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Cablegate: Japanese Morning Press Highlights 01/16/08

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UNCLAS SECTION 01 OF 13 TOKYO 000120

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: JAPANESE MORNING PRESS HIGHLIGHTS 01/16/08


Index:

1) Top headlines
2) Editorials
3) Prime Minister's daily schedule (Nikkei)

4) Asahi obtains document showing aircraft deployment scheme for
Futenma during Korean emergency (Asahi)

Opinion polls:
5) Yomiuri poll: Cabinet support rate slips 6.9 points to 46 PERCENT
, with non-support rate up 3 points to 41.6 PERCENT ; Public split
(47 for, 44 against) passage of refueling bill (Yomiuri)
6) Yomiuri poll reveals public's dissatisfaction with pension mess,
slow Diet deliberations (Sankei)
7) Fuji-Sankei poll: Cabinet non-support rate now outstrips support
rate 47.3 PERCENT to 36.6 PERCENT ; Public positive about new
antiterrorism law but not about revote method (Sankei)

Diet agenda:
8) Prime Minister Fukuda in upcoming Diet policy speech will stress
reorganizing administration of consumer affairs, resolve to deal
fully with pension mess (Nikkei)
9) Democratic Party of Japan (DPJ) President Ozawa against skips a
plenary session of the Diet (Mainichi)

10) DPJ hell bent to attack ruling camp in next regular session and
force an early Diet dissolution (Tokyo Shimbun)
11) Prime Minister Fukuda will ask for opposition camp's cooperation
during budget deliberations: "If budget delayed, will deal a blow to
the nation" (Nikkei)
12) DPJ faces a dilemma already over what to do about passage of
supplementary budget (Nikkei)
13) Deliberations in next Diet likely to bog down over issue of
local deficit bonds (Mainichi)
14) Ruling parties resolved to override Upper House rejection of
gasoline tax measure in order to secure funds needed for highway
construction (Tokyo Shimbun)

15) CIRO employee allegedly leaked secrets to Russian diplomat
(Mainichi)

16) METI plans new law to deal with increasing problem of industrial
spies (Mainichi)

Japan takes whaling on whaling:
17) Japanese whaling ship holds two anti-whaling activists for
interfering with its operations (Yomiuri)
18) Australian high court orders Japanese ships to halt whaling
operations (Yomiuri) 13

Articles:

1) TOP HEADLINES

Asahi:
Agreement reached between plaintiffs in hepatitis C lawsuits,
government

Mainichi, Yomiuri & Nikkei:
Citigroup's additional subprime mortgage losses come to 2.4 trillion
yen

TOKYO 00000120 002 OF 013

Sankei:
Nikkei 225 index finishes below 14,000, nearly 2,500 lower than at
the launch of Fukuda cabinet

Tokyo Shimbun:
Ruling bloc intends to put gasoline tax revision bill to second vote
to secure financial sources for road construction

Akahata:
DPJ's bill that may open the path for Japan to exercise right to
collective defense carried over to the next Diet session with
approval from LDP, New Komeito, DPJ, and PNP

2) EDITORIALS

Asahi:
(1) Earthquakes and reconstruction: Look for ways to rebuild houses
without destroying all of them
(2) Handball rematch for Olympic berth: Asia should unite

Mainichi:
(1) 13th anniversary of Great Hanshin Earthquake: Self-help efforts
important
(2) President Bush's tour of Middle East: U.S. responsible for
easing tensions in Middle East

Yomiuri:
(1) DPJ must not use bill for issuance of deficit-covering
government bonds as a political football
(2) Broader application of mixed medical treatment desirable

Nikkei:
(1) Warning from falling Nikkei 225 index, which finishes below
14,000
(2) Pay attention to ROK's review of its policy toward DPRK

Sankei:
(1) Unnecessary confrontation not desired in the upcoming ordinary
session of Diet
(2) Agreement in hepatitis C lawsuits: Need to review the
government's role

Tokyo Shimbun:
(1) Prime Minister Fukuda faces crucial test
(2) Fee-based night cram school run by municipal junior high school
may raise questions about public education

Akahata:
(1) No drastic change will occur even if DPJ takes power

3) Prime Minister's Official Residence (Kantei)

Prime minister's schedule, January 15

NIKKEI (Page 2) (Full)
January 16, 2008

09:00
Attended a cabinet meeting.

