Cablegate: Japanese Morning Press Highlights 10/10/08

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SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 10/10/08

Index:

1) Japan to propose at G7 new IMF loans for newly emerging
countries, using reserve funds of Japan, China, etc., and aimed at
stemming global financial crisis (Nikkei)

War on terror:
2) Ambassador Schieffer welcomes pending passage of Japan's bill
extending the MSDF refueling mission in the Indian Ocean (Asahi)
3) PACOM Commander Adm. Keating stresses continuing importance of
Japan's refueling mission in the Indian Ocean (Nikkei)
4) U.S. sounds out Japan on extra assistance for mainland
Afghanistan, including funds for UN training, medical care
(Yomiuri)
5) Government having trouble responding to U.S. request for Japan to
provide additional assistance to Afghanistan due to fiscal
constraints (Yomiuri)
6) Anti-terrorist bill extending Indian Ocean mission to Jan. 2010
could be enacted as early as Oct. 24 (Sankei)

North Korea problem:
7) U.S. sounds out Japan about going along with removal of North
Korea from list of terrorist-sponsoring countries (Nikkei)
8) U.S. special envoy indicates that removal of North Korea from
terror-backing list will not be rushed (Yomiuri)
9) Tokyo has feeling of impasse on the abduction issue, but will
continue extending sanctions of North Korea (Asahi)

Election prospects:
10) Yomiuri poll finds 58 PERCENT of public willing to give the
Democratic Party of Japan a chance to run the country (Yomiuri)
11) Prime Minister Aso setting the environment for a general
election by instructing addition economic measures that might
require issuance of deficit bonds (Yomiuri)
12) Aso keeps putting off decision on Diet dissolution until after
October (Tokyo Shimbun)

13) Government plans to shelve plan to restrict foreign capital from
investing in domestic airports (Mainichi)

Articles:

1) Japan to propose at G-7 use of foreign reserves for IMF emergency
loans to rapidly emerging countries

NIKKEI (Top Play) (Excerpts)
October 10, 2008

The government will call on the International Monetary Fund (IMF) to
establish an emergency lending program that taps the vast foreign
currency reserves of Japan and other cash-rich countries to help
emerging countries reeling from domestic financial turmoil. The aim
is to contain the global financial crisis with the consolidation of
a framework for international financial assistance to countries that
need a large amount of fiscal funds to pump public money into their
domestic financial institutions. Finance Minister and State Minister
for Financial Policy Shoichi Nakagawa is to make the proposal at a
meeting of the Group of Seven (G-7) finance ministers and central
bankers to be held in Washington on October 10. He will also urge
China and oil-producing Middle Eastern countries with ample foreign
reserves to come on board.

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As the U.S. financial crisis spreads to Europe and emerging
countries, a batch of smaller countries are being forced to bail out
financial institutions that have assets that dwarf government
coffers.

Iceland, which has nationalized major domestic banks because of the
financial meltdown, declaring an emergency situation, is a typical
example of such a case. Its largest bank has assets that are six
times Iceland's GDP, which stands at approximately 1.2 trillion yen.
The second largest bank's assets are 3.7 times Iceland's economy.
Since that nation needs massive funds beyond its economic
capability, it is now undergoing talks with Russia to borrow
approximately 550 billion yen. The Icelandic government has decided
to guarantee all the deposits and bonds held by six domestic banks.
The challenge now is to secure funds to finance the plan.

Though the IMF allows member nations emergency access to funds
equivalent to their contribution amounts, there is likely to be an
increase in countries seeking way more than what they give.

Japan's proposal would lend funds beyond the usual amount to small-
and medium-size countries, whose management of the state could face
a serious setback with their fiscal funds depleted due to the
injection of massive amounts of money into financial institutions.
G-7 members, such as the U.S. and European countries, will not be
eligible for this assistance scheme.

The envisaged facility would be set up by the IMF, which would ask
borrower nations to submit a financial restructuring plan, including
drastic measures to clean up bad loans. Financing would be extended
upon approval of the IMF board.

