Cablegate: Daily Summary of Japanese Press 01/17/08

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SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 01/17/08

INDEX:

(1) Poll on Fukuda cabinet, political parties, new antiterror law

(Yomiuri)

(2) Poll on Fukuda cabinet, political parties, MSDF refueling

mission (Sankei)

(3) DPJ enjoys high support rating despite its blunders; People pin

hopes on the party being better than others (Tokyo Shimbun)

(4) Overheated row over gasoline tax between LDP and DPJ (Asahi)

(5) No criticism against Ozawa raised in DPJ in order to win Lower

House race; Ozawa instead strengthens self-confidence (Sankei)

(6) Sapporo to call for self-restraint on events at three parks

before and after Lake Toya Summit, as security measure against

violence or terrorist acts (Mainichi)

(7) Australia's new government intensifies antiwhaling position,

urges Japan to stop killing whales (Tokyo Shimbun)

(8) Kisha no Me (Reporter's eye) column by Nakae Ueno: Okinawa faces

contradictions between U.S. bases and economic packages (Mainichi)

(9) Editorial: Bring about growth with M that can turn change

into opportunity (Nikkei)

ARTICLES:

(1) Poll on Fukuda cabinet, political parties, new antiterror law

YOMIURI (Page 2) (Full)

January 16, 2008

Questions & Answers

(Figures shown in percentage. Parentheses denote the results of a

survey taken in December last year.)

Q: Do you support the Fukuda cabinet?

Yes 45.6 (52.5)

No 41.6 (35.3)

Other answers (O/A) 0.9 (1.3)

None 30.6 (28.2)

D/K + Can't say (C/S) 0.9 (1.7)

Q: Do you appreciate Prime Minister Fukuda and his government on the

following points?

His personal character

Yes 58.0 (62.3)

No 33.4 (22.6)

D/K+CSW 8.6 (15.1)

His leadership

Yes 24.4 (28.5)

No 62.7 (43.1)

D/K+CSW 12.9 (28.4)

Foreign policy

Yes 30.9

No 48.8

D/K+CSW 20.3

Economic policy

Yes 17.0

No 64.7

D/K+CSW 18.3

North Korea policy

Yes 14.0 (15.5)

No 70.2 (60.3)

D/K+CSW 15.8 (24.2)

Response to Defense Ministry scandals

Yes 17.5 (13.3)

No 73.2 (66.9)

D/K+CSW 9.3 (19.8)

Response to pension issues

Yes 28.0 (31.2)

No 64.0 (53.9)

D/K+CSW 8.0 (14.9)

Response to hepatitis C infections

Yes 74.1 (43.5)

No 20.1 (37.5)

D/K+CSW 5.8 (19.0)

Q: What do you think about those listed below in connection with the

TOKYO 00000134 005 OF 017

newly enacted antiterrorism law intended to resume the Maritime

Self-Defense Force's refueling mission for multinational forces in

the Indian Ocean?

The new antiterror law was enacted

Good 45.1

Questionable 43.8

D/K+CSW 11.1

The Diet took time to deliberate, and the MSDF pulled out

Good 52.5

Questionable 35.2

D/K+CSW 12.3

The opposition-dominated upper chamber took time to deliberate

Good 48.8

Questionable 42.0

D/K+CSW 9.2

The ruling parties took a second vote in the lower chamber with a

majority of two-thirds

Good 39.4

Questionable 48.4

D/K+CSW 12.2

DPJ President Ozawa abstained from voting in the lower chamber's

last plenary sitting

Good 12.1

Questionable 77.0

D/K+CSW 10.9

Q: The ruling coalition holds a majority of the seats in the House

of Representatives, and the opposition bench dominates the House of

Councillors. What do you think about this lopsidedness in the Diet?

Pick only one from among those listed below.

That's good because there's political tension 13.8 (13.9)

The ruling and opposition parties should compromise 40.1 (41.3)

The House of Representatives should be dissolved at an early date

for a general election 43.7 (41.3)

DK+C/S 2.4 (3.5)

Q: Do you support a "grand coalition" of the LDP and the DPJ?

Yes 33.7

No 54.6

D/K+CSW 11.7

Q: The Fukuda cabinet has taken over almost all of the former Abe

cabinet's ministers. Do you think the Fukuda cabinet should be

shuffled substantially at an early date?

