Cablegate: Daily Summary of Japanese Press 01/24/08

DE RUEHKO #0189/01 0240805
P 240805Z JAN 08





E.O. 12958: N/A



(1) Interview with Vice Environment Minister for Global
Environmental Affairs Toshiro Kojima: Environment diplomacy to get
underway at Davos Forum; Japan intends to lead world, by winning
trust (Tokyo Shimbun)

(2) Business world and LDP calling for depriving FTC of judge's role

(3) Iwakuni mayoral election (Part 1): Prelude to election heating
up with public opinion divided over plan for transfer of U.S.
carrier-based aircraft to Iwakuni (Tokyo Shimbun)

(4) Iwakuni mayoral election (Part 2-conclusion): Residents weary of
a row over transfer of carrier-based aircraft to Iwakuni; shopping
area deserted (Tokyo Shimbun)

(5) Consumer administration: Government plans to set up and launch
in fiscal 2009 new organization to serve as control tower; Authority
to give orders to correct business practices also to be given

(6) Hard times for "Japanese flag" oilfields; Resource nationalism
rising in oil-producing countries that are clinging to interests

(7) Editorial: We oppose both government and DPJ plans on gasoline
tax rate (Asahi)

(8) Editorial: Is wasting public funds the DPJ's plan? (Mainichi)


(1) Interview with Vice Environment Minister for Global
Environmental Affairs Toshiro Kojima: Environment diplomacy to get
underway at Davos Forum; Japan intends to lead world, by winning

TOKYO SHIMBUN (Page 2) (Excerpts)
January 24, 2008

The World Economic Forum (Davos Forum) started in Switzerland on
Jan. 23. Prime Minister Yasuo Fukuda will stage environment
diplomacy, by sending Japan's initiative for the prevention of
global warming to the world. Prior to the meeting, Tokyo Shimbun
interviewed Vice Environment Minister for Global Environmental
Affairs Toshiro Kojima, who will accompany the prime minister on his
participation in the meeting, about prospects for Japan's
environment diplomacy.

-- What role will Prime Minister Fukuda play at the Davos Forum?

"Key members of political and economic circles in the world,
including highest-level corporate managers in the world and UN
Secretary General Ban Ki-Moon, will take part in the meeting. A

special seat will be prepared for Prime Minister Fukuda as the
chairman of the G-8 summit. The prime minister will reveal major
agenda items at the G-8, including climate change.

-- A series of international conferences to discuss global warming
issues, such as the G-20 Climate Change Dialogue in March in Chiba,

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the G-8 Environmental Ministers' meeting in May in Kobe City and the
G-8 summit, will take place in Japan this year.

"A final report on such issues as technology and funds needed for
measures to prevent global warming will be adopted at the G-20,
based on the action program adopted at the Gleneagles Summit in
Britain. Climate change, biodiversity and recycling will top the
agenda at a G-8 environment ministerial meeting. What have been
discussed will be reflected in a paper on the results of the Lake
Toya Summit and an accompanying document.

-- An agreement was reached in December last year in Bali, Indonesia
on the Bali roadmap for adopting a post-Kyoto framework by 2009. Do
you think things adopted at the G-8 Summit will affect this

"For instance, the U.S. has joined the framework of the roadmap this
time. President Bush made a statement at the Heiligendamm Summit in
Germany last year, noting that the U.S. would respect the UN-led
process. The U.S. participation this time is based on that
statement. Meetings on the roadmap will be held intermittently. Top
leaders' statements and decisions will be reflected in those

-- Climate change will be discussed at the G-8. What will be the key

''To begin with, the target of halving greenhouse gas emissions in
the world, the issue that has been carried over from the
Heiligendamm Summit, has to be discussed. Regarding a post-Kyoto
framework, the duration of a commitment period, carbon dioxide
emissions cuts by industrialized countries and developing countries,
such as China and India, which are emitting a great deal of
greenhouse gases, measures to adapt to the effects of global warming
and transfers of technology and funds will be talked about as basic

-- Japan along with the U.S. opposed the inclusion of numerical
emissions reduction goals at the Bali conference. Its action invoked
international criticism. Do you think Japan can display leadership?

