Cablegate: Japanese Morning Press Highlights 10/23/07

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UNCLAS SECTION 01 OF 08 TOKYO 004931

SIPDIS

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 10/23/07

Index:

1) Top headlines
2) Editorials
3) Prime Minister's daily schedule (Nikkei)

Moriya scandal:
4) Former Vice Defense Minister Moriya to be summoned as Diet
witness in probe of his relationship with defense contractor, now
under investigation (Asahi)
5) US affiliate of Yamada Yoko Corp. also being probed in defense
procurement scandal (Yomiuri)
6) Defense Minister concerned that defense procurement scandal will
sideline procurement of next generation CX engine (Yomiuri)
7) Yamada Yoko Corp. gave Democratic Party of Japan (DPJ) President
Ozawa political contribution of 6 million yen (Yomiuri)

MSDF fueling mission:
8) Vice Minister Yachi to visit Washington, meet Deputy Secretary
Negroponte on defense and foreign affairs issues (Mainichi)
9) Defense minister promises to put out a final report on missing
MSDF records later this month (Yomiuri)
10) Exchange in the Diet on the MSDF's missing records, etc.
(Yomiuri)
11) Prime Minister Fukuda, when he was chief cabinet secretary was
aware of the mistake in MSDF refueling record prior to his meeting
with the press (Asahi)
12) "The series of scandals involving the Defense Ministry are
regrettable," says prime minister, considering their possible impact
on new antiterror legislation (Yomiuri)
13) Japan still top ODA donor among the G-7 (Yomiuri)

Articles:

1) TOP HEADLINES

Asahi and Sankei:
Former Vice-Defense Minister Moriya to testify before Diet

Mainichi:
Blood product maker knows 197 names of hepatitis C patients

Yomiuri:
Prosecutors investigate US subsidy of Yamada Yoko Corp. over
unspecified expenditures

Nikkei:
Hitachi to exit pc production due to stiff competition

Tokyo Shimbun:
Legionella bacterium detected in condo spa in Adachi

Akahata:
Secretary General Ichida announces 24 Lower House proportional

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representation candidates

2) EDITORIALS

Asahi:
(1) Concealment of data a violation of civilian control
(2) MHLW too sloppy regarding hepatitis C

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Mainichi:
(1) MHLW never learns lesson about people suffering from hepatitis C
induced from contaminated blood products
(2) China unveils new leadership

Yomiuri:
(1) MHLW repeating "AIDS folly"
(2) New Chinese leadership

Nikkei:
(1) Political reform essential for sustainable Chinese growth

Sankei:
(1) Suspicions about former Vice-Defense Minister Moriya must be
cleared up swiftly
(2) New Chinese leadership

Tokyo Shimbun:
(1) Civilian control ignored by oil concealment
(2) AIDS lesson not applied to hepatitis C case

Akahata:
(1) Defense collusive ties must be probed thoroughly

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, October 22

NIKKEI (Page 2) (Full)
October 23, 2007

08:49
Met Japan-Australia Economic Committee Chairman Takashi Imai at the
Imperial Hotel. Attended a joint meeting.

10:21
Met Japan Federation of Commercial Broadcast Workers' Unions
Chairman Hirose and Vice Chairman Mabe. Followed by Finance Minister
Nukaga and others.

11:35
Met Vice Health, Labor and Welfare Minister Edogawa.

12:53
Met Chief Cabinet Secretary Machimura.

13:55
Vice Education Minister Zeniya.

15:06
Met Indonesia Local Representatives Conference Chairman Ginanjar.
Later met Vice Foreign Minister Yachi.

16:17
Met Special Advisor Yamatani.

17:02
Attended a party executive meeting in the Diet building.

17:31
Attended a meeting by the government and the ruling coalition on
social security and tax reform at the Kantei.

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18:11
Attended a meeting of cabinet ministers responsible for monthly
economic reports.

19:11
Met Research Commission on Foreign Affairs Chairman Yamasaki.

20:05
Met his secretaries at the Grand Prince Hotel Akasaka.

21:36
Returned to his private residence in Nozawa.

