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Cablegate: Japanese Morning Press Highlights 04/14/08

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UNCLAS SECTION 01 OF 10 TOKYO 001014

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 04/14/08


Index:

1) Cabinet Office poll finds close to 60 PERCENT of Japanese feel
strong sense of "patriotism" toward own country, record 70 PERCENT
wish to "contribute to society" (Sankei)

G-7 finance ministers and central bank governors' meeting:
2) Secretary Paulson, Finance Minister Nukaga meet at the G-7 in
Washington: "No policy measures ruled out" to deal with current
international situation (Nikkei)
3) Safe debut at G-7 meeting for newly installed Bank of Japan
Governor Shirakawa (Tokyo Shimbun)
4) BOJ Governor Shirakawa uses G-7 to build and renew contacts among
top central-bank governors (Yomiuri)

Foreign aid:
5) Government plans yen loans to Ghana, Angola, Nigeria as part of
ODA strategy to secure natural resources (Yomiuri)
6) Government to remove ban on private companies proposing ODA
projects (Asahi)

Defense and security affairs:
7) Japanese, Russian vice foreign ministers discuss U.S.-Japan
missile defense system as posing no threat to Russia (Nikkei)
8) USFJ Harrier drops two live bombs by mistake into sea in drill
off Okinawa (Yomiuri)

9) Papers sent to prosecutors for two Marines now in police custody
in Okinawa for taxi robbery in 2006 (Nikkei)
10) Investigators looking into cause of Aegis collision with fishing
boat conclude that the "watch was insufficient" and lay blame on the
ship's captain (Yomiuri)

Politics in turmoil:
11) Government, ruling parties reach basic agreement on FY2009 shift
of road-related taxes to general funds but concern that the LDP will
water results down (Tokyo Shimbun)
12) Democratic Party of Japan (DPJ) Secretary General Hatoyama:
Unlikely the DPJ will accept LDP's plan to convert road taxes to
general funds (Tokyo Shimbun)
13) Prime Minister Fukuda in the lurch if cannot get the agreement
to convert road-related taxes to general funds by fiscal 2009
(Asahi)
14) Former Foreign Minister Taro Aso determine to throw hat in ring
again and run in next LDP presidential election (Nikkei)
15) DPJ head Ozawa seeks labor federation Rengo's help in
"difficult" by-election race in Yamaguchi-2 (Nikkei)

ARTICLES:

1) Cabinet Office poll: Nearly 60 PERCENT "strongly" patriotic,
highest ever

SANKEI (Page 1) (Abridged)
April 13, 2008

People having a "strong" love of Japan accounted for an all-time
high of 57.0 PERCENT in a Cabinet Office survey of social awareness
released yesterday. Meanwhile, the proportion of those who answered
that they want to contribute to society also reached an all-time
high. The Cabinet Office analyzes: "This is probably because the
public is increasingly becoming concerned about the nation and

TOKYO 00001014 002 OF 010


society."

The survey was conducted in February this year with a total of
10,000 persons chosen from among men and women, aged 20 and over,
across the nation. The retrieval rate was 54.9 PERCENT .

The proportion of those who answered that they have a "strong" love
of Japan was up 4.9 points from the last survey taken in January
2007. Those who would like to contribute to society accounted for
69.2 PERCENT , also the highest ever (62.6 PERCENT in the last
survey). Meanwhile, 51.7 PERCENT answered that the public interest
should come before individual interests, up 4.3 points from the last
survey.

2) Ahead of G-7, Nukaga, Paulson agree to consider every possible
policy approach to bring about monetary stability

NIKKEI (Page 2) (Abridged slightly)
April 12, 2008

Toshiki Yazawa, Washington

A meeting of the Group of Seven (G-7) finance ministers and central
governors opens on the afternoon of April 11, or before dawn of
April 12, Japan time. Ahead of the G-7 meeting, Finance Minister
Fukushiro Nukaga met U.S. Treasury Secretary Henry Paulson on the
morning of April 11 and agreed that Japan and the United States
would consider every possible policy step in addressing financial
turmoil in close cooperation. They also confirmed a policy course to
pursue policy coordination in broad areas, including enhanced
involvement of the public sector in order to prevent a financial
crisis. Nukaga also conveyed to his U.S. counterpart Japan's
measures to reinforce its growth dynamic.