"The Japanese government's Cool Earth 50 calls for a 50 PERCENT cut
in greenhouse gas emissions and participation of all major emitters
in the framework. According to post-Kyoto Protocol discussions,
provided that the next commitment period is set for 10 years from
2013 through 2022, emissions must peak during that period, and then
take a downward turn. To achieve that goal, it is essential for the
U.S., China and the EU, major carbon dioxide emitters, to take part
in the framework. Whether Japan can come up with a proposal
acceptable to those countries holds the key. It is said that the
U.S. makes rules on the strength of power, the EU does so with
resourcefulness, and China does so with numbers. In order for Japan
to act as a leader, it is necessary for it to first win the
confidence of the international community. To that end, it is
imperative for it to achieve its goal of cutting greenhouse gas
emissions 6 PERCENT , compared with the 1990 level and show a
proactive stance toward global efforts to cut such gases beyond

(2) Business world and LDP calling for depriving FTC of judge's

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ASAHI (Page 9) (Full)
January 22, 2008

The Fair Trade Commission (FTC), the watchdog of the market, is now
facing a crisis. The FTC, which has exposed a number of bid-rigging
cases under Chairman Kazuhiko Takeshima, is about to lose the
function of being able to make judgments. The FTC is poised to raise
its opposition, but an increasing number of business leaders are
becoming more vocal in criticizing the current system in which the
FTC plays the dual role of prosecutor and judge.

The first trial this year started on the morning of January 17 at
the Fair Trade Commission in Kasumigaseki, Tokyo. In a bid-rigging
case in a bridge-building project commissioned by a government
agency, 22 companies had been ordered to cease activities in
violation of the Antimonopoly Law. Dissatisfied with the ruling, the
companies filed a complaint with the FTC.

Doubts voiced about fairness

With three judges sitting at the center of the room, the lawyers of
the companies and FTC officers serving as "prosecutors" were sitting
face-to-face on both sides of the judges' table. The room was just
like a courtroom, but the judges and the investigators were all FTC
officials. There are seven judges - two temporarily dispatched
judges, two lawyers, and three FTC members.

Under the so-called "umpire system," the FTC judges appeals filed by
companies against its punishment. A senior member of Nippon
Keidanren (Japan Business Federation) complained: "I doubt if fair
proceedings have been taken."

The FTC compiled a bill amending the Antimonopoly Law last December,
but the Liberal Democratic Party's Special Committee on Antimonopoly
Laws instructed it to rewrite the bill, stressing that it is
desirable from a commonsense standpoint that the duties of screening
and judging cases should be performed by separate bodies. The LDP
study group plans to reach a conclusion by the end of February and
submit the necessary legislation to amend the Antimonopoly Law to
the current Diet session.

The FTC is now on the defensive, but in 2005, when the law was
amended, it was given a powerful "weapon," that is, a rise in
administrative surcharges and a leniency system in which immunity
from criminal prosecution or a reduction in surcharge payments is
applied to companies that voluntarily report their illegal
activities to authorities.

Under the current system, an administrative surcharge as
administrative punishment and a fine as criminal punishment are
imposed on an offender. But Keidanren requested that the system
should be changed into a system to collect only administrative
surcharges. Despite the request, the LDP panel, reflecting on a
series of bid-rigging cases, toughened the penalties. The council on
basic problems related to the Antimonopoly Law, a private advisory
council to the chief cabinet secretary, also approved last June the
imposition of both a surcharge and a fine. Even while referring to
the possibility of changing the umpire system into the former prior
screening system in the future, the council regarded it proper to
keep the double-charge system for the time being.

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Last summer, the tide began to turn in Keidanren's direction. In the
wake of the LDP's devastating defeat in the House of Councillors
election in July, momentum began to gather for reviewing the
pro-competition policy. An argument for abolishing the umpire system
is also gaining influence in the LDP research panel.