4) Ruling camp accepts demand for summoning Vice Defense Minister
Moriya to Diet as sworn witness

ASAHI (Top Play) (Excerpts0
October 23, 2007

The Liberal Democratic Party and the New Komeito decided yesterday
to agree to a demand by the opposition camp to summon former Vice
Defense Minister Takemasa Moriya to appear before the Diet as a
sworn witness to question him over allegations that he had been
receiving favors from a former executive of Yamada Yoko Corp., a
trading firm specializing in defense and aircraft equipment. Now
that Moriya has admitted he had been treated to free golf in
violation of the Self-Defense Forces' code of ethics, the coalition
judged it unavoidable to respond to the opposition camp's demand.
The ruling coalition conveyed the decision to the Democratic Party
of Japan (DPJ) and other opposition parties. Though both camps have
yet to agree on a date, Moriya is likely to be summoned early next
week.

The government will hold a question and answer session at a House of
Representatives plenary meeting today on a bill to extend the
Maritime Self-Defense Force's refueling mission in the Indian Ocean.
Executive members of the Lower House special antiterrorism committee
from the ruling and opposition parties met yesterday afternoon to
set a schedule for deliberations after the plenary session. The
opposition camp made it a condition for starting deliberations at
the committee to summon Moriya and other key figures to the Diet as
sworn witnesses. The ruling coalition proposed last night that both
sides should hold sessions on Oct. 24-25 and then determine a
specific date and methods for summons after the session on Oct. 25.
But DPJ committee head Yoshio Hachiro claimed: "Moriya and others
should be summoned before the deliberations." Both sides failed to
agree on a date.

5) Prosecutors probe Yamada Corp.'s US office

YOMIURI (Top play) (Abridged)
October 23, 2007

The Tokyo District Public Prosecutors Office has asked US judiciary
authorities for investigative cooperation in order to probe a
US-based subsidiary of Yamada Corporation, sources have revealed.
Its task force sent prosecutors to the United States early this
month, suspecting the subsidiary's deceptive accounting, the sources
said. Yamada Corporation, headquartered in Tokyo's Minato-ku, is a
trading firm in the aeronautic and defense area. The trading house
has been closely tied to Takemasa Moriya, 63, formerly an

TOKYO 00004931 004 OF 008

administrative vice minister at the Defense Ministry, and this fact
is seen as a problem. The task force has now already questioned
executives at Yamada Corporation, as well as those at another
trading company that was established by a 69-year-old former
managing director of Yamada Corporation. The task force is believed
to be looking carefully into the flow of murky money involving the
two trading companies.

When Moriya was in the post of administrative vice defense minister,
a former managing director of Yamada Corporation frequently
marshaled him into customer golf. This former executive also used to
dine and wine Moriya after playing golf.

Yamada International Corporation (YIC), a US-based affiliate of
Yamada Corporation, is now suspected of having practiced deceptive
accounting. YIC locates its US head office in Washington, branching
out in New York and Los Angeles. Its former president, 70, is said
to be close to the former managing director. In June last year, the
former managing director retired from Yamada Corporation. After
that, the former YIC president also retired and became a
representative director of Nihon Mirise USA Inc., the Los
Angeles-based US main office of Nihon Mirise Corporation (NMC), a
trading house founded by the former managing director and
headquartered in Tokyo's Minato-ku.

According to Yamada Corp. sources, YIC scraped up off-the-book
money-adding up to several hundred million yen-with deceptive
accounting practices. "Yamada International is strongly suspected of
having used some of the money to entertain the former Defense
Agency's senior officials on official trips to the United States and
US defense-related business executives," one of the sources said.
The source also said that YIC has pooled the money. However, about
100 million yen out of the pooled money has been lost since the
former president went to NMC, according to the source.

6) Concern over impact of scandal involving former Administrative
Vice Defense Minister Moriya on CX engine, though some predict only
limited impact

YOMIURI (Page 4) (Full)
October 23, 2007

Following the revelation that former Administrative Vice Defense
Minister Takemasa Moriya had improper relations with a trading
company specializing in the defense area, voices concerning a
possible impact of the incident on the Air Self-Defense Force
introducing the next-generation transport aircraft codenamed CX. The
CX, successor aircraft to C1 transport planes, is now being
developed domestically. The development, which started in fiscal
2001, is expected to be completed in fiscal 2011. Regarding the
procurement of engines for CX transport aircraft, it was decided in
August 2003 to procure engines produced by General Electric Co.
(GE). The Defense Ministry purchased five engines for a development
purpose from Yamada Corp. specializing in defense equipment, which
has an agency contract with GE.

However, a former senior managing director of Yamada Corp. who had
treated Moriya to free rounds of golf, and wining and dining,
established his own company Nihon Mirise Corp. (NMC). GE later
changed its agency in Japan from Yamada Corp. to NMC. Since then,
friction has been continuing between the two companies with Yamada
Corp. filing a suit against NMC and the former senior managing

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director, asking for compensation.

