Cablegate: Japanese Morning Press Highlights 11/20/07

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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 11/20/07

Index:

1) Government reconfiguring North Korea policy, viewing that US
removal of DPRK from list of states sponsoring terrorism is now
inevitable (Sankei)

Diet affairs:
2) With Upper House stalled by DPJ's pursuit of defense scandal,
strong possibility that Diet will be extended again in order to pass
antiterror bill (Nikkei)
3) Prime Minister Fukuda to meet other party heads on 22nd and ask
for cooperation on new antiterrorism special measures bill (Yomiuri)

4) Alarmed by loss of symbolic Osaka mayoralty race, ruling camp is
now reassessing its election campaign system (Yomiuri)

Defense scandal:
5) Yamada Yoko Corp. had a 1.1 billion yen slush fund that it could
tap to court defense officials and lawmakers (Mainichi)
6) Tokyo prosecutors question as witness GE executive in connection
with the Yamada Corp. defense procurement case (Tokyo Shimbun)

Finance Minister Nukaga on the hot seat:
7) Contradicting Moriya testimony, Nukaga denies in Diet reply being
wined and dined by arrested defense contractor (Mainichi)
8) Asahi scoop: Nukaga charged with playing intermediary role in
2003 in awarding contract for Yamagata defense construction project
(Asahi)
9) Three more Okinawa communities awarded USFJ-realignment connected
subsidies (Mainichi)

Trade winds:
10) Japan-ASEAN reach agreement on an EPA (Tokyo Shimbun)
11) Japan's EPA with ASEAN could still be derailed by political
turmoil in Tokyo, cries for protection from Japanese farmers
(Nikkei)
12) METI Minister Amari: Difficult to obtain an WTO agreement this
year (Nikkei)

Articles:

1) Government urged to revamp strategy, on premise of US delisting
North Korea

SANKEI (Page 5) (Full)
November 20, 2007

In the Japan-US summit on Nov. 16, the two leaders discussed the
issue of whether the US would delist North Korea as a state sponsor
of terrorism. But the government remains tight-lipped about the
contents of the discussion.

Prime Minister Yasuo Fukuda just told reporters at his official
residence yesterday: "President Bush and I sufficiently discussed
the issue. The president is fully aware of the circumstances (in
Japan)."

A senior Foreign Ministry official, however, revealed yesterday that
the president did not declare in the summit that the US would not
take North Korea off its blacklist. The officer added: "He probably
means that the US will delist the North if US-Japan relations
permit," implying that delisting is unavoidable.

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A senior government official also hinted at the necessity of
revamping its strategy toward North Korea, premised on Washington's
removal of North Korea from the blacklist, remarking: "If the US
delists North Korea, Japan will lose one of its levers in
negotiations with Pyongyang (over the abduction issue)."

Behind the government's silence on the delisting issue is the fear
that since "delisting is Washington's established policy decision,"
as said by a Foreign Ministry source, if Japan, citing the issue of
Japanese nationals abducted by North Korea, raises opposition to the
policy, Japan-US relations might be strained. A senior government
official has already said, taking precautions: "Even if the US
decides to delist the North, it will not represent a failure of
Japanese diplomacy."

Meanwhile, one government source takes this view: "North Korea is
feeling like jumping at Japan's economic cooperation by normalizing
bilateral diplomatic ties. But as long as the abduction issue
remains unresolved, Japan will never normalize relations with North
Korea. It is North Korea that will be perplexed by the current
situation." The source indicated the view that even if the US
delists North Korea, the abduction issue will not be left behind.

President Bush's refusal to rule out delisting during the meeting
with Fukuda will inevitably allow Pyongyang to take advantage of
Japan's weak situation in the future. Although the Fukuda
administration is emphasizing a policy of dialogue, North Korea may
press the administration to make more concessions.

