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UNCLAS SECTION 01 OF 13 TOKYO 001524 
 
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 07/06/09 
 
TOKYO 00001524  001.2 OF 013 
 
 
Index: 
1) Japanese Communist Party Chairman Shii attends U.S. Embassy's 
Independence Day reception, a first  (Akahata) 
 
Opinion polls: 
2) Kyodo poll: 78.3 PERCENT  of public dissatisfied with DPJ 
President Hatoyama explanation of political funds scandal; Cabinet 
support rate rises to 24.4 PERCENT   (Tokyo Shimbun) 
3) Asahi poll: Aso Cabinet support rate rises a point to 20 PERCENT 
 (Asahi) 
4) Nikkei poll: Cabinet support rate continues to drop, now at 21.7 
PERCENT , while non-support rate jumps 7 points to 72 PERCENT 
(Nikkei) 
5) Yomiuri poll finds 80 PERCENT  of public unhappy with Hatoyama's 
explanation of political funds scandal, but Aso Cabinet support rate 
continues to drop, now at 19.7 PERCENT   (Yomiuri) 
 
Election frenzy: 
6) Democratic Party of Japan's candidate Kawakatsu beats out 
LDP-backed candidate in Shizuoka gubernatorial race, but not my much 
 (Mainichi) 
7) Another loss for the LDP in local elections seen as another blow 
for Prime Minister Aso; LDP defeat in Tokyo election July 12 to seal 
Aso's fate  (Asahi) 
 
8) Prime Minister Aso seems to be going to the G-8 summit conference 
with empty hands  (Tokyo Shimbun) 
 
Defense and security affairs: 
9) North Korea having fired seven more missiles over the weekend, 
Japan intends to make appeal in the UN Security Council for strict 
enforcement of sanctions  (Tokyo Shimbun) 
10) U.S. Navy top brass stresses strengthening of readiness to deal 
with North Korean threat  (Nikkei) 
11) Japan Business Federation (Keidanren) proposes revision of 
Japan's three weapons-export principles  (Sankei) 
12) Washington infighting over whether to continue F-22 production 
having a deep impact on Japan's choice of a next generation fighter 
(Sankei) 
13) Government mulls new type of missile defense system that could 
intercept incoming missiles at any of three stages  (Mainichi) 
 
14) Government to provide Indonesia with 1.5 trillion yen backing to 
deal with economic crisis  (Nikkei) 
 
15) Amazon.com charged by Japanese tax agency of not paying 14 
billion yen in taxes from internet sales  (Asahi) 
 
Articles: 
 
1) JCP Chairman Shii attends U.S. Independence Day reception 
 
AKAHATA (Page 2) (Full) 
July 3, 2009 
 
Japanese Communist Party (JCP) Chairman Kazuo Shii attended a 
reception for the 233rd anniversary of U.S. Independence Day (July 
4), held by the U.S. Embassy in Tokyo on July 2. It was the first 
time for the JCP to be invited to such an event as the U.S. 
Independence Day reception. 
 
Shii offered his appreciation for the invitation to Charge 
 
TOKYO 00001524  002.2 OF 013 
 
 
d'Affaires James Zumwalt. He also expressed his congratulations to 
the United States for its declaration of independence in 1776, which 
in a sense was the birth of the first democratic country in the 
world, as well as being an important event for humankind. Referring 
to a letter he had received from the Obama administration to reply 
his letter to President Barack Obama, Shii expressed his 
appreciation to Charge Zumwalt for his efforts on that behalf. 
Zumwalt expressed his appreciation to Shii for his attendance. He 
said that the U.S. government would like to cooperate with the JCP 
on issues where cooperation is possible. Shii also met with 
Political Minister Michael Meserve and other embassy officers. 
 
Shii was accompanied by JCP Vice Chairman Yasuo Ogata and 
International Bureau Deputy Chief Morihara. 
 
2) Poll: 78 PERCENT  dissatisfied with Hatoyama's account of false 
donations; Cabinet support rises to 23 PERCENT 
 
TOKYO SHIMBUN (Page 1) (Abridged) 
July 6, 2009 
 
The support rate for Prime Minister Taro Aso's cabinet rose 5.9 
points from last month to 23.4 PERCENT  in a spot telephone-based 
nationwide public opinion survey conducted July 3-4. The nonsupport 
rate dropped 9.7 points to 60.9 PERCENT . 
 