Minister Nukaga, after his meeting with Secretary Paulson, briefed
the press on their discussion, He also stated this about the U.S.
economy: "Although the U.S. economy is slowing down, it basically is
sustaining its growth dynamic and will certainly expand in the
future. It is important for financial institutions to determine
their losses and increase their capital." He indicated that the top
priority for financial institutions was to voluntarily boost their
capital bases in order to restore economic health swiftly. In the
meeting, Paulson stopped short of directly mentioning an infusion of
public funds, though he offered an explanation on the current
situation of the U.S. housing loan market and ways to increase the
involvement of the public sector. He reportedly also offered an
outlook on financial institutions' steps to increase their capital
bases.

Nukaga told him that although the Japanese economy has reached a
pause in its growth, the government would strengthen its growth
potential so that Japan would be able to contribute to the global
economy. He singled out Japan's willingness to pursue regulatory
reform in order to increase domestic demand. The two leaders also
discussed their respective views on exchange rates. But Nukaga
commented in the press conference, "I would like to refrain from
mentioning anything about it at this time."

Following his meeting with Paulson, Nukaga met World Bank President
Robert Zoellick. Nukaga revealed Japan's plans to counter global
warming and to assist the development of Africa, focusing on the
Tokyo International Conference on African Development (TICAD) to be

TOKYO 00001014 003 OF 010


held in May in Japan and the G-8 Lake Toya Summit in July.

3) BOJ Gov. Shirakawa makes safe debut in G7 meeting

TOKYO SHIMBUN (Page 2) (Slightly abridged)
April 13, 2008

Atsuhi Kanamori, Washington

New Bank of Japan (BOJ) Gov. Masaaki Shirakawa commented on the
Group of Seven finance ministers and central bank governors meeting
on April 11, in which he took part for the first time as BOJ
governor: "The G7 has discussed issues on a broad aspect." Shirakawa
left for Washington on April 10 after receiving formal appointment
on the night of 9th. He explained well the BOJ's monetary policy to
the finance ministers and central bank governors of other G7
members. He made a safe debut as governor of the BOJ at the
international conference.

Shirakawa, who met the press along with Finance Minister Fukushiro
Nukaga after the G7 conference, said with a smile: "I received words
of warm greeting from central bank governors." He continued: "I
explained that in order to stabilize the monetary system, liquidity
in supply is important." He expressed a sense of relief for having
explained Japan's monetary policy, his minimum job as BOJ chief.

Since the G7 finance ministers and central bank governors frankly
discuss exchange policy, on which the interests of G7 members clash,
and then (come up with) policy that manages the world economy, their
unity is strong and they build special communication channels.

As a BOJ policy board member, Shirakawa attended monetary
international conferences, so he has many friends among European and
U.S. financial authorities. Prior to the G7 meeting, European
Central Bank President Jean-Claude Trichet expressed his welcome,
saying: "I know him well." Although Shirakawa became governor of the
BOJ after political turmoil, he was accepted easily by G7 central
bank governors, who know his capability.

However, few foreign correspondents appeared at his press
conference. It was a lonely event.

4) BOJ Gov. Shirakawa plays up his personal network in G7 meeting

YOMIURI (Page 9) (Full)
April 13, 2008

Kenya Hirose, Washington

Newly appointed Bank of Japan (BOJ) Gov. Masaaki Shirakawa, who
assumed his current post on April 9, has just made his debut at a
meeting of the Group of Seven (G7) finance ministers and central
back governors in Washington. At a ceremonial photograph session,
Shirakawa casually played up the breadth of his personal network
with financial officials of the G7 countries, such as by talking
cheerfully with Bank of England Gov. Mervyn King.

At a press conference after the G7 conference, Shirakawa stated:

"This time, I felt that various problems in the monetary system have
appeared in a different form. I am determined anew that the BOJ
should contribute to the stability of the world economy and monetary

TOKYO 00001014 004 OF 010


market."