Yes 44.0 (41.1)

No 51.1 (49.2)

D/K+CSW 4.9 (9.7)

Q: When would you like the House of Representatives to hold its next

election?

During the first half of this year 23.6 (35.8)

After this July's G-8 summit in Japan and during the latter half of

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this year 45.9 (29.9)

Upon the current term's expiry or early next year 29.0 (19.9)

D/K+C/S 1.5 (4.8)

Q: Which political party's candidate would you like to vote for in

the next election for the House of Representatives?

LDP 34.4

DPJ 33.9

NK 4.1

JCP 3.9

SDP 2.6

PNP 0.5

NPN 0.3

O/A 9.2

D/K+C/S 11.1

Q: What form of government would you like to see after the next

election for the House of Representatives?

LDP-led coalition government 28.5 (29.7)

DPJ-led coalition government 32.5 (32.1)

LDP-DPJ grand coalition 34.4 (29.3)

D/K+C/S 4.6 (8.9)

Q: How long do you think the Fukuda government will continue?

Until around the next election for the House of Representatives 46.7

(56.2)

Until the fall of next year 34.0 (21.9)

Continue until after the fall of next year 15.8 (10.3)

D/K+C/S 3.5 (6.9)

Q: A gasoline tax law is due to expire this spring. What do you

think about this?

Extend the gasoline tax for local traffic networks 28.6

Abolish the gasoline tax in view of rising oil prices and other

circumstances 66.2

D/K+C/S 5.2

(Note) Figures in parentheses denote the results of the last survey

conducted Nov. 10-11 last year.

Polling methodology: The survey was conducted Jan. 13-14 by the

Sankei Shimbun and Fuji News Network (FNN) over the telephone on a

computer-aided random digit dialing (RDD) basis. For the survey, a

total of 1,000 persons were sampled from among males and females,

aged 20 and over, across the nation.

(3) DPJ enjoys high support rating despite its blunders; People pin

hopes on the party being better than others

TOKYO SHIMBUN (Page 2) (Abridged)

January 17, 2008

The major opposition Democratic Party of Japan (DPJ or Minshuto)

held a convention yesterday in which it adopted an action program

for 2008 specifying that the party will aim at achieving an Ichiro

Ozawa administration. In various opinion polls, the party's support

rates have been high since the House of Councillors election last

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July. If a House of Representative election is held this year, the

10th anniversary of the establishment of the DPJ, the party might

win and assume power despite its blunders. Why?

The DPJ's support rates in the past often fluctuated a around the 10

PERCENT level. Rates occasionally topped the 20 PERCENT line

following the party's leaps in national elections, but they always

retuned to the usual low level in just several months.

The party's support rate marked a record 37.6 PERCENT immediately

after last year's Upper House election. In a poll in mid-January,

nearly six months after the previous election, the party scored 27.0

PERCENT , only 5 points behind the Liberal Democratic Party (LDP).

Given a series of blunders by the DPJ during that period, including

Ozawa's resignation fiasco, this phenomenon seems mysterious.

One plausible explanation is that people may now think the DPJ is

better than the LDP that has been taking the wrong steps.

Despite the ruling coalition's crushing defeat in the Upper House

election, former Prime Minister Shinzo Abe announced that he would

stay in office, but he soon resigned from the post at the beginning

of the previous extraordinary Diet session. Chief Cabinet Secretary

Nobutaka Machimura and others offered improper explanations about

pension-record mismanagement, drawing heavy fire. A senior DPJ Upper

House member noted: "People are increasingly distrustful of the

government because of the pension fiasco. They think that management

by the current administration is so sloppy that they are willing to

accept (an administration) by any other party."

High approval ratings seem to be connected to some extent with the

increased presence of the DPJ, which has become the largest party in

the Upper House. Being a relatively young party, the DPJ was

occasionally mistaken for the former Democratic Socialist Party in

rural areas. The Upper House election has transformed the DPJ into a

party holding the key to the enactment of bills.

It is certain that the DPJ's popularity comes from growing public

interest in politics due to the divided Diet where the ruling bloc

no longer holds absolute numerical superiority.

The public also has a keen sense of urgency because of growing

socioeconomic disparities and other factors.