The leading opposition Demopcratic Party of Japan (Minshuto) still 
topped all other parties at 34.3 PERCENT  for proportional 
representation in the next election for the House of 
Representatives. However, the DPJ was down 13.5 points in the 
popularity ranking of political parties for proportional 
representation. The ruling Liberal Democratic was at 26.3 PERCENT , 
up 7.6 points. In the breakdown of public support for political 
parties as well, the LDP, which lost its first place in the last 
poll, scored 27.2 PERCENT , outstripping the DPJ, which was at 26.5 
PERCENT  in the poll this time. 
 
Meanwhile, respondents were also asked if DPJ President Yukio 
Hatoyama's account on his fund-managing body's false report on 
political funds was convincing. In response to this question, only 
12.4 PERCENT  answered "yes," with 78.3 PERCENT  saying "no." This 
issue can be taken as a factor for the cabinet support and the LDP's 
strength to have rebounded. 
 
Respondents were also asked who they thought was more appropriate 
for prime minister. To this question, 42.0 PERCENT  preferred 
Hatoyama, with 28.3 PERCENT  choosing Aso. 
 
Asked about the desirable form of government, 32.6 PERCENT  opted 
for "a new framework through political realignment," and 26.6 
PERCENT  preferred "a DPJ-led coalition government." 
 
3) Poll: Cabinet support remains flat at 20 PERCENT 
 
ASAHI (Page 1) (Abridged) 
July 6, 2009 
 
The Asahi Shimbun conducted a telephone-based spot nationwide public 
opinion survey on July 4-5, in which the Aso cabinet's support rate 
was 20 PERCENT , leveling off from the 19 PERCENT  rating in the 
last survey taken June 13-14. Prime Minister Aso has forgone his 
plan to replace his ruling Liberal Democratic Party's executive 
 
TOKYO 00001524  003.2 OF 013 
 
 
lineup due to opposition from within the LDP, and he has appointed 
only two cabinet ministers. Asked about this action, 68 PERCENT 
were negative, with only 16 PERCENT  affirmative. 
 
Meanwhile, respondents were also asked about the political donation 
scandal of Democratic Party of Japan (Minshuto) President Hatoyama's 
fund-managing body. In response to this question, 60 PERCENT 
answered that Hatoyama's account was "unconvincing," with only 27 
PERCENT  saying it was "convincing." Among DPJ supporters, 
"unconvincing" accounted for only 41 PERCENT , with "convincing" at 
48 PERCENT . 
 
In the breakdown of public support for political parties, the DPJ 
stood at 25 PERCENT , with the LDP at 24 PERCENT . In the last 
survey, the DPJ scored 29 PERCENT , with the LDP at 22 PERCENT . The 
gap between the two parties narrowed in the survey this time. 
 
4) Poll: Cabinet support down to 21 PERCENT 
 
NIKKEI (Page 1) (Abridged) 
July 5, 2009 
 
The approval rating for Prime Minister Taro Aso's cabinet dropped 4 
points from last month to 21 PERCENT  in a spot public opinion 
survey conducted by the Nihon Keizai Shimbun and TV Tokyo on July 
3-4. The disapproval rating rose 7 points to 72 PERCENT . In the 
breakdown of public support for political parties, the ruling 
Liberal Democratic Party dropped 2 points to 29 PERCENT , with the 
leading opposition Democratic Party of Japan (Minshuto) at 37 
PERCENT , the same as last month's. The DPJ's support rate exceeded 
the LDP's support rate by over 8 points for the first time. 
 
In the survey, respondents were also asked who they thought was more 
appropriate to become prime minister after the next election for the 
House of Representatives. In response to this question, 11 PERCENT 
chose Aso, up 1 point. DPJ President Hatoyama was at 22 PERCENT , 
down 4 points. 
 
Respondents were also asked which political party they would vote 
for in the next House of Representatives election for proportional 
representation. In this popularity ranking of political parties, the 
LDP dropped 1 point to 25 PERCENT , with the DPJ likewise down 4 
points to 35 PERCENT . Asked about the most desirable form of 
government, 11 PERCENT  chose an LDP-led coalition government, down 
2 points. Meanwhile, a total of 44 PERCENT  opted for an LDP-DPJ 
coalition government. 
 
The survey was taken by Nikkei Research Inc. by telephone on a 
random digit dialing (RDD) basis. For the survey, samples were 
chosen from among men and women aged 20 and over across the nation. 
A total of 1,455 households with one or more eligible voters were 
sampled, and answers were obtained from 843 persons (57.9 PERCENT 
). 
 