Seeing such a trend, an expert voiced concern that "if the umpire
system is abolished, the FTC's ability to expose offenses might be
undermined as a result of the FTC becoming cautious in making a
judgment." Further, the FTC emphasized the advantageous point of
being able to make a flexible response as an administrative organ.

Take the case of merger between Yawata Steel Corporation and Fuji
Iron & Steel Co. in 1970. The FTC initially instructed the two
companies to scrap their merger plan, reasoning that they will
result in gaining an excessively large market share. But the two
companies proposed lowering their share by selling business units.
The FTC finally approved the merger of the two companies into Nippon
Steel Corporation.

FTC scale-down unavoidable

However, since the Yawata-Fuji merger case, no case has been brought
into the FTC for a judgment. Because of this, the watchdog finds it
difficult to make a counterargument. It may be unavoidable for the
FTC to see its authority shrink even if it succeeds in avoiding the
role of judge from being taken away from it.

Growing calls for scraping the umpire system is to prove that "a
strong FTC" has begun to be deeply rooted in Japan. The FTC is
further aiming to reinforce its investigatory powers, including
authority to search houses and seize data, in a bid to make its
powers as strong as those in Western countries.

The European Union (EU) unearths international cartel cases and levy
huge fines on offenders, as part of efforts to enhance its
deterrence capability. In Europe and the U.S., a person who feels
dissatisfied with a ruling is allowed to file a complaint with a
court. Keidanren managing director Kubota emphasized: "If the FTC
insists that its authority should be strengthened in accordance with
international standards, it also should take procedures in
accordance with international standards."

Will the FTC be able to grow into a watchdog respected in the
international community? The FTC is now at a crossroads.

(3) Iwakuni mayoral election (Part 1): Prelude to election heating
up with public opinion divided over plan for transfer of U.S.
carrier-based aircraft to Iwakuni

TOKYO SHIMBUN (Page 26) (Abridged)
January 21, 2008

Makoto Hashimoto

A preliminary skirmish is intensifying over the question of whether
to allow the transfer of U.S. carrier-based aircraft to the Iwakuni
Marine Corps Air Station (in Iwakuni City, Yamaguchi Prefecture). A
one-on-one battle is expected to occur between former Mayor
Katsusuke Ihara (57), who is backed by opponents to the transfer
plan, and House of Representatives member Yoshihiko Fukuda (37) from
the ruling Liberal Democratic Party (LDP), who is supported by those

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in favor of the transfer plan. The election will be announced on
Feb. 3 with voting set for Feb. 10. Which side the public will
choose in the third round of a repeat mayoral election? This
reporter visited Iwakuni City, which is known as a military base

Opponents/former mayor's camp in high spirits; aim to win third

"It's unreasonable not to listen to the voices of the Iwakuni
people. It's also unreasonable to threaten the city government with
a subsidy cut on the grounds that the city does not behave as it is
told." Ihara made this remark at a rally for his campaign held at
the Iwakuni Citizen Hall on Jan. 19. Ihara, who wore a yellow scarf
- yellow being his campaign color -- continued his criticism of the
central government for its carrot-and-stick approach.

In March 2006, the city held a referendum. The result was that 90
PERCENT of the residents were opposed to the transfer plan. In the
mayoral election held one month later after the referendum, Ihara
defeated a candidate favoring the transfer plan by a big margin.
This time, Ihara will run in his third mayoral campaign. He asserts:
"I don't intend to call for removing the base, but I think the
central government should not force the local municipality to accept
the central government's policy, and instead, based on the wishes of
locals, it should negotiate with the United States." Most of some
1,700 participants in the rally were elderly persons wearing

Former Mayor Saburo Yamashita of Hatsukaichi City, Hiroshima
Prefecture, who was portrayed as an atomic-bomb survivor mayor,
joined the rally to encourage Ihara. Present also was political
commentator Minoru Morita, who declared he would give full backing
to Ihara, describing Iwakuni City as a "rising star in terms of
protecting democracy." Ihara shouted himself hoarse: "When I faced
the fourth rejection by the city assembly of a budget bill, I
thought I would have to go on a pilgrim's walking tour across the
country for ascetic self-discipline. But placing my faith in the
residents of Iwakuni and people across the country, I will win this

Meanwhile, on the evening of that day, the Fukuda camp held a
gathering of supporters at a hotel in the city.