09:52

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Met advisor Yamatani at the Kantei, followed by WHO Commission on
Social Determinants of Health Chairman Michael Marmot and others.

11:38
Made courtesy calls on Upper House President Eda, Vice President
Santo, Rules and Administration Committee Chairman Nishioka, and
Upper House factions in the Diet building, accompanied by Upper
House Secretary General Yamazaki and Chief Cabinet Secretary
Machimura.

11:53
Returned to his official residence.

12:01
Met at the Kantei with Yamatani, followed by Machimura joined in by
LDP Secretary General Ibuki. Machimura stayed on.

13:55
Met in the Diet building Waseda University Racing Department
director Yasuo Watanabe, captain Ryota Komano and others in the
presence of Lower House Speaker Kono and former Prime Minister
Mori.

14:02
Attended a Lower House plenary session. Afterwards, made courtesy
calls on Lower House Speaker Kono, Vice Speaker Yokomichi, Lower
House Rules and Administration Committee Chairman Sasagawa, and
Lower House factions, accompanied by LDP Diet Affairs Committee
Chairman Omori and Machimura.

15:56
Met at the Kantei chairman Noda of the LDP group to fundamentally
consider the pension system.

16:40
Met People's Life Minister Kishida, Vice Cabinet Minister Uchida and
others, followed by a HCV plaintiff group, in the presence of ruling
party hepatitis project team leader Kawasaki and MHLW Minister
Masuzoe.

18:00
Held a press conference.

19:33
Retuned to his official residence.

4) U.S. government documents reveal that during a Korean Peninsula
contingency, Futenma would become a key attack base, with a
four-fold increased in deployed aircraft

ASAHI (Page 31) (Abridged)
January 16, 2008

It has been learned from official U.S. documents the Asahi Shimbun
has obtained that during a contingency on the Korean Peninsula, the
U.S. Marines has a plan to deploy to Futenma Air Station in Okinawa
300 aircraft at a maximum and that the thinking about the alternate
facility (at Nago City) is that it would have the same capability,
too. The document revealed that there would be a four-fold increase
in deployed aircraft from the 70 or so currently stationed at the
base. It would be categorized in an emergency as a major "attack
base" for the air unit deployed there. Even with the realignment of

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U.S. forces in Japan, the importance of the airfield would not
change, and talks between Japan and the United States will be
focuses on that from now.

The documents are dated Jan. 23, 1996, which was just prior to the
agreement in April between the Japanese and U.S. governments on the
full reversion of Futenma Air Station. The material consists of an
internal memorandum and slides prepared by the 1st Marine Aircraft
Wing to brief then Deputy Assistant Secretary of Defense Campbell of
the Pentagon.

Campbell was the responsible official that year for deciding and
implementing the Japan-US Special Action Committee on Okinawa (SACO)
Agreement. According to the documents, the alternate facility to
replace Futenma was categorized as "a strategic stronghold for air
and ground units ready under tactical planning for a contingency on
the Korean Peninsula."

In addition, the documents state that "during a contingency, 300
aircraft are expected to use Futenma," consisting of adding to the
71 aircraft now at Futenma Air Station 142 aircraft that would be
"transiting" and 82 aircraft that would be "additionally deployed."
Of the 300 aircraft, there would be 21 fixed-wing aircraft, such as
air refueling tankers, and 279 that would include transport aircraft
and attack helicopters.

The Marines had sought, as a condition for relocating the base, that
the alternate facility should have the same capability, citing "a
need for maintaining Futenma's military capability."

