Domestic Politics

Special Measures Law on Humanitarian and Reconstruction Assistance for Iraq

After fierce debate the controversial bill dealing with the dispatch of the Self- Defense Forces to Iraq was finally approved by the Upper House early on Saturday 26 July.

Despite attempts to prevent a vote on the bill by opposition parties, the ruling coalition succeeded in getting approval of its plan to send troops to the Middle East by 136 to 102. The law will be in force for four years and might see over a thousand SDF members possibly sent to Iraq.

The scenes following the termination of debate in the Foreign Affairs and Defense Committee just before the plenary session resembled a mini riot as lawmakers opposed to the bill formed a scrum around the chairman and jumped on tables in an attempt to protest what they regarded as his forcing of a vote. Previously the opposition members had exploited a parliamentary rule suspending debate on any bill on which a minister subject to a no-confidence motion is working. By tabling such motions against the Foreign Minister, the head of the Defense Agency and the entire Cabinet they were successful in halting the bill's progress for a while. The ruling coalition however used its democratic majority to vote down these motions allowing consideration of the bill to resume.

The law, which passed the Lower House earlier in the month, sets out the conditions under which SDF personnel sent to Iraq would work and what sort of tasks they would carry out. The government used UN Security Council Resolution 1448 as the main legal basis for the legislation. That resolution calls on nations to contribute to the reconstruction of Iraq. The contentious nature of the issue caused divisions within the ruling coalition itself during preliminary discussions of the bill. Sections dealing with the SDF's responsibilities in disposing of chemical and biological weapons were excised from the draft text after the Executive Council of the LDP protested that they went beyond what UNSCR 1448 called for. There was also much debate about whether SDF troops would transport weapons and ammunition for the US and UK forces in Iraq. US commanders had requested that the SDF be responsible for providing "rear support" to their troops. Lawmakers had argued that this would violate the constitutional ban on collective self-defense and the use of force in settling disputes. The final form the bill took left unclear the issue of weapons transportation, and Foreign Minister Kawaguchi put off questions about where the units could be safely deployed by saying it would be irresponsible for her to demark areas before a serious study has been undertaken. LDP Secretary General Yamasaki Taku said he was confident that secure areas could be found for the SDF to work in. US military authorities reportedly requested that Japanese units be sent to Balad, north of Baghdad, to provide water for US units stationed there. The town is in the so-called Sunni Triangle, an area where US forces have come under repeated attack. Given the unsettled nature of the country the use of weapons for self-defense by deployed forces was another topic that stimulated debate. The bill approved by the Diet says that use of weapons "must be limited in cases of self-defense and defense of other people under their (SDF) control."

The exact nature of the deployment is still subject to some debate. It is unclear whether the mission will be to provide rear area support to US and coalition troops or to support humanitarian missions. Despite the title of the law, the wording regarding the purpose of the mission is quite vague. It says that through the deployment the SDF will be "contributing to the securing of peace and security in the international community through the reconstruction of Iraq." US expectations were for practical assistance to their troops, hence the request regarding Balad. After the passing of the bill by the Upper House Defense Agency head Ishiba Shigeru seemed to signal a rejection of this role by saying "We want to begin the deployment in a way that will be understood and supported. To accomplish that, the emphasis will fall on humanitarian and reconstruction aid." No final decisions on where the SDF will be sent or what specific roles they will carry out is likely to be taken before a panel from the Foreign Ministry, the Defense Agency and the Japan International Cooperation Agency report the findings of their inspection trip to the Middle East.

The DPJ - Liberal Party Merger

After trying and failing once before, the DPJ and the Liberal Party finally agreed on a formula that would allow them to merge before the next general election. Key concessions by Liberal Party leader Ozawa Ichiro removed the obstacles that had prevented agreement being reached in previous negotiations in May of this year.

