Cablegate: Japanese Morning Press Highlights 12/14/07

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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 12/14/07

Index:

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

4) Latest Yomiuri-Gallup poll of American and Japanese mutual views
shows alarming worsening of U.S.-Japan relations (Yomiuri)

5) Prime Minister Fukuda assures NATO secretary general that Japan
will soon resume refueling activities in the Indian Ocean (Asahi)

Defense scandals:
6) MSDF officer arrested for leaking Aegis information aware that he
was handling special defense secrets (Nikkei)
7) Defense Minister Ishiba finds the Aegis information leak
"extremely regrettable" (Mainichi)
8) Prime Minister Fukuda calls the Defense Ministry "shameful" for
sloppy handling of secret information that leaked out (Nikkei)
9) Top MSDF brass to resign to take responsibility for
leaked-secrets scandal (Sankei)
10) Former Vice Defense Minister Moriya re-arrested after
investigators find another stash of bribery money in a family bank
account (Mainichi)

Political uproar:
11) The Diet session extension gives time to pass the antiterrorism
bill, but with a host of scandals for the opposition to pursue, it
may be a double edged sword (Tokyo Shimbun)
12) New Komeito facing the extended Diet session with trepidation,
particularly worried about an early Diet dissolution (Sankei)

Economic trends:
13) Fukuda sets his international horizons on building an Asian
community centered on environmental cooperation and a new growth
strategy (Nikkei)
14) Ruling camp's tax guidelines put off basic reform of tax system,
aware that tax hikes could hurt its chances in the next election
(Asahi)

Articles:

1) TOP HEADLINES

Asahi:
Ruling camp puts off bold reform of tax system, with eye on election

Mainichi, Sankei & Tokyo Shimbun:
Plaintiffs reject court settlement for drug-induced hepatitis C
suffering

Yomiuri:
Government plans outlays for checking only 33 million unidentified
pension records next fiscal year

Nikkei:
Five Japanese companies promoting talks on a plan to build refinery
in Libya

Akahata:
JCP member points out continued orders made by Defense Ministry to

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defense contractors under disposition by suspension of business

2) EDITORIALS

Asahi:
(1) It's time for prime minister to make political decision for
plaintiffs suffering from hepatitis C virus
(2) Abolish securities preferential taxation

Mainichi:
(1) Government has responsibility to rescue all hepatitis C suffers
(2) Honestly speak about the need for tax hikes to cover social
security costs

Yomiuri:
(1) With arrest of MSDF officer, charges for negligence of oversight
responsibility unavoidable for executives
(2) Promote talks to settle hepatitis-C row

Nikkei:
(1) The ruling camp's package of tax reform proposals sidesteps
drastic measures

Sankei:
(1) Prime minister's political decision needed in hepatitis-C
lawsuit
(2) Putting off drastic tax reform measures impermissible

Tokyo Shimbun:
(1) Government urged to make decision to rescue all hepatitis-C
suffers
(2) Government must make drastic tax reform to narrow tax-revenue
discrepancies

Akahata:
(1) Ruling camp's tax reform proposal emphasizes use of consumption
tax exclusively to cover social security costs, deceiving people

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, December 13

NIKKEI (Page 2) (Full)
December 14, 2007

08:04
Met Deputy Chief Cabinet Secretary Iwaki at the Kantei.

09:00
Attended an Upper House Foreign Affairs and Defense Committee
meeting.

12:47
Met Assistant Deputy Chief Cabinet Secretary Saka at the Kantei.

14:30
Met former education ministers Nakayama and Kawamura and former
senior vice education minister Shionoya, followed by FIFA Chairman
Blatter.

15:09
Met Vice METI Minister Kitabata, Industrial Science and Technology

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Policy and Environment Bureau chief Ishida, and Resources and Energy
Agency Director General Mochizuki.

16:09
NATO Secretary General de Hoop Scheffer, followed by LDP General
Council Chairman Nikai, and Lower House members Kazuo Aichi and
Tetsuma Esaki.

17:25
Attended an Intellectual Property Strategic Headquarters meeting.