Today's data are far more serious than those when the Hosokawa

non-LDP coalition cabinet was established in August 1993. At

present, one out of three is a nonpermanent employee and is not

paying into the National Pension Plan. National and local debts have

also ballooned.

Feeling anxious about the future, people seem to be willing to let

the DPJ run the government for a change. "Voters have greater

expectations for regime change than us," a mid-level DPJ member

said.

The DPJ, however, has passed up opportunities to take over the reins

of government over the last several years. At the party convention,

Ozawa declared that he will stake his political life on the next

Lower House election.

Interview with Masaki Taniguchi, associate professor at the

University of Tokyo

TOKYO 00000134 008 OF 017

The Tokyo Shimbun asked Masaki Taniguchi, a University of Tokyo

associate professor of modern Japanese politics, why the DPJ has

been able to enjoy high support rates since the Upper House election

last summer.

For one thing, the LDP has been sloppy. The party has yet to come up

with a plan to build a solid socioeconomic system since suffering a

crushing defeat in the Upper House election last summer. Although

the Fukuda cabinet seemingly wants to win greater public support by

implementing specific policies, there have been noticeable delays

and failures. Public opinion is that the DPJ is better than the

LDP.

The DPJ's plan to provide the child allowance of 26,000 yen per

month is a policy of interest to urban areas with dropping

birthrates. A plan to implement an income-subsidy system for farmers

is appealing to local districts, and another plan to reform the

pension system is a policy of interest to a wide range of people

from the young to elderly. The DPJ has been more skillful to play up

its livelihood-oriented policies than the LDP. It seems easy to find

reasons to support the DPJ.

The DPJ's shift toward bread-and-butter policies under the

leadership of Ichiro Ozawa seems to have struck a chord with general

voters.

But in terms of foreign and security policies, the gap between DPJ

supporters and its lawmakers is bigger than that of other parties.

The party has put some policies on the back burner because views in

the party are diverse. When that part comes under close scrutiny,

some might initiate a "political realignment game" in the capitol

district of Nagatacho irrespective of public expectations.

(4) Overheated row over gasoline tax between LDP and DPJ

ASAHI (Page 2) (Slightly abridged)

January 17, 2007

The Democratic Party of Japan (DPJ) held its annual convention

yesterday, in which President Ozawa defined the upcoming regular

Diet session as a session that will focus on the challenge of

lowering gasoline prices. He stressed his resolve to block the

government's plan to maintain the provisionally high tax rate on

gasoline. If related bills are not passed by the time of its

expiration in late March, gasoline prices will be lowered. Given

that the gasoline issue is directly linked to family finances, the

government and the ruling camp, out of a sense of alarm, emphasize

that (if gasoline prices come down,) local governments will suffer

revenue shortages and their finances will eventually be thrown into

confusion. Industrial circles concerned are also worried about the

overheated showdown over the gasoline issue.

"Now that the rises in gasoline and light oil prices are hitting the

people's lives, we must step up efforts in the Diet to scrap the

current provisional tax rate on gasoline, demonstrating our efforts

to the people. We must lower the current gasoline prices by 25 yen

(per liter)."

In the party convention in Yokohama, Ozawa positioned the regular

Diet session as the first step toward a general election and

stressed his enthusiasm to break the vested-interest structure over

TOKYO 00000134 009 OF 017

financial resources for road construction. Ozawa expects it will be

possible to obtain public understanding because gasoline rates are

part of living expenses. The Social Democratic Party (SDP) also

decided to call for abolishing the provisional gasoline tax rate.

With the Japanese Communist Party also joining them, the opposition

bloc now locks arms against the government's plan.

Under the DPJ's plot, the party would prolong deliberations in the

House of Representatives on a bill amending the tax special measures

law, which includes a measure to extend the provisional tax rate

beyond its expiration, up until early March and have the bill

expired in the House of Councillors. If the ruling camp resorts to

its two-thirds overriding vote in the Lower House, the opposition

camp will adopt a censure motion against the prime minister in the

Upper House, calling on the government to dissolve the Lower house

while boycotting deliberations "with an indomitable resolve," as

said by Diet Affairs Committee Chairman Kenji Yamaoka.

In a meeting of the national LDP secretaries generals held at party

headquarters yesterday, the secretary general of the Wakayama

Prefectural Chapter commented: "We want the government to make more

efforts to explain that the extension of the provisional gasoline

tax rate will be better for local people's lives. Our party is

behind the DPJ over this issue."