5) Poll: Aso cabinet support spirals down to 19.7 PERCENT 
 
YOMIURI (Top play) (Abridged) 
July 4, 2009 
 
In the wake of the Aso cabinet's recent filling up of its vacant 
ministerial posts, the Yomiuri Shimbun conducted a telephone-based 
spot nationwide public opinion survey on July 2-3. According to 
 
TOKYO 00001524  004.2 OF 013 
 
 
findings from the survey, the Aso cabinet's support rate was 19.7 
PERCENT , further down from the 22.9 PERCENT  rating in the last 
survey conducted June 13-14. In the survey, respondents were also 
asked if they thought Democratic Party of Japan (Minshuto) President 
Hatoyama has fulfilled his accountability for the political donation 
scandal of his fund-managing body. In response to this question, a 
total of 80 PERCENT  answered "no." 
 
The cabinet support rate last fell below 20 PERCENT  in a survey 
taken March 6-8, and it was 17.4 PERCENT  in the March survey. In a 
survey taken May 16-17, the cabinet support rate rebounded to 30.0 
PERCENT . However, it went down in the following three consecutive 
surveys. The support rate clearly shows a downturn trend, which 
could affect when to dissolve the House of Representatives for a 
general election. The nonsupport rate for the Aso cabinet in the 
survey this time was 66.4 PERCENT  (67.8 PERCENT  in the last 
survey). 
 
In the popularity ranking of political parties for proportional 
representation in the next election for the House of 
Representatives, the DPJ scored 35 PERCENT , with the LDP at 25 
PERCENT . The DPJ was above the LDP but declined from 42 PERCENT  in 
the last survey. The LDP leveled off from 25 PERCENT  in the last 
survey. 
 
In the latest survey, respondents were also asked who they thought 
was more appropriate for premiership. In response to this question, 
41 PERCENT  named Hatoyama, with 24 PERCENT  choosing Aso. Hatoyama 
remained more popular than Aso. In the last survey, Hatoyama was at 
46 PERCENT  and Aso at 26 PERCENT . 
 
In the breakdown of public support for political parties, the DPJ 
stood at 28.6 PERCENT  (29.2 PERCENT  in the last survey), with the 
LDP at 25.5 PERCENT  (25.0 PERCENT  in the last survey). 
 
6) DPJ-affiliated Kawakatsu wins Shizuoka gubernatorial race, giving 
rise to growing calls for putting off Diet dissolution 
 
MAINICHI (Top play) (Abridged) 
July 6, 2009 
 
Eiko Matsuhisa 
 
The Shizuoka gubernatorial election, which both the ruling and 
opposition parties had designated as a "prelude" to the next House 
of Representatives election, was held on July 5. Heita Kawakatsu, 
60, former president of the Shizuoka University of Art and Culture, 
who was endorsed by the Democratic Party of Japan (DPJ), the Social 
Democratic Party, and the People's New Party, was elected governor, 
defeating three other candidates, including former House of 
Councillors member Yukiko Sakamoto, 60, who was endorsed by the 
Liberal Democratic Party (LDP) and New Komeito. This was another 
defeat for the ruling parties, after losing three mayoral races in a 
row in major cities - Nagoya, Saitama, and Chiba - since April. With 
the Tokyo Metropolitan Assembly election taking place on July 12, a 
public opinion poll conducted by Mainichi Shimbun on July 4 and 5 
showed that the DPJ is on its way to becoming the number one party 
in the assembly. There are now growing calls in the ruling parties 
for putting off Diet dissolution and the general election. 
 
Prime Minister Taro Aso, who is facing increasing moves to oust him 
due to his cabinet's sagging support ratings, had wanted to win the 
 
TOKYO 00001524  005.2 OF 013 
 
 
Shizuoka and Tokyo elections in order to go into the general 
election. 
 
However, after the official declaration of candidacy for the 
Shizuoka gubernatorial race on June 18, his statements, such as 
"(Diet dissolution) is not far off," had given rise to confusion in 
the ruling parties over appointments to the cabinet and the party 
leadership, thus affecting the election campaign adversely. 
Sakamoto's defeat despite the fact that the DPJ camp was facing the 
risk of divided supporters due to the candidacy of a former Upper 
House member is certain to lead to calls to hold Aso responsible. 
 
LDP Secretary General Hiroyuki Hosoda gave the following comments to 
reporters in Tokyo on the evening of July 5: "The result is very 
disappointing. Since there is this much support (for Ms Sakamoto), 
we should also work hard (in the Lower House election)." As to the 
impact of the election result on the timing of the Lower House 
election, he would only say: "I am not sure. We will have to ask the 
prime minister." 
 