17:49
Met Chief Cabinet Secretary Machimura.

18:02
Attended an Education Rebuilding Council meeting.

18:28
Dined with Japan Business Federation Chairman Mitarai and others at
the Grand Prince Hotel Akasaka.

20:19
Returned to his residence in Nozawa.

4) Yomiuri-Gallup poll: Japan-U.S. ties rated worst

YOMIURI (Page 1) (Full)
December 14, 2007

The Yomiuri Shimbun and the Gallup Organization, a U.S. pollster,
conducted a joint public opinion survey in mid-November. In the
survey, Japanese and American respondents were asked if they thought
Japan-U.S. relations are currently in good shape. To this question,
those who answered "yes" totaled 39 PERCENT in Japan and 46 PERCENT
in the United States. The figures were respectively down 14 and 15
percentage points from last year's survey. Both figures are lower
than those in the previous telephone-based surveys conducted in 2000
and after. The survey this time shows that the public sentiment
toward Japan-U.S. relations has worsened in both countries.

Meanwhile, those who think Japan-U.S. relations are in bad shape
totaled 32 PERCENT in Japan (23 PERCENT last year) and 10 PERCENT
in the United States (7 PERCENT last year). In Japan, the
proportion of those who think Japan-U.S. relations are in bad shape
topped 30 PERCENT for the first time since 2000. Those who "can't
say which" accounted for 23 PERCENT in Japan (20 PERCENT last
year) and 31 PERCENT in the United States (24 PERCENT last year).

In the survey, Japanese and American respondents were also asked if
they trusted each other's country. In Japan, the proportion of those
negative topped that of those affirmative, with a total of 54
PERCENT saying they do not trust the United States and a total of
34 PERCENT saying they do. Negative answers outnumbered affirmative
ones for the fifth year in a row. In the United States, those who
trust Japan (totaling 61 PERCENT ) outnumbered those who do not (30
PERCENT ). However, the proportion of those who trust Japan was down
15 points from last year. The proportion of those who do not trust
Japan was up 9 points.

The public view and trust of each other's country worsened in the
survey this time. This seems to reflect a growing gap over North
Korea and the Maritime Self-Defense Force's pullout from its

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refueling activities in the Indian Ocean.

5) NATO pins hopes on Japan's refueling operations: Secretary
general hold talks with premier

ASAHI (Page 4) (Full)
December 14, 2007

Prime Minister Fukuda yesterday met with visiting North Atlantic
Treaty Organization (NATO) Secretary General Jaap de Hoop Scheffer
at the Prime Minister's Official Residence (Kantei). Touching on
Japan's refueling assistance operations in the Indian Ocean, Fukuda
told de Hoop Scheffer, "We are making our utmost for passage of a
new bill aimed at resuming the operations at an early date." The
secretary general expressed expectations for Japan's contributions

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to the war on terror, saying, "We highly appreciate Japan's precious
assistance to NATO member nations through its refueling
operations."

The secretary general noted that NATO has launched a dialogue with
China. Fukuda responded, "It is important for NATO to take an
interest in China and Asia. Japan will also strengthen its relations
with China."

The secretary general also met with Foreign Minister Koumura and
Defense Minister Ishiba the same day.

6) Aegis info leak: Arrested commander was aware that it was special
defense secret

NIKKEI (Page 43) (Abridged slightly)
December 14, 2007

Sumitaka Matsuuchi, a Maritime Self-Defense Force lieutenant
commander stationed at the Yokosuka base, has been arrested on
suspicion of violating the Law Concerning the Protection of Secrets
for the Japan-U.S. Mutual Defense Assistance Agreement, in
connection with the case in which pivotal data on the Aegis system
circulated within the MSDF. It became clear yesterday that he has
admitted to the Kanagawa prefectural police and the MSDF Criminal
Investigation Command that he had been aware that (the leaked data)
was a special defense secret.

According to investigation, Matsuuchi used to engage in the
development of ship systems as a member of the programming unit
(currently the ship development unit) that compiled the data on the
Aegis system, a special defense secret that must not be leaked under
the law.