The gathering was held in the form of a buffet-style party. It was
joined by some 700 politicians and business persons dressed in
suits. Shunichi Harada, manager of the "Iwakuni no Akarui Mirai o
Tsukuru Kai," a civic group to create a bright future for Iwakuni

City, said in high spirits: "It's lucky that (Mr. Ihara) decided to
step down. We will accept his challenge." Iwakuni Chamber of
Commerce and Industry President Hisahi Nagano declared: "The
consensus of business leaders in the city is to see House of
Representatives member Fukuda head this city's government."

Fukuda said: "The central government is indeed to be blamed for lots
of things. I'd like to represent the voices of the Iwakuni people
and speak to the central government on their behalf. I'll dispel the
public's misgivings by discussing such specific matters as expanding
the noise control area and shortening flight hours." Fukuda
indicated his intention to "wage a struggle that would only be ended
when certain conditions were fulfilled." Fukuda continued, "I'll
without fail measure up to your expectations." In response, someone

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there encouraged him by saying, "You must win the election."

Ahead of the start of a short campaign battle, Fukuda, less known in
the city than Ihara, plans to visit mountainous and island areas to
make his name known to the residents there.

The Fukuda camp stresses the significance of the debts amounting to
100 billion yen or more held by the city government. Fukuda's
campaign strategy is to stress that the city finances will collapse
or that taxes will be hiked. Fukuda also attaches importance to
public services, asserting that child-care fees, school lunch fees,
and medical expenses for school children should be free or be
lowered and that elementary and junior high school buildings should
be reinforced to resist earthquakes in five years. Fukuda's
supporters pin their hopes on him with one saying, "Even though we
raise objections, the transfer plan will be implemented." Another
argued, "Subsidies should be used for measures that will be
beneficial to the public."

Ihara argues against Fukuda: "I reduced the city government's debts,
but the debts swelled owing to the merger of towns and villages in
the neighborhood (in 2006). Given that the city has the industrial
district and the express highway, it is incorrect to say that
Iwakuni will collapse like Yubari City, Hokkaido. There will be no
tax hikes. I have a lot of things to do, for instance, cutting
salaries of the mayor and civil servants and reducing the number of
the city assembly members.

A city assembly member backing Ihara explained: "Iwakuni as well as
other municipalities are in financial difficulties. Because of the
lack of justice, the other side focuses on financial matters."

(4) Iwakuni mayoral election (Part 2-conclusion): Residents weary of
a row over transfer of carrier-based aircraft to Iwakuni; shopping
area deserted

TOKYO SHIMBUN (Page 27) (Abridged)
January 21, 2008

Makoto Hashimoto

What are views of the residents (about the plan to transfer
carrier-based aircraft to Iwakuni) ahead of the mayoral election?

1,194 base-related complaints filed last year

There were 220 complaints filed to the city government against noise
and flights in 2004, but the figure increased to 1,194 in 2007.

Residents living in the vicinity of the U.S. Marine Corps Air
Station Iwakuni even now suffer from the roar of jet fighters. One
74-year-old man complained: "I feel like I live under a railroad
overpass. The roar of aircraft sometimes continues until late at
night; as a result, some people suffer from headaches or become

Carrier-based aircraft assigned to the U.S. Naval Air Facility
Atsugi (sitting in the cities of Yamato and Ayase, Kanagawa
Prefecture) are well known for their touch-and-go landing practices.
"In the past, there was one week of touch-and-go training. That was
terrible. If 59 more planes come here to do such training...," the
man added. He will bring the first lawsuit this spring in Iwakuni

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City, where there has been no such case lodged against the base in
the past asking for suspension of flights.

