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Cablegate: Daily Summary of Japanese Press 08/31/07

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UNCLAS SECTION 01 OF 11 TOKYO 004056

SIPDIS

SIPDIS

DEPT FOR E, P, EB, EAP/J, EAP/P, EAP/PD, PA;
WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST DIVISION;
TREASURY/OASIA/IMI/JAPAN; DEPT PASS USTR/PUBLIC AFFAIRS OFFICE;
SECDEF FOR JCS-J-5/JAPAN,
DASD/ISA/EAPR/JAPAN; DEPT PASS ELECTRONICALLY TO USDA
FAS/ITP FOR SCHROETER; PACOM HONOLULU FOR PUBLIC DIPLOMACY ADVISOR;
CINCPAC FLT/PA/ COMNAVFORJAPAN/PA.

E.O. 12958: N/A
TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA

SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 08/31/07


Index:


(1) Interview with key cabinet ministers: Foreign Minister Nobutaka
Machimura says becoming impatient would play into North Korean
hands

(2) Interview with Finance Minister Fukushiro Nukaga: Reviews
previous policy from the public's viewpoint

(3) Interview with Agricultural Minister Takehiko Endo

(4) Agriculture Minister Endo intends to "stay on" in executive
posts of three aid associations over political donations

(5) Panel to produce proposals on collective defense in November;
Some in ruling bloc reluctant to change government's interpretation
of Constitution

(6) Can Prime Minister Abe buoy up administration? First chapter in
battle over Antiterrorism Law at extra Diet session

(7) Facts about civilian control (Section 4): Thinking of SDF as
Japan's new garrison-SDF in transformation (Part 5):
Guidelines-Alliance bolstered behind tragedy

(8) Estimated budget requests on table: Upper House election result
likely to affect budget compilation; Requests center on five key
items

ARTICLES:

(1) Interview with key cabinet ministers: Foreign Minister Nobutaka
Machimura says becoming impatient would play into North Korean
hands

YOMIURI (Page 2) (Full)
August 30, 2007

-- What is your prospect for the upcoming second round of the
Japan-North Korea working group on diplomatic normalization slated
for Sept. 5?

Machimura: The previous one was not fruitful. I expect the upcoming
one to produce some results, since we had to some degree a
preparatory meeting. Because North Koreans are skilful negotiators,
it would be good if we took a step or even a half step forward in
the talks.

-- How do you define "progress" on the abduction issue?

Machimura: There is little point in defining it. The moment we
declare "Japan's definition is this or that," we'll give the other
side an excuse to argue against us. It's important to be ambiguous
in the realm of diplomacy.

-- The United States is impatient to achieve results. We are worried
that the abduction issue may be left behind.

Machimura: It will not easy to bring about a complete abandonment of
their nuclear programs. They apparently are linking the possession
of nuclear weapons directly to the survival of their state. I think

TOKYO 00004056 002 OF 011


it is strange to believe that the nuclear issue will be resolved at
an early date, and it will be difficult to resolve the abduction
issue. If we become impatient, we could come to play into North
Korea's hands.

-- Do you intend to offer aid to North Korea, which has suffered
from a flood? If you decide to do so, how do you explain about the
relationship between aid and the basic principle of "no aid without
any progress on the abduction issue"?

Machimura: I don't think it is a good idea to link everything to the
abduction issue. It was a natural disaster. Even in the past we have
provided (aid) to that country, regardless of its principles and its
social system. We are discussing how to help it.

-- How about providing fuel oil?

Machimura: The abduction issue is a matter of national concern. I
think it is difficult to provide fuel oil (to North Korea) at a time
when there is no (progress) (on the abduction issue). We will make a
decision while carefully examining what results the upcoming
Japan-North Korea working group (in the six-party talks) will
produce.

-- On the question of extending the Antiterrorism Special Measures
Law, do you think the ruling bloc should be flexible enough to
respond to discussion with the major opposition Democratic Party of
Japan (DPJ or Minshuto) on revising the law?

Machimura: The DPJ is a responsible opposition party in the Upper
House, where it can get things done. Given this, I think it should
not stick with the same attitude it had previously. At the time of
the Gulf war, Ichiro Ozawa, now president of the DPJ, was the
strongest advocate of the need for Japan to make a direct
contribution at a time when other countries were doing the same. I
expect him to come up with a responsible answer. The DPJ, too, is
supposedly thinking that they need to take some kind of anti-terror
measures. I believe both of us can reach a rational conclusion if we
discuss what to do in order to achieve a common goal. Aside from the
case where the DPJ may try to drive the ruling parties into
dissolving the Lower House for a snap election, if both of us think
about how to deal with the situation as a responsible member of the
international community, I believe we can find an answer.