5) Poll: Cabinet support down to 46 PERCENT

YOMIURI (Page 1) (Full)
January 16, 2008

The approval rating for Prime Minister Fukuda and his cabinet fell
6.6 percentage points from December last year to 45.6 PERCENT in a
face-to-face nationwide public opinion survey conducted by the
Yomiuri Shimbun on Jan. 12-13. The Fukuda cabinet's support rate
failed to reach 50 PERCENT for the first time since coming into
office. The Fukuda cabinet's disapproval rating was 41.6 PERCENT ,
up 6.3 points. The decline in the approval rating mainly seems to
reflect public awareness of the government's failure to resolve the
issue of pension record-keeping flaws.

In the breakdown of public support for political parties, the ruling
Liberal Democratic Party stood at 35.5 PERCENT (35.3 PERCENT in
the last survey taken in December last year), with the leading
opposition Democratic Party of Japan (DPJ) likewise leveling off at
16.9 PERCENT (17.1 PERCENT in December).

In the survey, respondents were asked if they supported the Diet
passage of a new antiterrorism bill to resume the Maritime
Self-Defense Force's refueling mission in the Indian Ocean. To this
question, a total of 47 PERCENT answered "yes," with a total of 44
PERCENT saying "no." However, the legislation was enacted in a
second vote of the House of Representatives after it was voted down
in the House of Councillors. When asked if it was appropriate, 46
PERCENT answered "no," with 41 PERCENT saying "yes." Asked about
the DPJ's response during the extraordinary Diet session, a total of
59 PERCENT said they did not support it, while a total of 34
PERCENT said they did.

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6) Cabinet support rate sinks below 50 PERCENT line: Public
dissatisfied with government's handling of pension issue, delay in
Diet deliberations, but critical of DPJ's tactics, as well
(Yomiuri)

YOMIURI (Page 2) (Excerpt)
January 16, 2008

In the nationwide opinion poll just carried out by the Yomiuri
Shimbun, the support rate for the Fukuda Cabinet slipped below the
50 PERCENT line, and the gap between the support and non-support
rate shrank to only 4 points. The reason for the drop in support
rate seems to be public dissatisfaction with the pension issue, as
well as the pace of deliberations in the Diet due to the lopsided
relation between the upper and lower houses.

On the missing 50 million pension accounts, the government admitted
last December that it would be difficult to find out who the owners
are. A majority of the respondents or 55 PERCENT consider this as a
breach of commitment by the government. On the revote in the Lower
House to pass the antiterrorism special measures law, the survey
carried out last December found 43 PERCENT of the public
considering such as "appropriate," while 44 PERCENT felt it was
"inappropriate." This time, the respondents who felt such was
"inappropriate" (46 PERCENT ) outnumbered those who thought the move
"appropriate" (41 PERCENT ).

7) Poll: Support for Fukuda cabinet spirals down to 36.6 PERCENT ;
34 PERCENT want grand coalition after general election

SANKEI (Page 3) (Full)
January 16, 2008

The Sankei Shimbun and Fuji News Network (FNN) conducted a joint
public opinion survey on Jan. 13-14, in which the rate of public
support for Prime Minister Yasuo Fukuda's cabinet further fell 4.5
percentage points from the last survey (taken Nov. 10-11, 2007) to
36.6 PERCENT . The Fukuda cabinet's support rate had plummeted in
the last survey. The Fukuda cabinet's disapproval rating was 47.3
PERCENT , outstripping its approval rating for the first time.
Meanwhile, the ruling Liberal Democratic Party got a 32.1 PERCENT
support rate, with the leading opposition Democratic Party of Japan
(Minshuto) at 25.0 PERCENT .

Among those who answered that they supported the Fukuda cabinet,
women accounted for 57.1 PERCENT , with men at 42.9 PERCENT . Among
those aged 60 and over, the Fukuda cabinet's support rate was high,
with its approval rating at 42.9 PERCENT and its disapproval rating
at 28.1. The support rate slightly topped the nonsupport rate only
among those aged 20-29. In all other age brackets, nonsupport
outstripped support.

Fukuda has now made a decision to provide across-the-board relief to
hepatitis C victims who contracted the disease from
government-approved blood products. Asked about this political
decision, 74.1 PERCENT answered that they appreciated it. In
addition, 58.0 PERCENT appreciated Fukuda's personal character.