7) With Shizuoka election loss, difficult for Prime Minister Aso to 
take lead in dissolving Lower House; Outcome of Tokyo election could 
spur calls for his resignation 
 
ASAHI (Page 1) (Full) 
July 6, 2009 
 
Prime Minister Taro Aso, who intended to dissolve the House of 
Representatives after winning the Shizuoka gubernatorial and Tokyo 
Metropolitan Assembly elections, has encountered his first hurdle by 
the loss in the Shizuoka gubernatorial race. It is certain that Aso 
will further lose his grip on the Liberal Democratic Party (LDP), 
for it has now become more difficult for him to take the initiative 
in dissolving the Lower House. Although many in the ruling camp have 
taken a stance of quietly watching from afar the outcome of the July 
12 Tokyo assembly election, if the coalition encounters severe 
results from that race, pressure on Aso to step down will 
unavoidably heighten. 
 
"We drew a distinction between a local election and a national 
election," Chief Cabinet Secretary Takeo Kawamura said last night, 
indicating that Aso has no responsibility for the defeat in the 
Shizuoka gubernatorial election. Aso repeatedly said that a local 
election and a general election are two separate things. 
 
The view in the main opposition Democratic Party of Japan (DPJ) has 
been that if the LDP lost the Shizuoka race, "the tide will have 
turned" (junior lawmaker), since the DPJ had failed to run a unified 
candidate. Many in the ruling camp think the confusion created by 
Aso on whether to shuffle the LDP executives and his cabinet was a 
reason for the election setback. Criticism of Aso will likely 
intensify. 
 
Aso appears to be looking into the possibility of dissolving the 
Lower House soon after the Tokyo election if the ruling coalition 
wins that race. LDP Election Strategy Council Deputy Chairman 
Yoshihide Suga, a close aide to Aso, stressed last evening: "There 
was no effect on the strategy for dissolving the Lower House." The 
Prime Minister's side has even taken a bullish posture, citing such 
reasons as there being no likely candidate to replace Aso and that 
there is strong public criticism against replacing a prime minister 
four consecutive times without going through a general election. A 
 
TOKYO 00001524  006.2 OF 013 
 
 
person close to Aso said: "Resignation is impossible." 
 
However, the circumstance surrounding Aso are extremely severe 
because Aso's approval rates have slumped to around 20 percent and 
because the DPJ has gained greater strength in campaigning for the 
Tokyo assembly election. For Aso, the political funding scandal 
involving DPJ President Yukio Hatoyama is the only means of 
attacking the DPJ. 
 
If the LDP and its coalition partner the New Komeito lose their 
majority in the Tokyo assembly, Aso could lose any chance to 
dissolve the Lower House. While calls for an early dissolution are 
growing in the ruling camp, senior LDP faction members supporting 
Aso will probably consider whether to have Aso dissolve the Lower 
House or leave office. A former LDP executive member who supports 
Aso said: "In the party, not only anti-Aso forces but also other 
members now want the Prime Minister resign." 
 
8) G-8 summit last hurrah for Prime Minister Aso? 
 
TOKYO SHIMBUN (Page 2) (Abridged slightly) 
July 6, 2009 
 
Prime Minister Taro Aso will leave this evening for L'Aquila, Italy 
to attend the Group of Eight summit. With his sagging approval 
ratings, it will be extremely difficult for Aso's party to win in 
the next House of Representatives election, which may be held in 
August. Depending on the result of the July 12 Tokyo Metropolitan 
Assembly election, the drive to unseat Aso as prime minister might 
go into full gear. Therefore, there is a possibility that the G-8 
summit will become the last big diplomatic event for Aso. 
 
On the sidelines of the G-8 summit on July 8-10, Aso will hold talks 
with Russian President Dmitry Medvedev on the morning of July 9 
(afternoon of July 9, Japan time). 
 
In order to boost his administration's popularity, Aso, who once 
served as foreign minister, intends to lead discussions at the G-8 
by playing up Japan's economic stimulus measures, as well as the 
measures to prevent global warming, including Tokyo's medium-term 
target of cutting 15 percent of greenhouse gas emissions. 
 
In the Japan-Russia summit on July 9, there will be little hope for 
seeing any improvement on the dispute over the four Russia-held 
island off northeastern Hokkaido. It does not appear likely that Aso 
will be able to achieve diplomatic results since Moscow has strongly 
reacted against Tokyo's enactment on July 3 of a special measures 
law to promote the resolution of the territorial row, which 
stipulates that the four islands are "an integral part of Japan." 
 