Residents are enraged at (the central government) with one arguing,
"Their approach is mean. Instead of telling us, 'This is the only
place across the country to be chosen as a location for the
transfer,' they simply asked us, 'Yes or no?' This is outrageous."

Meanwhile, the bar district, which at one point flourished at the
outbreak of the Vietnam War, is now totally deserted. A taxi driver
in his sixties claimed: "Public works projects have dwindled. The
bars are not doing well. Our business has reached a dead end. I hate
seeing even the face (of Mr. Ihara)."

The atmosphere at the shopping area located in front of JR Iwakuni
Station is likewise dead. A self-employed man (49) said, "It may be
the right thing to oppose the transfer plan, but doing so is not a
pragmatic choice." A 61-year-old woman, who voted for Ihara in the
previous mayoral election, expects change by saying, "I don't know
what kind of trouble exists behind the scenes, but this time, I am
weary of him."

The Iwakuni base divides the city into two and prevents it from
rebuilding itself because of height restrictions. The city has a
population of some 150,000 persons, but if there is no base
presence, Iwakuni would have developed into a city of a half
million. Should the city call on the central government to
compensate for that? Or should the city reject the transfer plan on
the condition that because of the base, companies tend to move out
from here to somewhere else. These are not easy questions to

How about Mt. Atago, which was sliced up as part a project to
relocate the base one kilometer offshore. This relocation came about
as a measure to reduce base noise, but the idea is said to have
motivated the central government to consider Iwakuni as a candidate
site for relocation (of carrier-based jets). Mt. Atago's grove with
its village shrine was destroyed in order to construct a housing
area, and there is a strong possibility that houses for the U.S.
military will also be constructed there.

Masami Fukuda, a 46-year-old housewife living near the Mt. Atago
development area, is opposed to the transfer plan. She argued: "I am
concerned about public security. Because of extra-territorial
rights, U.S. soldiers can go outside the fence, but we can't enter
inside the fence. I hear there are cases of hit-and-run accidents
caused by U.S. soldiers or cases where U.S. soldiers intruded into
private citizens' premises. Once the base functions are reinforced,
there will be no moving out of it for at least for another century.
I will cast a ballot, taking fully into account the future of my

When this reporter asked passengers in front of Iwakuni Station whom
they might vote for, most answered promptly: "Mr. Ihara" or "Mr.
Fukuda." There seem to be a few who have not decided for whom they
will vote, even though no panel discussion has been held so far for
the two candidates-to-be to exchange views. This may be the result
of the city being divided.

Defense Minister Shigeru Ishiba made this comment: "Of course, I am
interested in (the mayoral election) to see what is the public's
will, but there will be no change in our attitude of advancing the

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transfer plan as part of the realignment of the U.S. forces in

Both camps have shown no sign that they will lay down their arms,
even though the public's will is shown anew in the election. In
fact, one member of the Fukuda camp argued, "Mr. Ihara caused the
public to be divided by holding a referendum and hatred emerged
eventually among the public." A resident opposing the transfer plan
offered a counterargument: "City assembly members who had been
opposed to the transfer plan changed their mind at a time when the
subject of subsidies (from the central government) cropped up. That
is attributable to the central government and the United States."

(5) Consumer administration: Government plans to set up and launch
in fiscal 2009 new organization to serve as control tower; Authority
to give orders to correct business practices also to be given

MAINICHI (Page 1) (Full)
January 19, 2008

Prime Minister Yasuo Fukuda in a policy speech revealed a plan to
revise consumer administration. The outline of a new organization
that will facilitate the new proposal in a unified manner was
revealed on Jan. 18. The envisaged organization will be given the
role of a control tower that will lead concerned government
agencies. It will be empowered to issue a recommendation to
government agencies to rectify the situation, according to need. A
proposal for establishing a new organization by transferring
relevant government agencies' consumer administration under its wing
as it is will be put on hold. The government will work out a
specific plan over six months, while determining discussions pursued
within the Liberal Democratic Party (LDP).