Reflecting such voices, the LDP leadership has drawn up a rollback

strategy. The leadership distributed to lawmakers materials

detailing that the abolishment of the provisional tax rate will

inevitably deal a blow to local finances and people's lives, with a

list of the expected amount of financial shortages to be accrued for

each local government. Deputy Secretary General Hiroyuki Hosoda

said: "Is it possible to win DPJ members in prefectural chapters

over to our side? We expect you to make efforts to persuade local

opposition members to be against the plan of lowering gasoline

prices."

LDP prefectural assemblies' members will hold a rally on Jan. 23 to

call for maintaining the provisional tax rate. About 20

DPJ-affiliated prefectural assembly members and DPJ lawmakers,

including House of Councillors member Yasuhiro, are also expected to

participate in the rally.

Concern is also growing in the DPJ. In the party convention

yesterday, a representative from the Aomori Prefectural Chapter

complained: "Local government heads are taking lead in preparing to

attack the DPJ, out of the dissatisfaction that it will be

impossible to construct roads and to use snowplows. I hope the party

leadership will give a full explanation on its policy."

Both ruling and opposition camps are concerned about public opinion.

In a speech in front of JR Sakuragi-cho Station in Yokohama City

after the party convention, DPJ Deputy President Naoto Kan

emphasized: "Public power is indispensable. I want you to stage

citizens' campaign to prevent the ruling bloc from using an override

vote in the Lower House.

(5) No criticism against Ozawa raised in DPJ in order to win Lower

House race; Ozawa instead strengthens self-confidence

SANKEI (Page 5) (Full)

January 17, 2008

TOKYO 00000134 010 OF 017

The main opposition Democratic Party of Japan (DPJ or Minshuto)

stressed in its annual convention yesterday a policy of forcing

Prime Minister Yasuo Fukuda to dissolve the House of Representatives

as early as possible. Advocating its determination to scrap the

provisional gasoline tax, the DPJ is expected to turn up the heat on

the government of Prime Minister Yasuo Fukuda with such issues as

the government's mishandling of pension premium payment records.

Diet Affairs Committee Chairman Kenji Yamaoka stated in a street

corner speech that the DPJ would present a censure motion against

the Prime Minister if the ruling coalition takes a lower chamber

override vote on annual revenue-related bills to maintain the

provisional tax rates. In the annual convention, however, no

criticism was raised against President Ichiro Ozawa's dogmatic acts.

This appears to be the weakness of the DPJ, which relies on Ozawa's

political power.

When asked in a press conference after the convention about

criticism against his conduct of having left the plenary session on

Jan. 11 of the Lower House, Ozawa responded in a strong tone: "I

promised from before to go to Osaka to support the gubernatorial

campaign. As party head, I make my own priorities about my own

duties." He rebutted with his argument mixed up the official duties

of cabinet ministers and party duties: "The prime minister and state

ministers do not attend all plenary sessions, do they? Why do you

criticize me but not them?"

In the DPJ there was a view critical about Ozawa's abstention from

voting. Some DPJ members were perplexed at his act. Concerned about

more criticism of Ozawa coming up, Secretary General Yukio Hatoyama

and other senior party members apologized on behalf of Ozawa. In the

press briefing, Ozawa bluntly said, "I don't know what the secretary

general talked about."

It seems that the fact that there was no view criticizing Ozawa in

the convention is one of the reasons Ozawa has bolstered his

self-confidence.

A veteran lawmaker explained: "In a bid to win the Lower House

election, the DPJ has to rely on Ozawa's political power. It is not

time to criticize him." The said lawmaker made this comment: "The

political dynamics that is the same as the one in the internal

uproar last November over Ozawa's on again off again resignation is

now operating."

There were DPJ members who expressed dissatisfaction to reporters.

The party executives intend to conduct soon an opinion poll in all

the Lower House single-seat districts. Election Campaign Committee

Hirotaka Akamatsu said: "(Looking at the results of the survey) we

may change candidates." This appears to become one of the reasons

for preventing DPJ members from criticizing Ozawa.