Aso, who is a Christian, is expected to have an audience with the 
Pope, Benedict XVI on July 7. After that, he will meet with Italian 
Prime Minister Silvio Berlusconi. However, no other summit meetings 
have yet to be set. He plans to return home on July 11, the day 
before the Tokyo assembly election. 
 
9) Government to propose strict implementation of sanctions 
resolutions on North Korea at UNSC meetings 
 
TOKYO SHIMBUN (Page 2) (Excerpts) 
July 5, 2009 
 
 
TOKYO 00001524  007.2 OF 013 
 
 
In the wake of North Korea's launches of ballistic missiles on July 
4, the government decided to seek the complete implementation of UN 
sanctions on North Korea at meetings of the U.S. Security Council. 
At the same time, believing that there is a possibility that the 
North will launch Nodong missiles which have Japan in their range, 
the government has decided to step up its information-gathering 
system. The government thinks that if such signs become clear, Japan 
will have to use its missile defense (MD) system. 
 
Immediately after the missiles were launched in the morning, the 
government set up a taskforce at the Prime Minister's Official 
Residence (Kantei) composed of senior officials of ministries and 
agencies concerned. The government also immediately lodged a stern 
protest to North Korea via diplomatic channels in Beijing. At the 
same time, the government began making arrangements to present the 
issue to the U.S Security Council early next week. The government 
eyes a form of presidential statement to urge other countries to 
strictly implement the past sanctions resolutions. 
 
Prime Minister Taro Aso, meeting the press corps in front of his 
official residence on the afternoon of July 4, stressed the 
government's policy direction to make every effort to collect 
information. The Prime Minister also plans to present the North 
Korean issue at this year's G-8 summit that will begin on July 8. 
 
The North, which has warned that it will fire intercontinental 
ballistic missiles, is set to launch long-range missiles, such as 
Nodong missiles that are now in place for actual warfare. 
 
Since July 1, the JADGE new air defense system has been operational 
by the Defense Ministry, enhancing the surveillance setup. A senior 
Defense Ministry official noted, "If necessary, we will consider 
activating the MD system, as we did in April." 
 
10) Naval Operations Adm. Roughead emphasizes reinforced U.S. navy's 
quick-response system and cooperation with MSDF 
 
NIKKEI (Page 3) (Abridged slightly) 
Evening, July 4, 2009 
 
Visiting U.S. Navy Chief of Naval Operations Adm. Gary Roughead held 
a press conference in Tokyo on the morning of July 4. In it, 
Roughead criticized North Korea's move to launch missiles, saying, 
"Such is not helpful for the security of the region." At the same 
time, the admiral indicated that the U.S. Navy is reinforcing its 
surveillance and quick-response setup in collaboration with Japan's 
Maritime Self-Defense Force. Touching on the Chinese Navy's buildup, 
the admiral also expressed a view that it will take China 
substantial time to deploy its aircraft carrier to have an impact on 
the military balance between the United States and China. 
 
Adm. Roughead is on an Asian tour to exchange views with leaders of 
Japan's MSDF and of South Korea's Navy. The press conference was 
held before news on North Korea's missile launches broke out on the 
morning of July 4. About measures against missile launches, the 
admiral emphasized the strengthened quick-response system, saying, 
"The U.S. Navy has the most advanced missile defense (MD) system in 
place, which is capable of tracking North Korean missiles." 
 
He also explained that the U.S. Navy is keeping a watchful eye on 
the positions of vessels at sea for the implementation of UN 
Security Council sanctions resolutions on North Korea. The admiral 
 
TOKYO 00001524  008.2 OF 013 
 
 
suggested that the U.S. Navy is watching not only the North Korean 
cargo ship Kang Nam, which is suspected of carrying nuclear- and 
missile-related materials, but also a wide range of North Korean 
vessels. 
 
The admiral indicated that the Kang Nam, which has given up its 
initial destination of Burma (Myanmar), is currently in the East 
China Sea. He attributed that to the U.N. Security Council 
resolution. 
 
About the Chinese Navy's military expansion policy course, as seen 
in its effort to procure/build an aircraft carrier, the admiral 
said: "Possessing only one aircraft carrier is meaningless, and it 
will take 100 years to make destroyers, including a carrier group, 
operational." He also explained that is it some time before the 
deployment of a strategic nuclear-powered submarine capable of 
launching submarine launched ballistic missiles (SLBM) with an 
estimated range of 800 km, saying, "It will take substantial time 
for the deployment of sea-based strategic weapons to be used in 
actual warfare." 
 
