Cablegate: Daily Summary of Japanese Press 01/23/08

DE RUEHKO #0172/01 0230808
P 230808Z JAN 08





E.O. 12958: N/A



(1) Poll on Fukuda cabinet, political parties, MSDF Indian Ocean
refueling mission, HCV relief legislation (Mainichi) 2

(2) DPJ to submit counterproposal against government's budget bill
(Mainichi) 3

(3) Cabinet adopts legislation designed to maintain provisional
gasoline tax rate to submit it to Diet in afternoon (Yomiuri) 4

(4) U.S. force realignment splits city hosting base; Iwakuni mayoral
election near at hand (Asahi) 5

(5) The reason why Japan cannot dispatch GSDF troops (Sankei) 7

(6) Global shares plunge: Impact of U.S. interest rate cut to be
watched closely; Can a breakthrough be made as falling stock prices
show no sign of hitting bottom? (Yomiuri) 8


(1) Poll on Fukuda cabinet, political parties, MSDF Indian Ocean
refueling mission, HCV relief legislation

MAINICHI (Page 3) (Full)
January 21, 2008

Questions & Answers
(T = total; P = previous; M = male; F = female)

Q: Do you support the Fukuda cabinet?

Yes 33 (33) 31 35
No 45 (44) 54 37
Not interested 18 (21) 13 23

Q: (Only for those who answered "yes" to the above question) Why?

Because the prime minister is from the Liberal Democratic Party 27
(22) 28 26
Because something can be expected of the prime minister's leadership
9 (11) 6 10
Because there's something stable about the prime minister 36 (37) 37
Because something can be expected of the prime minister's policy
measures 21 (13) 22 20

Q: (Only for those who answered "no" to the above question) Why?

Because the prime minister is from the Liberal Democratic Party 9
(12) 9 10
Because nothing can be expected of the prime minister's leadership
29 (28) 27 32
Because there's no fresh image about the prime minister 10 (8) 10
Because nothing can be expected of the prime minister's policies 50
(40) 53 46

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Q: Which political party do you support?

Liberal Democratic Party (LDP) 28 (26) 26 29
Democratic Party of Japan (DPJ or Minshuto) 24 (27) 28 20
New Komeito (NK) 5 (4) 4 6
Japanese Communist Party (JCP) 3 (3) 3 3
Social Democratic Party (SDP or Shaminto) 2 (1) 1 2
People's New Party (PNP or Kokumin Shinto) 1 (0) 1 0
New Party Nippon (NPN or Shinto Nippon) 0 (0) 0 --
Other political parties 0 (1) 1 0
None 37 (35) 36 37

Q: The Diet has now enacted a new antiterrorism special measures
law, under which Japan will resume the Maritime Self-Defense Force's
refueling activities for foreign naval vessels in the Indian Ocean.
Do you support this action?

Yes 47 50 45
No 42 46 39

Q: The ruling coalition passed the new antiterror legislation in a
second vote of the House of Representatives with a majority of
two-thirds after it was voted down in the House of Councillors. Do
you think this way of passing a bill is appropriate?

Yes 46 50 42
No 44 47 42

Q: The ruling coalition may pass budget-related bills and other
legislative measures in a second vote of the House of
Representatives with a majority of two-thirds. Do you support this?

Yes 38 38 38
No 51 57 45

Q: The DPJ did not introduce a censure motion against Prime Minister
Fukuda over the new antiterror law's enactment in a second vote. Do
you think this decision was appropriate?

Yes 48 54 43
No 35 39 31

Q: In the wake of class-action lawsuits instituted against the
government by hepatitis C victims who contracted the disease from
government-approved blood products, the Diet has enacted a law to
provide across-the-board relief to all hepatitis C victims. The
government has failed to reach a settlement on this HCV issue, so
lawmakers initiated legislation to help them out. Do you appreciate
Prime Minister Fukuda for his decision over this issue?

Yes 58 57 60
No 35 40 30

(Note) Figures shown in percentage, rounded off. "0" indicates that
the figure was below 0.5 PERCENT . "--" denotes that no respondents
answered. "No answer" omitted. Figures in parentheses denote the

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results of the last survey conducted Dec. 15-16.

Polling methodology: The survey was conducted Jan. 19-20 over the
telephone across the nation on a computer-aided random digit
sampling (RDS) basis. Answers were obtained from 1,031 persons.