According to the terms of the concord the procedure will not so much be a merger, as a dissolution of the Liberal Party. The DPJ name, policy platform and party code will all be retained while the Liberal Party will cease to exist. Pending agreement by the thirty Liberal Diet members, the new DPJ will become the largest opposition in the Diet. A combination of fears about the Liberal Party's electoral future and a desire to unite to unseat the ruling coalition seem to have persuaded Mr. Ozawa to relent on several points that had de-railed previous merger talks.

Other Issues

JULY 4 The Special Measures Law on Humanitarian and Reconstruction Assistance for Iraq passed the Lower House on a standing vote. The three parties of the ruling coalition supported the measure while opposition parties opposed it. Two influential members of the LDP abstained in protest that an open vote was not allowed.

JULY 6 Kodera Hiroyuki was elected to a fourth term as governor of Gunma Prefecture, defeating his rival Yoshimura Shunichi by about three hundred thousand votes. Both candidates ran as independents

JULY 7 253 plaintiffs hoping to have recent anti-terrorist legislation declared unconstitutional lodged an appeal with the Tokyo High Court against the dismissal of their suit by a Saitama court in June.

JULY 9 The government released a revised ODA charter reflecting greater emphasis on peace building and combating the sources of terrorism. The draft stated that Japan would take greater efforts to promote security and prosperity when considering overseas development assistance in the future. Japan is the world's second largest aid donor by total after the United States of America. The ODA budget for FY03 is ¥857.8bn.

JULY 10 A controversial bill authorizing courts to hospitalize mentally ill people who are facing serious charges but are judged incapable of standing trial was passed into law by the Upper House.

JULY 11 Asada Goro and Yasuda Jitsuo, two former members of the Nagasaki Prefecture LDP were found guilty of illegally demanding political contributions from local construction firms. The two were given suspended sentences by a Nagasaki court for approaching construction firms holding government contracts and demanding contributions to the governor's re-election campaign.

JULY 18 Saitama Prefecture governor Tsuchiya Yoshihiko officially resigned after his daughter and one of her aides was arrested on suspicion of violating the Political Funds Control Law. Ichikawa Momoko, who headed her father's fund raising apparatus, and Ozaki Harumi were arrested on the 10th for allegedly failing to declare ¥113 million worth of political donations over a five-year period. Ichikawa is accused of using some of the money to pay off the debts of a firm she ran. Initially Tsuchiya had refused to resign, denying any knowledge of his daughter's activities. He agreed to step down on the 12th after Tokyo investigators looking for documents searched both his official and private residences, as well as his office. Mr. Tsuchiya, a former speaker of the Upper House of the Diet, was in the middle of a third four year term and was the head of the National Governors Association.

JULY 18 Former SDP policy committee chairwoman Tsujimoto Kiyomi was arrested along with three others on fraud charges. The accusations stem from a March 2002 article in the magazine Shukan Shincho which accused Tsujimoto of ‘name lending', a process in which a Diet member claims state salaries for office staff who do not actually undertake any work. In Tsujimoto's case she is accused retaining most of the salaries of two aides, Sasaki Yoshie and Henmi Masako, for other office expenses and private use while paying them between fifty and seventy seven thousand yen a month. After the story broke Tsujimoto went before the Lower House Budget Committee and told the chairman that she often received political advice from one of the secretaries, Sasaki, over the phone. Shortly afterwards she resigned, dramatically removing her Diet members badge at a press conference. In August of the same year her office said that Tsujimoto had repaid all the money fraudulently claimed from the state along with interest. The former Diet member's arrest refocused pressure on SDP leader Doi Takako. It was her aide Goto Masako who allegedly told Tsujimoto how to carry out the fraud and introduced her to Henmi, who was working for another SDP member at the time. Goto was one of the three along with Henmi and Tsujimoto who was arrested. At a press conference Mrs. Doi said she had not considered resigning. She said she bore no responsibility for the fraud, nor did the party as a whole condone such activities. Some leading SDP members have accused the investigators of political motivation. Aside from the embarrassment to Doi, some SDP members have hinted at a political motivation behind the arrest. Tsujimoto was a leading figure in the campaign to expose Suzuki Muneo, an LDP member currently in prison awaiting trial on charges of bribery and corruption. She had gone so far as to call him a liar to his face after he testified to the Diet. Following her own resignation in March 2002 Tsujimoto, who remains popular in her electoral district in Osaka, said that she fully intended running in the next Lower House election. With an election due in the next year her arrest will substantially damage her hopes for a comeback.

