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Cablegate: Japanese Morning Press Highlights 10/03/08

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UNCLAS SECTION 01 OF 12 TOKYO 002760

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 10/03/08

Index:

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

Defense and security:
4) ASDF colonel fired for leaking secret report on China sub to
Yomiuri reporter (Tokyo Shimbun)
5) Punishment of ASDF officer carried out with the U.S. in mind
(Asahi)

Diet agenda:
6) Lower House election day likely to slip due to deliberations on
supplementary budget; Dissolution may come after Oct. 16 now
(Sankei)
7) Prime Minister Aso in Diet reply calls for talks with opposition
camp on the anti-terror bill to extend the Indian Ocean mission
(Yomiuri)
8) Aso in Diet confirms that he will continue to support the
Murayama statement apologizing for Japan's WWII acts (Asahi)
9) Both camps in the Diet agree to discuss the supplementary budget
bill Oct. 6-7 (Asahi)
10) LDP league starts discussion to review the postal-privatization
scheme (Mainichi)
11) Another setback for Aso administration: Allegation that Chief
Cabinet Secretary Kawamura's political support groups claimed office
expenses for free apartment (Tokyo Shimbun)

DPJ in action:
12) DPJ taking off after the Soka Gakkai in the Diet (Sankei)
13) DPJ going after the women's vote in the next election
(Mainichi)
14) DPJ's Kan insists that there are 19 trillion yen in "hidden
funds" in government coffers that could be used to implement the
party's economic plan (Yomiuri)

Economy:
15) Government and ruling camp considering an additional economic
stimulus package, but where to find the fiscal resources is the
problem (Yomiuri)
16) Japan's Business Federation (Keidanren) proposes plan to Aso
that would raise the consumption tax to 10 PERCENT in a couple of
years (Nikkei)

17) India's prime minister coming to visit Japan late this month
(Nikkei)

Articles:

1) TOP HEADLINES

Asahi:
LDP calls on all government agencies to notify if opposition parties
request documents; DPJ charges it with censorship

Mainichi:
Cancer survival rates differ up to 23 pts among hospitals, according
to ministry survey

Yomiuri:
30 PERCENT of rivers under supervision of prefectural governments

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not inspected regularly for disaster preparedness

Nikkei:
METI to review ways to revise gas, electricity charges, reflecting
recent rising fuel prices

Sankei & Tokyo Shimbun:
Lower House election likely to take place later than widely expected
Nov. 2 due to delayed deliberations on extra budget bill

Akahata:
JCP Chairman Shii presents reform plan focusing on people's peaceful
lives

2) EDITORIALS

Asahi:
(1) Prime minister should boldly decide to quickly dissolve Lower
House
(2) Osaka governor's remark on TV program: How about disbarring
him?

Mainichi:
(1) Come up with economic stimulus measures focusing on encouraging
households
(2) Osaka Governor Hashimoto's defeat in ruling underlines what
lawyers should be

Yomiuri:
(1) BOJ Tankan shows weak business confidence
(2) Dismissal of ASDF colonel: News media has duty to give let the
public know

Nikkei:
(1) U.S. government's support of U.S. Big Three contains many
problems
(2) We expect more substantial EPAs

Sankei:
(1) Melamine-tainted food: Improvement in rules on indication of
origin necessary
(2) Clear up truth of official falsified pension records

Tokyo Shimbun:
(1) Business downturn: Global financial crisis looming large
(2) Outside executives in sumo association welcomed as first step to
eliminate closeness, self-righteousness

Akahata:
(1) Representatives interpellations in both Houses: Will "two
political evils" be rectified or preserved?

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, October 2

NIKKEI (Page 2) (Full)
October 3, 2008

08:30
Arrived at the Kantei.


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10:01
Plenary session in the Upper House

12:14
Met with State Minister for Economic and Fiscal Policy Yosano at the
Kantei.

13:52
Lawmakers' meeting in the Diet building.