Shirakawa is expected to meet on the 12th separately with U.S.
Federal Reserve Board (FRB) Chairman Ben Bernanke and European
Central Bank President Jean-Claude Trichet. He is likely to brief
them on Japan's experience of having overcome its own monetary
crisis by injecting public funds. It remains to be seen how far he
can display the BOJ's presence in his meetings with top leaders of
foreign central bank banks. His capabilities are now being tested.

5) Government to provide Ghana, Angola, and Nigeria with yen loans
in order to secure natural resources

YOMIURI (Page 2) (Full)
April 13, 2008

The government has firmed up a plan to designate three African
countries - Ghana, Angola, and Nigeria - which are rich in natural
resources as eligible for yen loans. The aim is to secure natural
resources by underwriting the economic development of the three
countries with the cooperation of Japanese companies that are now
considering resource development there. The decision will be
announced in May at TICAD, the African development conference to be
held in Yokohama City.

Of the 53 African countries, only 21 are now eligible for yen loans.
The reason is that there is anxiety about many of the countries
being able to repay the loans due to their sluggish economies or
unstable political conditions. Angola has never been provided with
yen loans. Ghana last received yen loans in 1999, and Nigeria has
not been provided with such since 1991.

Ghana is rich in bauxite, and both Angola and Nigeria are
oil-producing countries. As a result, a number of Japanese companies
are considering resource developing in those countries. Late last
year, the Japan Business Federation (Nippon Keidanren) released an
opinion paper that called for expanding the countries eligible for
yen loans, focusing on Africa.

The government at the TICAD conference is thinking of adopting a
"Yokohama Declaration" as a memorandum of agreement. It will stress
the importance of the role of the private sector in African
development. The new policy plan will be reflected in that
statement.

6) Government plans to remove ban on private companies proposing ODA
projects

ASAHI (Page 1) (Abridged)
Eve., April 12, 2008

The government has firmed up its policy intention of removing the
ban on Japanese companies, such as trading firms, proposing official
development assistance (ODA) projects. There will soon be a formal
agreement between the government and the Japan Business Federation
(Nippon Keidanren). Although until now constraints have been placed
on providing assistance to designated companies, the method (of
allowing private companies to come up with ODA projects) is already
occurring actively in American and Europe, so it was decided that
Japan, too, would greatly change its ODA policy.

By strengthening the ties between the government and private sector,

TOKYO 00001014 005 OF 010


it would not only make it easier for private Japanese companies to
make inroads into developing countries, it also would lead to a more
efficient allocation of the ODA budget, which has dropped to fifth
place in the world due to cuts in it that reflect Japan's difficult
fiscal situation. On the other hand, there is also concern about
collusive relations being formed with designated companies, so the
challenge will be how to ensure there is both transparency and
fairness in the ODA process.

According to an informed source, in the context of the ODA budget
being cut, Keidanren proposed building a new framework of
cooperation between the public and private sectors. The
three-pronged proposal is: 1) build a framework for regular
dialogue; 2) let private companies considering advancing into those
countries join feasibility studies for projects in those same
countries; and 3) institutionalize the carrying out of ODA projects
proposed by private companies.

If it becomes possible to assist designated companies, yen loans
could be provided to Madagascar, which is rich in such rare metals
as nickel and titanium, for building port facilities. This kind of
project is expected to greatly lower the shipping costs of Japanese
trading firms already making inroads into that country. Many trading
firms also similarly have their eyes on oil-rich Angola, as well.

There is no rule formally banning assistance to designated private
companies; it is a self-imposed restriction. Regarding changing such
a policy, Foreign Minister Koumura at the Africa Partnership Forum,
an international conference held in Tokyo on April 7, expressed his
views about actively carrying out ODA through the cooperation of the
public and private sectors, stating: "In order for African economies
to achieve sustainable development, it is absolutely necessary that
infrastructure be built in order to diversify industries and bring
in private investments." The government plans to publicize Japanese
new assistance paradigm to developing countries a the fourth TICAD
conference in May that Japan will chair, as well as the Lake Toya G8
Summit in Hokkaido in July.