The emergency financing is to be funded by the approximately 200
billion yen reserved for assistance to IMF member nations as well as
from loans provided, where necessary, by Japan and other countries
from their foreign currency reserves. Nakagawa will propose this
government plan at such venues as the G-7 and IMF-related meetings.
He will also seek cooperation from China and Middle Eastern oil
nations.

2) U.S. envoy welcomes refueling extension

ASAHI (Page 4) (Full)
October 10, 2008

The Diet is now expected to pass a government-introduced bill
amending a refueling assistance special measures law to extend the
Maritime Self-Defense Force's refueling activities in the Indian
Ocean. "We greatly welcome it," U.S. Ambassador to Japan Schieffer
told the press, including the Asahi Shimbun, in an interview
yesterday. "It may be difficult to dispatch troops (Self-Defense
Forces) under the Constitution," Schieffer said. "But," he added,
"we hope Japan will do something in Afghanistan, in addition to the
activities in the Indian Ocean." With this, he expressed hope that
Japan would take measures, including financial aid, to help
stabilize Afghanistan.

3) Refueling still important: U.S. commander

NIKKEI (Page 2) (Full)
October 10, 2008

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Defense Minister Yasukazu Hamada met with U.S. Pacific Command
(PACOM) Commander Keating yesterday evening at the Defense Ministry.
In the meeting, Keating requested Japan continue the Maritime
Self-Defense Force's current refueling activities in the Indian
Ocean. "It's still very important," Keating said. "We hope Japan
will continue the activities," he added. Hamada said, "I want to
make efforts so this can obtain Diet and public endorsement."
Takashi Saito, chief of the Self-Defense Forces' Joint Staff Office,
was also present at the meeting.

4) U.S. unofficially asks Japan for aid to mainland Afghanistan,
eyeing funds for training troops, medical services

YOMIURI (Page 1) (Full)
October 10, 2008

The U.S. government has sounded out the Japanese government for
financial assistance to improve Afghan troops' capabilities,
extensive medical services, including the dispatch of doctors, and
for aid to Provisional Reconstruction Team (PRT), according to
government sources yesterday.

U.S. Deputy Assistant Secretary of Defense Bobby Wilkes informed
Japan of the U.S. government's request for Japan's contributions in
the war against terror in Afghanistan when he visited Japan in late
July. Japan has reserved consideration of the possibility, citing
the need to make utmost efforts for domestic coordination to
continue the Maritime Self-Defense Force's refueling mission in the
Indian Ocean.

According to the sources, the U.S. believes that the number of
Afghan troops should be increased to about 130,000 to stabilize the
security situation in the nation. Estimating that nearly 2 trillion
yen would be needed to cover the troops' salaries and training
expenses, as well as to improve their equipment, the U.S. conveyed
to its allies its intention to ask them for more financial
contributions.

The planned medical assistance would cover entire Afghanistan, and
the U.S. expects Japan to dispatch doctors and help improve medical
facilities, such as hospitals. The bolstered medical services are
believed to also cover the treatment of sick and injured soldiers of
the International Security Assistance Force (ISAF). The Japanese
government has already provided financial aid to some of the PRT.
The U.S. government apparently hopes for Japan to make larger
contributions to this program.

5) Government worried over U.S. request for extra aid in
Afghanistan, given the fiscal constraints

YOMIURI (Page 2) (Excerpts)
October 10, 2008

The Japanese government is worried over what its contribution should
be to fight the war on terror in Afghanistan. Although the U.S.
government has unofficially asked Japan for extra contributions to
that country, Japan cannot easily reach a decision, for it faces a
number of problems such as making legal preparations, the security
situation in that country, and Japan's severe fiscal situation.

Chief Cabinet Secretary Kawamura said in a press conference
yesterday: "It is true that the international community, including

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the U.S., hopes Japan will make more contributions to ongoing
efforts in Afghanistan," adding: "The U.S. is aware that Japan
should make a decision to provide assistance on its own."

