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Cablegate: Japanese Morning Press Highlights 11/05/08

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E.O. 12958: N/A
TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA

SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 11/05/08

Index:

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

Tamogami incident:
4) Former ASDF chief Tamogami refused to resign from his post when
Defense Minister Hamada so requested, so he was fired (Mainichi)
5) Government agonizing about how best to handle the Tamogami affair
(Yomiuri)
6) Turns out that 50 SDF personnel submitted essays to the same
privately-sponsored contest that former ASDF chief Tamogami
participated in (Asahi)
7) Pay cuts at the top of the Defense Ministry to show
responsibility for allowing the Tamogami incident to occur
(Mainichi)
8) Opposition camp to summon former ASDF chief Tamogami to the Diet
for testimony on his views in controversial essay that got him fired
(Sankei)
9) Opposition camp upset that Tamogami was allowed an early
retirement, threaten to further bog down the Indian Ocean refueling
mission bill (Tokyo Shimbun)
10) LDP wants an early passage of the refueling mission bill so
reluctant to drag Tamogami testimony into the deliberations on the
legislation (Mainichi)

11) Foreign Ministry sets up policy office to handle anti-piracy
measures (Mainichi)

Diet agenda:
12) Pressure still building for a Lower House election in January,
but does Prime Minister Aso have the will or desire to dissolve the
Lower House? (Sankei)
13) Democratic Party of Japan (DPJ) President Ozawa still counting
on Diet dissolution between now and January (Sankei)

Economic affairs:
14) Government council report on the future of the economy sees need
to raise the consumption tax by 2025 to 18 PERCENT to pay the
social security bill (Tokyo Shimbun)
15) Aso government's fixed tax cut plan denounced by critics as
another pork-barrel measure (Tokyo Shimbun)
16) Important bill to strengthen the financial functions may hit a
snag in the Upper House as the opposition seeks amendments
(Mainichi)

Articles:

1) TOP HEADLINES

Asahi:
Capacity of medical schools to increase by 700 to 8,486 in FY2009

Mainichi:
Music producer Komuro fails to pay 14 million yen contract money for
children's war sales

Yomiuri:
Government's National Council on Social Security's final report:
Consumption tax should be increased by 3.3-3.5 PERCENT in 2015


TOKYO 00003080 002 OF 013


Nikkei:
Imported crude, natural gas prices plunge on tepid demand

Sankei:
National Council on Social Security's final report: Consumption tax
should be hiked by 6 PERCENT in 2025

Tokyo Shimbun:
National Council's final report: Consumption tax should be raised
maximum of 18 PERCENT in 2025

Akahata:
National Council's final report: Consumption tax should be increased
by 3.3-11 PERCENT in 2015

2) EDITORIALS

Asahi:
(1) Social security reform: Prime Minister Aso should speak more
precisely
(2) Revitalization of regional economies: Cooperation and
independence necessary

Mainichi:
(1) Cash incentives: Measures too loose
(2) Arrest of Komuro: Serious crime that destroyed the dreams of
young people

Yomiuri:
(1) Social Security Report: Find political will for social security
reform
(2) National Archives of Japan should be reorganized to make it a
stronger organization

Nikkei:
(1) Panasonic's acquisition of Sanyo to prompt realignment of
electronic manufacturers
(2) We urge debate on the "pain" of social security reform

Sankei:
(1) Government should show concrete plans for consumption tax hike
(2) China-Taiwan agreement: Question remains over "shelving of
sovereignty"

Tokyo Shimbun:
(1) Arrest of Komuro: Hero of the times falls
(2) Tibet issue: Continue dialogue

Akahata:
(1) Dispatch of helicopters to Afghanistan: Expansion of support for
war impermissible

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, November 4

NIKKEI (Page 2) (Full)
November 5, 2008

09:29
Met with Defense Minister Hamada and Vice Defense Minister Masuda.
Hamada remained.

TOKYO 00003080 003 OF 013

10:01
Cabinet meeting. Environment Minister Saito remained. Then met with
State Minister for Declining Birthrate Obuchi and Chairman Ozaki of
the Expert Council on the Way Public Document Should be Controlled,
followed by Public Security Intelligence Agency Director General
Yanagi.

11:35
Met with al-Atiyah

13:45
Met with Vice Health, Labor and Welfare Minister Erikawa, followed
by Deputy Secretary General Yamaguchi. Then met with Otsuji,
chairman of the LDP caucus in the Upper House and Deputy Chief
Cabinet Secretary Konoike.

15:07
Deputy Foreign Minister Sasae.

16:00
Issued appointment letters to Cabinet Counselor Gyoten and Nogami.
Vice Finance Minister for International financial affairs Shinohara,
Foreign Ministry Economic Affairs Bureau Director General Otabe,
Matsumoto and Konoike were present.

18:25
National Council on Social Security meeting. Then met with Nippon
Keidanren Honorary Chairman Okuda.