However, 73.2 PERCENT did not appreciate the Fukuda cabinet over a
series of scandals involving the Defense Ministry. Asked about other
policy issues, 70.2 PERCENT answered that they did not appreciate

TOKYO 00000120 006 OF 013


the Fukuda cabinet over North Korea, with 64.0 PERCENT saying they
did not appreciate the Fukuda cabinet over his government's way of
handing unaccounted-for pension records. In the survey, respondents
were asked if they appreciated Fukuda's leadership. To this
question, 62.7 PERCENT were negative. Fukuda's leadership was
invisible on these policy issues, and this apparently led to the
drop in the Fukuda cabinet's support rate.

The LDP, in its support rating, was down 0.1 point, while the DPJ
was up 1.5 points. Even so, the LDP was 7.1 points higher than the
DPJ.

Respondents were also asked which political party they would like to
vote for in the next general election for the House of
Representatives. In response, 34.4 PERCENT chose the LDP, with 33.9
PERCENT preferring the DPJ.

Asked about the desirable form of government, 34.4 PERCENT chose a
grand coalition involving the LDP and the DPJ, topping all other
answers. Among other answers, 32.5 PERCENT picked a DPJ-led
government, with only 28.5 PERCENT choosing an LDP-led government.

Respondents were further asked when they would like the next general
election to take place. To this question, 45.9 PERCENT picked
"during the latter half of this year after this July's G-8 summit,"
with 29.0 PERCENT saying "upon the current term's expiry or shortly
thereafter next year" and 23.6 PERCENT saying "during the first
half of this year."

Meanwhile, a new antiterrorism bill, which is intended to resume the
Maritime Self-Defense Force's refueling mission in the Indian Ocean,
was passed in a second vote of the House of Representatives after it
was voted down in the House of Councillors. In this regard, 45.1
PERCENT were affirmative about the legislation itself, with 43.8
PERCENT negative about it. However, 48.4 PERCENT were negative
about the lower chamber's overriding of the upper chamber's
decision, with only 39.4 PERCENT saying it was appropriate.

8) Fukuda to announce in policy speech plan to create new body for
consumer affairs administration

NIKKEI (Page 1) (Full)
January 16, 2008

The government yesterday disclosed the draft of a speech Prime
Minister Yasuo Fukuda will deliver at the outset of the ordinary
Diet session to start on Jan. 18. He will announce plans to create a
new body with strong authority and a ministerial post responsible
for dealing with consumer affairs. The prime minister will also
declare that the government will send pension premium records to all
contributors every year starting in 2009.

Fukuda, who touts his administration as giving priority to what is
best for consumers, will list the administration's policy goals for
the first time. He will state: "The government will establish a new
organization with strong authority in order to integrate
consumer-affairs administrative functions currently split among
various government agencies." The prime minister will define the new
body as a liaison center for consumers and as playing the leading
role in implementing various measures to benefit consumers.

On the pension record-keeping fiasco, Fukuda will emphasize his

TOKYO 00000120 007 OF 013


determination to make utmost effort to pave the way for resolving
the issue under his cabinet. He will announce plans to send special
pension-record notices to all contributors by October this year and
regular notices to all of those who have yet to reach the
entitlement age for receiving pension benefits every year beginning
in 2009.

To turn the national and local primary balance into the black by
fiscal 2011, the prime minister will stress the need to drastically
reform the nation's tax system, including the consumption tax. The
government plans to establish a national conference on social
security by the end of this month. Fukuda will reveal that systemic
reform of the tax system and the social security system will be
discussed in this panel, and will also express his desire to discuss
the issue with the opposition camp.

Key points in the prime minister's draft policy speech

? Establish a new body with strong authority to integrate
administrative functions for consumer affairs. Create a ministerial
post for consumer affairs administration.
? Send regular pension-record notices to all contributors who have
yet to reach the entitlement age for receiving pension benefits
starting in fiscal 2009.
? Reduce more than 4,000 public servants in fiscal 2008.
? Maintain the current provisional road tax rate.
? Carry out drastic reform of the nation's tax system, including the
consumption tax.
? Achieve the goal of turning the national and local primary balance
into the black by fiscal 2011.