-- Regarding the reform of the United Nations Security Council
(UNSC), do you intend to consider a provisional reform plan like
establishing a rule for reelection of the permanent UNSC member
nations?

Machimura: My concern is that if Japan declares at this point in
time that it supports a mild reform plan, the move for reforming the
UNSC would stop.

(2) Interview with Finance Minister Fukushiro Nukaga: Reviews
previous policy from the public's viewpoint

ASAHI (Page 4) (Full)
August 31, 2007

-- The government has declared it would begin this fall discussion
of a drastic reform of the tax system, including the consumption
tax.

TOKYO 00004056 003 OF 011

Nukaga: We've promised the nation to increase the government's share
of contributions to the basic pension within fiscal 2009. It is
important to review the tax system, including the consumption tax,
in order to secure a stable source of revenue for the pension
programs. However, if the opposition bloc opposes our reform bill,
no law will be enacted. I think it is important for the ruling
parties to pull the major opposition Democratic Party of Japan (DPJ)
into discussion. I want to give a detailed explanation to every
party.

-- The DPJ opposes a consumption tax hike. Do you think the DPJ will
respond to your call for discussion?

Nukaga: Winning a landslide victory in the recent Upper House
election, the DPJ has now become a responsible party. I think the
DPJ finds itself in a phase different from where it was before. In a
matured democratic society, the ruling and opposition parties can
discuss a safety net for the society and security issues. Now is a
good opportunity to raise the level of politics.

-- Former Finance Minister Omi was positive abut cutting the
corporate tax in order to help firms increase their
competitiveness.

Nukaga: Big companies have growth potential, but small companies and
local economies have been in an impoverished condition. How to
revitalize them is an immediate task I am facing.

-- What do you think should be changed in the previous fiscal
management?

Nukaga: We've adhered to the structural reform line so as to enhance
the economy's vigor. This must be retained, but at the same time we
need to review the previous policy from the public's viewpoint.

-- Immediately after the Upper House election, some in the ruling
Liberal Democratic Party (LDP) insisted that Prime Minister Abe
should resign. How do you support the prime minister from inside the
cabinet?

Nukaga: It's incorrect to think that I assumed the post of finance
minister to back Mr. Abe. I accepted the post in the belief that
politicians are responsible for willingly dealing with how to
maintain Japan's international competitiveness and such problems as
what to do about the ever-increasing social insurance burden. The
LDP suffered a stinging defeat in the recent Upper House election,
but it is my belief that revitalizing the LDP, which for many years
has played an important part in post-war politics, would benefit the
nation.

-- The top leader of the Development Bank of Japan, that of the
Japan Bank for International Cooperation, and that of the National
Life Finance Cooperation are all to serve out at the end of
September. Do you choose the new top leaders from the private sector
or from among former bureaucrats?

Nukaga: Their jobs are important. I must install in those posts good
persons in terms of their capabilities and insight. I'll appoint the
right person for the right job.

(3) Interview with Agricultural Minister Takehiko Endo

TOKYO 00004056 004 OF 011

SANKEI (Page 11) (Full)
August 31, 2007

-- What is your view on conditions for importing US beef?

"The US sets as a criterion that the age of the cattle can be (up
to) 30 months. What is important is to take technical steps to
prevent specified risk materials (SRM) from being included in beef
shipments. This is not a matter settled through
government-to-government talks. We must carefully check whether
appropriate technical measures are being taken."

-- New multilateral trade liberalization talks (Doha Round) at the
World Trade Organizations will move into full swing in September.
What is your view on that?

"The proposal made by Agricultural Committee Chairman Crawford
Falconer, (to pave the way for future discussion,) is worthy of
appreciation to a certain extent. However, the contents such as the
number of important products in the agricultural area are harsh. We
need to collect more information, but at present, I think it would
be acceptable, provided that some revisions are made."

-- The Democratic Party of Japan (DPJ or Minshuto), the number one
party in the Upper House following the election, plans to introduce
during the extraordinary Diet session a bill creating an income
compensation system for individual farmers.

"We must deal with that issue, based on the reality that the
opposition now controls the Upper House. However, I wonder whether
such a proposal can gain the understanding of the public, since it
would require an enormous amount of funding resources. We must be
careful because if we earmark a budget to compensate farmers'
income, we would be criticized for scattering about pork-barrel
largesse.