19:36
Dined with secretary and others at a steak house in Higashi-Azabu.

22:22
Met with secretary at a bar in Hotel Okura.

0:30
Arrived at the private residence.

4) Ex-ASDF chief of staff refused to resign

MAINICHI (Page 2) (Full)
November 5, 2008

On the issue of former Air Self-Defense Force Chief of Staff Toshio
Tamogami's publication of an essay running counter to the
government's view of history, Defense Minister Yasukazu Hamada asked
Tamogami to resign as the problem was brought to light but he
refused, sources revealed yesterday. The Defense Ministry therefore
sacked Tamogami from his ASDF chief of staff post on Oct. 31 and
retired him three days after that under the age limit. However,
Tamogami's refusal of Hamada's recommendation is now being called
into question from the perspective of civilian control over the
Self-Defense Forces.

According to the sources, Hamada called Tamogami on the evening of
Oct. 31, when the essay was made public. Hamada then urged Tamogami
to resign voluntarily, telling him: "This is a problem on the ASDF
chief of staff's part. I'd like you to quit." However, Tamogami
refused to do so, saying: "I wrote it based on my beliefs. I will
not send in my resignation."


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The Defense Ministry then even considered taking disciplinary
action. However, the Self-Defense Forces Law has no relevant
regulations. The Defense Ministry therefore removed Tamogami from
his ASDF chief of staff post and assigned him to the Air Staff
Office. Even thereafter, Tamogami did not comply with the Defense
Ministry's recommendation to go through procedures for resignation,
the sources said. The Defense Ministry therefore mandated his
retirement on Nov. 3.

Meanwhile, Tamogami, meeting the press yesterday, stressed: "I will
resign in accordance with the defense minister's decision. I will
comply with civilian control."

5) Government agonizing over Tamogami essay scandal

YOMIURI (Page 4) (Abridged slightly)
November 5, 2008

The government and the ruling coalition are agonizing over the issue
of former Air Self-Defense Force Chief of Staff Toshio Tamogami's
essay on the Showa War and other events that was at variance with
the government's view. Tamogami retired from the ministry as of Nov.
3. The government is trying to bring the matter to a close swiftly
with the Defense Ministry announcing yesterday punitive actions
against senior ministry officials. Meanwhile, the opposition camp is
set to thoroughly pursue the defense ministry on the fact that it
did not take punitive action against Tamogami.

Ahead of a cabinet meeting yesterday, the Prime Minister ordered
Defense Minister Yasukazu Hamada to take steps to: (1) prevent a
recurrence, (2) clarify oversight responsibility, and (3) provide an
explanation to the public. Hamada explained in a press conference
after the cabinet meeting: "No one wishes anyone to resign
voluntarily nor are there prospects to cooperate in a set of
procedures. We must keep paying salaries for several months." It is
a fact that some in the ministry think that punitive measures might
diminish the morale of SDF members.

Meanwhile, major opposition Democratic Party of Japan President
Ichiro Ozawa in a press conference yesterday declared: "Allowing him
to retire does not face up to the heart of the problem. We are going
to take that issue up as one associated with the LDP-New Komeito
coalition." Four opposition parties agreed through their Diet chiefs
meeting yesterday to summon Tamogami to the Diet for testimony. The
DPJ demanded the LDP that Tamogami testify as early as Nov. 6 before
the Upper House Foreign Affairs and Defense Committee, which is
discussing a bill amending the New Antiterrorism Special Measures
Law. With Tamogami revealing he plans to respond to the call, the
prevailing view is that it has become difficult for the committee to
take a vote on the legislation on Nov. 6, as was planned by the
ruling bloc.

6) Over 50 SDF members may have entered essay contest in which
Tamogami won prize

ASAHI (Page 39) (Abridged slightly)
November 5, 2008

The Defense Ministry said on Nov. 3 that Toshio Tamogami, 60, who
was dismissed as Air Self-Defense Force chief of staff due to his
award-winning essay that claimed Japan was wrongly accused of being
a wartime aggressor, retired from the ministry as of Nov. 3. It was

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learned yesterday through the ministry's internal survey that over
50 Self-Defense Force personnel seem to have entered essays in the
same contest. The ministry is checking the process leading up to
their applications and whether or not their essays contained any
problem areas and expanding the survey to include personnel across
the nation.

The contest was run by the private hotel operator Apa Group under
the theme "A truthful view of modern history." A total of 13 essays
won prizes and no other SDF member (but Tamogami) was included in
them. Reportedly there were over 230 entries.

The ministry is investigating its internal bureaus and the Ground,
Maritime, and Air Self-Defense Forces. The ministry's survey has
found that more than 50 SDF personnel, including several ASDF
members, had notified or consulted their superiors about submitting
essays.