9) Ozawa again skips plenary session

MAINICHI (Page 5) (Full)
January 16, 2008

Ichiro Ozawa, president of the leading opposition Democratic Party
of Japan (Minshuto), was absent from a plenary sitting of the House
of Representatives yesterday when the Diet closed its extraordinary
session. The DPJ held a meeting of its House of Representatives
members shortly before the plenary sitting, but Ozawa did not attend
the meeting. The DPJ's executive office explained that he had
something else to do.

Ozawa was present at a meeting of his party's executive officers and
a meeting of his party's board members after the plenary session.
Prime Minister Yasuo Fukuda visited the DPJ's room after the Diet
closed, but Fukuda could not meet Ozawa. The House of
Representatives took a vote in its Jan. 11 plenary sitting, and
Ozawa left his seat before the vote and went to Osaka Prefecture to
back up a candidate running in the prefecture's gubernatorial
election.

10) DPJ looking to rally opposition parties to seek Lower House
dissolution

TOKYO SHIMBUN (Page 2) (Full)
January 16, 2008

The Democratic Party of Japan (DPJ or Minshuto), the largest
opposition party, has stepped up its efforts to work on other
opposition parties to fall into line with it in order to scrap

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provisional tax rates, including the gasoline tax.

DPJ Policy Research Committee Chairman Masayuki Naoshima and Tax
Research Committee Chairman Hirohisa Fujii met yesterday in the Diet
building with People's New Party (PNP) Policy Research Council
Chairman Shozaburo Jimi to seek understanding from the PNP for their
party's policy of abolishing the provisional tax rates. Although
they failed to obtain approval from the PNP, the DPJ plans to
continue its efforts.

Up until now, Naoshima attended meetings of the Social Democratic
Party (SDP) and Diet Affairs Committee Chairman Kenji Yamaoka
telephoned SDP lawmakers to seek their understanding. The DPJ is
expected to explain to the Japanese Communist Party (JCP) its view
shortly. The party leadership expects that it will be able to work
with the JCP and SDP.

In the extraordinary Diet session, which ended yesterday, the DPJ
raised the hackles of other opposition parties due to the lack of
its spadework. In connection with the reason for the party's
decision to put its efforts into consensus building, a senior party
member said: "We need to hold a solid majority (in the Upper House).
We are also considering future election cooperation." A senior Diet
Affairs Committee member commented: "We will make the upcoming
regular Diet session a gasoline Diet and force (the prime minister)
to dissolve the Lower House." Therefore, the DPJ wants to form a
coalition of all opposition parties under the banner of "gasoline"

As Secretary General Yukio Hatoyama said, "We have reflected on our
insufficient efforts" for consensus building in the extra Diet
session. The DPJ appears to be trying to demonstrate its efforts to
other opposition parties.

Since some in the DPJ, however, are still critical about abolishing
the provisional tax rates, it is difficult to iron out differences
of opinions within the party.

11) Premier asks for cooperation from opposition parties, noting
that delay in budget deliberations would deal blow to people's
lives; Extraordinary Diet session closes

NIKKEI (Page 2) (Full)
January 16, 2008

Prime Minister Yasuo Fukuda on Jan. 15 held a press conference at
the Prime Minister's Office following the close of the extraordinary
Diet session. Referring to the fiscal 2008 budget bill and related
bills, he pointed out that given falling stock prices, soaring crude
oil prices and the future of the economy, any delay in Diet
deliberations would deal a blow to people's lives. He thus indicated
a stance of seeking understanding from the opposition camp for the
passage of the bills within the fiscal year. Regarding adoption of
related bills in a second vote in the Lower House, he simply stated,
"It is too early to say whether we will do it."

Concerning abolition of the provisional tax, special purpose
road-construction revenues, which the DPJ is calling for, Fukuda
expressed a negative view: "It would be good if gasoline prices will
drop. However, scrapping the gas tax would affect other aspects of
people's lives. We must also consider environmental measures." He
expressed hopes for consultation with the ruling camp, saying, "They
may understand, if we talk."