The Defense Ministry plans to procure another engine for a CX
transport aircraft for a development purpose this fiscal year as
well. It was set to procure through NMC, which has a contract with
GE. However, no prospects have been obtained for procuring a GE
engine due in part to the trouble.

However, as one senior official of the Air Staff Office said, "Even
if it is not possible to select a company that deals with the
procurement of a sixth engine, we can press ahead with efforts,
while engaging in the development. There will be no impact on such
matters as the time to equip it on a CX transport aircraft," some
take the view that the impact of the scandal involving Moriya on the
CX engine will be limited.

7) Yamada Yoko Corp. contributed 6 million yen to Ozawa

YOMIURI (Page 2) (Full)
October 23, 2007

The office of Democratic Party of Japan (DPJ) President Ozawa
announced yesterday that his two political organizations had
received a total of 6 million yen in political donations from Yamada
Yoko Corp., a trading firm specializing in defense and aircraft
equipment. The office said that it will return all the money.

According to the office, the Rikusankai, Ozawa's funds management
organization, received 500,000 yen in donations every year from 1995
through 1999, totaling 2.5 million yen. The Jiyuto (Liberal Party)
Iwate prefecture 4th branch office, headed by Ozawa, received
500,000 yen during a period from 2000 through 2003, and from 2004
through 2006, the DPJ Iwate prefecture 4th branch office got the
same amount every year, totaling 3.5 million yen.

An office member said: "We will take the necessary procedures to
return the total amount of money to Yamada Yoko Corp. on the morning
of the 23rd. Although there are no cozy ties with the company, we
decided to return the money so as not to invite misunderstanding."

8) Yachi to visit US

MAINICHI (Page 3) (Full)
October 23, 2007

Administrative Vice Foreign Minister Shotaro Yachi will visit the
United States on an Oct. 24-27 schedule to meet with Deputy
Secretary of State Negroponte and other US government officials, the

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Foreign Ministry announced yesterday. Yachi will talk with them
about a new antiterror legislative measure and Japan's host nation
support ("omoiyari yosan" or "sympathy budget") for US forces in
Japan. Asian and Oceanian Affairs Bureau Director General Kenichiro
Sasae and other Foreign Ministry officials will also leave for the
United States today. Sasae will meet with his US counterparts,
including Assistant Secretary of State Hill, chief delegate to the
six-party talks over North Korea's nuclear issue.

9) Defense minister orders committee to produce final report this
month on correction of oil and discarded log by MSDF

YOMIURI (Page 4) (Full)
October 23, 2007

TOKYO 00004931 006 OF 008

In the wake of the revelation of a series of improprieties,
including the correction of the amount of oil provided to a US oiler
by the Maritime Self-Defense Force, the Defense Ministry yesterday
held an inaugural meeting of the committee to study ways to ensure
civilian control, chaired by Defense Minister Shigeru Ishiba. Ishiba
ordered the committee to produce a final report before the end of
the month on the correction of the amount of oil provided to the US
refueler and a logbook discarded by the MSDF.

Ishiba started off the meeting with the remark, "Closely associated
with civilian control, these are extremely vital." He then ordered
the committee to study the following before the end of current
fiscal year to report back to him: (1) a review of the organization,
including the relationship between the SDF personnel and Defense
Ministry internal bureaus officials, (2) a review of external
explanations, including Diet replies by SDF personnel, (3)
educational and mentality reforms, and (4) a review of paperwork on
checking Diet replies.

Reports presented by the Defense Ministry to the ruling and
opposition parties yesterday made it clear that although a section
chief of the Maritime Staff Office had been aware of the erroneous
data on the amount of oil six days before then Defense Agency
Director-General Ishiba was to report on the incorrect amount at the
Diet on May 15, 2003, the section chief failed to report on it to
his superior.

Afterward, the section chief has been serving as a state-paid
secretary to Liberal Democratic Party lawmaker Satsuki Katayama. He

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tendered a resignation to Katayama yesterday.