11) Nippon Keidanren to recommend review of three principles on arms 
exports to "open way for joint development" 
 
SANKEI (Page 1) (Full) 
July 4, 2009 
 
The Defense Production Committee of the Nippon Keidanren (Japan 
Business Federation) drew up a draft recommendation on July 3 asking 
the government to review the three principles on arms exports to 
enable participation in international joint development of fighters 
and other military hardware. The recommendation was formulated in 
preparation for the revision of the "National Defense Program 
Guidelines (NDPG)" to be conducted by the government in late 2009. 
This is because failure to participate in joint development may 
affect the building of defense capability - Japan may not be able to 
procure cutting-edge equipment, for instance. Nippon Keidanren 
asserts that "the three principles should be reviewed, while 
continuing to abide by the basic concept of a peaceful country" and 
asks that participation in development from the initial phase be 
allowed. 
 
In the Nippon Keidanren's recommendation of July 2005 for the NDPG 
revision five years ago, it merely pointed out that "it is necessary 
to reconsider" the three principles and did not ask for a review. It 
has now taken one step further this time. The recommendation will be 
approved officially by a Board of Councillors meeting on July 14. 
 
Behind the Nippon Keidanren's concern is the fact that international 
joint development of weapons and equipment has become popular, 
particularly in the U.S. and Europe. For instance, the F-35 next 
generation fighter is being developed jointly by the United States 
and the UK, Israel, Singapore, and other countries. 
 
This is because of the growing sophistication of weapons and the 
rising cost of developing them. The draft recommendation points out 
that, "The era in which one single country develops and produces the 
most advanced equipment has ended." It further claims that with the 
U.S. and other countries becoming increasing cautious about the 
leakage of military technology, it is "highly possible" that failure 
to participate in joint development may mean that Japan will be 
"given lower-grade equipment" even if it wants to procure 
 
TOKYO 00001524  009.2 OF 013 
 
 
cutting-edge equipment. 
 
One of the concrete measures included in the recommendation is that 
private companies will be allowed to participate in joint research 
on basic technology with other private companies before actual joint 
development. It also demands priority budget allocations for 
submarines, armored vehicles, early warning satellites using space 
technology, and other items requiring Japan's own development 
efforts. 
 
The Liberal Democratic Party (LDP) National Defense Division has 
also recommended the relaxation of the three principles on arms 
exports and the government's "Council on Security and Defense 
Capability" has been discussing a review of the principles. 
 
12) Pitched battle between U.S. government and Congress over 
stopping production of F-22s and ban on exports to impact Japan's 
choice of FX fighter 
 
SANKEI (Page 1) (Abridged) 
July 3, 2009 
 
Takashi Arimoto, Washington 
 
Hard bargaining is continuing between the Obama administration and 
U.S. Congress over the procurement of the state-of-the-art stealth 
fighter F-22 for the U.S. Air Force. The government has decided to 
suspend the production of the aircraft as a symbolic step to reduce 
the nation's defense spending, saying the price is too high and the 
aircraft is designed based on Cold-War thinking. The U.S. Congress, 
on the other hand, is seeking to study the option of lifting the ban 
on exports to Japan, incorporating additional procurements costs in 
the National Defense Authorization Act for Fiscal Year 2010. The 
administration has not ruled out the President using his veto. The 
future of the pitched battle between the U.S. government and 
Congress will affect Japan's efforts to select its next-generation 
mainstay fighter jet (FX). 
 
Amending the authorization act on June 25, the U.S. Senate Armed 
Services Committee allotted an additional 1.75 billion dollars or 
160 billion yen for the procurement of seven F-22s. The House, too, 
has adopted a bill to add an additional 369 million dollars or 35 
billion yen for the procurement of the aircraft. 
 
Congress, including the Democratic Party, is seeking the continued 
procurement of the aircraft in defiance of the Obama 
administration's policy. It is because Congress regards the 
stealth-technology F-22, which is said to be the world's strongest 
fighter, as indispensable for the U.S. Air Force to maintain its air 
supremacy. Further, if the F-22's production is suspended, workers 
in some constituencies will lose their jobs. A total of over 25,000 
people in 44 states are involved in the production and provision of 
aircraft components. 
 
Meanwhile, Secretary of Defense Robert Gates has rebutted that the 
suspension of the procurement of the F-22 would not bring any change 
to the U.S. Air Force's supremacy, presenting a policy course to 
produce over 500 F-35 fighters over the next five years. 
 