14:02
Plenary session in the Lower House.

16:02
Lower House Budget Committee meeting. Stood talking with Chief
Cabinet Secretary Kawamura, followed by Party Youth Division chief
Inoue and Deputy Chief Cabinet Secretary Matsumoto.

16:11
Photo session with staff members of the Youth Division.

17:19
Met with Shigeo Iizuka, representative of the Abductee Family
Association, and others.

17:49
Met with METI Minister Nikai, Vice METI Minister Mochizuki and
Natural Resources and Energy Agency Director General Ishida.

19:02
Goes to a bar in Roppongi with Lower House member Takeshi Iwaya and
others.

23:18
Arrived at the private residence at Kamiyama-cho.


4) ASDF colonel sacked over info leak

TOKYO SHIMBUN (Page 1) (Abridged)
October 3, 2008

The Defense Ministry dismissed an Air Self-Defense Force colonel
yesterday for his alleged leak of classified information about a
Chinese submarine's accident in the South China Sea, officials said.
Hideki Kitazumi, 50, is alleged to have leaked the information to a
Yomiuri Shimbun reporter when he was assigned to the Defense
Intelligence Headquarters, the officials said. The police unit of
the Ground Self-Defense Force had sent the case to prosecutors on
suspicion of violating the Self-Defense Forces Law.

This is the first time an SDF member has been dismissed for
providing information to a news reporter, although there were cases
where SDF personnel were dismissed for leaking information to
foreign spies. The Defense Ministry took unprecedented action for
the heaviest punishment without waiting for the Tokyo District
Public Prosecutors Office to take action for criminal punishment.

The action was taken against the backdrop of tightened information
security. It could result in daunting officeholders as news sources
and constraining the right to know and a free press.


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According to the Defense Ministry's account, Kitazumi explained that
he provided the information to an outsider although he knew it was a
"defense secret." Administrative Vice Defense Minister Kohei Masuda,
meeting the press yesterday, stated: "The case this time is subject
to dismissal as well as other information leak cases in the past.
We're aware of press freedom, but the problem is that he provided
the information to a person who should not be in a position to
know."

The Yomiuri Shimbun commented yesterday, "It is extremely
regrettable that they conducted investigations to identify the news
source and took disciplinary action against the person while citing
information leakage as a reason."

5) SDF member's sacking possibly with U.S. in mind

ASAHI (Page 34) (Abridged)
October 3, 2008

A member of the Self-Defense Forces was dismissed yesterday for
allegedly leaking a "defense secret" to a newspaper reporter. It is
the first time an SDF member has been subjected to such a
disciplinary action for alleged information leakage. The information
provided to a Yomiuri Shimbun reporter was about a Chinese
submarine's accident. The information is said to have contained
intelligence from the U.S. military. The Defense Ministry is
believed to have punished the officer in deference to the United
States. Experts have voiced their concerns, saying the action will
have a negative impact on the press reporting.

The newspaper article about the Chinese submarine's accident was
carried by the Yomiuri Shimbun in its morning edition dated May 31,
2005. The article reported that a Chinese submarine surfaced in the
South China Sea and that Japan and the United States had discovered
that the Chinese submarine "was numbered with figures in the 300s."
However, it was five months thereafter when the then Defense
Agency's intelligence division filed a criminal accusation with the
Ground Self-Defense Force's police unit. Even more odd, it was not
until January 2007, one and a half years later, that the GSDF police
launched a full-fledged investigation. At that time, Japan and the
United States were sharing intelligence at a high pitch to introduce
a ballistic missile defense (BMD) system. "We considered the fact
that the United States had strongly called for intelligence
security," a senior official of the Defense Ministry said.