-- What is your view on the possibility of revising the subsidy
system applied to each crop type?

"There appears to be misunderstanding among farmers regarding
requirements for becoming eligible for subsidies. Though I am not
especially thinking of revising such requirements, I want to
simplify the complicated procedures."

(4) Agriculture Minister Endo intends to "stay on" in executive
posts of three aid associations over political donations

ASAHI ONLINE NEWS (Full)
August 31, 2007, 12:06 p.m.

In response to the case of the ruling Liberal Democratic Party's
(LDP) Yamagata Chapter's 2nd Constituency Branch Office having
received political donations from a subsidy-granting organization,
Agriculture Minister Endo explained at a press briefing this
morning: "I intended to examine every item of expenditures,
including the office expenses, but there was a mistake,"
apologizing: "I offer my sincere apology for having caused trouble
and worried you."

It was the Yamagata Prefectural Livestock Industries Union that had
contributed money to the LDP's local chapter. This union was granted

TOKYO 00004056 005 OF 011


a total of 17 million yen in subsidies and incentives from the
Agriculture & Livestock Industries Corporation, an independent
administrative agency under the supervision of the Agriculture
Ministry, in 2004, the year before the union contributed to the
local chapter.

When asked about three agricultural aid associations, such as the
National Agricultural Insurance Association (NAIA), in which he
serves as an executive officer, Endo said he did not receive any pay
from them. Endo intends to stay in an executive post. This means
that he will concurrently continue to serve as the top officer of
the Agriculture Ministry, the supervisory body of those aid
associations.

Endo served as director of the NAIA, chief director of the Yamagata
Prefectural Agricultural Insurance Association, and chief director
of the Okitama Agricultural Insurance Association, and received a
total of 6.38 million annually as a pay from them. Reportedly, Endo
will entrust the authority with the prefectural association's chief
director to the deputy chief director and the authority with the
Okitama association's chief director to the deputy chief director
while he is in office as agriculture minister.

(5) Panel to produce proposals on collective defense in November;
Some in ruling bloc reluctant to change government's interpretation
of Constitution

YOMIURI (Page 2) (Abridged)
August 31, 2007

The government's Council for Rebuilding the Legal Foundation for
National Defense, chaired by former Ambassador to the United States
Shunji Yanai, yesterday basically finished discussion on four
scenarios presented by Prime Minister Shinzo Abe. The council plans
to finalize its views on remaining moot points in order to come up
with a set of proposals in November urging the government to change
its constitutional interpretation prohibiting exercising the right
to collective self-defense to open the door for collective defense.
But given Prime Minister Abe's weakening grip on his administration
following the ruling camp's crushing defeat in the July House of
Councillors election and deeply-seated cautious views in the camp,
many observers are skeptical about the feasibility of the panel's
proposals.

The panel yesterday discussed how the Self-Defense Forces should
take part in international peace-building operations. The Cabinet
Legislation Bureau's (CLB) interpretation of the Constitution
regarding logistic support, such as the SDF's transport, supply and
medical services to foreign forces engaged in UN peacekeeping
operations, is that any act that is regarded as fully integrated
with military actions might be a violation of the Constitution. In
the meeting, many called for a review of the CLB's interpretation,
saying it is blocking Japan's peace-building activities.

From this May through June, the council discussed two scenarios:
whether the SDF can counterattack when a US warship is attacked on
the high seas, and whether Japan can intercept a ballistic missile
that might be headed for the United States. The discussion led to
the conclusion to urge the prime minister to change the government's
interpretation in a way allowing the SDF to take appropriate actions
in those two situations. Yanai in a Yomiuri interview yesterday
indicated that the council is largely tilted toward a review of the

TOKYO 00004056 006 OF 011


government's interpretation.

After the council meeting, Yanai pointed out the following for
further discussion: (1) matters closely associated with each other,
such as the use of weapons and logistical support, (2) guidelines
for altering the interpretation, and (3) why some acts are defined
as violations of the Constitution.

Whether Prime Minister Abe will actually decide to change the
interpretation after receiving the proposals remains to be seen. Now
that the Upper House is controlled by the opposition, there is no
prospect for related bills, such as a bill to revise the SDF Law, to
clear the Diet. New Komeito Secretary General Kazuo Kitagawa has
also voiced his party's opposition to changing the government's
interpretation of the right to collective self-defense. Pessimism is
simmering in the LDP, as seen in former cabinet minister's comment:
"The proposals would probably be put aside indefinitely."

