JAPANESE NEWSPAPER HIGHLIGHTS - AUG 1, 2006.

TOKYO, Aug 1 Asia Pulse - Highlights of today's newspapers:

NIKKEI NET:

- Japan devotes a full chapter to its security ties with the United States in the latest annual government report on defense released Tuesday, reflecting the importance it places on a bilateral agreement reached in May on the realignment of U.S. forces in Japan.

- Orix Corp. (TSE:8591) has decided to acquire QB Net Co., which runs a nationwide chain of QB House establishments known for offering quick, cheap haircuts.

- The impact of the Bank of Japan's decision to ditch zero interest rates is gradually being felt, with both Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corp. announcing increases in mortgage rates beginning Tuesday.

- Brisk sales of cellular phones have helped the world's leading producers of related semiconductors log increases in operating profits for the April-June quarter, while their counterparts that make memory chips for personal computers have seen their profits tumble.

- Japan's gross domestic product for the April-June quarter grew 0.4 per cent from the previous quarter in real terms, or 1.7 per cent a year, according to the average of 14 private research institutions' estimates released by Monday.