Japan has joined the war against terror in Afghanistan by offering
refueling service by the Maritime Self-Defense Force in the Indian
Ocean. To continue the service, it is necessary to get a bill
amending the New Antiterrorism Special Measures Law through the
Diet. Prospects are now in sight to enact the bill, as the
Democratic Party of Japan, which gives priority to dissolving the
House of Representatives, has taken a cooperative stance about the
bill. A Foreign Ministry source said: "The refueling operation is
safer and cheaper than personnel contributions on the ground of
Afghanistan."

In Afghanistan, however, a fight is intensifying between the Taliban
and the multinational force and the International Security
Assistance Force (ISAF), which are participating in Operation
Enduring Freedom (OEF). When many countries have decided to send
more troops to that nation, calls are growing for Japan to make
contributions on the ground of the nation.

Keeping such voices in mind, the Japanese government once looked
into dispatching helicopters possessed by the Self-Defense Force to
Afghanistan, but it had to give it up in the end because new
legislation is needed to do so. Taking such circumstances of Japan
into consideration, the U.S. has sounded out Japan on cooperation
centering on financial aid as its possible contribution.

6) Legislation to extend refueling mission until Jan. 2022 likely to
pass Diet on Oct. 24, at earliest

SANKEI (Page 2) (Excerpts)
October 10, 2008

A bill amending the New Antiterrorism Special Measures Law is likely
to pass the Diet later this month. The bill is designed to extend
the ongoing Maritime Self-Defense Force's refueling mission in the
Indian Ocean beyond its January expiration. This development
followed a suggestion yesterday by the Democratic Party of Japan
(DPJ), which is opposed to the bill, to put the bill to the vote in
a meeting of the House of Representatives Special Committee on Oct.
20. The bill will be voted down in the opposition-controlled House
of Councillors but will be reinstated by a two-thirds lower chamber
overriding vote on the 24th, at the earliest.

The legislation will make it possible for Japan to continue the
refueling operation, which Japan has labeled as its main
contribution in the war on terror, until January in 2022.

The Lower House Antiterrorism Special Committee decided in its
executive meeting yesterday to hold a session for explanations about
the rationalization for the government-sponsored bill and a
counterproposal by the DPJ today and deliberations on the bill on
the 17th and the 20th. The DPJ proposed in the meeting taking a vote
on the 20th. The bill is likely to be approved by a majority from
the ruling camp and clear the Lower House on the 21st.

The DPJ intends to vote the bill after few days of deliberations in
the House of Councillors. After it is voted down in the Upper House
on the 24th, at the earliest, the bill will be enacted by an
override vote in a Lower House plenary session the same day.

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The refueling service was suspended last November but was resumed in
February as the New Antiterrorism Special Measures Law was enacted
by a revote in the Lower House this January with approval from the
ruling camp. The said law is to expire on Jan. 15.

7) U.S. sounds Japan out on delisting of North Korea as state
sponsor of terrorism

MAINICHI (Page 2) (Full)
October 10, 2008

It has been learned that U.S. special envoy to the six-party talks
Sung Kim informally sounded Japan in his meeting on Oct. 8 with
Foreign Ministry Asian and Oceanian Affairs Bureau Director General
Akitaka Saiki Japan on the U.S. policy of delisting North Korea as a
state sponsor of terrorism if the United States and North Korea
agreed on the framework of verification of North Korea's nuclear
report. The Bush administration has been motivated to find a
breakthrough in the deadlocked situation in order to produce
achievements on the U.S.-DPRK negotiations at its final stage prior
to the presidential election in November.

In the meeting on Oct. 8, special envoy Kim briefed Saiki on the
details of the framework of verification discussed between
Washington and Pyongyang. Saiki elaborated yesterday to Prime
Minister Taro Aso. After closely studying the contents, the Japanese
government plans to discuss anew with the United States and South
Korea.