2) Calls for re-extension of Diet session becoming stronger;
Party-head talks on Nov. 22

NIKKEI (Page 2) (Excerpts)
November 20, 2007

There is a growing call for extending again by about one month the
current Diet session, which will run until Dec. 15, in the
government and Liberal Democratic Party (LDP). The reason is that
deliberations on a bill to resume the refueling activities by the
Maritime Self-Defense Force (MSDF) in the Indian Ocean have been
delayed. Prime Minister Yasuo Fukuda will meet separately with the
heads of ruling and opposition parties, including New Komeito leader
Akihiro Ota and Ichiro Ozawa, president of the Democratic Party of
Japan (DPJ or Minshuto), on Nov. 22 when he returns home from
Singapore to ask their support for an early passage of the new
refueling bill.

When asked by the press before his departure for Singapore yesterday
whether he intended to enact the refueling bill even by extending
the ongoing session, Fukuda responded: "That depends on the Diet
schedule." In a CNN interview aired on the 18th, he hinted the
possibility of re-extension of the session, saying: "Whether the
bill is enacted or not will be decided in one or two months."

The dominant view is in the ruling coalition, mainly in the LDP
Upper House executive, that the government should again extend the
current Diet session. The House of Councillors will hold
deliberations on the refueling bill on Nov. 26 or after. The Upper
House Committee on Foreign Affairs and Defense opens two sessions
every week. In the backdrop of the growing calls for a re-extension,
the government has no choice but to extend again the session because

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the Diet schedule is tight until the Dec. 15 end.

If the current session is extended again, it will have an impact on
the compilation of state budget for next fiscal year. If so, the
Finance Ministry will discuss the matter with other ministries and
agencies, but it will be difficult for cabinet ministers to secure
time for negotiations since the Diet is now in session. As a result,
the state budget for FY2008 will inevitably be compiled early next
year as a cabinet decision will be made after negotiations by
cabinet ministers. The New Komeito, the LDP's coalition partner, is
cautious about a re-extension idea because the party doesn't favor
an earlier dissolution of the House of Representatives to call for a
snap election.

In case the session is extended again, chances are that the ruling
camp will readopt the new refueling bill in the Lower House, which
the ruling bloc dominates. The possibility cannot be denied that if
the ruling parties take a second vote on the bill in the Lower
House, the opposition camp will submit to the Diet a censure motion
against the prime minister. As a result, the focus will be on
whether Fukuda decides to dissolve the Lower House to call a general
election.

DPJ Secretary General Yukio Hatoyama said in a speech deliberated
yesterday at the Japan National Press Club:

"If (the bill) is not enacted by Dec. 15, it is unthinkable that it
will be killed there. I'm sure that (the government) will again
extend the session."

He then said how his party would respond to that:

"I wonder whether 60 days are needed. I think the bill should be put
to a vote after thorough deliberations are carried out. The practice
of spending time without holding deliberations should be ended
because such will render useless the Upper House debates."

3) LDP, DPJ leaders to hold talks on Nov. 22; Fukuda to ask Ozawa
for cooperation to enact new antiterrorism bill; If talks end in
failure, current Diet session may be extended again

YOMIURI (Top Play) (Excerpts)
November 20, 2007

The ruling Liberal Democratic Party (LDP) and main opposition
Democratic Party of Japan (DPJ or Minshuto) agreed yesterday to hold
a meeting on Friday between Prime Minister Yasuo Fukuda, president
of the LDP, and DPJ President Ichiro Ozawa. The LDP asked the
opposition parties to hold party-head meetings in which Fukuda will
explain his visit to the United States and discuss how the Diet
should be managed in the future. The DPJ accepted the offer. The
Japanese Communist Party also conveyed its acceptance to the LDP.
Other opposition parties intend to accept the request. Fukuda will
reveal his intention to aim at enacting the new antiterrorism
special measures bill by Dec. 15 when the current Diet session is
over. He will seek the opposition leaders' cooperation for the
bill's enactment. If the talks end in failure, the government and
ruling coalition will coordinate to extend again the current Diet
session.