Concerning the punishment, Kazuhisa Ogawa, an analyst of military
affairs, noted: "Intelligence provided by Japan's ally, the United
States, leaked. That's the problem. If trust in the alliance is
impaired, intelligence sharing with the United States is not
possible. The Defense Ministry needed to show that nothing like this
will never happen again. The Defense Ministry identified Col. Hideki
Kitazumi as the one who provided the information without hearing the
reporter, and the ministry punished him."

The information about the Chinese submarine was said to be
classified under the category of a "defense secret"-or highly
confidential next to the category of "special defense secret" of
intelligence about the United States' state-of-the-art weapons.
"Defense secret" is a new category established in a 2001 amendment
to the Self-Defense Forces Law. The amended law also established
additional charges for instigating defense secret leakage to punish
those who have obtained information classified as defense secret.

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6) Lower House election likely to take place later than the
widely-expected Nov. 2 due to delayed deliberations on extra budget
bill

SANKEI (Top Play) (Full)
October 3, 2008

The Liberal Democratic Party (LDP) and the New Komeito presented a
timeframe in a directors meeting of the House of Representatives
budget Committee yesterday to discuss the fiscal 2008 supplementary
budget bill on Oct. 6-8 and get the bill through the Lower House on
the 8th. The opposition camp approved deliberations on Oct. 6-7 but
held off on making a reply about the 8th. If the bill is passed in
the Lower House later than the 8th, it will become impossible to
start deliberations on the bill at the House of Councillors before
Oct. 14. Given this, it now seems to be difficult to set the date of
official announcement of the next Lower House election at Oct. 21
and the date of election at Nov. 2 as widely expected.

The ruling camp planned to pass the extra budget bill on Oct. 9
after deliberations at the Lower House on Oct. 6-7 and at the Upper
House on Oct. 8-9. But the Democratic Party of Japan (DPJ) rejected
the plan yesterday, based on the stance of not agreeing on the plan
without a promise for Lower House dissolution on the 9th.

In the event that both camps agree on an alternative plan drawn up
by the ruling coalition, deliberations on the bill at the Upper
House will be postponed to sometime after Oct. 14, in part because
Finance Minister and State Minister in Charge of Financial Services
Shoichi Nakagawa is scheduled to attend a meeting of central bank
governors and finance ministers from the Group of Seven
industrialized countries (G-7) in Washington on the 10th.

In this case, the dissolution of the Lower House will take place
later than Oct. 16, even at the earliest, and it will become
impossible to officially announce the election on Oct. 21. Two ideas
are now conceivable: "Official announcement on Oct. 28 and election
on Nov. 9" or "announcement on Nov. 4 and election on Nov. 16."
Within the LDP, since calls for a second extra budget are growing as
the financial crisis originating in the U.S. is spreading across
world markets, the election could be delayed still further.

In replying to questions by reporters at his official residence last
night, Prime Minister Taro Aso said: "I am determined to pass the
extra budget bill. The bill must be enacted without fail. Sorry, but
nobody heard me talking about dissolution."

In the representative interpellation session at the Upper House
plenary session yesterday, as well, Aso said: "I would like to
prioritize realizing policies such as economic measures over
dissolving the Lower House." In response to questions from Azuma
Koshiishi, leader of DPJ Upper House caucus, Aso indicated his
determination to enact a bill amending the New Antiterrorism Special
Measures Law to extend the Maritime Self-Defense Force's refueling
mission in the Indian Ocean and three bills related to creating a
consumer agency.

Koshiishi demanded an early dissolution of the Lower House through
talks, remarking: "We are not thinking about unnecessarily
prolonging or boycotting deliberations on the supplementary budget
bill." But Aso emphasized, without referring to Lower House

TOKYO 00002760 006 OF 012


dissolution: "I hope you will quickly reach a conclusion (on the
extra budget bill)."

In reference to no replies from DPJ President Ichiro Ozawa to
questions from him in Diet interpellations on Oct. 1, Aso said: "It
was truly regrettable. I expect to engage in discussion with Mr.
Ozawa at the Budget Committee and demonstrate our perception gap
before the people." Representative interpellations will also take
place in the Upper House today.