8) Delisting not ready yet: U.S. envoy

YOMIURI (Page 2) (Full)
October 10, 2008

Satoshi Ogawa

WASHINGTON-Sung Kim, the U.S. Department of State's special envoy
for the six-party talks over North Korea's nuclear programs, told
reporters yesterday at an airport in the suburbs of Washington that
the U.S. government has yet to decide whether to delist North Korea
as a state sponsor of terrorism. "We haven't made that decision
yet," Kim said. With this, he clearly denied some news reports
saying the U.S. government has told the Japanese and South Korean
governments that the United States would delist North Korea this
month. Kim returned home after briefing the Japanese and South
Korean governments on the results of the recent visit to North Korea
of Assistant Secretary of State Christopher Hill, chief U.S.
delegate to the six-party talks.

The Foreign Ministry's Asian and Oceanian Affairs Bureau Director
General Akitaka Saito, who represents the Japanese government at the
six-party talks, reported to Prime Minister Aso yesterday at his
office that the United States and North Korea have basically
concurred on procedures to verify North Korea's nuclear declaration.
The Japanese government will remind the U.S. government of Japan's
standpoint. "There's also a question mark about the agreement," a
government source said.

9) Abduction issue: Sense of frustration in government; Sanctions to
be extended against North Korea

TOKYO 00002824 006 OF 010

ASAHI (Page 4) (Full)
October 10, 2008

The government will decide in a cabinet meeting today to extend by
six months its sanctions against North Korea, which will expire on
Oct. 13. While the expectation is strong that the United States will
delist North Korea as a state sponsor of terrorism, Japan has no
choice but to deal with the abduction issue by using its independent
sanctions against Pyongyang. Given that, a sense of impasse has
emerged in the government.

Tokyo invoked its sanctions on Pyongyang on October 2006, extending
three times so far. The extension this time around is the forth one.
Japan has banned the freighter Man Gyong Bong from entering Japanese
ports, as well as imports from the North

Japan and North Korea agreed in a working-level meeting of their
foreign ministries in August that Japan would resume the travel of
people between the two countries and the entry of chartered planes
if the North set up an abduction investigation panel. Following the
abrupt resignation of then Prime Minister Yasuo Fukuda, North Korea
informed Tokyo of its decision to forgo the setting up of an
investigation panel. The government of Prime Minister Taro Aso asked
last week the North Korean side to fulfill its promise through its
embassy in Beijing, but it has not yet received any response.

Meanwhile, U.S. Assistant Secretary of State Christopher Hill
visited Pyongyang last week and he and his North Korean counterpart
seem to have reached a certain agreement. If the United States
removes North Korea from its list of state sponsors of terrorism,
Japan will lose a diplomatic bargaining card to use in negotiations
with Pyongyang.

10) Poll: 58 PERCENT willing to let DPJ take office, but 47 PERCENT
see DPJ as lacking competence to run country

YOMIURI (Page 2) (Full)
October 10, 2008

According to the Yomiuri Shimbun's Oct. 4-5 face-to-face nationwide
public opinion survey, 58 PERCENT were affirmative and 38 PERCENT
negative when respondents were asked if they thought it would be all
right to let the leading opposition Democratic Party of Japan
(Minshuto) run the government at least once. In the survey,
respondents were also asked about the governing competence of
political parties. In response to this question, a total of 67
PERCENT answered "yes" for the ruling Liberal Democratic Party.
When it came to the DPJ, however, public opinion was almost split,
with "yes" at 46 PERCENT and "no" at 47 PERCENT . The figures show
the current mood among voters accepting a change of government
between the ruling and opposition parties, irrespective of whether
or not the DPJ is competent to take office.

When asked if it is all right to leave the reins of government to
the DPJ, affirmative answers accounted for a majority among men,
women, and all age groups. Among DPJ supporters, "yes" reached 95
PERCENT . Among floating voters with no particular party
affiliation, "yes" accounted for 61 PERCENT . Even among LDP
supporters, 38 PERCENT were affirmative.