TOKYO 00000120 009 OF 013

Regarding a dissolution of the Lower House and a snap election, he
noted: "I will dissolve the Lower House at some point. It must not
affect the economy and people's lives. The Lower House must not be
dissolved so easily." He thus indicated a cautious view of a
dissolution of the Lower House before the Group of Eight Summit
(Lake Toya Summit) in July.

In relation to the mishandling of pension premium payment records,
Fukuda stressed his policy of having a social security national
council set up before the end of the month to discuss the
possibility of reforming the public pension system. Concerning
recourses to finance the payment of social security benefits, he
said, "We must consider the issue from various angles, such as which
revenues should be used, tax money or insurance money. I will not
categorically say at this point that consumption tax revenues will
be used."

12) DPJ in dilemma over battle over supplementary budget

NIKKEI (Page 2) (Full)
January 16, 2008

The Democratic Party of Japan (DPJ or Minshuto) is having difficulty
deciding what approach it should take to bills related to a fiscal
2007 supplementary budget and a bill amending the Local Allocation
Tax Law, which the government is set to introduce in the regular
Diet session to be convened on Jan. 18. It is criticizing the
government for its lax estimates of tax revenues. However, if
related bills fail to secure Diet approval within the current fiscal
year, local governments, which are to be urged to pay the local
allocation tax to the central government, would be thrown into
chaos. The DPJ is also unsure as to which issue should be made a
critical point of confrontation between the ruling and opposition
camps, with a battle over the gas tax close at hand in late March.

DPJ approves supplementary budget bill only once

The supplementary budget will be automatically enacted on Jan. 30,
after the Lower House sends it to the Upper House. Though this rule
does not apply to related bills, they could also be enacted if the
ruling camp adopts them in a second vote by more than a two-thirds
majority in the Lower House, even if the opposition camp votes them
down in the Upper House.

The DPJ has approved a supplementary budget only once in the past
five years, the fiscal 2004 supplementary budget. Criticism that
there are some disagreeable points about the fiscal 2007
supplementary budget is growing in the DPJ, as Secretary General
Yukio Hatoyama put it.

The DPJ is making an issue over the government's downward estimate
of tax revenues of both the central and local governments, with one
mid-ranking senior official saying, "The government distributed tax
allocations based on lax revenue estimates." That is because a local
allocation tax resource for distributing a set ratio of national tax
revenues to local governments has a shortfall of 299.2 billion yen,
requiring as many as 80 local governments to issue deficit-covering
local bonds, a practice that is not allowed in principle.

Revenue shortfalls reach 480 billion yen


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The Ministry of Internal Affairs and Communications, which holds
jurisdiction over local finances, is increasingly alarmed about the
situation. It distributed to lawmakers of both the ruling and
opposition camps leaflets noting that there is a possibility of many
entities going into the red if the local allocation tax bill fails
to secure Diet approval. MIC Minister Hiroya Masuda during a press
conference after a cabinet meeting on Jan. 15 underscored, "Unless
the bill is passed into law by the end of the fiscal year, there
will be chaos." According MIC, revenue shortfalls are estimated to
total 480 billion yen.

The DPJ leadership aims to highlight the "tyranny of numbers," by
forcing the ruling camp to adopt the related bills through a revote
in the Lower House at the outset of the regular Diet session. Its
strategy is to play up a confrontational stance right from the
beginning of the Diet session, ahead of the issue of whether to
maintain the provisional tax rate imposed on the gas tax, which it
characterizes as the major bone of contention.

However, if local administration gets into a mess, the ruling camp
might make a counterattack on the DPJ noting that it lacks the
capability to run the government. Some DPJ members have made
weak-spirited remarks, with one senior official of the Policy
Affairs Council saying, "It would be difficult to say that local
governments should return the tax allocation revenues that have
already been distributed to them." Thus, the DPJ has yet to decide
what approach it should take.