7) Aso proposes talks with opposition bench over new antiterror
bill

YOMIURI (Page 2) (Abridged)
October 3, 2008

Prime Minister Aso, attending a plenary sitting of the House of
Representatives yesterday for interpellations from each political
party's representative, indicated that he would call on the
opposition parties for talks over a government-introduced bill
amending the new Antiterrorism Special Measures Law to extend the
Maritime Self-Defense Force's refueling activities in the Indian
Ocean. He stated: "We need to continue the (refueling) activities.
Through talks between the ruling and opposition parties, I want to
have the opposition parties' understanding on the necessity of
continuing the activities."

Concerning historical awareness, Aso averted that his cabinet would
also follow Prime Minister Murayama's statement of 1995 that
expressed "deep remorse" over Japan's colonial rule and aggression
in the past.

8) Aso in Diet interpellation vows that his cabinet will follow
Murayama Statement; Describes DPJ manifesto pledges as
"unrealistic"

ASAHI (Page 4) (Abridged slightly)
October 3, 2008

In yesterday's Lower House interpellation session, Japanese
Communist Party and Social Democratic Party lawmakers asked Prime
Minister Taro Aso in succession for his views on history. In
response, the prime minister explicitly said that his administration
would follow the 1995 Murayama Statement that expressed remorse and
apology for Japan's colonial rule and aggression.

Touching on the prime minister's policy speech that went, "The
present lies at the end of the accumulation of the tradition of
government of 118 years (from the prewar through the postwar
periods)," JCP Chairman Kazuo Shii asked: "Aren't you aware of the
fact that sovereignty has shifted from the Emperor in the prewar
period to the Japanese people in the postwar period under the
Constitution of Japan?" The prime minister replied: "I simply wanted
to point out the tradition of the appointment of prime minister that
has been in place for over a century under constitutional government
and the gravity of the responsibility for lying at the end of that
long line."

SDP member Yasumasa Shigeno then asked the prime minister's stance
toward the Murayama Statement. In response, Aso said: "The statement
you just mentioned and the Koizumi Statement present the
government's view on the last major war. My cabinet will follow that

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view."

The prime minister also criticized the Democratic Party of Japan's
campaign pledges, announced by President Ichiro Ozawa on Oct. 1. The
prime minister said that how to secure the 5.6 trillion yen needed
for a 26,000-yen monthly child allowance program was unclear. He
also called the DPJ's plan to eliminate expressway tolls unrealistic
for such would end up raising taxes.

9) Ruling, opposition camps agree to begin Lower House Budget
Committee sessions on Oct. 6; Date to take vote to be rediscussed

ASAHI (Page 4) (Excerpts)
October 3, 2008

In yesterday's Lower House Budget Committee Board of Directors
meeting, the ruling parties agreed to hold committee sessions on
Oct. 6-7 to deliberate on a fiscal 2008 supplementary budget bill.
The sessions will be attended by cabinet ministers, including Prime
Minister Taro Aso. In yesterday's meeting, the ruling camp called
for a wrap-up question-and-answer session and a vote on the budget
on Oct. 8. The opposition bloc did not accept the request. They will
discuss the matter again today.

The view is gaining ground in the ruling camp that the next Lower
House election, which was once expected to occur on Nov. 2 or later,
would be postponed. In the meantime, the Democratic Party of Japan
is set to intensify its offensive against the government and ruling
bloc in the upcoming Budget Committee sessions with the aim of
forcing Prime Minister Aso into early Diet dissolution. The plan to
enact the supplementary budget might fall through and the political
situation might become fluid at a stroke depending on how the Lower
House Budget Committee sessions turn out next week.