At present, exporting the F-22 is prohibited under the so-called the 
Obey Amendment for the protection of military secrets. Congress' 
move for lifting the ban will give Japan some hope for procuring the 
 
TOKYO 00001524  010.2 OF 013 
 
 
F-22, Japan's top candidate for its FX. In the event of exporting 
the aircraft to Japan, there is an estimate that the price of one 
F-22 fighter, including its designing and specification costs, will 
come to 250 million dollars or 23 billion yen. 
 
13) Government considering new three-stage interception missile 
defense system 
 
MAINICHI (Top play) (Full) 
July 5, 2009 
 
Yasushi Sengoku 
 
It was learned on July 4 that the Ministry of Defense (MOD) is 
considering the introduction of new interception missiles in 
addition to the current sea-based Standard Missile 3 (SM-3) and 
land-based Patriot Advanced Capability 3 (PAC-3) for defense against 
North Korea's ballistic missiles. This will be a land-based Terminal 
High Altitude Area Defense (THAAD) system, and its coverage will be 
about 10 times that of PAC-3. The MOD envisions this as the "third 
missile" that will complement the SM-3 and the PAC-3. It is also 
considering the inclusion of this in the revision of the National 
Defense Program Guidelines toward the end of 2009 and the Mid-term 
Defense Buildup Program. 
 
The orbit of ballistic missiles is calculated after U.S. early 
warning satellites detect the missile launch with data from Japanese 
and U.S. Aegis ships and radars. The current Japanese missile 
defense system consists of two stages. The Maritime Self-Defense 
Force's SM-3s will first intercept approaching missiles outside the 
atmosphere at an altitude of over 100 kilometers. 
 
If interception fails, the Air Self-Defense Force's PAC-3 will 
intercept the ballistic missile at an altitude of 15-20 kilometers. 
 
However, the range of the PAC-3 is rather short at about 20 
kilometers and its coverage on the ground is limited to a radius of 
20 kilometers. It will require prior information on missile launches 
and moving to an appropriate location in advance. PAC-3s are 
currently deployed in the Tokyo metropolitan area and the Chubu and 
Kinki regions. They will be increased to 11 locations in FY2010 but 
it will be difficult to cover the entire Japan. 
 
On the other hand, the THAAD has a range of over 100 kilometers and 
its coverage is about 10 times that of PAC-3 on the ground. 
Deploying three or four of them will cover the entire country. 
Although its range is shorter than the SM-3, which can fly several 
hundred kilometers, it is capable of interception both beyond and 
within the atmosphere and is also capable of intercepting ballistic 
missiles flying at low altitudes, which the SM-3 is unable to do. 
The U.S. forces will be deploying them from September in the United 
States. 
 
Deploying the PAC-3 in 11 locations will cost some 500 billion yen. 
While the MOD has not revealed the cost for introducing the THAAD, 
it reckons that the THAAD will cost less to cover the entire 
Japanese territory. 
 
14) Japan to set up 1.5 trillion yen framework for Indonesia: 
Government to sign agreement to provide yen in time of financial 
crisis 
 
 
TOKYO 00001524  011.2 OF 013 
 
 
NIKKEI (Page 1) (Excerpts) 
July 6, 2009 
 
The government has decided to sign an agreement with the Indonesian 
government to immediately provide 1.5 trillion yen in the event of a 
financial crisis. This is part of a set of financial assistance 
measures for Asia, which Japan announced in May. It plans to 
increase the number of countries eligible for such assistance. The 
aim is to make providing yen-based assistance lead to the spread of 
the international use of the yen, as well as to prevent a financial 
crisis from occurring in the Asian region. 
 
The Indonesian vice finance minister will visit the Japanese finance 
Minister as early as July 6. He is expected to reach a basic 
agreement on the signing of a bilateral currency swap agreement. 
 
Finance Minister Kaoru Yosano at a finance ministerial of the ASEAN 
(Association of Southeast Asian Nations) plus 3 (Japan, China and 
South Korea) announced financial assistance to be extended to the 
Asian region. Japan is considering providing a total of 6 trillion 
yen for such a purpose, of which one-quarter will be for Indonesia. 
Preparations to sign a similar agreement with the Philippines and 
Thailand are also under way. 
 
The agreement is intended to provide aid for Asian countries that 
have been hit by a currency crisis due to a sudden outflow of 
capital to foreign countries or a financial crisis, in which they 
could suffer a shortage of foreign currency. Indonesia and other 
countries that entered into this agreement can sell the yen provided 
by Japan to procure necessary funds. 
 