The DPJ considers March the best chance to force the Fukuda

government to dissolve the Lower House to call a snap general

election because the annual revenue-related bills on the provisional

tax rates, including the gasoline tax, are set to expire at the end

of March.

The government and ruling parties initially pledged to complete the

work of matching pension accounts that remain unidentified by the

end of March as well. Therefore, the DPJ intends to force Fukuda

dissolve the Lower House around that time.

TOKYO 00000134 011 OF 017

Yesterday after the annual convention, a group of junior and

mid-level lawmakers calling for reducing the gasoline prices, which

was formed on Jan. 15, gave street corner speeches in front of JR

Sakuragicho Station in Yokohama.

Among regional organizations of the DPJ and local assembly members,

there still remains a view cautious about abolishing the provisional

tax rates as they are concerned that road projects will be delayed.

Another issue remains unsolved is to form a coalition of opposition

parties. The opposition camp failed to reach a consensus over how

their response to the new antiterrorism special measures bill in the

latest extraordinary Diet session. If a similar thing happens, "We

will be unable to force the Prime Minister to dissolve the Lower

House for a general election in March; as a result, we may have to

act on the defensive," said a senior member. The DPJ is in financial

difficulty, with Financial Committee Chair Taisuke Sato saying,

"Although the leadership says funds should be mainly allocated to

the election campaign, our party has a shortage of money. We will

collect the deeds of the houses of senior party members to get

loans." There are a number of hurdles for the DPJ to overcome before

taking over power.

(6) Sapporo to call for self-restraint on events at three parks

before and after Lake Toya Summit, as security measure against

violence or terrorist acts

MAINICHI online (Full)

January 12, 2008

The Sapporo municipal government announced on Jan. 11 that if

applications are filed for events planned at Odori, Nakajima, or

Maruyama parks in Chuo Ward during the July 1-11 period, before and

after the Lake Toya Summit, the government will ask their sponsors

to cancel the events themselves or to change the places or times.

This measure stems from the fear that events in the central part of

the city may lead to violence or terrorist acts. The municipal

government explains that this is not a regulation but a request.

However, non-government organizations (NGOs) and civic groups,

taking the measure as a move to restrict gatherings and speech,

asked the city not to restrict the use of "parks open to the

citizens."

An official of the city's administrative division said: "This is a

measure giving top priority to the safety of the citizens. Ordinary

gatherings will not be subject to the measure." Sapporo has in mind

the Heiligendamm Summit, at which a large-scale demonstration was

staged in the area and many people were injured or arrested in

clashes between police and demonstrators.

The city explains that if an application is filed after the issuance

of a request and if it is judged the planned event would not bother

other people, based on the city ordinance on parks, the city would

give permission. Even so, there are no definite standards. For

gatherings or demonstrations in the three parks, permission from the

municipal government is needed. Given this, NGOs are concerned that

the city's move might become a regulatory measure in effect.

Representative Koji Akiyama of the G-8 Summit Civic Forum Hokkaido,

which has already applied for permission, complained: "It is

excessive to restrict the use of the parks that should be opened to

the public."

TOKYO 00000134 012 OF 017

Free PMF concert canceled

The municipal government has decided to cancel the annual Odori Park

concert, a free concert as part of the international education music

festival scheduled for July 6. Regarding a flower festival, the

Sapporo summer festival, the creation of a flower garden, and a flea

market to be held at Odori Park, as well, coordination is underway

to delay the dates.

(7) Australia's new government intensifies antiwhaling position,

urges Japan to stop killing whales

TOKYO SHIMBUN (Page 6) (Full)

January 16, 2008

Michio Yoshieda, Manila

The Australian Labor Party-led government, which was established in

last December, is bolstering its antiwhaling position by mobilizing

patrol boats to watch Japanese research whaling vessels. When the

new government was formed, it committed itself to implementing

hard-line policies. Perhaps because of this stance, it has behaved

in a way quite different from its predecessor government. Yesterday,

antiwhaling activists including one Australian from an environmental

protection organization created a commotion by jumping aboard a

Japanese research whaling vessel on the high seas.

"The Australian government will formally urge Japan to stop killing

whales." Both Foreign Minister Smith and Environment Minister

Garrett of the Rudd government made this remark last December, when

they described Japan's research whaling as a meaningless and cruel

act. The two ministers declared they would put all their efforts

into preventing whaling.