In a press conference at the Japan National Press Club, DPJ
Secretary General Yukio Hatoyama commented on a re-extension of the

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Diet session:

"Rather than taking advantage of the 60-day clause (in the
Constitution), the bill should be put to a vote after a sufficient
debate is carried out in the House of Councillors. We should conduct
serious deliberations."

The Constitution stipulates that if the Upper House does not take a
vote on a bill within 60 days, the bill will be considered as voted
down and the House of Representatives can readopt it with a
two-thirds majority vote. In the case of the new antiterrorism bill,
which was sent to the Upper House on Nov. 13, the Lower House can
take a second vote on January 12 or after. So Hatoyama's comment
indicated the stance of forgoing taking a vote on the new
antiterrorism legislation before the end of the year.

4) Ruling coalition reconsiders election arrangements

YOMIURI (Page 4) (Excerpts)
November 20, 2007

Because the candidate backed by the ruling Liberal Democratic Party
(LDP) and New Komeito was defeated in Sunday's Osaka mayoral
election, some in the parties yesterday called for a review of
election arrangements.

Prime Minister Yasuo Fukuda told the press corps yesterday: "The LDP
along with New Komeito did made efforts, but the defeat was
regrettable. Of course, there were regional circumstances."

Chief Cabinet Secretary Nobutaka Machimura stated: "There will be no
adverse effect on national elections." Many members in the
government and ruling camp, however, have taken the view that they
should learn lessons from the defeat, citing that their candidate
was older and that municipal assembly members belonging to the LDP
were not active in supporting the candidate.

One New Komeito member express displeasure, saying: "According to
exit polls, we were only able to get half of LDP supporters."

Most LDP-backed or sponsored candidates have been defeated in the
mayoral elections of such major cities as Kita-Kyushu, Sapporo, and
Hiroshima held since 2006. Some members in the ruling camp are
concerned about the Osaka gubernatorial election in January and the
Kyoto mayoral election in February. Since there is a possibility
that the results of these elections will have an impact on the next
House of Representatives election, LDP Election Committee Chairman
Makoto Koga told reporters yesterday: "It is only natural for us to
rebuild election arrangements so that there will be no impact on the
Lower House election."

5) Yamada Yoko pools 1.1 billion yen: Tokyo prosecutors ask for
investigative cooperation from US

MAINICHI (Top Play) (Excerpts)
November 20, 2007

Mainichi Shimbun has learned that Motonobu Miyazaki (69), former
executive director of Yamada Yoko, a defense equipment trader, and
several others have pooled approximately 10 million dollars
(approximately 1.1 billion yen) in the company's US bank accounts.
It was also found that apart from about 100 million yen, which

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Miyazaki is suspected of having embezzled, they had transmitted
slush funds worth about 400,000 dollars (approximately 44 million
yen) to Japan. The Tokyo District Public Prosecutors Office Special
Investigation Department appears to have asked for investigative
cooperation from US judicial authorities. The special investigation
department is now investigating Miyazaki on suspicion of bribery,
suspecting that part of the slush funds might have been used for
wining and dining former Administrative Vice Defense Minister
Takemasa Moriya (63).

According to an informed source, Yamada International Cooperation, a
US subsidiary of Yamada Yoko, has pooled slush funds, pretending to
pay bonuses to executives. Former President Akiyama (70) was in
control of the money. In addition to these slush funds, the company
has also pooled approximately 1.1 billion yen in profits gained on
the sale of stocks and dividends and used that money to entertain
lawmakers and Defense Ministry officials who visited the US.

Miyazawa was arrested on suspicion of embezzling corporate funds
worth about 117 million yen. Now he is suspected of having illegally
funneled about 44 million yen in slush funds. The special
investigation department appears to have asked US judicial
authorities to investigate into five bank accounts held by the
company.