JULY 23 The LDP decided on September 20 as the date for its Presidential Election. Campaigning will begin on September 8.

JULY 27 Ando Tadahiro, a former civil servant, beat challengers Makino Toshi and Sato Makoto to become governor of Miyazaki Prefecture. Mr. Ando ran as an independent candidate.

JULY 28 A former aide to the arrested Lower House member Suzuki Muneo was given a sixteen-month suspended sentence for violating the Political Funds Control law. Miyano Akira was convicted of conspiring to conceal over ¥100m in donations. He was also found guilty of charges that he had leaked confidential information to a Hokkaido firm on some of its competitors in a bidding contest for a government funded construction project on one of the disputed Northern Territories.

Business and Finance

Other Issues

JULY 2 Nissan Motor Co. announced that it will invest ¥55.56bn in its Barcelona plant to enable it to produce a Spots Utility Vehicle and small pick-up truck from 2005.

JULY 2 Two leading life insurance companies said that they would not cut yields on guaranteed yield policies even after the expected passage of a law that would allow them to. Asahi Mutual Life Insurance Co. and Nippon Life Insurance Co. told a policyholders meeting of their determination to maintain yield levels. Meiji Life Insurance Co. and Yasuda Mutual Life Insurance Co. announced that they would merge in January 2004 pending policyholder approval.

JULY 11 Kyushu Industrial Transport Co., a Kumamoto based bus company, became the first commercial firm that has approached the Industrial Revitalization Corp. for assistance in restructuring to announce details of its rehabilitation plans. The scheme involves ¥21.7bn worth of debt being forgiven by leading creditor banks and a re- focusing of company strategy on core operations. If the IRC approves the plan it will buy up the remaining debts of the bus company.

JULY 12 Vodafone Group PLC reached an agreement to sell its fixed line subsidiary Japan Telecom Co. to the US investment fund Ripplewood LLC. The cost is likely to be around ¥260bn

JULY 18 The Upper House of the Diet passed a bill allowing insurance companies to cut payouts on guaranteed dividend policies. Major life insurance companies have rejected the law pledging not to cut payouts.

JULY 20 Sources claimed that the Financial Services Authority knew that the capital adequacy ratio of Daiwa Bank, one of the banks that merged to form Resona earlier this year, was below the 4% level as early as autumn 2001. It was claimed by anonymous sources that the Daiwa over reported its reserve provision for bad loans and had booked excessive deferred tax assets inflating its capital adequacy ratio to 10.06%. The FSA was accused of not using its authority to force the bank to correct the problem. Last month Resona received a ¥2 trillion infusion of public funds, effectively nationalizing it, after its capital adequacy ratio fell below acceptable levels.

JULY 22 Japan's largest steel manufacturer Nippon Steel Corp. announced it was forming a joint venture with Shanghai Baoshan Iron and Steel Corp. to produce steel for the automotive and electronics industry in China.

JULY 23 The Bank of Japan announced that share purchases from banks have reached ¥1.506tr, halfway to the ¥3tr limit that the bank has set. Purchases, which began in November 2002, have slowed recently following the rise in share prices.

JULY 24 Sony Corp. announced a 98% decline in group net profit for the firs quarter of FY2003. The company blamed weak demand for consumer electronics and the absence of a follow up to the high grossing movie Spiderman from its motion picture division. Sales fell almost 7% compared to a year earlier to ¥1.6tr.