Consumer administration involves 10 government agencies, including
the Cabinet Office, the Ministry of Health, Labor and Welfare and
the Ministry of Agriculture, Forestry and Fisheries. Since they have
different laws under their jurisdiction, the adverse effects of
bureaucratic sectionalism have been pointed out.

The LDP Consumer Problems Research Group (chaired by Seiko Noda) is
negative toward the idea of setting up a consumer agency, which
government agencies are fiercely opposing, as their vested interests
will be deprived. It also goes against the administrative reform
drive. The panel will map out a set of proposals before the end of
February, but it is unlikely that it will adopt the consumer agency

In contrast, a plan to make the Cabinet Office Quality-of-Life
Policy Bureau, which is responsible for planning and formulating
consumer-related basic policies, an independent entity. The aim is
to improve consumer administration by turning it into an
administrative committee like the Fair Trade Commission. The prime
minister on the evening of Jan. 18 told reporters at the Kantei,
"(The new organization) must be given a position where it can say
things to concerned government agencies, if problems arise."

(6) Hard times for "Japanese flag" oilfields; Resource nationalism
rising in oil-producing countries that are clinging to interests

ASAHI (Page 10) (Excerpts)
January 24, 2008

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Japanese corporations' rights to develop in overseas oilfields are
undergoing a series of trials. The reason is because resource
nationalism is rising, as evidenced by Russia's and Kazakhstan's
requests for the transfer of rights against a backdrop of surging
crude oil prices. Although the government is trying to find a way
out by means of resource diplomacy, a dark cloud is hanging over the
government's goal of doubling Japanese-flag drilling rights, amid
intensifying competition with up-and-coming nations, such as China
and India.

The Kashagan oilfield in the Caspian Sea is said to be one of the
largest oilfields in the world. The Kazakh government announced on
Jan. 14 that it would allow a state-owned enterprise to purchase
part of the rights owned by foreign capital. The share of concession
rights held by Inpex and other Japanese corporations has declined
from 8.33 PERCENT to 7.56 PERCENT .

Kazakhstan suspended the construction last August ostensibly for
environmental reasons. What actually lies behind it is discontent
with a loss from a delay in the development construction as well as
with greater contributions to the development cost. The Ministry of
Economy, Trade and Industry (METI) welcomes the resumption of the
construction, although it has come at the cost of reduced interests
on the part of Japan.

Russia also applied pressure on the development of Sakhalin 2, now
underway by the Royal Dutch/Shell Group, Mitsui & Co., and
Mitsubishi Corp., citing environmental destruction. The three
companies in April 2007 handed over more than 50 PERCENT of the
management right to a state-run energy corporation.

Ken Koyama, director of the Institute of Energy Economics, Japan,

"Oil-producing countries are increasingly discontent with the
development contracts that were concluded when crude oil prices were
still low. The practice of collecting financial resources by linking
them to environmental issues might turn into a model."

Japanese firms' rights to develop Iran's Azadegan oil field have
also markedly diminished due to the country's suspected nuclear
development. The Khafji oilfield off the dividing zone between Saudi
Arabia and Kuwait is the first oilfield Japan developed
independently. Arabian Oil Co., which had been engaged in production
there, completely withdrew on Jan. 4.

Government focused on resource diplomacy

The government in 2006 set a goal of increasing the share of
independently developed oil to imported crude oil from the current
19 PERCENT to 40 PERCENT by 2030. The step came from the prospects
that the unstable situation in the Middle East and growing demand in
China and India would make it difficult to secure crude oil.

Japan aims to win drilling rights in such countries as Venezuela,
Libya, and Angora where iron fists are often used. Winning rights in
such countries comes with the danger of losing those rights or
having them reduced due to resource nationalism there.

METI Minister Akira Amari has played up his determination to
actively pursue resource diplomacy, saying that oil-producing
countries' attempts to fence around and nationalize oilfields are

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current trends.