6) Prosecutors quiz GE employee over excessive treatment

TOKYO (Page 1) (Full)
November 20, 2007

Takemasa Moriya, 63, former administrative vice minister at the
Defense Ministry, was overly treated by Motonomu Miyazaki, 69, a
former managing director of Yamada Corporation, a trading company
dealing in defense equipment for the Self-Defense Forces. On this
issue, a task force of the Tokyo District Public Prosecutors Office
seems to have quizzed a Japan branch executive of General Electric
Co., a US manufacturer of the engine for the Air Self-Defense
Force's follow-on cargo aircraft (CX). This executive was once in
the SDF and negotiated directly with the Defense Ministry and
Miyazaki. The task force is believed to have questioned him about
what was behind the transfer of an agent contract.

According to informed sources, the executive is from the SDF. In his
SDF career, this executive was once assigned to the then Defense
Agency's Technical Research and Development Institute. He retired
several years ago and entered GE's Japan branch. He is currently
with the branch's aircraft engine project division and serves as a
point of contact with the Defense Ministry. He was in charge of the
CX engine for the ASDF.

In 2003, when Miyazaki was a managing director of Yamada Corp., the
then Defense Agency decided to procure the CX engine from GE. At
that time, Yamada Corp. was a GE agent. In September last year,
Miyazaki established Nihon Mirise Corporation (NMC), a trading firm
dealing in defense equipment. NMC then grabbed Yamada Corp.'s agent
contract with GE. In December last year, when GE was about to enter
into an agent contract with NMC, a munitions chief from GE
headquarters in the United States and Miyazaki met with Moriya in
the vice minister's room for about 50 minutes.

The task force seems to be looking into what was behind the CX
engine selection and the contract switch, suspecting that Moriya

TOKYO 00005294 006 OF 009

might have favored Miyazaki.

GE cancelled its contracts with Yamada Corp. and NMC in late October
after the scandal was brought to light.

7) Finance Minister Nukaga once again denies his presence at wining
and dining session: Yamada Yoko purchases fund-raising party tickets
worth 2.2 million yen

MAINICHI (Page 1) (Excerpts)
November 20, 2007

Finance Minister Fukushiro Nukaga during a meeting of the Upper
House Budget Committee held yesterday afternoon revealed that he had
Yamada Yoko, a company specializing in military procurement,
purchase fund-raising party tickets totaling 2.2 million yen over
six years from 2002 through 2007. Concerning proceeds from the sale,
Nukaga said, "I have returned the full amount to Yamada Yoko, as the
matter has become a social issue." He made this statement in
response to a question asked by Shinkun Haku, a lawmaker belonging
to the Democratic Party of Japan (DPJ or Minshuto). Former
Administrative Vice Defense Minister Takemasa Moriya has testified
that Nukaga along with former Yamada Yoko executive director
Motonobu Miyazaki attended a wining and dining session. Regarding
this testimony, Nukaga said, "I have checked the testimony by day
and night and found no such record." He thus once again denied his
presence at the wining and dining session.

Nukaga said that he held four parties a year in the name of
breakfast study meetings at the time. Yamada Yoko purchased 10 party
tickets worth 200,000 yen at each session. According to records kept
by Nukaga's office, 10 study meetings were held from 2004 through
March 2007. Nukaga said that when he inquired with Yamada Yoko about
the purchases of party tickets in the period before 2004, he
received a reply that the company purchased party tickets totaling
2.2 million yen in a period from 2002 through 2007.

Concerning whether he was present at a wining and dining session
hosted by Yamada Yoko, Moriya during the summoning to the Upper
House Foreign and Defense Affairs Committee on Nov 15 testified that
when former Defense Department Japan Desk chief James Auer, now a
professor at Vanderbilt University, visited Japan, Nukaga along with
Miyazaki attended a wining and dining session. Nukaga insisted that
he telephoned Auer through his attorney on Nov. 16, following
Moriya's testimony, and received a reply from Auer that he knows
Nukaga but never dined together. He underscored that he did not
attend a wining and dining session along with Moriya and Miyazaki,
saying that he checked the schedule kept by his office, the schedule
of his official car at a time when he was chief cabinet secretary,
and his association with Auer.