10) LDP lawmakers launch postal privatization review

MAINICHI (Page 5) (Full)
October 3, 2008

A group of Liberal Democratic Party (LDP) lawmakers studying a
review of postal privatization held an inaugural meeting yesterday
at party headquarters. The LDP parliamentarian group called "Yusei
Kenkyu-kai" is headed by Shunichi Yamaguchi, a special advisor to
the prime minister. In the meeting, the group drew up with an
emergency resolution calling for including in the party's manifesto
(set of campaign pledges) such proposals as 1) revising the four
postal functions created by splitting Japan Post so that
over-the-counter and mail delivery services would be merged under a
single management and 2) maintaining postal services for
less-populated areas. The group will present the proposals to Prime
Minister Taro Aso and to the party leadership possibly next week.

About 60 lawmakers, including Consumer Administration Minister Seiko
Noda and former Transport Minister Takao Fujii who voted against the
postal privatization bill in 2005, attended yesterday's meeting.
Participants actively criticized the deficiencies of the present
postal system created by former Prime Minister Junichiro Koizumi and
former Internal Affairs and Communications Minister Heizo Takenaka,
with one saying: "The motivation of post office employees has
declined." Another said: "The four postal functions have not worked
well."


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The postal privatization-related law stipulates that the ways to
promote privatization will be reviewed in March 2009. In the LDP,
however, a review of postal privatization is being carried out
mainly by those who were against the reform. Former Prime Minister
Koizumi has announced that he will retire from politics after his
term in the Lower House expires. Aso also appointed some "postal
rebels" as members of his cabinet. With the securing of "postal
votes" in mind, a mood of calling a review of postal privatization
will likely grow in the LDP.

11) Chief cabinet secretary to explain his office expense
controversy today; Possibly another blow to the Aso administration;
Focus on disclosure of receipts

TOKYO SHIMBUN (Page 2) (Full)
October 3, 2008

In the wake of the resignation of Land and Transport Minister
Nariaki Nakayama, an office expense scandal involving Chief Cabinet
Secretary Takeo Kawamura, a key member of the cabinet, came to light
yesterday. Although the government and ruling coalition do not think
it will escalate to the chief cabinet secretary having to resign,
the incident could deal a mortal wound to the Aso administration,
depending on how Kawamura explains it and how the opposition bloc
reacts, particularly with an imminent Lower House dissolution and
snap general election.

Kawamura's three political organizations recorded a total of 5
million yen in 2007 in expenses, including rents, by registering his
secretary's home, which is supposed to be rent-free, as the
lawmaker's office. Kawamura emphatically, said, "(His home) actually
functioned as my office. I will offer a solid explanation." He
intends to explain the matter in detail in a regular press briefing
today.

Seiichi Ota, the agricultural minister during the Fukuda
administration, and Norihiko Akagi, who served in that post during
the Abe administration also recorded huge office expenses by
registering their respective secretaries' homes as their offices.
Ota weathered the storm by disclosing receipts, but the scandal cost
Akagi his post in the end. Whether or not Kawamura will be able to
disclose receipts could dictate the outcome.

LDP Secretary General Hiroyuki Hosoda, appearing on a TBS news
program, said this about the Kawamura issue, "I don't think it's
really a problem."

There are no signs that the opposition bloc will grill Kawamura over
the issue. Nevertheless, if it concludes that Kawamura has not
fulfilled his accountability, opposition parties might take it up in
Lower House Budget Committee sessions that will open on Oct. 6.

12) DPJ pursuing relationship between New Komeito and Soka Gakkai

SANKEI (Page 5) (Excerpts)
October 3, 2008

Senior Democratic Party of Japan (DPJ) members have stepped up
efforts to pursue the issue of the relationship between the New
Komeito and its religious sect backer, the Soka Gakkai. The party
took up the issue yesterday in representative interpellations in the
House of Councillors and in press conferences. The aim is to drive

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Prime Minister Taro Aso into a corner so that he will have to
quickly dissolve the House of Representatives, at a time when rumors
are flying that the dissolution of the Lower House may be pushed
back. The DPJ expects that the New Komeito will now put pressure
upon Aso and the Liberal Democratic Party to dissolve the Lower
House in order to avoid the issue of its relations with the Soka
Gakkai coming up, according to a senior DPJ member.