13) Deliberations on deficit-covering bonds by local governments
likely to run into trouble

MAINICHI (Page 2) (Excerpts)
January 16, 2008

The government has decided to allow local governments to issue
deficit-covering bonds as a measure to cover local tax revenue
shortages in fiscal 2007. This decision, however, revealed that
local finances are rapidly worsening due to the cooling down of the
economy. The opposition camp will surely point out the government's
unrealistically optimistic view in estimating local finances when it
compiled the budget. At this point, there is no telling whether
related bills will be passed in the ordinary Diet session to start
on Jan. 18.

According to a senior member of the Internal Affairs and
Communications Ministry, it was early December when significant
falls in local tax revenues were confirmed. Corporate enterprise tax
and corporate inhabitant tax revenues sharply dropped in fiscal
2007, falling far short of initial estimates by the government,
prompting local governments to send out an SOS to the central
government.

In the case of tax revenue shortages, the government usually allows
local governments to float bonds intended only for construction
projects. However, given that the number of public works projects
has been reduced over the past several years, the government judged
it necessary to revise relevant laws to allow local governments to
issue deficit-covering bonds that can be issued with no limitation
to purposes.

This special measure to cover tax revenue shortages was taken in
fiscal 1975 (to issue bonds worth about 340 billion yen) after the

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oil shock and in fiscal 2002 (worth about 120 billion yen), when a
recessionary fears mounted. This time, the government expects 80
local governments to float bonds worth 180 billion yen.

Revenue resources for tax grants to local governments are also
lacking, reflecting a sharp drop in national tax revenue, including
from the income tax, the corporate tax, and the consumption tax.
About 30 PERCENT of local grants come from national tax revenue.
Under the local fiscal plan, the government planned to distribute
approximately 15.2 trillion yen in fiscal 2007 to local governments.
But a financial shortage of 299.9 billion yen was found afterward.
The government intends to cover the deficit with money from the
general account. To do so, it is necessary to revise relevant laws.

14) Ruling camp plans to pass gasoline tax bill by two-thirds
override vote in Lower House to secure fiscal resources for road
projects

TOKYO SHIMBUN (Top Play) (Excerpts)
January 16, 2008

The ruling parties decided yesterday to enact a bill amending the
Special tax Measures Law, including measures to maintain the
provisional gasoline tax, by resorting to a two-thirds majority
override vote in the House of Representatives if the legislation is
voted down in the House of Councillors. In case the main opposition
Democratic Party of Japan (DPJ or Minshuto) delays putting the bill
to a vote, the ruling coalition will take a second vote in the Lower
House based on Article 59 of the Constitution, which stipulates that
if the upper chamber fails to put a bill to a final vote within 60
days, it can be passed by a lower chamber overriding vote. The
ruling camp has determined that it is necessary to maintain the
provisional tax to secure fiscal resources for road projects in
fiscal 2008 and after.

The secretaries general and Diet affairs committee chiefs of the
ruling Liberal Democratic Party (LDP) and its coalition partner New
Komeito from the two Diet chambers held a meeting yesterday, in
which they agreed that it would be necessary to pass the legislation
before the end of this fiscal year (March) in an attempt to avoid
major confusion caused by a hike in gas prices.

They affirmed a policy of submitting the bill as early as Jan. 25 to
the Lower House and send it to the Upper House in mid-February. They
also confirmed a plan to urge the LDP to put it a vote in the Upper
House before the end of the March.

15) CIRO official leaks internal data to Russia; Papers on the case
to be sent to prosecutors

MAINICHI (Page 1) (Full)
January 16, 2008

A Cabinet Intelligence and Research Office (CIRO) official in his
fifties has been quizzed several times by the Metropolitan Police
Department Public Security Bureau on suspicion that he leaked
Japan's internal information to the Russian Embassy in Japan, the
Mainichi Shimbun has learned. Once charges are established, the MPD
plans to send papers on the case to prosecutors on suspicion of
violating the National Civil Service Law (obligation to observe
confidentiality).