Asked by a reporter last night about the political situation
difficult to put the council proposals into shape, Abe simply said:
"Discussion is still underway. I would like to see the council
deepen its discussion."

(6) Can Prime Minister Abe buoy up administration? First chapter in
battle over Antiterrorism Law at extra Diet session

YOIMIURI (Page 1) (Full)
August 31, 2007

Democratic Party of Japan (DPJ) President Ichiro Ozawa blasted out
at the government of Prime Minister Shinzo Abe in a meeting
yesterday of the party's female lawmakers at the Grand Prince Hotel
in Kioicho, Tokyo. Ozawa stated:

"In Japan, the Diet consists of the House of Representatives and the
House of Councillors, which are of equal rank, called bicameralism.
(Shinzo Abe) has stayed in the premiership even after the ruling
coalition became a minority in the Upper House. I think this is
because he does not understand the spirit of the parliamentary
system."

He then stressed his determination to force the prime minister to
dissolve the Lower House at the extraordinary Diet session to be
convened on Sept. 10. Some in the DPJ have taken an icy view on the
reshuffled Abe cabinet, with Deputy President Naoto Kan saying,
"(Abe) puts priority to lasting his cabinet longer. He was able to
contain calls for leaving office by giving cabinet posts to veteran
lawmakers from various factions in the LDP."

Some other DPJ members also have said that the party should pay
attention to the appointments of Toshihiro Nikai, a former aide to
Ozawa, as chairman of the General Council and Tadamori Oshima, an
experienced negotiator, as chairman of the Diet Affairs Committee.

A senor DPJ member, who has close ties with Ozawa, predicts that the
LDP will rattle the DPJ by using the "Nikai-Oshima combination."

In order to counter the new LDP leadership, Ozawa will reshuffle the
executive lineup today. While maintaining the triumvirate with Kan
and Secretary General Yukio Hatoyama, Ozawa intends to pick veteran
lawmakers as chairman of the Policy Research Committee and chairman
of the Diet Affairs Committee.

TOKYO 00004056 007 OF 011

Ozawa also has started strengthening the solidarity of opposition
parties. He told Hatoyama at a Japanese restaurant in Tokyo on the
night of Aug. 20:

"In democratic society, numbers have power. I would like to form a
parliamentary group along with the People's New Party, New Party
Nippon, and independent lawmakers to grab a majority in the Upper
House."

The DPJ parliamentary group has 112 members, ten short of the 122,
which is the majority of the Upper House seats. If it can secure the
majority, adding four People's New Party seats, one New Party Nippon
seat, and independent seats to its 112, it will be able to pass
bills through the Upper House, without asking the Japanese Communist
Party for cooperation. When the DPJ submits first to the Upper House
a bill to ban the use of pension premium payments for other purposes
than pension benefits, it will be easy for the party to apply
pressure on the ruling coalition.

Ozawa has continued feeling out the possibility of forming a
loose-knit alliance with the People's New Party and New Party
Nippon, thinking that he must not fail to form a joint parliamentary
group.

How the DPJ will response to an extension of the Antiterrorism
Special Measures Law, which expires in November is the first test
for the government and ruling camp.

The Antiterrorism Law has been extended three times. The DPJ opposed
it each time in the past. If it opposes it again at the upcoming
extra Diet session, chances are that Maritime Self-Defense Force
troops, which have refueled US and other nations' vessels in the
Indian Ocean, will be forced to withdraw.

In her meeting with Ozawa, German Chancellor Angela Merkel stated:
"Japan should bear heavier responsibility for dealing with
international terrorism." Ozawa, however, remained unchanged, citing
that his party has no choice but to oppose the law's extension since
the MSDF dispatch based on the Antiterrorism Law is not backed by a
clear UN resolution.

Ahead of the extra Diet session, in which a fierce battle is
expected to occur due to the trading of places between the ruling
and opposition camps, there appears in the capital district of
Nagatacho an idea of forming a grand alliance. Some hope for
"partial alliance" on each policy.

Although the government and ruling coalition have taken a positive
stance toward consultations on correcting the bill to revise the
Antiterrorism Law, some ruling camp lawmakers think that it would be
difficult to get the legislation through the Diet as long as Ozawa
changes his opposition to the law's extension.

One month has passed since the LDP suffered a humiliating defeat in
the Upper House election. The real ability of the Abe administration
and the DPJ will be tested from now on.