Azumi Koshiishi, chairman of the DPJ Upper House caucus, charged in
yesterday's questioning session: "It is said that a religious
corporation, which receives preferential tax treatment, is carrying
out more serious election campaigns than political parties."

Koshiishi made the above remark based on remarks in June by Junya
Yano, a commentator and former New Komeito chairman, in a study
session of opposition lawmakers. Yano said: "The central halls (of
the Soka Gakkai) in the rural areas are bases for (Komeito) election
campaigns."

DPJ President Ichiro Ozawa, appearing on a commercial television
program yesterday, took a positive stance toward the idea of
summoning Yano to testify before the Diet, saying: "The issue of
politics and religion is a serious issue." Deputy President Naoto
Kan sided with Ozawa, noting: "Religion holds political power. A
religious organization is using that power. This should be
discussed." The DPJ leaders' remarks indicated that this issue would
be debated in the Diet if the dissolution of the Lower House were
pushed back.

13) DPJ making pitch to female voters in next Lower House election

MAINICHI (Page 5) (Full)
October 3, 2008

The main opposition Democratic Party of Japan (DPJ) has prepared
campaign fliers aimed at attracting female voters in the next House
of Representatives election. The fliers are titled: "Important
information on the DPJ's emergency plan to rescue households." The
DPJ is now making a strenuous effort to win women's votes. The party
will form a caravan of 22 female Upper House members, and send the
members to electoral districts to help female candidates.

The fliers say that the DPJ will secure funding resources to allow a
26,000 yen monthly family allowance for each child being raised, as
well as for other measures by taking back tax money from the
bureacracy.

The caravan will go to the Fukushima No. 2 district from which Lower
House member Kazumi Ota will run in the next election, and the
Nagasaki No. 2 district in which Eriko Fukuda, leader of the
hepatitis C infected Kyushu plaintiffs, will run against former
Defense Minister Fumio Kyuma.

14) "Possible to use 19 trillion yen in hidden government funds,"
says DPJ's Kan

YOMIURI (Page 9) (Full)
October 3, 2008

DPJ Vice President Naoto Kan on October 2 inspected the Finance
Ministry Foreign Exchange Markets Division, which is in charge of
managing foreign currency reserves. His aim was to look into the

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ministry's method of managing assets in the special account for
foreign reserve funds and to what extent reserves in that account,
"the so-called hidden funds" (maizokin) can be used. Kan said,
"There is more than 19 trillion yen in accumulated investment
profits. I was able to confirm that it is possible to use those
funds."

In response, Vice Finance Minister Kazuyuki Sugimoto during a press
conference the same day took a negative stance regarding the idea of
using the reserve funds, noting, "A drop in foreign currency
reserves can have an unexpected impact on the exchange market. It is
necessary to be careful in considering such an idea."

15) Government, ruling parties looking into possible additional
economic stimulus measures, but ways to secure funding resources not
in sight

YOMIURI (Page 9) (Excerpts)
October 3, 2008

Following a growing concern about the future of the Japanese economy
in the wake of the financial crisis that started in the U.S., the
government and the ruling parties have started looking into the
possibility of additional economic pump-priming measures. Prime
Minister Aso is also positive toward compiling a second
supplementary budget, once a fiscal 2008 supplementary budget to
finance a comprehensive economic stimulus package has obtained Diet
approval. However, given the political situation where the Lower
House could be dissolved for a snap election before the fiscal 2008
supplementary budget is passed by the Diet, some are taking a
cool-headed view toward such moves, with one senior Finance Ministry
official noting, "Calls for additional measures are for the sake of
making a public appeal with the upcoming election in mind."