Police and other authorities think Matsuuchi was authorized to
handle special defense secrets. His statement seems to back that
up.

Under the law based on the Japan-U.S. Mutual Defense Assistance
Agreement, ship and aircraft structures and their efficiency
provided by the United States are classified as special defense
secrets that must not be leaked. In the event a person handling

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special defense secrets leaked such secrets, he could face a prison
term of up to 10 years.

Matsuuchi allegedly copied the data into a CD around August 2002 and
sent it to a 43-year-old lieutenant commander, who was an instructor

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at the MSDF's First Service School (Etajima, Hiroshima Prefecture),
via the internal mail system.

Matsuuchi also indicated that he had given the data at the request
of the lieutenant commander. Prefectural police and other
investigative authorities are trying to find out how the information
leaked out and how it spread within the MSDF.

7) Ishiba describes Aegis info leak incident as extremely
regrettable

MAINICHI (Page 31) (Full)
December 14, 2007

In the wake of the arrest of a Maritime Self-Defense Force
lieutenant commander in connection with the Aegis data leak
incident, Defense Minister Shigeru Ishiba held a press conference
yesterday. He said: "The matter concerns the foundation of the
Japan-U.S. alliance; it is extremely regrettable." Ishiba also
indicated that he will take disciplinary action against persons
concerned, saying, "A lack of awareness of information security or
lax discipline is a grave problem."

8) Prime Minister Fukuda critical of intelligence leaks, calls the
Defense Ministry "shameful" (Nikkei)

NIKKEI (Page 2) (Full)
December 14, 2007

Prime Minister Yasuo Fukuda yesterday commented on the arrest of a
Maritime Self-Defense Force lieutenant commander for the leakage of
material with key information about the Aegis ship: "What in the
world system do they have to let vital defense intelligence leak out
so simply? I think it is shameful." He was responding to a question
from the press corps.

9) MSDF top brass to quit over misconducts

SANKEI (Page 1) (Full)
December 14, 2007

The Maritime Self-Defense Force's top brass officer, Eiji Yoshikawa,
has made up his mind to resign as MSDF chief of staff, sources
revealed yesterday. Yoshikawa will take responsibility for MSDF
personnel's misconducts, such as leaking classified data about an
Aegis-equipped ship and covering up a mistaken amount of fuel
supplied by an MSDF vessel in the Indian Ocean, according to the
sources. He is expected to be replaced in March next year.

In the information leakage incident, Sumitaka Matsuuchi, an
incumbent MSDF officer in the rank of lieutenant commander, was
arrested yesterday by Kanagawa prefectural police and MSDF shore
police on the charge of violating an information security law
relating to a mutual defense assistance agreement between Japan and
the United States.

According to informed sources, leaked information contained
classified data about missile defense systems. The incident marred
the United States' trust of the MSDF. The United States is Japan's
ally. In particular, the MSDF is closely related with the U.S. Navy.
Considering these facts, the Defense Ministry recognized the need
for it to take some action in order to recover the United States'

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trust. Yoshikawa, who became MSDF chief of staff in August last
year, is highly likely to be replaced.

In addition, the MSDF covered up a mistaken amount of fuel supplied
by its vessel in the Indian Ocean and mistakenly scrapped vessel
logbooks. These are related to civilian control and archives. Police
authorities are still investigating the truth about those scandals.

The Defense Ministry will release a fact-finding report of
investigations within the year, according to Defense Ministry and
MSDF officials. The Defense Ministry is expected to announce
preventive steps and punish those involved in January next year or
after. After paving the way to prevent such scandals, the MSDF chief
of staff will step down. He is likely to be replaced with Vice Adm.
Yoji Koda, commander-in-chief of the Self-Defense Fleet.

10) Prosecutors to re-arrest Moriya, judging over 3 million yen sent
to family members' accounts as bribes; U.S. law enforcement asked
for investigative cooperation

MAINICHI (Page 31) (Excerpts)
December 14, 2007

The special investigation squad of the Tokyo District Public
Prosecutors Office seems to have decided to re-arrest early next
week former Administrative Vice-Defense Minister Takemasa Moriya,
63, on suspicion of taking bribes totaling over 3 million yen from
defense contractor Yamada Corp. Yamada allegedly sent the money to
bank accounts held by Moriya's family members. A certain amount of
money was remitted to a bank account opened in the United States in
the name of his second daughter. The special investigation squad has
asked U.S. law enforcement for investigative cooperation.