As part of the government's resource diplomacy, then Prime Minister
Shinzo Abe and METI Minister Amari visited in succession a number of
Middle Eastern countries last April through May. Amari, who visited
Abu Dhabi earlier this month, promised cooperation in a wide range
of fields, such as industry, medical care, and education. Looking
back on the trip, Amari said: "I was able to extract positive
statements for the first time about renewing oilfield interests held
by Japanese companies."

Developing oilfields itself has become difficult.

Exploring deep seabed oil is technically difficult and may cost as
much as 100 billion yen. The equipment and labor costs necessary for
oil exploration have doubled over the last three years.

Fierce competition with developing countries, such as China and
India, has also elevated the breakeven point. According to an oil
company executive, the breakeven point, which was 40 dollars a
barrel two years ago, has now increased to nearly 60 dollars a
barrel. In some cases, it is 80 dollars. "In many cases, we just
have to look on with folded arms," an oil industry source said

(7) Editorial: We oppose both government and DPJ plans on gasoline
tax rate

ASAHI (Page 3) (Full)
January 23, 2008

Will the current temporary high gasoline tax rate have to be
extended or not? Debate on this issue is heating up in the current
ordinary Diet session. This question is tantamount, so to speak, to
whether the gasoline tax should be reduced or not.

The price of regular gasoline has risen to 154 yen per liter due to
oil price hikes. If the temporary tax rate expires at the end of
March, the price of gas at the pump will drop by about 25 yen,
making consumers happy.

Even so, we need to think of this issue more deeply. The government
and the ruling camp have come up with a plan for extending the
current rate, but the Democratic Party of Japan (DPJ) has called for
scrapping the rate. In view of the nation's finances and the global
environment, however, we find both sides' proposals unacceptable.

Among major industrialized countries, Japan is in the most serious
fiscal predicament. Under its austere fiscal situation, the
government has to squeeze out money to finance social security
outlays, which have been swelling as the nation ages rapidly. Japan
must first reorder priorities and allocate government funds based on
this new scheme. To that end, tax revenues for road construction
should be allocated for general expenditures to enable the revenues
to be used for medical and educational purposes.

Since tax revenues for road projects automatically are collected,
the government has allocated the money to road projects without
closely checking whether the planned roads are actually necessary.
As a result, various parties concerned began to hunt for road tax
revenues. Now, it might be a good chance to destroy this traditional
collusive structure.

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Gasoline prices in Japan are higher than in the United States, which
is called "a society that gobbles up oil," but they are still at a
low level, compared to other major industrialized countries. At a
time when the nation is stepping up efforts to constrain gasoline
consumption, as part of efforts to fight global warming, a cut in
the gasoline tax is a measure that undermines efforts to end global

When considering such circumstances, it might be necessary to keep
the current high gasoline tax rate.

The government plan, however, proposes maintaining the current tax
rate for 10 years from fiscal 2008 while limiting the use of
gasoline tax revenues only for road-related projects. The plan says
that since roads are still necessary in local areas, and also in
order to rectify disparities among regions, the government will
implement road-construction projects worth 59 trillion yen with road
tax revenues over the next 10 years. This argument is tantamount to
a call for road construction in order to prevent such revenues from
being allocated for general expenditures, so it is totally

Meanwhile, the DPJ plan calls for allocating the road-related tax
revenues for general expenditures and for completely abolishing the
provisional tax rates. If the current high rates are scrapped, the
central and local governments will lose a total of 2.6 trillion yen
in tax revenues, almost half of their total tax revenues. Despite
this estimate, the main opposition says that road-construction
projects will not be reduced in local areas. In such a case,
financial sources will naturally fall short.

Even money set aside for welfare purpose may be used to finance road
maintenance or construction projects. There is the possibility that
people may have to pay the price for an abolishment of the high tax
rates in the form of downgraded welfare services and an increased
financial burden.