(2) DPJ to submit counterproposal against government's budget bill

MAINICHI (Page 5) (Abridged)
January 23, 2008

Daisuke Kondo

The major opposition Democratic Party of Japan's (DPJ) Budget
Research Council yesterday shaped a bill to change the previous
functions of budget as a counterproposal against the government's
budget bill. The DPJ plans to introduce its bill in the current
ordinary session of the Diet. In advancing debates on budget-related
bills, including the one related to the provisional tax rate for
special revenue sources, the DPJ intends to prod the government to
dissolve the Lower House for a snap general election. The DPJ's bill
presents a broad overview of the budget it would draft if it comes
to power. It also contains the procedures for securing fiscal
resources for the DPJ's key policies related to, for instance,
agriculture and child allowances. It also takes on an aspect of
being a pre-manifesto for the next Lower House election.

Budgetary handouts rejected

The DPJ's bill specifies financial sources for five key policies as
mentioned in its manifesto used for the latest Upper House election,
for instance, family income compensation and child allowances shall
be secured.

Family income compensation and child allowances both require a vast
amount of financial burden with the former one trillion yen and
latter 4.8 trillion yen. So, the government and the ruling bloc are
criticizing this policy as being unrealistic and just dole-outs. To
deal with that criticism, the DPJ indicates in its bill seven
specific steps for securing fiscal sources, one of which is in
principle to review special accounts.

Establishment of debt management agency

In order to counter the criticism that the DPJ's policy is
pork-barrel largesse, the party specifies measures toward achieving
fiscal soundness. Particularly on primary balance, the DPJ's bill
expressly stipulates that a primary balance surplus shall be
achieved by fiscal 2011. As part of this effort, the bill states a
debt management agency shall be established to manage and make clear
the state's assets and debts. In order for budget to be compiled
under political leadership, the bill specifies that the work of
budget-compilation be transferred from the Finance Ministry to the
Cabinet Office.

Main points of the DPJ's bill

Fundamental philosophy: Promote the achievement of primary balance;
and aim to achieve a primary balance surplus by 2011

Key policies: Integrate the public pension programs into one system;
expand child-rearing allowances; creating an income compensation

TOKYO 00000172 004 OF 010

system for individual farmers; reform the subsidies system for local
public entities; and expand help to small and medium-sized firms

Principles for expenditure cut: Curtail costs of public procurement;
drastically review public works projects; drastically review the
reform of special public corporations; abolish in principle special
account; curb the total personnel costs for civil servants employed
by government; review special tax measures; and make good use of
government assets.

How to compile budget: Establish a debt management agency; create a
budget under the cabinet's leadership

(3) Cabinet adopts legislation designed to maintain provisional
gasoline tax rate to submit it to Diet in afternoon

YOMIURI NET (Excerpts)
13:18, January 23, 2008

The government adopted at an ad hoc cabinet meeting this morning tax
reform-related bills, including one to revise the Special Taxation
Measures Law.

The government will submit them to the House of Representatives this
afternoon. The bill amending the Special Taxation Measures Law is
intended to maintain the provisional tax rates, including the
gasoline tax. If it fails to clear the Diet by the end of March,
gasoline prices will drop and the central and local governments' tax
revenues will also decline. Although the government and ruling
parties are aiming to enact it within the current fiscal year, the
major opposition Democratic Party of Japan (DPJ or Minshuto) intends
to oppose it. Diet deliberations on the bill are expected to face
rough going.

At the ad hoc cabinet meeting, Finance Minister Fukushiro Nukaga
said: "The bill is directly connected with the people's livelihood.
A failure to enact it before the end of this fiscal year would have
grave impacts on the people's day-to-day lives as well as on
economic activities. It must be enacted within this fiscal year."

Unless the bill amending the Special Taxation Measures Law is
enacted before March 31, the provisional tax rates that are added to
the regular gasoline tax and other taxes will be eliminated, and as
a result, the gasoline price, for instance, will drop by 25.1 yen
per liter starting in April. At the same time, it will be tax
increases in some cases. For instance, corporate tax breaks for
small- and mid-sized companies that made capital investment will be

Dubbing the current Diet session the "gasoline Diet," the DPJ is
calling for the abolition of the provisional tax rates. In the
meantime, the government and ruling parties are aiming to enact the
legislation before March 31, saying that (the elimination of the
provisional tax rates) will reduce the tax revenues for the central
and local governments and increased gasoline consumption will have
an adverse effect on the environment.

