Point 1: Yes, it was a beetle pet shop. The reporters went into the shop, which was packed full of beetle cages, all labeled with species name. Some of the rare beetles were going for insane prices, in the hundreds or thousands of dollars.
Point 2: Yes, there are legal and illegal beetles for importing. Beetle pet shops are allowed to import and sell certain species. However, some beetles are illegal to import into Japan because they get loose and displace native beetles in the wild.
Point 3: Yes, they were smuggling beetles. The reporter went to one of the illegal beetle exporters in Laos and showed dozens of bottles containing beetles intended for export to Japan. The exporter showed how each beetle is wrapped in paper, making a small package that can be slipped into a suitcase pocket and is difficult for customs agents to find. Large beetle importers sometimes have shipments with thousands of beetles at a time, and they slip a couple rare, illegal beetles into this shipment.
Point 4: Yes, this was a major story. They were quite concerned. The reporters interviewed beetle experts, who lamented that it was difficult to locate illegal beetles smuggled in large shipments, particularly since the experts themselves had often never actually seen the rare beetles in question. They showed pictures of foreign beetles captured in Japan in the wild, where they should not exist, and raised serious questions about the future of Japan's delicate ecology.
I think I watched the whole news story--which was repeated in the "news scramble" later, because it was such a vital topic--with my mouth hanging open in disbelief.
So...if you're ever stumped for a character persona in an RPG, you may want to try Beetle Smuggler. Put all those regular weapon/drug/stolen merchandise smugglers to shame.
While I'm on the topic of news and Japanese culture, I thought I'd mention the passion for leaf viewing. Gazing at colorful leaves in the fall is a pastime second only to cherry blossom viewing in the spring. If you look at the website for the Yomiuri Newspaper, for example, they have an entire page dedicated to telling you what stage of color the leaves are at in various places. Here's my area. It's the beginning of the height of the leaf viewing season.
Kyoto is famous for its red leaves--more famous for the leaves than for cherry blossoms, in fact, which is saying something. And...right in the middle of what is far and away the busiest time of the year for Kyoto's tourist industry...some of the more popular tours have been canceled. A large part of the city is under security lockdown. Police officers are coming in from surrounding prefectures to help share the burden of responsibility. All of this is in preparation for President Bush arriving tomorrow.