In Australia, whales are considered a symbol of environmental

protection, so opposition against whaling is deep-seated among the

people. The former Howard administration, mainly consisting of

members of the Liberal Party, was also opposed to whaling, but the

Labor Party in its election campaign criticized the Howard

government as being lenient on whaling and declared it would be

ready to send naval vessels to track the Japanese whaling fleet. The

Labor Party also announced it would conduct monitoring when a new

government was launched.

Monitoring includes watching research whaling by patrol boats and

air planes, reinforcing the coalition of antiwhaling countries at

the International Whaling Commission (IWC), and making protests

against whaling. Furthermore, the Labor Party reportedly has a plan

to send a special envoy for protection of whales to Japan in order

to press it to stop whaling.

Monitoring is a visible, concrete action, so the Labor Party has

drawn a lot of responses. The Customs' patrol boat "Oceanic Viking"

and airplanes are tracing the Japanese whaling fleet navigating in

the Antarctic Ocean. (The Labor Party) also says it will collect

"evidence," such as photos, envisioning the possibility of taking

the case to an international court. It is working for that end, but

the government has been silent on the details of the Labor Party's

activity. When asked about relations with Japan, Foreign Minister

Smith reiterated that "because relations with Japan are close, they

will not be affected." But some of the opposition parties are

voicing concern about possible adverse effects.

TOKYO 00000134 013 OF 017

Local media and environmental protection groups are inciting the

government. Regarding monitoring, for instance, they criticized the

Labor Party as being slow to implement it. Three weeks after the

announcement of monitoring, the party started such action, but some

criticized monitoring as lacking substance or criticized the party

as apparently being hesitant and not serious about monitoring

Japanese ships.

Meanwhile, on Jan. 15, the Federal Court of Australia issued an

order for research whaling in the protection zone designated by

Australia to be stopped. This order has no binding force in terms of

international law, but the anti-whaling campaign in that country is

likely to further heat up.

(8) Kisha no Me (Reporter's eye) column by Nakae Ueno: Okinawa faces

contradictions between U.S. bases and economic packages

MAINICHI (Page 6) (Abridged)

January 17, 2008

Nakae Ueno

I visited Okinawa in last December to collect news materials for a

serial titled "The Age of 'Emperor Moriya." This serial was to delve

into the areas of defense policy in which former Administrative Vice

Defense Minister Takemasa Moriya was involved. When I was collecting

news information in the prefecture, I realized that contradictions

existed between the presence of U.S. military facilities and

economic packages offered by the central government.

"The problem Okinawa is facing is also a 10-year-old pending issue

for me. No person other than me can explain why 10 years have been

lost," Moriya told me in the fall of 2005, when I visited him before

being transferred to the Mainichi Shimbun's West Japan Head Office.

In response, I said, "I'm going to gather news materials in

Okinawa."

"The lost 10 years" point to the problem of the return of the U.S.

Marine Corps Futenma Air Station (in Ginowan City, Okinawa) to

Okinawa, which has become a political challenge for both Japan and

the United States following the occurrence of a rape of an

elementary school girl by U.S. soldiers. Agreement on the full

reversion of the Futenma base was reached in 1996 between Prime

Minister Ryutaro Hashimoto and U.S. Ambassador to Japan Mondale.

Local protests greeted the plan to relocate Futenma to an offshore

airfield.

Later, Japan and the U.S. struck a deal on a plan to relocate the

Futenma base to the coastal area of Camp Schwab. But the way Japan's

central government and the U.S. government negotiated that plan,

without consulting Okinawa, resulted in strong objections in

Okinawa. The Defense Agency (now Ministry of Defense) continued

negotiations with Nago City and later added changes to the initial

plan and decided to construct two airstrips that would be V-shaped.

In May 2006, Japan and the U.S. again reached an accord (on the

V-shaped airstrips plan). But Okinawa remains unconvinced even now

two years after the accord was reached. It continues to call on the

central government to alter the plan. Strains continue between

Okinawa and the central government.

Why has there been a lost of a decade? I will answer the question

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for Moriya. The reason is because the relocation of the Futenma base

and a package of economic development measures for the northern part

of Okinawa have been made a set. I felt the remarks made by Moriya

just before he was arrested were on target: "The governor is the

problem. Isn't there anyone among the heads of municipalities in the

northern region of Okinawa who is willing to play the role of a bad

guy?"