The DPJ asked the gasoline tax part be separated from the
legislation, but the government and ruling coalition rejected it and
decided to submit it some 10 days earlier than usual with the aim of
enacting it within the current fiscal year. Although some Upper
House LDP members are calling for the bill's passage of the Lower

TOKYO 00000172 005 OF 010

House within January, the party leadership intends to send it to the
upper chamber around mid-February, thinking that an inappropriate
step would throw the Diet into turmoil.

(4) U.S. force realignment splits city hosting base; Iwakuni mayoral
election near at hand

ASAHI (Page 2) (Abridged)
January 20, 2008

The official campaign for the February 10 Iwakuni mayoral election
will kick off on Feb. 3. The relocation of a carrier-based air wing
to the U.S. air station in the city is the top campaign issue. The
race is expected to be a duel between former mayor Katsusuke Ihara,
57, who is opposed to the relocation, and Liberal Democratic Party
House of Representatives member Yoshihiko Fukuda, 37, who is backed
by pro-relocation municipal assemblymen and others. Although the
Ministry of Defense (MOD) intends to push ahead with the relocation
plan regardless of the outcome of the election, the Prime Minister's
Official Residence (Kantei), which is searching for a way to elicit
talks on base issues in Okinawa, fears that the conflict with local
residents in Iwakuni will intensify, too.

At a rally on the afternoon of Jan. 19, Ihara, appearing before some
1,700 people, said:

"The number of U.S. aircraft will double, and no explanation can
dispel our concerns about noise, accidents, and crimes. Placing high
priority on relations with the United States, the government is
trying to unilaterally force this plan on us."

The government has frozen subsidies totaling 3.5 billion yen for
building a new Iwakuni city hall due to Ihara's opposition to the
plan. Ihara criticized the government's step as "unbelievably

The Fukuda camp, opening a campaign office at around the same time,
also held a rally near the major tourist attraction Kintai Bridge.
Before some 800 people, Fukuda stressed: "Iwakuni's economy is
depressed. I will turn Iwakuni into a city that is comfortable to
live in."

The point at issue is clear: whether to reject the relocation plan
by placing high priority on making citizens feel secure and safe, or
to accept the plan in order to elicit financial support from the

Ihara has always been tolerant of the base itself. The government
announced the subsidies for building a city hall in return for
accepting air tankers from Futenma Air Station by Ihara's
predecessor. Ihara has never objected to the relocation from

But he said 'no' to the relocation of the carrier-based air wing,
because that would double the number of aircraft at the Iwakuni
base, turning it into a major air base in the Far East on par with
Kadena Air Base in Okinawa. Ihara's stance further stiffened with
the government's decision to freeze the subsidies for the planned
city hall. "The government is trying to control us by using the
carrot-and-stick approach," Ihara said.

Ihara's reaction drew fire from the predominantly pro-relocation

TOKYO 00000172 006 OF 010

city assembly. The assembly voted down four times the budgetary
bills designed to fund the construction cost with other financial
sources. Their view is that the city should accept the relocation
plan and obtain the subsidies.

Two years ago, Ihara initiated a local referendum, in which he
successfully extracted popular will overwhelmingly opposed to the
relocation. Ihara also submitted his resignation on December 26, the
day he presented the municipal assembly with a budget bill for the
fifth time, only to announce his candidacy for the mayoral race
later in the day.

His aim is to press the municipal assembly for change on the
strength of "new popular will" and say 'no' to the central
government with the assembly.
Ihara said at the rally that if he was elected and the conflict with
the assembly still continued, he could recall the assembly.

Fukuda, in accepting the relocation, said, "I will cooperate for the
sake of U.S. force realignment." With Ihara's strategy of playing up
popular will in mind, Fukuda is also trying to present himself as a
person determined to take solid measures against noise, telling
people, "I will not be at the beck and call of the central
government." Assemblymen tolerant of the relocation plan have often
held small meetings in which they repeatedly asked, "Should the city
take a pragmatic approach and open a bright future, or take the path
toward bankruptcy?" One even said: "I am ready to quit as an

MOD: There will be absolutely no change

Immediately after the Iwakuni mayoral race was set late last year,
Deputy Chief Cabinet Secretary Masahiro Futahashi grilled a senior
MOD official over the deeply complicated base issue.

Futahashi's discontent comes from the belief that MOD's subsidy
policy as part of the carrot-and-stick approach under the former
Koizumi and Abe administrations has stiffened the stance of
municipalities opposed to increased base burdens.

Last October, Ihara asked the government to set up a venue to
discuss matters, including a resumption of the subsidies. But MOD
said that it would comply with the request only if he was willing to
accept the relocation. This further strained the relationship
between the two.