The prime minister in a reply made during an interpellation session
took a positive stance toward additional economic measures, saying,
"The international financial situation has changed significantly. It
is necessary to take more measures in a flexible manner." New
Komeito Secretary General Kitagawa on September 28 also indicated a
desire to compile a large-scale economic stimulus package, saying,
"The package should be on the scale of several dozen trillion yen."

The ruling parties on the 1st launched a special team to start
looking into measures to address the financial crisis, including an
additional economic package. Plans floated in the ruling parties
include tax breaks for securities investment, housing acquisition
and capital spending, and a plan to specify the size of a
fixed-amount income and local tax cuts and its coverage, a policy
the LDP and the New Komeito agreed to implement within the year.

However, doubts have been raised about whether tax cuts can have the
effect of stimulating the domestic economy, because the recent
economic woes are mainly due to increased costs borne by companies
as a result of the sharp rise in crude oil and grain prices. Some
Finance Minister officials take the view that even if fixed-amount
tax cuts are implemented, tax payers will save benefits as long as
there are anxieties about their future, such as pensions and medical
care. A view is strong that a preferential tax system for securities
investment would produce troublesome paperwork, dampening people's
investment desire.

16) Nippon Keidanren proposes 10 PERCENT consumption tax hike to

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Aso administration

NIKKEI (Page 5) (Full)
October 3, 2008

The Japan Business Federation (Nippon Keidanren) on October 2
released a set of proposals addressed to the Taro Aso cabinet. The
main pillar of the package is a call for raising the consumption tax
to 10 PERCENT by fiscal 2010, or fiscal 2011 at the latest, to
finance social security expenses and fiscal reconstruction, setting
the reform period at three years. Though the package includes the
implementation of a fixed rate income tax break, it places emphasis
on the fiscal discipline, calling for bringing the primary balance
into the black by fiscal 2011 without fail.

The set of proposals is aimed to be included in a package reform of
the tax, fiscal and social security systems. There is, however, a
gap with the policy stance of the new administration, which
prioritizes economic stimulus measures.

Chairman Fujio Mitarai after meeting with Prime Minister Aso at the
Kantei on September 30 told reporters, "What the prime minister said
is in agreement with the stand of Nippon Keidanren." However, there
is a subtle difference in views between Aso, who advocates economic
growth, based on, first, economic stimulus measures, second, on
fiscal reconstruction and, third, on reform, and Nippon Keidanren,
which focuses on fiscal reconstruction.

The association's proposal regarding the consumption tax is more
radical than a proposal State Minister for Economic and Fiscal
Policy Karoru Yosano, who also advocates fiscal reconstruction, made
during the LDP presidential campaign. Its aim appears to be to spur
policy debate between the LDP and the DPJ in the run-up to the
upcoming general election.

17) Indian prime minister to visit Japan late this month

NIKKEI (Page 2) (Full)
October 3, 2008

It has been decided that Indian Prime Minister Manmohan Singh will
visit Japan in late October to hold talks with Prime Minister Taro
Aso. A final coordination on a two-day visit on Oct. 22-23 is now
being carried out. The schedule will be approved by the cabinet
soon. The expectation is that the two leaders will issue a joint
statement stipulating the need for expanding strategic cooperation
in diplomatic and economic areas. While political maneuvering is
intensifying over the dissolution of the House of Representatives
and a general election, Aso appears to be aiming to maintain the
cohesiveness of his government by promoting steadily diplomatic
activities.

Although the Indian prime minister visited in July to attend as a
guest in the Group of Eight (G-8) Summit in Hokkaido, this will be
his first formal visit since he did one in December 2006.

In the summit meeting, Aso and Singh will affirm cooperation on the
UN reform and nuclear nonproliferation issues. The two leaders are
expected to agree on strengthening cooperation also on energy and
battle against global warming. They will look into the possibility
of exchanges between Japan's Self-Defense Forces and India's
military forces.

TOKYO 00002760 012 OF 012

SCHIEFFER

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