According to an informed source, former Yamada executive Motonobu
Miyazaki, 69, who was re-arrested on suspicion of giving bribes,
instructed former Yamada U.S. subsidiary president Osamu Akiyama,
70, who was indicted on corporate embezzlement, to send over 3
million yen to the Moriya side from the slush funds in the United
States. At Miyazaki's instructions, Akiyama allegedly sent several
hundred thousand yen to an account held by Moriya's wife Sachiko,
56, under arrest on suspicion of taking bribes, every time she asked
for money for paying tuitions, oversea travel expenses, and the
like.

It has also become clear that cash in U.S. dollars has been remitted
to the U.S. bank account held by Moriya's second daughter, who was
studying English in the United States. Requesting investigative
cooperation of U.S. law enforcement, the special investigation squad
seems to be investigating money transfers between bank accounts in
the United States.

11) Extended Diet session a double-edged sword for the ruling camp:
Pension issue, Defense Ministry scandals bound to be pursued

TOKYO SHIMBUN (Page 2) (Excerpts)
December 14, 2007

The government and ruling parties have decided to re-extend the
current extraordinary Diet session until Jan. 15 next year in order
to enact a new antiterrorism special measures bill to allow the
Self-Defense Force to resume its refueling activities in the Indian
Ocean. But with identifying the 50 million pension accounts that

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remain missing running into trouble, coupled with the series of
bribery scandals involving the Defense Ministry, the government and
ruling coalition by extending the session have given the opposition
camp more chances to pursue them. The government and ruling bloc
face a severe atmosphere in the Diet straight through the New Year.

"The campaign pledge did not come to my mind immediately," said
Prime Minister Yasuo Fukuda yesterday in a House of Councillors
Foreign Affairs and Defense Committee session. He responded this way
to a question about his remark on the pension-record fiasco: "Is
failing to fulfill a campaign pledge such a serious matter?"

In a House of Representatives Budget Committee session in January
2003, former Prime Minister Junichiro Koizumi, when asked about his
government's failure to fulfill its pledge not to issue more than 30
trillion yen in government deficit bonds, quipped: "That's not such
a big deal." His remark gave the opposition a golden opportunity to
attack the government and ruling coalition. Fukuda's remark is
reminiscent of Koizumi's famous slip of the tongue.

The pension issue, in which voters have a strong interest, is
another unlucky development for the ruling camp. The long-running
pension fiasco hurt the ruling parties in the 2004 and 2007 Upper
House elections, going down to defeat to the main opposition party
Democratic Party of Japan (DPJ or Minshuto). If the broken pledge
and pension fiasco form a synergistic effect, the re-extension of
the Diet session will be a double edged sword for the ruling camp.

Chief Cabinet Secretary Nobutaka Machimura, who has come under fire
for his remark that the government never pledged to completely
identify every last person and last yen by the end of next March,
offer an apology in a meeting of his faction: "I apologize for
causing trouble by my insufficient explanation. I will deal with
this matter as sincerely as possible." Liberal Democratic Party
(LDP) Secretary General Bunmei Ibuki expressed his resolve in his
faction's meeting, saying: "Three months are left until March. I
will do my best until the last minute." The two were desperate to
assuage criticism of the government and ruling camp.

Another source of trouble is the bribery scandal involving a former
administrative vice defense minister. If the investigation expands
to political circles, it will deal a serious blow to the Fukuda
government. A mid-level LDP member pointed out: "I wonder whether
the new refueling bill should be enacted even by re-extending the
Diet session." A senior New Komeito member said: "It is a
significant decision. We will see if it was a good one or not."

DPJ Secretary General Yukio Hatoyama took a stance of opposing a
re-extension of the session, saying: "The government is responsible
for fiddling around for two months." The opposition, however,
actually seems to be waiting for the re-extension.