7) Japan-U.S. missile defense poses no threat

NIKKEI (Page 2) (Full)
April 12, 2008

The Japanese and Russian governments on April 11 held security
discussions in Tokyo at the vice minister level. Russia asked for a
briefing on the missile defense (MD) system that is being deployed
through cooperation between Japan and the United States. The
Japanese side stated: "It is purely for defense and presents no
threat to surrounding countries."

8) U.S. jet mistakenly drops 2 live bombs off Okinawa

YOMIURI (Page 34) (Full)
April 12, 2008

An AV-8B Harrier attack plane of the U.S. Marines in Japan
mistakenly dropped two live bombs into the sea about 2.8 kilometers
outside of training waters near the island of Kumejima in Okinawa
Prefecture when it was on a training flight mission Apr. 9 over a
U.S. Air Force firing range on the island of Torishima in the
Okinawa prefectural town of Kumejima, the Defense Ministry Okinawa
Defense Bureau announced yesterday. The Okinawa prefectural

TOKYO 00001014 006 OF 010


government has filed a protest with U.S. forces in Okinawa and
called for the U.S. military to take measure to prevent a recurrence
and to clear up the cause of the incident.

A spokesman for U.S. forces in Okinawa announced on the evening of
Apr. 10 that the AV-8B had mistakenly dropped practice bombs that
contain no ammunition powder when it was in training at around 2:45
p.m. that day, according to the Okinawa Defense Bureau. Yesterday
evening, however, the U.S. military corrected the announcement,
saying the training was conducted April 9 and the mistakenly dropped
bombs were live bombs.

Torishima is an uninhabited island situated about 28 kilometers
north of Kumejima, an island outlying west of Okinawa's main island.
The training range has a radius of about 5.5 kilometers around
Torishima.

9) Okinawa police to send papers to prosecutors on two U.S. Marines
in connection with 2006 Okinawa robbery

NIKKEI (Page 3) (Full)
April 12, 2008

Two U.S. Marines stationed in Okinawa have been detained by U.S.
military authorities in connection with a taxi robbery that occurred
in Okinawa City in 2006, according to informed sources yesterday.
Okinawa prefectural police have questioned the two Marines in
cooperation with the U.S. military. As soon as the charges are set,
the police will send papers on them to prosecutors as early as next
week on suspicion of robbery.

If the Naha District Public Prosecutors Office indicts them, their
custody would be handed over to Japan in accordance with a provision
of the Japan-U.S. Status of Forces Agreement.

The incident occurred shortly after 4:00 a.m. July 4, 2006. The two
black U.S. Marines allegedly grabbed the 64-year-old driver of the
taxi they were in on a street on 1, Chuo, Okinawa City, and walked
away with his wallet containing several 10,000-yen notes.

10) Marine accident office blames ex-captain and "insufficient
watch" for Aegis accident

YOMIURI (Page 1) (Slightly abridged)
April 12, 2008

A task force of the Marine Accident Investigators' Office (MAIO)
concluded that the Feb. 19 collision of the Maritime Self-Defense
Force's Aegis-equipped destroyer Atago with the fishing boat Seitoku
Maru was mainly attributable to the Atago's "insufficient watch"
that failed to monitor the movements of fishing boats. The Atago
continued to run on autopilot steering, and the crew did not become
aware of the fishing boat Seitoku Maru until just before the
accident. As a result, the Aegis ship could not avoid the Seiroku
Maru when the crew became aware of it.

The MAIO will ask the Yokohama Marine Accident Inquiry Agency
possibly next month to start a hearing of those involved in the
accident, including the 34-year-old MSDF lieutenant commander, an
antisubmarine warfare officer who was on duty when the accident took
place, as well as Capt. Ken Funato, 52, then the Atago's commander.


TOKYO 00001014 007 OF 010


The MAIO task force believes that the Atago, which had spotted the
Seitoku Maru ahead of it on the right, had the obligation to give
way, and that the accident could have been avoided if the former
antisubmarine warfare officer had ordered the Atago's crew to keep
watching the Atago's lights. The task force also believes that
Funato had failed to thoroughly instruct senior officers, who are in
charge of duty officers, and other crewmen to pay attention to safe
navigation.