(7) Facts about civilian control (Section 4): Thinking of SDF as
Japan's new garrison-SDF in transformation (Part 5):
Guidelines-Alliance bolstered behind tragedy


TOKYO 00004056 008 OF 011


TOKYO (Page 1) (Full)
August 23, 2007

The ground was fearfully quiet.

On Oct. 21, 1995, there was a rally in a seaside park of Ginowan
City, Okinawa Prefecture, with the participation of local residents.
In the park, there were as many as 85,000 people coming out to
participate in the rally. They were sharing their wrath and sorrow
for the incident of US servicemen's rape of a local schoolgirl. On
the platform was Okinawa Gov. Masahide Ota, whose shirt sleeves were
rolled up. "I feel really sorry that I could do nothing to protect
the dignity of a small child." With this, Ota expressed his regret.
A local high school girl, representing the young, made an appeal.
"Let me please ask to get back our island that is peaceful with no
military troops-and with no tragedies-into our hands," she said.
There were also some people who were moved to tears.

The rally ended after resolving on antibase efforts, such as
strengthening discipline for US military personnel, revising the
Japan-US Status of Forces Agreement (SOFA), and reducing the
footprint of the US military presence on Okinawa. The following
month, Japan and the United States set up an intergovernmental
working group, which is called the "Special Action Committee on
Facilities and Areas in Okinawa" or "SACO" for short, to discuss
steps for realigning and scaling down the US military presence on
Okinawa.

"Touched off by that incident, Japan and the United States will
review their relations." Okinawa had such an expectation. However,
the island prefecture's population was let down. In April of the
following year, Tokyo and Washington announced a joint bilateral
declaration on security to expand the scope of bilateral military
cooperation from the Far East to the Asia-Pacific region. At the
same time, the Japanese and US governments entered into an
arrangement called the Japan-US Acquisition and Service-Crossing
Agreement (ACSA) for US forces and the Self-Defense Forces to
provide each other with supplies and labor. Consequently, Japan and
the United States have bolstered their military alliance further.

In fact, officials from Japan and the United States were reviewing
the two countries' relations in private. The move had nothing to do
with the rape incident.

In early September 1995, the Japanese and US officials met in a
conference room of the Foreign Ministry, which is located in Tokyo's
downtown area of Kasumigaseki-the center of Japan's bureaucracy with
most government offices located. Meeting there in the Foreign
Ministry's conference room were North American Affairs Bureau
Director General Masaki Orita and US Assistant Secretary of Defense
Joseph Nye. It was two months before US President Clinton's
postponed visit to Japan. Orita and Nye were thrashing out the
wording of a document titled "The Japan-U.S. Joint Declaration on
Security: Alliance for the 21st Century," which was to be released
on the occasion of Clinton's visit to Japan.

The joint declaration suggested the need for Japan and the United
States to revise their guidelines on bilateral defense cooperation,
and the document reconfirmed the bilateral security arrangement.

In those days, North Korea was allegedly developing nuclear weapons.
Triggered by that nuclear crisis, Tokyo and Washington decided to

TOKYO 00004056 009 OF 011


review the defense cooperation guidelines. In March 1993, North
Korea, which was pushing ahead with its nuclear development,
declared its intent to break away from the Nuclear Nonproliferation
Treaty (NPT). Time and again, Washington consulted with Tokyo on
what the SDF could do to back up US forces in the event of
emergencies on the Korean Peninsula.

The United States came up with a total of nearly 2,000 requests,
such as minesweeping, underway replenishment for US naval vessels,
and medevac or search and rescue operations for wounded soldiers.
Tokyo, however, turned down all those requests in its answer to
Washington. The United States, riled by Japan's rejection of the
requests, demanded a review of the defense cooperation guidelines so
that Japan could back up US forces during emergencies in the
periphery of Japan.

Orita recalls: "In the event of emergencies on the Korean Peninsula,
Japan cannot be allowed to do nothing. We needed to review the
guidelines, and I thought it was a matter of concern to Japan's
national security."

Gov. Ota was aware that Tokyo and Washington were about to review
the guidelines. He had known the move from an American's essay. In
the Vietnam War days, Okinawa was a frontline base for GIs. It came
across his mind that local workers were engaged in disposing of dead
bodies sent from the battlefield.

Ota noted: "Japan and the United States are going to cooperate in
the event of emergencies near Japan. If that is the case, there may
be a situation like the Vietnam War."