12) New Komeito concerned about political situation after
re-extended Diet session

MAINICHI (Page 5) (Full)
December 14, 2007

It was decided yesterday that the current extraordinary Diet session
would be extended again until Jan. 15 next year. With an eye on
avoiding an early dissolution of the House of Representatives and a
snap general election, the New Komeito, which had been reluctant to

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re-extend the extra Diet session, accepted the re-extension of the
session in consideration of the government and the ruling Liberal
Democratic Party (LDP), which are only focused on the passage of the
new antiterrorism special measures bill. However, if the bill is put
to a second vote at the Lower House, (overriding the Upper House's
rejection,) the Democratic Party of Japan (DPJ or Minshuto) and
other opposition parties may submit a censure motion against Prime
Minister Yasuo Fukuda. Since the party's concern about the
possibility of a Lower House dissolution still remains, the New
Komeito will continue to face a tough political situation.

"It means we have crossed the Rubicon," said a senior New Komeito
member to reporters after a meeting of the secretaries general of
the ruling and opposition camps, in which the ruling coalition
conveyed its decision to re-extend the extra Diet session to the
opposition camp.

Until immediately before accepting the re-extension idea, senior New
Komeito members were fretting over how to clear three conditions:
whether to enact the new antiterrorism bill or not; how to avoid a
dissolution of the Lower House; and whether a regular Diet session
could be convened smoothly.

Since Prime Minister Fukuda pledged in his summit meeting with U.S.
President George W. Bush to do his best to enact the bill, if the
bill is not passed through the Diet, the government will suffer a
serious blow, and the New Komeito, the junior coalition partner of
the LDP, will feel the backlash. Therefore, the New Komeito had no
choice but to accept Fukuda's decision on the re-extension.

Meanwhile, election cooperation between the LDP and New Komeito has
not moved forward. The candidate backed the two countries was
defeated in the mayoral election of Osaka City. The religious sect
Soka Gakkai, the New Komeito's chief supporter, has given a warning
since the April unified local elections: "The New Komeito must avoid
an early dissolution of the Lower House."

In order to coordinate their views of the political situation,
Fukuda and New Komeito leader Akihiro Ota had a two-hour meeting on
the night of Dec. 11. Ota said that his intention to prevent the
Lower House from dissolving was understood by Fukuda. He noted: "I
said that it would be desirable to dissolve the Lower House next
fall or after. I think the Prime Minister has already been aware of
that." A senior New Komeito member told the press yesterday: Even if
a censure motion against the Prime Minister is submitted, unless he
has the resolve to pass the budget, the bill will not be readopted
in the Lower House." He commented that Fukuda's decision led to the
New Komeito's approval.

However, it is uncertain how the political situation will develop
after the re-extended Diet session. The DPJ and other opposition
parties will inevitably step up their offensive over the pension
fiasco and other issues. There is no way to predict how
investigations on the Defense Ministry by the special investigation
squad of the Tokyo Public Prosecutors Office will develop.

There is concern about the future course of the political situation,
with one New Komeito member saying: "We really don't know what will
happen two weeks and one month from now."

13) Fukuda administration as part of new growth strategy proposes
Asia Community, centered on cooperation in environment area

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NIKKEI (Page 1) (Full)
December 14, 2007

The government yesterday outlined a new economy-growth strategy to
be advocated by Prime Minister Yasuo Fukuda. In it, the prime
minister will propose establishing an Asia economic and
environmental community in which Japan will cooperate with Asian in
protecting the environment and intellectual property and in saving
energy in a bid to grow the regional economy. As domestic measures,
the strategy places emphasis on efforts to increase job
opportunities and demand by strengthening cooperation between urban
and rural areas, as well as between big and small businesses. By
taking these measures, the administration aims to keep the nation's
real growth rate at more than 2 PERCENT over the next decade
despite the nation's declining birth rate.