JULY 24 The Japanese government announced a rise in tariffs on imports of refrigerated beef to 50%. Beef importation rose by 17% in the first quarter allowing the Japanese government to raise tariff levels under a WTO agreement. Hardest hit by the decision will be beef exporting countries such as Australia and the United States. Some sources have put the cost to Australian producers as high as AUS$80m.

JULY 28 Following the lead of major European firms, Mitsubishi Corp agreed to buy 6m barrels of crude oil from Iraq over a five-month period. Beginning in August the trading firm will import 40,000 barrels a day of Basra Light crude oil.

JULY 28 Daihatsu Motor Co. announced a group net profit of ¥1.52bn in the first quarter of FY03, on sales of ¥238.87bn.

JULY 28 Canon Sales Co., the sole distributor of Canon Inc. products, said first quarter net profit fell 33% to ¥1.11bn despite a 4.6% rise in sales on the same period last year. The company blamed marketing costs and costs associated with the re-location of its head quarters in Tokyo. Canon Inc. itself announced a record 74.5% rise in group net profit for the first half of 2003. Strong sales of its range of digital cameras pushed total sales up 10.9% to ¥1.536tn.

JULY 31 Nissan Motor Co. announced a rise in sales of 2.7% in the first quarter. Total sales amounted to ¥1.65tn.

International Politics

The Azadegan Oilfield

July 1 marked a deadline in negotiations between the government of Iran and a state backed consortium of Japanese firms seeking to develop the Azadegan oilfield. The deadline came and went without any definitive agreement being signed, but the cause of this delay seemed to have less to do with economic and technical issues and more to do with political pressure applied by the US government.
Japan imports over 90% of its energy needs and has been long pursued a policy of maintaining good relations with middle eastern states to obtain a diversified supply. When Arabian Oil Co. lost its right to concessions in the Khafji Field in Saudi Arabia in 2000 energy officials began looking for an alternative source. Since November 2000, when the Trade Minister Hiranuma Takeo obtained preferential negotiating rights, a group of oil firms and trading houses including Tomen Corp. and Inpex Corp have been engaged in discussions with Tehran on obtaining development concessions on the large Azadegan oilfield in western Iran. During President Khatami's visit to Japan in July 2001 it was decided that both sides would aim to agree terms for the development within the next two years. The field is estimated to contain about 26bn barrels and could supply three hundred thousand barrels a day for the foreseeable future. Pressure from the United States however slowed moves towards an agreement on joint development. Iran was one of the countries included in President Bush's axis of evil and Washington has accused Tehran of seeking to develop nuclear weapons. The International Atomic Energy Authority has reported that Iran is constructing uranium enrichment facilities and other architecture of weapons making. Leading American officials have conveyed their desire for Japan to refrain from investing in the Islamic Republic. Speaking on June 30 at a State Department press conference spokesman Richard Boucher said he felt that now would be "a particularly unfortunate time to go forward with any new oil and gas deals" in Iran. After the missed deadline Iranian officials said that firms from other companies would be invited to negotiate for concessions but that a deal with the Japanese consortium was still possible. The bind that Japan has been placed in presents its leaders with a difficult choice. Long term Japanese energy strategy has emphasized diversified, stable sources. Yet this must be balanced against fears of nuclear proliferation and the need to manage alliance relations with Washington. Many fear that going ahead with the Azadegan investment would send the message that Japan has double standards over nuclear proliferation. In the case of North Korea, which is close to, and antagonistic towards, Tokyo the government is resolutely opposed to nuclear proliferation and seeks US assistance in managing the crisis. Investing in Iran, which is also alleged to have obtained missile technology from Pyongyang, would require some explaining on behalf of the Japanese government. Chief Cabinet Secretary Fukuda Yasuo said that no contract would be signed until Japanese concerns about nuclear proliferation were addressed and has urged Tehran to sign up to an IAEA protocol allowing more invasive inspection of its nuclear facilities. The US and Japan have also discussed holding the first set of energy talks since 1996 to discuss the issue. Economy, Trade and Industry Vice -Minister Murata Seiji and Okamoto Iwao, head of the Natural Resources and Energy Agency have met with their US counterparts to discuss the possible agenda for such talks. Hiranuma Takeo who played such an important role in securing the Japanese consortium's negotiating rights summed up the situation when he said "I know Japan-US relations are important …(but) I want the US to understand that we have been in negotiations since 2000."