All eyes were on Okinawa over its base issues. The Japanese and US
governments worked behind the scenes on reviewing the bilateral
defense cooperation guidelines. "It's important to work on base
issues," says a former senior official of the Foreign Ministry.
"But," he went on, "we couldn't make light of the security
arrangement."

On April 17, 1996, President Clinton and Prime Minister Ryutaro
Hashimoto inked the Japan-US Joint Declaration on Security at the
State Guesthouse, also known as the Akasaka Palace, in Tokyo's
Motoakasaka. The declaration specified that the two leaders have
agreed to begin the work of reviewing the defense cooperation
guidelines. The Okinawa schoolgirl rape incident changed nothing in
bilateral relations. It was the day Japan and the United States made
the first step to integrate the SDF and US forces.

(This is the last of a five-part series written by Shigeru Handa, a
senior writer, Hidehiro Honda, Political Section, and Takashi
Nakayama, Yokohama.)

(8) Estimated budget requests on table: Upper House election result
likely to affect budget compilation; Requests center on five key
items

ASAHI (Page 11) (Full)
August 31, 2007

Budget request estimates for fiscal 2008 are now on the table with
the closing day on August 31. Following the crushing defeat of the
ruling bloc in the July Upper House election, voices calling for a
boosting to budgets to secure people's peace of mind and to be

TOKYO 00004056 010 OF 011


distributed to regional districts are gaining ground. Government
agencies' calls for boosts to their budgets are growing stronger.
Since there is a possibility of the Democratic Party of Japan (DPJ
or Minshuto), which has become the top party in the Upper House,
submitting a set of budget-related bills, the compilation of the
fiscal 2008 budget will likely be turbulent.

Prime Minister Abe in early August, right after the devastating
defeat of the LDP, ordered the Finance Ministry to make regional
revitalization, strengthening growth potential, education reform and
environment-centered programs key points in compiling the budget.
The LDP and the New Komeito also requested the addition of national
safety and peace of mind, increasing the number of key items to
five. Many government agencies have filed budget requests in line
with those five key policy items.

The Ministry of Health, Labor and Welfare (MHLW) will focus on peace
of mind in the national life. It has requested 76.5 billion yen, up
18 PERCENT from the initial budget for fiscal 2007, as a budget for
establishing a better medical-service system. Of that amount, 16
billion yen would be allocated to alleviating the shortage of
doctors. The MHLW has also called for establishment of a subsidy
system for transporting patients who have to go to hospitals in
distant locations due to the integration of hospitals. Its plan also
includes the deployment of medical helicopters to enable doctors to
provide patients in remote areas with medical treatment. MHLW
Minister Masuzoe underscored, "In some municipalities expectant
mothers have to go to neighboring towns to give birth. The shortage
of doctors is a major problem stemming from the social structure."

The Ministry of Land, Transport and Infrastructure (MLIT) is trying
to find a means of survival in regional revitalization, such as
revitalizing downtown areas and additional subsidies for community
renovation. In a framework for requests for the enforcement of key
items, the MLIT has requested a total of about 110 billion yen for
the consolidation of basic road systems and Haneda Airport, noting
that such efforts will lead to strengthened international
competitiveness and regional revitalization.

However, some government agencies are not satisfied. That is because
even though their frameworks for requests have been expanded, making
requests would end up in vain without an increase in fiscal
resources, as one official in charge of budget requests noted.

A Finance Ministry official noted, "The request framework is
absolutely for the sake of making requests only. We will not augment
fiscal resources. We will settle the amounts requested within the
scope of the budgetary request guidelines, such as a 3 PERCENT cut
in public works." However, the government agencies' side is
determined to demand an increase in fiscal resources in order to
prevent their requests from being settled within the framework, as a
senior MEXT ministry official put it. The battle between the Finance
Ministry and other government agencies will likely drag on until the
end of the year.

There are other signs of friction over the fiscal 2008 budget,
including the moves of the DPJ, which has taken a leap forward with
the Upper House election.

The DPJ included the introduction of a monthly child allowance worth
26,000 yen per child and an income guarantee system for individual
farmers. Both proposals require budgetary measures. Chances are that

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the DPJ may submit budget-related bills to the regular Diet session
to be convened in January next year.

Some Finance Ministry officials take the view that if the ruling and
opposition parties cannot reach a consensus on the DPJ proposals by
year's end, when the draft budget is finalized, it would cause major
trouble, including the possibility of revising the budget bill, as
one senior Finance Ministry official put it.

DONOVAN

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