The government, clearly deciding to take a dialogue approach toward
Okinawa, resumed talks with the affected municipalities after a
lapse of 10 months. But toward Iwakuni, it keeps a stern attitude,
with one MOD official saying: "The situations between Okinawa and
Iwakuni are completely different."

In order to implement the Futenma relocation plan, landfill for
airfield construction requires authorization of the governor, so the
government needs to obtain the concurrence of the affected
municipalities as well. In contrast, Iwakuni mayor does not have the
authority to stop the relocation project. The Kantei thinks Iwakuni
is less important than the Futenma relocation that will be
implemented in exchange for moving 8,000 U.S. Marines to Guam. Even
if the Iwakuni remains opposed to the relocation, U.S. force
realignment can move forward. "There will be no change to the
realignment project even if Mr. Ihara wins the race," a MOD official

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(5) The reason why Japan cannot dispatch GSDF troops

SANKEI (Page 7) (Excerpts)
January 23, 2008

By Hiroshi Yuasa, Tokyo

The situation in Afghanistan, which has now become the main
battlefield in the war on terror, is far severer than that in Iraq.
Signs of revival of Islamic Taliban militants have begun to appear
centering on the snow-covered mountainous areas near the Pakistani
border. Although President Karzai has been able to maintain his
administration due to his ability to raise funds from the
international community, funds into the country have been dwindling.
The end of the flow of money might be the end of love.

In 2006, the feeble administration smoothed over past crimes by
military cliques in the name of national reconciliation, pardoning
the outlaws who had been involved in torturing and slaughtering
during the Taliban era and giving cabinet portfolios to bloody
warlords. The stable situation in Afghanistan began deteriorating
that year.

At present, 40,000 NATO-led multinational troops are deployed in
Afghanistan. The figure, which is quite small for maintaining law
and order in the country, includes 14, 000 troops from the United
States. Washington has decided to send an additional 3,200 troops to
be prepared against the offensive this spring.

A variety of information is flying about, such as that Canadian
troops are having a hard time in the Taliban's old heartland of
Kandahar, or that seven Taliban militants have entered the inland
city of Bamiyan.

Having suffered tremendously in civil wars, the Afghan people tend
to take the side of forces with power in order to live.

Meanwhile in Japan, the government presented a bill to resume the
refueling operation in the Indian Ocean and the Democratic Party of
Japan submitted a bill to send ground troops. After many twist and
turns, the House of Representatives readopted the
government-sponsored bill in the end. It was the right decision.

The DPJ-sponsored legislation was designed to limit support
activities to the civilian sector after a ceasefire agreement is
reached and to areas where no Afghan people sustained damage.
Foreign Minister Masahiko Koumura is not the only one who thinks
specifying safe areas is difficult.

Unlike in the southern Iraqi city of Samawah, there are no troops
from the Netherlands or Britain to defend Ground Self-Defense Force
troops in Afghanistan. Already 117 persons from Britain, Canada and
the Netherlands have died. The presence of troops not allowed to
take combat action would only be a drag. Sending out ground troops
requires sufficient equipment, permission for combat, and the
preparedness to result in loss of life.

What does Japan want to do in Afghanistan? -- This was the question
posed to me by Yukari Ota of the UN Afghan mine support center, who
was temporarily back in Japan. Stationed in 2004 at a local office

TOKYO 00000172 008 OF 010

in northern Afghanistan, Ota endeavored for the dismantlement of
military cliques. Currently she is serving as the center's special
assistant in the country's capital of Kabul.

"Fostering a tribal society into a nation state is extremely
difficult. It takes decades instead of a couple of years. Troops
from major countries are aiming at 'reconstruction.' What is Japan's

Japan does not have any desire to dispatch combat troops. Sending
the Maritime Self-Defense Force's supply ship and destroyer to
support multilateral forces in the Indian Ocean is just the right
step for such a country. An MSDF destroyer will depart from the
Yokosuka base on Jan. 24 and a supply ship from the Sasebo base on
Jan. 25.

(6) Global shares plunge: Impact of U.S. interest rate cut to be
watched closely; Can a breakthrough be made as falling stock prices
show no sign of hitting bottom?

YOMIURI (Page 3) (Excerpts)
January 23, 2008

Falling prices on the stock market are showing no sign of hitting
bottom. Tokyo stocks yesterday plunged for the second straight day.
Stock prices also tumbled in the markets of newly emerging countries
in Asia. The impact of the U.S. subprime loan crisis is increasingly
becoming serious. The Federal Reserve Board (FRB) yesterday further
lowered the interest rate as an emergency measure, but the New York
Stock Exchange opened broadly lower. In Japan, the impact of the
subprime loan fiasco is becoming a real possibility. Moves on the
Tokyo Stock Exchange (TSE) today are drawing attention.