10) Outline of the report compiled by the Defense Ministry

YOMIURI (Page 4) (Full)
October 23, 2007

(Correction to the amount of fuel supplied)

? Maritime Self-Defense (MSDF) supply vessel Tokiwa on Feb. 25, 2003
supplied approximately 800,000 gallons of fuel to the US oiler
Pecos. Around Feb. 26, the Maritime Staff Office Operations and
Plants Department Operations Division erroneously entered the
amount supplied.
? The director of the division and several others realized the error
on May 9 the same year. However, they did not report the error to
their superiors in the idea that another bureau was responsible for
fuel matters and that the issue of indirect supply of fuel to the
aircraft carrier Kitty Hawk was quieting down.

(Disposal of logbook)

? A crewmember of the supply vessel Towada on July 26, 2007, put
the ship's logbooks covering from July through December 2003 through
a shredder by mistake without obtaining approval from the captain.
The shredded documents were then incinerated.

11) Maritime Staff Office section chief recognized error involving
amount of supplied oil before then Chief Cabinet Secretary Fukuda's
press conference

ASAHI (Page 1) (Full)

TOKYO 00004931 007 OF 008

October 23, 2007

It was learned yesterday that although a section chief of the
Maritime Staff Office had recognized on May 9, 2003, the
misreporting of the amount of oil (actually 800,000 gallons)
supplied by a Maritime Self-Defense Force (MSDF) supply vessel to a
US tanker in February 2003, he had not reported it to his superior.
Prime Minister Fukuda (then chief cabinet secretary) therefore had
to report in a press conference that the amount was "about 200,000
gallons." The information-sharing and crisis-management systems in
the government are likely to be called into question.

According a report (compiled by the Defense Ministry), the section
chief noticed the error on May 9, but since he did not report it to
his superior, then Chief Cabinet Secretary Fukuda in a press
conference on the afternoon of the same day and then Defense Agency
Director General Ishiba in a Diet reply on Oct. 15 both said the
amount of supplied oil was 200,000 gallons.

Moreover, according to the report, the force deployed in the Indian
Ocean constantly sent accurate data to the Maritime Staff Office
section. Without checking such data, then Joint Staff Council
Chairman Toru Ishikawa announced at a news conference on May 8 that
the amount was 200,000 gallons. Based on this announcement, the
government reportedly drew up guidelines for Diet replies

12) "The series of scandals involving the Defense Ministry are
regrettable," says prime minister, considering their possible impact
on new antiterror legislation

YOMIURI (Page 4) (Full)
October 23, 2007

Regarding the possible impact of a series of scandals involving the
Defense Ministry on the new antiterror special measures legislation,
Prime Minister Fukuda yesterday evening noted, "It is very
regrettable that scandals occurred right on our doorstep. I hope the
new legislation and international cooperation will be considered
separately. But it will be difficult." He thus indicated his view
that scandals involving the Defense Ministry are bound to affect
Diet deliberations on the legislation. Fukuda then once again
indicated his intention to aim for passage of the new legislation
during the current Die session, noting, "I hope the legislation will
obtain Diet approval, if possible. We must do our utmost in order to
realize that." He made these comments to reporters at the Prime
Minister's Official Residence (Kantei).

13) MOF counters MOFA opposition to ODA cut, saying, "Japan's ODA
still ranks first among G-7 nations"

YOMIURI (Page 9) (Full)
October 23, 2007

The Ministry of Finance (MOF) yesterday countered the Ministry of
Foreign Affairs' (MOFA) opposition to cut official development
assistance (ODA), providing data to the Fiscal System Etc., Council,
an advisory panel reporting to the finance minister. The data
indicated that Japan's ODA continues to rank first among the Group
of Seven industrialized countries in term of a ratio to its national
tax revenues.

Japan had been competing for the no. 1 ODA donor slot with the US

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since the late 1980s. However, following a series of cuts in the ODA
budget in the wake of the nation's fiscal reconstruction policy, it
gave up first place to the US in 2006. The second spot went to
Britain. The ODA budget for fiscal 2007 (72.93 billion yen) dropped
to nearly 40 PERCENT smaller than the peak level recorded in fiscal
1997.

However, according to the data provided by MOF, the ratio of Japan's
ODA to its national tax revenues was 2.5 PERCENT in 2006. It has
maintained the top slot for the nine consecutive years. MOF insisted
that the point that Japan's position in the international community
has declined is irrelevant." MOFA has requested 815.3 billion yen in
its general-account budget request for fiscal 2008, up 11.8 PERCENT
from the fiscal 2007 level. However, MOF intends to slash the ODA
budget by 3 PERCENT from the fiscal 2007 level as stipulated in the
budget request guidelines.

SCHIEFFER

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