8) Nukaga associates did favor for bidding: ex-defense bureaucrat

ASAHI (Top play) (Abridged)
November 20, 2007

Nobumasa Ota, 58, a former director general of the Sendai Regional
Defense Facilities Administration Bureau, an outpost of the Defense
Facilities Administration Agency now integrated into the Defense
Ministry, told an Asahi Shimbun reporter in an interview that he was
asked in March 2000 by associates of then Deputy Chief Cabinet
Secretary Fukushiro Nukaga to designate a construction company in

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Yamagata Prefecture for construction works ordered by the DFAA
Sendai bureau. Nukaga's side totally denied that they did so. Ota
asserted that he received a report from a senior official of the
Sendai bureau at that time, quoting this official as saying the
request was transmitted to the DFAA through former Administrative
Vice Defense Minister Takemasa Moriya, the then chief of the Defense
Agency director general's secretariat. Ota is willing to make public
his diary, which he says recorded the circumstances.

The Asahi Shimbun asked Nukaga if he did anything like doing a favor
for the construction company or recommending it. In response to this
question, Nukaga, through his lawyer, answered "no."

Ota, according to his account, received a report from a senior
official of the DFAA Sendai bureau on the evening of March 2, 2000,
when Ota was DFAA Sendai bureau director general. Ota says the
request from Nukaga's associates over the Yamagata-based constructor
was transmitted to the DFAA in Tokyo through Moriya. In addition,
Ota quoted this senior official as explaining that there was a
similar request from Nukaga's associates in 1999. According to Ota,
the senior official also explained that the DFAA Sendai bureau once
designated the construction company in fiscal 1999 but the company
did not become a successful bidder, and that the DFAA Sendai bureau
thereafter could not designate that company because its rating did
not match the rank of a construction project.

Ota keeps his diaries on a personal computer. He typed in what
happened on March 2, 2000, writing: "XX (the position title of a
person with the DFAA Sendai bureau) came to me. He told me that
there was a claim from Deputy Chief Cabinet Secretary Nukaga to the
chief of the (Defense Agency director general's) secretariat. The
claim was that the DFAA Sendai bureau's moves are bad although he
(Nukaga) recommended XX (the name of a company) in Yamagata."

Nukaga denies favor

Nukaga's lawyer answered yesterday in written form about a "favor,"
which Ota says Nukaga's associates did. The lawyer responded to an
Asahi Shimbun interview.

This lawyer totally denied that Nukaga or someone connected with him
did a favor for a specific construction company, saying: "I also
asked the construction company about this. But they said, 'That's
not true.' They also said they didn't meet Mr. Ota in 1999 and
2000.'"

Nukaga, according to his written answer, did not make any complaint
to Moriya. Nukaga is also said to have worked on the DFAA Sendai
bureau chief. On this point, Nukaga answered, "I heard from my
secretaries that none of them told the company to meet the bureau

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chief."

9) 3 Okinawa municipalities added to incentive list for USFJ
realignment

MAINICHI (Page 3) (Full)
November 20, 2007

The government, in its official gazette dated Nov. 19, designated
three additional municipalities in Okinawa Prefecture for its
subsidization of base-hosting localities along with the realignment
of US forces in Japan. The three additionally designated

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municipalities are Kin Town, Onna Village, and Ginoza Village. The
three municipalities had announced on Nov. 13 that they would accept
the US Marine Corps' shared use of Camp Hansen in the island
prefecture with the Ground Self-Defense Force. The government listed
a total of 33 municipalities in the nation for its first designation
announced late last month. However, six municipalities, including
Kin Town, were off the list because they had not accepted government
plans.