The former antisubmarine warfare officer was on duty from 4 a.m. on
the day the accident occurred, so he was in a position to spot
fishing boats about to cross ahead and collide, according to MAIO
sources. Nevertheless, the Atago did not keep watching those fishing
boats with its officers on duty or radar and kept its autopilot
steering on. The Atago became aware of the Seitoku Maru right before
the collision. The destroyer then switched from autopilot steering
but still could not dodge the Seitoku Maru and collided with the
fishing boat at 4:07 a.m.

11) Reallocation of road revenues to general account decided:
Suspicion that the plan has been rendered ineffective because of
vague contents, procedures; Road policy clique in Diet put up strong
opposition

TOKYO SHIMBUN (Page 2) (Excerpts)
April 12, 2008

The government and the ruling parties on April 11 finalized their
decision regarding talks between the ruling and opposition camps to
discuss special-purpose road construction revenues. Prime Minister
Yasuo Fukuda will aim at shifting the road tax revenues to the
general account, starting in the fiscal 2009, as he had previously
proposed, based on this decision. Since the contents and procedures
of this policy plan are vague, whether the proposal will be realized
in line with the prime minister's intention is unclear.

The prime minister that evening stressed to reporters, "I do not
think what has been decided will be derailed at all. Nobody thinks
so, do they?" However, contrary to the prime minister's bullish
remark, there remains concern that the decision might be derailed.

The first controversial point is the wording that the
special-purpose road construction revenues system is to be abolished
in the 2008 tax code revision. Fiscal resources to make up for the
abolition of the special-purpose revenues must be found under the
current stringent fiscal condition. One participant in a
road-related meeting of the New Komeito has already noted, "The plan
to free up road tax revenues should be forgone, unless a drastic
reform, including reform of the consumption tax, is achieved."

The plan also adds an element not seen in the prime minister's
proposal announced on March 27 -- "Roads that are deemed necessary
will be steadily built." This leaves a possibility of a huge amount
of money being diverted for the building of roads, even if road
revenues are shifted to the general account.

There is also concern about procedures. The Liberal Democratic Party
(LDP) simply obtained authorization at an executive meeting, after
securing at an executive liaison council meeting approval for
leaving the matter to the leadership to work. Procedures for
obtaining a formal decision at the General Council were omitted. The
New Komeito just had party executives explain the plan at a joint

TOKYO 00001014 008 OF 010


meeting of road-related divisions.

The Koizumi cabinet once came up with a policy of freeing up the
road tax revenues. However, the proposal was rolled-back by the LDP
road policy clique in the Diet. As a result, only a portion
exceeding road-related expenditures was shifted to the general
account, based on a cabinet meeting during the Abe cabinet.
Likewise, the plan adopted this time could be derailed.


The reason that the plan ended up with vague contents and procedures
is because Election Committee Chairman Makoto Koga, a heavyweight in
the LDP road policy clique, and General Council Chairman Toshihiro
Nikai opposed the idea of giving assurance to the reallocation of
the road funds to the general account.

12) DPJ takes position that it is difficult to reach agreement:
Hatoyama ready to respond to talks

TOKYO SHIMBUN (Page 2) (Full)
April 12, 2008

Referring to the decision reached between the government and the
ruling parties on special-purpose road construction revenues,
Democratic Party of Japan (DPJ or Minshuto) Secretary General Yukio
Hatoyama during a press conference on April 11 noted, "The decision
is based on the premise that the bill amending the Special Tax
Measures Law is to be enacted without revision and that the
provisional tax rate is also to be reinstated. It is impossible for
our party to agree to such a proposal."

Hatoyama questioned the inclusion in the decision reached by the
government and the ruling parties of words that roads that are
deemed necessary will be steadily built. He said, "I doubt that
under such a proposal, road revenues can be used more for medical
services, welfare, education and the environment."

He again indicated his stance of calling on the government and the
ruling parties to make their decision a party decision at the LDP
Executive Council or a cabinet decision. He expressed readiness to
respond to talks with the ruling parities, however.