Blow on Japanese economy could become real possibility

The Nikkei Stock Average dropped 1,288 points in two days. A male
company employee in his 60s complained, "Since the speed of the fall
is too fast, it's hard to find the right timing to sell off my
stocks. I took part in many lecture meetings, but half of the
projections analysts made were not wrong."

BOJ Governor Toshihiko Fukui held a press conference at the BOJ head
office at 3:30 p.m. yesterday. He indicated a sense of alarm,
noting, "Investors are increasingly avoiding taking risks. The
subprime loan flap could have a negative impact on the Japanese
economy through consumers' sentiment."

Optimism disappears

Disappointment at U.S. President Bush's economic stimulus package
worth up to 150 billion dollars (approximately 16 trillion yen),
released on Jan. 18, has triggered the global stock plunges. The
prevailing market response to the package is that tax breaks will
not lead to a fundamental settlement of the subprime risk and the
proposed size is also insufficient, which has given rise to
U.S.-induced global stock falls. A chain reaction of stock market
plunges spread from the U.S., Europe, Japan and to Asia, forcing the
FRB to lower the interest rate as an emergency measure.

Among stock markets in Asian countries, the stock price index in
Hong Kong fell more than 8 PERCENT , compared with the level of the
previous day. The Mumbai market in India was forced to close

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There was a media report noting that the Bank of China, China's four
major state-run commercial banks, will report huge amounts of
deficits sustained by the subprime loan fiasco, leading to a view
that the decoupling theory that even if the economics of advanced
countries slow, it can be covered with high growth of newly emerging
economies has been smashed, as Takeshi Segawa of Shinko Securities

U.S. stocks moved in an unstable manner, plummeting and then
slightly recovering, after the FRB lowered the interest rate.
Tsuyoshi Nomaguchi of Daiwa Securities warned, "If the U.S. fails to

stop its economy from slowing, the impact of the subprime loan
calamity is bound to be felt by Japanese and Asian markets as

Corporate performances, consumption could lose steam

Growing concern

Concern about Japanese companies' performances deteriorating has
grown due to major stock price falls, which nobody had expected at
the end of last year.

The electronic appliances industry, which hopes to see expanded
sales of flat-screen TVs with the Beijing Olympic Games close at
hand in August, is becoming nervous about stock prices, which do not
show any sign of hitting bottom. A Victor Co. of Japan source noted,
"Audio visual devices are for highly personal favorite pursuit. We
are especially concerned that consumers might lose buying motives
due to the low stock prices."

Toyota Motors, which has increased sales on the brisk overseas
markets, cannot afford not to take notice of the impact of the
stumbling stock prices. Its estimated sales volume in the US is 2.64
million units, up 1 PERCENT from the preceding year, and 700,000
units in China, up 40 PERCENT . However, one related industrial
source pointed out, "If the economies of both countries cool off,
even Toyota would suffer a major blow."

Naoko Kamiyama of Morgan Stanley said, "If Japanese companies
project a profit decline in the fiscal 2008 settlement of accounts,
stock prices could fall further."

According to Hideo Kumano of the Dai-ichi Live Insurance Economic
Research Center, latent profits of stocks held by the six major
financial groups as of Jan. 22 had shrunk from approximately 8.1
trillion yen, marked at the end of September 2007, to approximately
3.4 trillion yen. Some life insurers appear to have sustained latent

Personal consumption

Stock plunges have begun to deal a blow to consumer spending. An
increase in the prices of various consumption goods caused by
soaring crude oil prices is affecting people's lives. Seibu
Department Stores noted that sales of high-prices goods, such as
jewelry, are slowing.

Toshifumi Suzuki, chairman of Seven and I Holdings said, "Stock
plunges are having a significant psychological impact. Consumers

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will tighten their purse strings.

Low stock prices could dampen spring wage negotiations as well. The
top leaders of the Japan Business Federation (Nippon Keidanren) and
the Japanese Trade Union Confederation will meet today, marking a
practical start of the spring wage battle for 2008. Nippon Keidanren
has shown a positive stance toward the idea of raising wages, but
now they are increasingly becoming cautious about it.

The trade union's side underscored that consumption would not be
boosted without pay raises. However, the growth scenario of
full-fledged recovery of consumption, backed by recovered wages,
will likely be derailed.


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