Futenma airfield relocation and other realignment plans are now
facing rough going, so the government considered the fact that the
three Okinawa municipalities have changed their mind to cooperate on
its realignment plans. The Defense Ministry was in a hurry to
designate the three municipalities.

10) Talks with ASEAN on scrapping of tariffs reach agreement: EPA to
be put into effect as early as next year

TOKYO SHIMBUN (Top Play) (Excerpts)
November 20, 2007

Japan and the Association of Southeast Asian Nations (ASEAN) at an
economic ministerial meeting held yesterday in Singapore confirmed a
comprehensive economic partnership agreement (EPA) aimed at trade
liberalization. The result will be reported at a summit to be held
in Singapore on Nov. 21. This is the first time for Japan to sign a
multilateral EPA. All concerned countries will sign an agreement
after completing domestic procedures and aim at putting it into
effect in time for actually scrapping tariffs before the end of next
year.

Japan's trade totals 142.6 trillion yen, of which trade with ASEAN
accounts for 12.7 PERCENT , following the US and China. Most trade
tariffs within the ASEAN region will be scrapped. It is expected
that the EPA with ASEAN will significantly promote the advance of
Japanese companies into the region and the division of labor within
it.

According to the agreement, Japan will exempt key trade items, such
as rice, from the abolition of tariffs. Regarding other items, (1)
customs duties on 90 PERCENT of imports from ASEAN will be
abolished as soon as the agreement is put into effect; and (2) those
on 3 PERCENT of imports from ASEAN will be scrapped within 10
years.

11) Japan still lags behind over EPA strategy due to negative
attitude about agricultural reform

NIKKEI (Page 5) (Full)
November 20, 2007

(Commentary)

Japan and the Association of Southeast Asian Nation (ASEAN)
finalized negotiations on concluding an economic partnership
agreement (EPA) yesterday. China and South Korea have already
brought EPAs with ASEAN into force, going ahead of Japan. In part
because of growing calls in the ruling camp for more steps to
protect domestic farmers following its crushing defeat in the July
House of Councillors election, uncertainty is looming over Japan's
EPA strategy.

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There are more than 500 million people in ASEAN members. Now that
Japan is faced with sagging domestic demand and a decreasing
workforce, concluding an EPA with ASEAN will contribute to
revitalizing its economy in terms of both supply and demand.

However, Japan has lagged behind South Korea and other countries in
view of trade strategy. China brought a free trade agreement (FTA)
with ASEAN into force this July, gradually abolishing or lowering
tariffs. South Korea also agreed this April to sign an FTA with the
United States. It has also started FTA negotiations with the
European Union (EU).

The ruling coalition, reflecting on its disastrous defeat in the
Upper House election, has begun to take an inward-looking attitude,
delaying agricultural reform. A reform plan compiled this fall by
the Ministry of Agriculture, Forestry and Fisheries stopped short of
referring to such reform plans as farmland taxation. An electric
machinery executive said: "Unless the path of agricultural reform is
accelerated, Japan will be left further behind South Korea."

12) METI minister: Difficult to conclude WTO trade talks this year

NIKKEI (Page 5) (Full)
November 20, 2007

Kazunori Yanase, Singapore

In a press conference in Singapore on the afternoon of Nov. 19,
Economy, Trade and industry Minister Akira Amari indicated that it
would be difficult to reach a framework agreement at the new round
(Doha Round) of global trade talks under the World Trade
Organization (WTO) by the end of this year. Amari said: "Persons
involved in the negotiations think it would be difficult to reach a
conclusion this year. It will be physically difficult."

Japan and the Association of Southeast Asian Nations (ASEAN) agreed
in their economic ministerial meeting on the afternoon of Nov. 19 to
temporarily set up during this fiscal year the headquarters of the
East Asia-ASEAN economic research center in Jakarta, Indonesia,
where the ASEAN secretariat is located. The research center, the
establishment of which Japan proposed, is the Asian-version
Organization for Economic Cooperation and Development (OECD).

SCHIEFFER

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