In a meeting of the Council on Economic and Fiscal Policy today,
Economy, Trade and Industry Minister Akira Amari and State Minister
in Charge of Economic and Fiscal Policy Hiroko Ota will spell out
their respective basic views about the new strategy. The government
will compile by next January a mid-term guideline for economic
management that will include strategic growth measures. The prime
minister instructed in a meeting of the economic council on Nov. 8
that the panel draw up a new growth strategy.

The new strategy puts forward ways to beef up Japan's economic
growth potential through cooperation with Asia. In particular, the
strategy focuses on cooperation in making rules to protect the
environment and intellectual property, as well as to conserve
energy. For these areas, proper systems have yet to be prepared. As
an energy-conservation measure, for instance, the new strategy
proposes creating a fund invested by Japanese government-affiliated
financial institutions and companies and investing in projects
designed to save energy or to develop new energy sources. It also
suggests Japan's support for creating a system for energy-saving.

Japan will also aim to improve the environment for Japan's
investment in Asia by introducing common rules through cooperation
in setting up economic systems. The strategy envisions the
establishment of an Asia economic and environmental community that
includes China, South Korea, India, and the Association of Southeast
Asian Nations (ASEAN) in 2018.

As domestic measures to narrow the income discrepancies between
urban and rural areas, and between big and small companies, the
strategy stresses the importance for both sides to share information
and personnel. Specifically, the administration proposes introducing
the regional system and a mechanism to enable those who retired from
big companies to get new jobs at small companies in small cities.
The Council on Economic and Fiscal Policy will include the measures
in the strategy in its annual economic and fiscal policy guidelines
for 2008.

14) Ruling party guidelines for tax code revision leave out drastic
tax system reform policy: Consideration given to local areas with
eye on next election

ASAHI (Top Play) (Excerpts)
December 14, 2007

The Liberal Democratic Party (LDP) and the New Komeito yesterday

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adopted their ruling-party guidelines for tax code revisions for
fiscal 2008. They made a strategic move for a future tax hike by
incorporating a phrase into the package that the consumption tax
will be made a major fiscal resource to finance increasing social
security expenses. However, neither the margin of the envisaged hike
or a timetable has been included. The government's and the ruling
parties' policy of realizing a drastic reform of the tax system,
including the consumption tax, possibly in fiscal 2007 has thus been
put on the back burner. Their policy of calling on opposition
parties, such as the Democratic Party of Japan (DPJ or Minshuto), to
take part in tax system discussions has been included in the
guidelines with the opposition camp's dominance in the Upper House
taken into account.

Following the adoption of the guidelines, the government will
introduce related bills to the regular Diet session next year. The
DPJ also plans to compile its own tax code reform guidelines
possibly next week. Differences in the views of the ruling and
opposition parties are already surfacing over the handling of
specific road-construction revenues and some other issues. Fierce
debate is expected.

The major issue in the debate on the tax system is the handling of
the consumption tax. The guidelines characterized the consumption
tax as a major fiscal resource to cover the cost of the payments of
social security benefits, such as pension benefits, and medical and
nursing-care services, and measures on the declining birthrate. The
LDP Fiscal Reform Study Council, chaired by Kaoru Yosano, proposed
turning the consumption tax into a social security tax. Part of this
idea was adopted in the guidelines. The aim is to lead a proposal
for clear-cut usage of consumption tax revenues to a tax hike
debate.

Though the panel called for raising the consumption tax to about 10
PERCENT by around 2015, the package did not include a specific
margin of the hike.

Referring to a timetable for drastic tax system reform, including
the consumption tax, LDP Tax System Research Committee Chairman Yuji
Tsushima during a press conference indicated the idea of

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implementing such a reform in fiscal 2009. He noted, "Increasing the
government share of contributions to the national pension system by
fiscal 2009 is an unavoidable issue."

A central focus in the process of compiling the guidelines was
consideration to regional areas aimed at the next Lower House
election. Corporate tax revenues are concentrated in major cities,
centered on Tokyo. The guidelines call for an increase in
allocations to local governments by turning nearly half the
corporate tax revenues or approximately 2.6 trillion yen, into a
special local corporate tax starting in October 2008. The
reallocation will start in fiscal 2009.

SCHIEFFER

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