13) Government, ruling camp agree on plan to shift road tax revenues
to general budget in bid for Fukuda administration's survival

ASAHI (Page 1) (Full)
April 12, 2008

The government and the ruling parties formally agreed yesterday on a
plan to move highway-related tax revenues into the general budget
starting in FY2009. The plan was proposed by Prime Minister Fukuda
in a desperate effort to regain his administration's political
ground. A written agreement noted: "Necessary highways will be
constructed steadily," so the plan could be emasculated in the
future. Even so, Fukuda has surely crossed the Rubicon.

Although both the Koizumi and Abe administrations addressed the
issue of moving road tax revenues to the general account, they were
unable to implement the challenge in the face of resistance from the
Liberal Democratic Party road-policy clique in the Diet. If the
Fukuda administration succeeds in translating the plan into action,
that will be a major reform of LDP politics. But the road-policy

TOKYO 00001014 009 OF 010


clique and the Land, Infrastructure and Transport Ministry have been
fiercely raising objections to the plan.

Fukuda told reporters yesterday: "We made the most significant
policy decision in the meeting today. If the decision is easily
withdrawn, our party will lose public confidence." A close aide to
Fukuda also said: "This will be a major reform that the Koizumi and
Abe administrations failed to carry out."

A system to allocate tax revenues for road construction and
maintenance projects on a priority basis was established in 1954.
This system was in a sense a vote-magnet for the LDP to win support
in elections in exchange for allocating public works projects. In
other words, the system is a fundamental element of postwar LDP
politics.

By setting forth the major goal of shifting road tax revenues into
the general account starting in FY2009, Fukuda aims to give a boost
to his administration.

Fukuda intends to revive the provisional gasoline and other
highway-related tax rates (which have been expired since April 1,)
by taking an override vote in the House of Representatives in late
April. The written agreement also specified that the related bills
should be enacted at an early date. It has been necessary for Fukuda
to fly the banner of reform as part of efforts to lay the groundwork
for introducing the unpopular policy of raising gasoline prices
again.

Key points in the agreement between the government and the ruling
camp

? The agreement is premised on passage of a FY2008 revenue bill and
other related bills at an early date.
? Thoroughly eliminate waste of expenditures at highway-related
public corporations and in the road improvement special account.
? Abolish the system to allocate road tax revenues for road
construction projects when the tax system is reformed this year and
move the revenues into the general budget starting in FY2009.Take
measures to prevent ill effects of the reform on local finances.
Implement highway construction and maintenance projects that are
considered necessary.
? Review the current tax rates, including the provisional rates, in
this fiscal year's tax reform proposal.
? Set the period for the mid-term highway-construction plan at five
years and draw up a new plan based on latest demand estimates

14) Aso determined to throw his hat again into the political ring in
the next election for LDP president, but party leaders would like to
hold him back

NIKKEI (Page 2) (Excerpt)
April 12, 2008

"I am once more resolved to face the challenge," said former Liberal
Democratic Party (LDP) Secretary General Taro Aso at a party of his
faction held at a Tokyo hotel on April 11. He was stressing his
resolve to run again in the next LDP presidential election.
According to the sponsors, the party drew 3,000 participants,
revealing how popular Aso is. But some of the party leaders who
participated in the event voiced words of constraint about his
desire to be the prime minister after Fukuda.

TOKYO 00001014 010 OF 010

15) Ozawa after discussion with Rengo (federation of trade unions)
calls by-election in Yamaguchi-2 a "tough situation"

NIKKEI (Page 2) (Full)
April 12, 2008

Democratic Party of Japan (DPJ) President Ichiro Ozawa on April 11
exchanged views in Iwakuni City, Yamaguch Prefecture, with the
leadership of Rengo's Yamaguchi branch on the by-election for the
House of Representatives. The voting will take place on April 27.
Meeting with the press afterward, Ozawa pointed out: "We judged that
the situation is extremely tough." He then stressed, "The public
will be judging the Liberal Democratic Party, New Komeito, and the
Fukuda Cabinet."

DPJ Secretary General Yukio Hatoyama at a press conference on April
11 stated: "The results of this election will decide the direction
that the issue of using provision taxes as a resource for road
building will take."

SCHIEFFER

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