid-rigging and cartels. 
Behind this are changes in the industrial structure, which have 
resulted in drastic changes in the types of illegal practices and 
the players involved. Unfair price cutting competition banking on 
the capacity of a business to endure unprofitability has recently 
been rampant due to the decline in personal consumption. 
 
The number of cases of price cutting aimed at the elimination of 
rivals - which could potentially lead to unfair price cutting - 
watched by the Fair Trade Commission (FTC) in FY08 rose rapidly to 
about six times that in FY05. Such cases became common in the sale 
of electric home appliances, alcoholic beverages, and gasoline. 
Local businesses demanded stiffer penalties in order to restrain 
such practices. 
 
The amended law imposes a fine on "unfair price cutting" equivalent 
to 3 PERCENT  of the sales volume. The Zensekiren (National 
Federation of Oil Workers Unions) made up of gasoline retailers 
(chaired by Masao Seki) says: "This is expected to deter businesses 
from practicing unfair pricing." 
 
The new law imposes a fine equivalent to 1 PERCENT  of the 
transaction volume between businesses for "abusing a position of 
advantage." In June last year, Yamada Denki (a major electric home 
appliance retail chain) was slapped with a cease-and-desist order 
for violating the Antimonopoly Law (provision on abusing position of 
advantage) for asking its suppliers to send employees to staff its 
stores. Major electric home appliance retail chains, which have 
often put pressure on their suppliers, are likely to be forced to 
review their practices. 
 
In the auto industry, parts makers dealing directly with car 
manufacturers preside over a hierarchy of sub-suppliers. In 
industries with a broad network of transactions, the major groups 
will have to take responsive measures for the group as a whole to 
prevent the bullying of subcontractors and other unfair practices. 
 
 
TOKYO 00001252  010 OF 011 
 
 
During the process of legal amendment, a review of the "arbitration 
system" for companies to appeal the FTC's verdicts was also 
confirmed. 
 
With stricter penalties, there might be an increase in appeals by 
companies being penalized, but the arbitration system is run by the 
FTC. There has been a growing demand from businesses for 
"independent arbitration procedures" (Nippon Keidanren (Japan 
Business Federation)) 
 
How to deal with concerns about the growing powers of the FTC is 
also likely to become a point of contention in the future. 
 
(7) Japanese companies rely on Asian markets for record 36 PERCENT 
of fiscal 2008 operational profits 
 
NIKKEI (Top Play) 
June 4, 2009 
 
Japanese companies are increasingly relying on Asia for their 
operating profits. Listed companies generated a record 36 PERCENT 
of their operating profits in Asia in the term that ended in March 
¶2009. While their operating profits in Japan, the U.S. and Europe in 
the second half of fiscal 2008 (from October 2008 through March 
2003) slipped into the red, those in Asia alone registered black ink 
figures. Demand in Asia was stable even amid the ongoing global 
recession. The profitability of operations in Asia has begun to 
influence growth of the corporations over the mid- to long-term, as 
well. Some companies are showing signs of intensively investing 
management resources in Asia. Asia will likely shore up Japanese 
companies in the second half of fiscal 2009, as well. 
 
Among listed companies that closed their business books in March 
(excluding the financial and three emerging markets), a Nikkei 
survey covered 432 companies that disclose group sales and operating 
profit figures for each region. Operating profits mean profits 
generated from companies' mainstay business. Such data are being 
watched with attention, because they can be used for comparison of 
profit-earning capacity according to business field or region. 
 
The companies reported 10 PERCENT -20 PERCENT  declines in sales for 
all regions in the second half of fiscal 2008. Operating profits 
plunged 82 PERCENT  to 2.31 trillion yen in Japan and to 135.2 
billion yen in the Americas due to the financial crisis. They bled 
red ink in Europe with an operating loss of 199.7 billion yen. 
 
Meanwhile, operating profits in the Asia and Oceania region slipped 
just 28 PERCENT  to 1.72 trillion yen. Due to improved efficiency in 
local production, the operating profit margin was 4.4 PERCENT  for 
this region, compared with 1.1 PERCENT  for the domestic market. 
 
The share of Japan in group operating profits dropped 48 PERCENT , 
down about 18 points, while that of Asia increased 24 points, 
narrowing the difference. 
 
Behind the increase in Asia's share is solid consumption. Suzuki 
Motor Corporation's operating profit in Asia outside Japan marked 
35.3 billion yen, down 37 PERCENT , for the first time surpassing 
that in the domestic market -- 28.7 billion yen or a 66 PERCENT 
drop. Unicharm Corp's operating profit in Asia outside Japan 
increased 17 PERCENT  on brisk sales of baby diapers and sanitary 
goods. 
 
TOKYO 00001252  011 OF 011 
 
 
 
Economic stimulus measures appear to have contributed, too. Nippon 
Yusen K.K.'s operating profit in Asia increased 43 PERCENT  to 13.9 
billion yen due to increased transportation of iron ore from 
Australia to South Korea, reflecting the brisk Chinese market. 
 
In the second half of fiscal 2008, Japanese companies were in the 
red by 2.53 trillion yen in Japan, 62.9 billion yen in the Americas 
and 273.2 billion yen in Europe. Asia outside Japan was the only 
region in which they made profits, posting an operating profit of 
470.4billion yen. 
 
Many companies take the view that Asia will remain strong. Komatsu 
Ltd. expects that global demand for its seven key construction 
machinery products, such as hydraulic shovels, will dip 26 PERCENT 
from the preceding term. China is expected to be the only market 
where demand will grow. China's share of the sales of construction 
machinery products by Komatsu will increase 15 PERCENT , up 5 
points. The company plans to double the size of its plant in 
Changzhou, China at the beginning of 2010. Shiseido Co. plans to 
proactively increase personnel resources in China, projecting 
yuan-based sales in that market will continue to log double-digit 
gains. 
 
According to the global economic outlook issued by the International 
Monetary Fund (IMF), the global economy in real terms in 2009 will 
mark negative growth of 1.3 PERCENT , while emerging Asian nations, 
including China, will likely maintain 4.8 PERCENT  growth. The 
potential to earn money in Asia will likely hold the key to Japanese 
companies regaining their operational profits. 
 
ZUMWALT