The initial reason dates back a decade. The central government came

out with a set of economic promotion measures for 12 municipalities

in the northern part of Okinawa in order to influence a referendum

in Nago City on the construction of an offshore heliport, but the

result of the referendum was that a majority opposed the

construction. In December 1997, however, Tetsuya Higa, then mayor of

Nago City, accepted the construction plan on the condition that a

package of economic measures would be provided to the northern

region, but he then declared he would step down as mayor. After some

bumps and detours, the Okinawa governor expressed his opposition to

the economic package for the northern region. The package was being

implemented in line with a promise that the package would be worth

100 billion yen over 10 years starting in 2000.

By obtaining cooperation from those heads of municipalities in the

northern region who sought to continue the economic package, Moriya

forced Okinawa to accept the V-shaped airstrips construction plan.

He then decided to halt implementing the package, citing as the

reason that "if they continue to receive money even though there has

been no progress on the relocation plan, they are simply portraying

themselves as lacking self-reliance." Later, however, Moriya,

meeting with calls by heads of northern-region municipalities for

the continuation of the package, revived the package but in name

only. Until he stepped down as vice minister, Moriya would not allow

the budget for the package to be used.

The people of Okinawa denounced "carrot-and-stick approach" used by

the government for the set of economic measures for the northern

region. Moriya criticized the package as stemming from Okinawa's

"lack of self-reliance." But relations between the bases and such

economic measures go back to Okinawa's reversion to Japan in 1972.

Tsuneo Oshiro, professor emeritus at the University of the Ryukyus

SIPDIS

who was involved in the Okinawa Promotion and Development Plan

(currently Okinawa Promotion Plan) the central government had

hammered out when Okinawa was reverted to Japan, made this comment:

"The package of economic measures for Okinawa from the beginning has

been linked to the U.S. bases." "For the central government, the

primary purpose of the development plan is 'how to maintain U.S.

bases in a stable manner.' This purpose was made much clearer with

the addition of promotion measures including those for the northern

region, which were taken after the elementary school girl rape

incident," Oshiro continued. The central government offers financial

resources and works out projects to be implemented. Simply in terms

of the effects, the package of pump-priming measures for the

northern region is a microcosm of the economic promotion measures

for Okinawa as a whole.

In the 2006 gubernatorial election, in which incumbent Governor

Hirokazu Nakaima was elected, there were signs that the Okinawan

people were prioritizing economic affairs and were tolerating the

presence of the bases. But the reality is that because of the

existence of bases, Okinawa has no choice but to call for economic

measures. The more Okinawa seeks such measures, the more it finds

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itself unable to separate itself from the bases. This vicious spiral

has continued since Okinawa's reversion to Japan. The spiral has

been even worse after the agreement was reached on the return to

Okinawa of the Futenma base, whose theoretical purpose was to reduce

Okinawa's base burden.

Last month, the central government decided to lift the freeze on the

implementation of the set of economic measures for the northern

region with the aim of letting Okinawa sit at the table for talks on

the Futenma relocation. But this is not a real solution. Some 75

PERCENT of U.S. military bases in Japan are concentrated in

Okinawa, forcing it to shoulder most of the burden of the Japan-US

security alliance. If the central government forces Okinawa to

continue to play that role in the future, the first matter to do is

to discuss a new set of measures that will actually help Okinawa to

become economically self-reliant. The populace in Okinawa desire

neither a burden reduction in name only nor promotion measures

financed by the central government in return for Okinawa's

acceptance of the base burden. All this raises a fundamental

question about the Japan-U.S. security arrangements.

(9) Editorial: Bring about growth with M that can turn change

into opportunity

NIKKEI (Page 2) (Full)

January 15, 2008

It was revealed early in the new year that JFE Holdings and IHI have

started talks to integrate their ship-building businesses. Mergers

and acquisitions (M) are bound to become a major focus of

corporate management this year as well. The business environment is

unclear, what with such concerns as the slowing of the U.S. economy,

the soaring of natural-resource and energy prices, and plummeting

stock prices. We would like to see business managers opt for M

that will turn change into opportunity for corporate growth, instead

of their being swayed by the changes going on.