However, the floating voters were also split about the DPJ's
governing competence, with "yes" accounting for 46 PERCENT and "no"

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at 44 PERCENT . Among those who said it is all right to leave the
reins of government to the DPJ, 66 PERCENT answered "yes" to the
question asking if the DPJ is competent to take office, with 29
PERCENT saying "no." In the survey, respondents were also asked to
give their impressions of Prime Minister Aso and DPJ President
Ozawa. To this question, a "good impression" of the prime minister
accounted for 57 PERCENT , with a "bad impression" at 36 PERCENT .
The "good impression" of Ozawa was at 35 PERCENT , and the "bad
impression" at 59 PERCENT . Even among those thinking it is all
right to leave the reins of government to the DPJ, the "good
impression" of Ozawa was at 49 PERCENT , with the "bad impression"
at 45 PERCENT .

The survey was conducted with a total of 3,000 persons chosen from
among the nation's voting population. Answers were obtained from
1,787 persons (59.6 PERCENT ).

11) Prime Minister Aso laying groundwork for Lower House election

YOMIURI (Page 4) (Abridged slightly)
October 10, 2008

Prime Minister Taro Aso yesterday instructed the ruling coalition of
the Liberal Democratic Party and New Komeito to draw up an
additional economic stimulus package in response to the global
financial crisis. He also is laying the groundwork for dissolving
the House of Representatives. In an attempt to appeal the
government's efforts to the public, some ruling parties' members are
saying that issuing deficit-covering government bonds is inevitable
in order to compile a large-scale budget for the additional economic
package.

It is extremely rare for a prime minister to issue such an
instruction while the Diet is deliberating on a supplementary budget
bill. Aso last night told the press corps at the Prime Minister's
Official Residence:

"The (economic) situation has become severer. We are now in a
situation to consider at least a pump-priming economic package and
measures to extend financial help to small and midsize companies."

The ruling camp is motivated to use the additional economic stimulus
package as a tool to win the next Lower House election, with one
official saying: "We will be able to campaign in the general
election under the slogan of the ruling coalition attaching priority
to economic recovery." The ruling bloc's scenario is that the
economic package would be compiled in October and that the Lower
House would be dissolved for a snap election in mid-November.

Therefore, the ruling camp will now draw up a new economic package.
The ruling camp's financial crisis taskforce plans to come up with
highly-effective measures with an eye on the Lower House election. A
person close to Aso said yesterday:

"The extra budget, which is now being deliberated on at the Diet,
was drawn up by the Fukuda administration. We would like to show
Aso's political identity in the planned additional economic stimulus
package."

Regarding fixed amount income and residential tax cuts, which have
been decided to implement before the end of this fiscal year, the
amount of tax cuts per capita will be hammered out in the future.

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The New Komeito, which has strongly called for the implementation of
the fixed amount tax cuts, has envisaged a 2 trillion scale tax cut.
The additional economic package would include a further cut in
expressway tolls, and tax reductions in housing loans and business
investment.

A senior LDP official said: "With the election drawing closer, we
should not be stingy." Therefore, it is certain that the scale of
the second extra budget will exceed 2 trillion yen. There is a view
in the New Komeito that to cover the fixed amount tax cuts and tax
reduction in housing loans, a 10 trillion yen scale extra budget
should be drawn up to.

12) Will expected October Diet dissolution be put off? Ruling camp
to boil down date after supplementary budget passed, but end of the
year timing could hurt economy

TOKYO SHIMBUN (Page 2) (Excerpts)
October 10, 2008

With the heightening possibility of the economy slipping into
recession, the timing of dissolving the Lower House for a snap
election is becoming unclear. Prime Minister Aso has stressed that
the state of the economy takes precedent over Diet dissolution, and
calls are rising within the Liberal Democratic Party (LDP) for
putting it off until the end of the year or the beginning of next
year. However, when consideration is given to such factors as the
compilation of the fiscal 2009 budget bill, there are some problems
with and end of year, beginning of next year scenario for Diet
dissolution. What choice will the Prime Minister take? We flip
through the pages of a calendar leading the Lower House election
that remains elusive.