Some opposition members insist that an environment tax should be
introduced in exchange for abolishing the temporary tax rates. This
point of view is important. It might be necessary to consider
setting up environment taxation on wide-ranging energy and rearrange
gasoline taxation to include some of it in the environment tax.

The tug-of-war between the ruling and opposition parties may make it
impossible to reach a conclusion by the end of March, and gasoline
prices could go up and down. Such a situation must be avoided
without fail. Both camps must sit at the table for negotiations on
changes in their bills, also keeping environment legislation in

(8) Editorial: Is wasting public funds the DPJ's plan?

MAINICHI (Page 5) (Full)
January 22, 2008

How will the opposition parties tide over the Prime Minister Yasuo
Fukuda's policy speech, in which he said that he would carry out a
policy of "placing the public at the political center" and shifting
to a "low-carbon-producing society." Interpellations by
representatives from each political party, the first battle field
for Diet debate, have begun.

TOKYO 00000189 012 OF 013

Yukio Hatoyama, secretary general of the largest opposition
Democratic Party of Japan (DPJ or Minshuto) stressed the expansion
of the growing economic gaps in society and the decline in Japan's
national strength as key issues.

Hatoyama gave a warning that as a result of former Prime Minister
Junichiro Koizumi's "false reform in which the strong prey on the
weak," rural areas have lost their vitality and the daily lives of
people have grown worse. He added that at the same time, a fall in
Japan's economic standing and children's academic performance
decline have become serious problems.

Hatoyama strongly criticized the Fukuda cabinet's policy vacuum,
noting: "The cabinet, neglecting the people's lives and economic
management, has only been intent on providing oil without charge to
U.S. warships in the Indian Ocean."

The DPJ secretary general argued that the Fukuda government has just
been standing idly by instead of tackling such issues as the social
divide, falling stock prices and Defense Ministry scandals.

Some points Hatoyama mentioned are true. Economic and Fiscal Policy
Minister Hiroko Ota even said: "the Japanese economy can no longer
be called first-rate." However, we did not detect a sense of crisis
in the prime minister's policy speech. Our strong impression was
only that the price of crude oil was hovering at a high level at the
same time that stock prices were plummeting.

Hatoyama spent a lot of time explaining what the DPJ would do if it
assumed the reins of government. Under a DPJ-led government, he said
that: all the consumption tax money would be used for the basic
pension program; a system of providing the child allowance of 26,000
yen would be created; high school education would be free; a
compensation system for family farms would be created to directly
support them; and, excluding some urban areas, expressway tolls
would scrapped. In response to calls from the public who are
suffering from high oil prices, the DPJ considers the current Diet
regular session as a session to reduce gasoline prices, placing top
priority on the daily lives of the people.

Most of the DPJ's assertions were included in its campaign pledges
for last summer's House of Councillors election. Looking at the
items, what stands out is the DPJ's willingness to lavishly spend
public funds. The public would have been pleased if they were
realized, but where will the money come to pay for the programs?
Didn't we learn the significance of fiscal discipline when the
government coped with huge issuances of government deficit bonds,
issued under the guise of being economic stimulus packages?

Hatoyama asserted that it would be possible to secure fiscal
resources by avoiding wasteful spending, citing such measures as
eradication of bid-rigging practices and the practice of amakudari
or placing retired senior bureaucrats into high-paying posts at
government-affiliated organizations, as well as a reduction in labor
costs for national public servants. However, the DPJ's ideas are too
abstract and optimistic. As long as the DPJ publicizes its campaign
pledges for the next Lower House election without referring to the
pain the public would have to pay, a government led by the DPJ will
never come into being.

DPJ President Ichiro Ozawa, who left the Lower House plenary hall

TOKYO 00000189 013 OF 013

before the new antiterrorism bill was put to a vote, rejected any
criticism against him, arguing, "I don't think the bill was
important." It was as if to say that the role of the opposition camp
is to engage in a power struggle, so he had no interest in that bill
once he knew the result. We hope that the full-fledged Diet debate
will not become such a power game.


© Scoop Media

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