SIPDIS


TOKYO 00000120 012 OF 013


The CIRO official, who is responsible for cabinet affairs, is
suspected to have made several contacts with a Russian Embassy
officer at Tokyo restaurants over the last year and handed him data
on Japan's domestic situation.

Placed under the Cabinet Secretariat, CIRO is an intelligence
organization responsible for collecting, analyzing, and researching
information on the cabinet's important policies. In addition to
three departments of domestic, international, and economic affairs,
there is the Cabinet Satellite Intelligence Center as well.

CIRO is headed by director of cabinet intelligence. The government
has decided to establish this April the Counterintelligence Center
to analyze intelligence leaks that occurred outside Japan.

16) METI eyes new legislation to crack down on industrial espionage

MAINICHI (Page 2) (Full)
January 16, 2008

The Ministry of Economy, Trade and Industry (METI) has unveiled a
plan to establish a new law to crack down on industrial espionage,
the act of stealing vital corporate information. The aim is to
prevent the outflow of corporate information by clamping down on
acts of theft that were not prohibited under the criminal code. Also
by revising the Patent Law, the ministry plans to keep patents vital
for national security secret. The government intends to submit two
bills to the regular Diet session next year.

In a press conference after a cabinet meeting yesterday, METI
Minister Akira Amari underlined the need to enact a new law by
citing compact discs (CDs) containing critical data, saying:
"Stealing CDs is a crime in Japan, but there is no law governing
what is on a CD." METI plans to enact legislation that will make
illicitly obtaining or leaking vital information a crime. The
ministry will consult with the Industrial Structure Council, an
advisory panel to the METI minister, about specific contents this
spring. By revising the Patent Law, the ministry plans to introduce
a secret patent system to keep patents that are designated as
critical technologies from the public eye.

17) Two anti-whaling activists detained for trespassing on Japanese
survey ship in Antarctic Ocean

YOMIURI (Page 2) (Full)
January 16, 2008

The Fisheries Agency (FA) yesterday revealed that anti-whaling
activists of the U.S.-based environmental protection organization
"Sea Shepherd" blocked a Japanese whale research vessel from
navigating in the Antarctic Ocean by throwing rocks against it, and
that two male activists who had climbed aboard the whale research
vessel were placed under restraint on trespassing charges. This is
the first case of restraint due to trespassing since research
whaling began in 1987. The FA is consulting with the Ministry of
Foreign Affairs (MOFA) and other government offices about how to
treat those two persons.

According to the FA, the two activists who were aboard a large
rubber raft approached "No. 2 Yushinmaru" (of 747 tons) that was
hunting minke whales, wound rope around the screw of No. 2
Yushinmaru, and threw bottles that contained some kind of

TOKYO 00000120 013 OF 013


odoriferous liquid at it.

No crew member of No. 2 Yushinmaru was injured.

The Japanese whale research fleet had been likewise obstructed by
Sea Shepherd in last February, as well. At the time, two Japanese
crew members suffered a minor injury on the face by bottles thrown
by anti-whaling activists.

According to Sea Shepherd's website, a 28-year-old Australian and a
35-year-old British were detained by the Japanese side. Those two
persons climbed aboard No. 2 Yushinmaru in order to tell the captain
of the vessel that the vessel is violating the international
protection law.

18) Australia's Federal Court orders Japanese whaling fleet to stop
whaling

YOMIURI (Page 2) (Full)
January 16, 2008

Eki Arai

The Federal Court of Australia accepted the appeal by an Australian
animal protection organization that the Japanese whale research ship
that is killing whales in the "whale protection zone" as designated
by Australia in the Southern Ocean in accordance with that country's
domestic law is a violation of the law and ordered the Japanese ship
to stop whaling. The Japanese government has rejected the ruling and
intends to continue whaling.

The lawsuit was filed by (Australia's) Humane Society International
(HSI) against Japan's private-sector shipping company Kyodo Senpaku
(based in Tokyo), which has contracted with Japan's Institute of
Cetacean Research on availability of ships for whaling. HSI filed
suit to stop whaling in 2004. In 2005, the Federal Court dismissed
the case, but HSI filed an appeal.

DONOVAN

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