Japan's global share stands at only about 3 PERCENT

An increasing number of Japanese companies now use M as an option

for corporate management. However, M in Japan are not so highly

visible. According to Thomson Financial, a financial information

service provider, the value of M throughout the world last year

reached approximately $4.48 trillion, resetting a record high. Japan

was involved in less than 3 PERCENT of that activity. Given the

fact that Japan accounts for about 10 PERCENT of the aggregate

market value and gross domestic product (GDP) in the world, the

figure is small.

The subprime loan issue surfaced last summer. Since then, European

and American banks have become cautious about highly risky lending

of funds for purchases of companies, deteriorating investment funds'

capital procurement capability. As such, some take the view that the

global M boom has passed its peak.

However, it could be taken instead that now is the chance for

Japanese companies, whose financial structure is strong and

corporate performances are good. That is because there is a better

chance of carrying out M with lower costs, as can be seen in the

fact that competition with investment funds over target companies

for mergers and acquisition has decreased. Teijin President Toru

Nagashima said, "Now is the best opportunity to carry out M,

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looking at it from the opposite perspective." Canon President

Tsuneji Uchida and Mitsubishi Corporation President Yorihiko Kojima

SIPDIS

expressed in their New Year messages their determination to tackle

M in a proactive manner.

Of course, cost is not the only condition for a successful M For

a successful M, it is essential to first clarify a mid- to

long-term business strategy and goals to tackle at the

pre-negotiation stage. M are prone to fail to work if an

acquiring company tries to diversify its business into areas remote

from its main line of business, without having a basic policy

regarding which business areas should be strengthened.

Looking at companies that have expanded operations through M,

many of them clarified the main line of business to be strengthened,

as can be seen in that Nidec Corporation focused on motors and JS

Group Corporation centered on the diversification of housing-related

businesses. Kirin Holdings last year decided to purchase Kyowa

Hakko. It also acquired a leading Australian dairy products company.

These decisions are apparently made, based on the company's key

business areas of food and health.

Acquiring companies is not the only aspect of M Companies should

be positive about the idea of becoming a seller of business areas in

order to sell off unprofitable businesses for the sake of selecting

out and concentrating operations and introducing other companies'

capital, technology and management know-how. In particular, there is

large room for introducing foreign capital.

According to Recof, an M service provider, foreign companies

acquired a record number of 308 Japanese companies last year. Japan

in May last year lifted a ban on triangular mergers, which enable

foreign companies to buy Japanese companies using their own stocks

as merger consideration. However, there was only one successful case

last year -- the purchase of Nikko Cordial Securities by Citigroup

of the U.S.

Many companies now cross-hold stocks to fend off hostile takeover

bids. However, it would not be possible to attract capital both from

domestic and foreign investors, if they fail to show a growth

strategy to investors, giving the impression that their stance is

inward-looking. The global flow of money has drastically changed.

Investment funds, newly emerging countries, such as China, and

oil-producing countries in the Middle East have emerged as

investors. In order to attract global money, by changing the image

that Japanese companies have a closed nature, it may be worth

considering that Japan Airlines, for instance, which thinks itself

as Japan's representative carrier, procures funds from foreign

companies.

How to manage new company after M counts

Needless to say, it is important to produce management results after

the achievement of an M In an M between companies in the same

line of business, there are many cases in which expected effects

were not produced, because a merger between rival companies could

give rise to friction due to differences in their corporate

climate.

In the merger carried out by Nidec Corporation, President Shigenobu

Nagamori himself spearheaded a cost reduction effort and reform of

staff-consciousness in the merged company. Japan Servo, which it

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bought from Hitachi, had been running an operating deficit for two

straight terms until the previous term. However, its operational

performance moved into the black six months after the merger.

There is no fixed method of running a merged company. Kenjiro

Unshod, the founder of Tostem, a leading construction material

company, and the former chairman of JS Group Corporation, said,

"Whether businesses acquired through an M will get on track will

largely depends on who will manage those businesses." Selecting such

a person is one of the key jobs of the top leader.

When the top persons of previous companies share chairmanship and

presidency, how closely they communicate will largely determine the

integrity of the new company. A gap in the management policies of

the two top persons would bring about an internal split. Top

management personnel are responsible for paving the way for

producing synergy effects, by disseminating the management policy of

the new company.

DONOVAN