Another aim of the Japanese government is to promote the 
internationalization of the yen, by adopting a system denominated in 
yen. With an eye on the rise of China, the government wants to 
prevent the status of the yen from declining. If signatory countries 
request the provision of yen, Japan will provide it in exchange for 
their local currencies. The yen funds needed for this agreement are 
to be disbursed from the special foreign exchange funds account. 
 
15) Amazon online shopping site's business in Japan hit with back 
tax of 14 billion yen 
 
ASAHI (Top Play) (Excerpts) 
July 5, 2009 
 
It has been learned that the Tokyo Regional Taxation Bureau has 
ordered a company affiliated with Amaon.com Inc., a leading U.S. 
online mail order company, to pay back tax of about 14 billion yen. 
Amazon.com commissions its Japan subsidiaries to carry out 
merchandise distribution and other functions in Japan, but the firm 
has been gaining sales proceeds based on the system of Japanese 
customers making contracts for merchandise they buy from a U.S. 
company affiliated with Amazon.com. However, based on the fact that 
portions of this company's functions are based in Japan, the tax 
authorities in Japan appear to have determined that the company 
should have filed a tax return for multi-billion-yen income in 
Japan. 
 
Dissatisfied Amazon.com applies for bilateral talks 
 
The tax authorities have ordered Amazon.com International Sales, 
located in Seattle, U.S.A, which functions as a head office for 
 
TOKYO 00001524  012.2 OF 013 
 
 
controlling businesses in countries other than those in North 
America, to pay 14 billion yen in back taxes. Since Amazon pays 
taxes in the U.S., it has applied for holding bilateral talks in 
protest of the Japanese side's decision. Tax officials of both 
countries are now reportedly conferring on the matter. Amazon Japan, 
Amazon.com's Japan corporation located in Shibuya Ward, Tokyo, has 
released a comment, noting that since the taxation is irrelevant, 
the company is now continuing discussions with the Japanese 
authorities. 
 
Amazon.com International Sales commissions sales operation to Amazon 
Japan and merchandize distribution to Amazon Japan Logistics, 
located in Ichikawa City, Chiba Prefecture. The head office in the 
U.S. controls the rest of the key functions. This business style can 
be viewed as a commissionaire business method. The tax rates of both 
countries are almost on the same level. However, if contracts, sales 
and the country of tax payment are concentrated in the U.S., it is 
possible to reduce the amount of tax payment. 
 
The Japan-U.S. tax treaty frees U.S. companies that engage in 
business in Japan without permanent establishment, such as branch 
offices, from having to file a tax return or pay taxes to the 
Japanese government. Amazon has a merchandise distribution center in 
Ichikawa City, which stores purchased books and other merchandise. 
 
Nations considering measures to deal with companies that are trying 
to trim down on taxes 
 
(Commentary) With "cheap and quick" as its business motto, Amazon's 
sales in Japan are now reportedly surpassing leading Japanese 
bookstores. The company is known for its rational management style. 
It has now been revealed that the company failed to file a tax 
return in Japan for income earned here. Apart from the case of 
Amazon, some companies that adopt the commissionaire business method 
are headquartered in countries with low tax rates, such as tax 
havens, in an effort to trim down on tax payment. The Organizations 
for Economic Cooperation and Development (OECD) has frequently taken 
issue with such business methods. In Japan, the Tokyo Taxation 
Bureau in 2004 pointed out the unreported income of Adobe Systems', 
the Japan subsidiary of a U.S. computer software firm. The parent 
company based in British Cayman Islands, tax haven sold software in 
Japan, and its Japanese corporation received commissions and the 
cost of sales and management. Adobe Systems filed a complaint 
against the order to pay back taxes. The Tokyo High Court handed 
down a decision against the government in October last year. 
 
A U.S. attorney, a tax and law consultant for U.S. companies 
operating in Japan, said, "It is only natural that head offices 
receive income, since they take inventory and exchange risks." He 
also revealed his opinion, "If high taxes are imposed, then that 
business will not produce profits." 
 
Following a substantive drop in tax revenues due to the financial 
crisis and the economic slowdown since last fall, U.S. President 
Obama released a plan to amend the tax code with the intention to 
toughen taxes on multi-national companies. Various OECD member 
nations, such as France and Germany, are now beginning to launch 
measures targeting multi-national companies and the wealthy. Amid 
such a trend, it is now imperative for the government to take 
measures against the outflow of taxable income, since Japan's 
effective tax rate on companies is as high as 40 PERCENT . 
 
 
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ZUMWALT