Deliberations in the Upper House Budget Committee on the fiscal 2008
supplementary budget, which the Prime Minister has positioned as his
top priority item, began yesterday. The budget bill is expected to
pass the Diet on Oct. 16.

On the other hand, the Prime Minister on Oct. 9 ordered the ruling
camp to come up with additional measures to stimulate the economy.
The outline of the new package is likely to be readied after the
20th. With this, the goal of dissolving the Lower House immediately
after passing the supplementary budget has disappeared.

Passage of the bill amending the New Anti-Terrorism Special Measures
Law that would continue the oil refueling operations in the Indian
Ocean is expected late this month. If this bill, too, is considered,
the Prime Minister's range of options for October dissolution has
narrowed greatly.

LDP Secretary General Hiroyuki Hosoda and New Komeito Secretary
General Kazuo Kitagawa yesterday morning instructed the Diet Affairs
Committee chairmen of the parties to aim at entering deliberation on
bills related to creating a consumers affairs agency immediately
after the refueling mission bill is passed. Since the Diet schedule
after the ruling camp passes the supplementary budget is becoming
filled with one bill after another, the timing of Diet dissolution
is being put off, creating much speculation about what lies ahead.

There is a strong view that if the second supplementary budget is
presented to the Diet, it will likely be in early November at the
earliest. In case Diet dissolution is postponed that far, the

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opposition camp will definitely react sharply. If consideration is
given to deliberations in the Upper House, it is questionable
whether the bill could be passed by the 30th of November, when the
session ends.

If the Prime Minister decides to dissolve the Diet after that,
tackling tax reform in December and compiling the fiscal 2009
national budget draft will have to be put off until early next year.

Some lawmakers in the LDP are calling for dissolving the Diet at the
start of the regular Diet session in January, but in this case, it
would become impossible to pass the fiscal 2009 budget before the
end of the fiscal year (end of March). This kind of concern surfaced
in meetings of the party faction on the 9th.

Since dissolution at the end of the year or beginning of next year
would encounter such kinds of obstacles, the date of the Lower House
election, according to former Finance Minister Ibuki, would create
for the legislature turmoil in the economy unless it is set before
mid November or after April next year.

13) Government puts on hold plan to restrict foreign investment in
airport operating companies

MAINICHI (Page 1) (Full)
October 10, 2008

The government's study council on restricting the operations of
airport-related companies (chaired by Chuo University Law School
Professor Seiichi Ochiai) on October 9 reached agreement that
restrictions on airport-operating companies should be premised on
the principle of non-discrimination between domestic and foreign
companies. Vice Transport Minister Ken Haruta indicated his
ministry's stance of respecting this perception of the panel,
saying, "We take the panel's decision seriously."

A prevailing view heard during discussions by the panel was that
both domestic and foreign investors are negative toward the idea of
only regulating foreign investors. As such, the panel will now
likely focus discussions on "large-lot restrictions," or setting a
cap on the number of shares one investor can purchase whether
domestic or foreign. Discussions also will include "conduct
restrictions," in which cooperation would be sought to prevent
terrorism and hijacks. The Transport Ministry plans to draft a
restriction plan, based on the decision reached by the panel and
submit a bill amending the Airport Law to the regular Diet session
next year.

Narita International Airport Corporation will soon to join the stock
market. An Australian investment bank last fall took a 19.89 stake
in Japan Airport Terminal Co., which controls and manages Haneda
Airport. Such cases prompted the government to hold discussions to
look into placing restrictions on foreign investment in airports.
There has been a growing concern that a purchase of an airport by a
foreign investor would damage national interests and cause security
concerns.

For this reason, the Transport Ministry at first tried to
incorporate a regulation designed to constrain foreign companies'
investment ratio in airport-related companies below one-third.
However, it gave up on the plan for the time being with both the

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ruling camp and some cabinet ministers citing that it is against the
national strategy of boosting investment in Japan. An export panel
was then established in August under the jurisdiction of the chief
cabinet secretary and the transport minister. The panel has been
discussing the way such restrictions should be set.

SCHIEFFER

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