JULY 2 The Japanese representative to talks in Washington concerning KEDO, the consortium in charge of building nuclear reactors in North Korea under the Joint Framework Agreement, said that construction should be suspended. The 1994 agreement stated that in return for North Korea's abandoning of its nuclear weapons program the international community would provide alternative sources of energy through oil shipments and the construction of Light Water Reactors. Oil deliveries were stopped in December 2002 after North Korea admitted it was pursuing a covert nuclear weapons development plan.

JULY 3 The Defense Agency announced plans to recall the Aegis destroyer Kongo from the Indian Ocean to provide homeland defense against a possible missile threat from North Korea. The supply ship Haruna will replace the Kongo until another Aegis equipped ship relieves it.

JULY 7 The government said it planned to launch two new spy satellites in September to increase its coverage of North Korea.

JULY 12 Eto Takami, joint leader of the Eto-Kamei faction in the LDP, was criticized by the governments of South Korea and China as well as by an association of Koreans citizens resident in Japan for his comments on the pre-war Japanese empire. Mr. Eto told an LDP meeting in Fukui prefecture that Japan had signed unification papers with Korea in 1910 and that the agreement had the full support of the United Nations. The UN was not actually founded until 1945.

JULY 15-17 Prime Minister John Howard of Australia visited Japan as part of an extended trip through Asia. Mr. Howard and Mr. Koizumi, both close allies of the US, discussed the situation in North Korea and agreed that continued dialogue and pressure were required. They also concluded an agreement to set up a committee at deputy ministerial level to examine the costs and benefits of liberalizing trade and investment. Mr. Howard made clear his disapproval of Japanese tariff rises against beef imports. He rejected the idea that Japan's agricultural sector was "unique" as some Japanese politicians have claimed. Mr. Howard complained that the spirit of the 1993 WTO provision under which Japan is justifying its tariff increases was being violated. The provision allows member states to raise tariffs if imports increase by 17%. Mr. Howard acknowledged that imports had increased, but he says that total levels of imported beef have merely returned to historical norms following a recent precipitous decline caused by fears of Bovine Spongiform Encephalopathy. Australia is a major beef exporting country where farmers are already suffering in the grip of a prolonged drought.

JULY 18-20 Prime Minister Tony Blair of the UK also visited Tokyo for talks with Mr. Koizumi. Mr. Blair came directly from Washington wｈere he had addressed a joint session of Congress, but his visit was somewhat overshadowed by allegations he is facing in Britain that his government exaggerated the threat posed by Iraq.
In his meetings with the Japanese Prime Minister, Mr. Blair expressed support for the reform program that his counterpart is carrying out. He also called for any further talks with North Korea to include Japan and South Korea as well. In his meeting with the heads of Japan's largest automakers Mr. Blair stressed that Britain was still a good destination for Japanese overseas investment. The two leaders also signed agreements on scientific and environmental research exchange and outlined plans to increase the use of IT in the academic, governmental and commercial fields.

JULY 25 The Ministry of Foreign Affairs announced that Japan would provide ¥614m to the Marshall Islands to aid with the refurbishment of a hospital.

JULY 28 In a telephone conference with President Bush Mr. Koizumi discussed the passing of the Special Measures law and the situation with North Korea. They also talked about the performance of the Japanese economy with the President affirming that he believed revival efforts would be successful.