When releasing an essay or a giving a speech on his/her duties, an
SDF member must notify his/her superior about it in writing in
advance. Tamogami verbally informed the head of the Defense
Ministry's secretariat about his essay in a chat without presenting
a written notice, based on his judgment that it did not concern his
duties. The ministry has judged that the content of the essay was
concerned with Tamogami's duties and that he should have informed
his superior in writing.

The ministry is expected to check exactly how many more SDF
personnel entered the contest and to consider punitive measures
against those essays posing problems. Although Tamogami indicated
that he had not coerced essays from other SDF personnel, the
ministry will investigate if the former top ASDF officer had exerted
his influence regarding entering the contest.

7) Administrative vice defense minister to be punished with pay cut
over Tamogami essay scandal; Defense minister to return one month's
salary

MAINICHI (Page 1) (Abridged slightly)
November 5, 2008

The Defense Ministry announced yesterday punitive actions against
senior ministry officials in connection with the release of an essay
by former Air Self-Defense Force Chief of Staff Toshio Tamogami. The
ministry will punish Administrative Vice-Defense Minister Kohei
Masuda with a pay cut of 10 PERCENT for one month for a violation
of control and supervision under the Under the Self-Defense Forces
Law; Personnel and Education Bureau Director-General Atsushi
Watanabe with a reprimand; and Minister's Secretariat
Director-General Kimito Nakae with a caution. Further, Defense
Minister Yasukazu Hamada will voluntarily return his cabinet
minister salary for one month. Senior Vice-Defense Minister Seigo
Kitamura and parliamentary defense secretaries Ryota Takeda and
Nobuo Kishi will also return 50 PERCENT of their position salaries
for one month.

According to the Defense Ministry, Tamogami verbally informed Nakae
that he had entered an essay contest but did not inform Nakae of the
contents of his essay or file a written notice, as internally
required. Given the situation, the ministry has decided to take
punitive actions against the senior ministry officials at an early
date in the judgment that administrative confirmation and other

TOKYO 00003080 006 OF 013


factors had been insufficient.

8) Opposition parties to summon Tamogami

SANKEI (Page 5) (Abridged)
November 5, 2008

The leading opposition Democratic Party of Japan (Minshuto) and
three other opposition parties, the Japanese Communist Party, the
Social Democratic Party, and the People's New Party, all took a
critical stance yesterday toward the government over former Air
Self-Defense Force Chief of Staff Toshio Tamogami's publication of
an essay differing from the government's view of history. The four
opposition parties held a meeting of their Diet affairs committee
chairmen yesterday, in which they agreed to summon Tamogami to
testify before the House of Councillors Foreign Affairs and Defense
Committee as an unsworn witness. In addition, they also agreed to
pursue the government's appointment and oversight responsibilities
as well as the Defense Ministry's.

In response, the DPJ's Keiichiro Asao, senior director on the House
of Councillors Foreign Affairs and Defense Committee, told the LDP's
Katsuhito Asano, also senior director on the committee, that the
opposition bench would summon Tamogami to testify before the
committee as an unsworn witness.

Meanwhile, DPJ President Ichiro Ozawa, meeting the press yesterday,
remarked: "Those in the military have their own various views about
political issues. That is good. But it's not good to make statements
about specific political issues. The Self-Defense Forces, which is
an armed organization, should follow judgments made by the
government elected by the people." This can be taken as indicating
that Ozawa thinks an SDF officer's remark over historical perception
was a political remark and that anyone in the SDF should abstain
from making such remarks.

The ruling coalition wants the House of Councillors Foreign Affairs
and Defense Committee to take a vote tomorrow on a
government-introduced bill amending the new Antiterrorism Special
Measures Law. However, the ruling parties also fear that the
Tamogami problem may delay the committee's vote on the legislation.

9) Opposition parties object to ex-ASDF chief of staff's ordinary
retirement over controversial essay; Diet likely to face rough going
in debate on refueling bill

TOKYO SHIMBUN (Page 2) (Full)
November 5, 2008

On the issue of former Air Self-Defense Force Chief of Staff Toshio
Tamogami's publication of an essay justifying Japan's aggressive
wartime past, all opposition parties yesterday raised objections to
the ordinary retirement of Tamogami after he refused to submit to
disciplinary procedures. The opposition parties will pursue the
government's responsibility. The government, driven by a sense of
crisis, took action in haste to punish senior Defense Ministry
officials. However, the Diet will inevitably be affected in its
deliberations. It will not likely be so easy to draw the curtain on
the issue.

"The most immediate action is this way (involuntary retirement)." So
saying, Chief Cabinet Secretary Takeo Kawamura admitted in a press

TOKYO 00003080 007 OF 013


conference that the retirement of Tamogami under the date of Nov. 3
was intended to settle the situation quickly.

On Oct. 31, the government dismissed Tamogami from his ASDF chief of
staff post as soon as the issue was brought to light. The government
wanted Tamogami to voluntarily quit the Defense Ministry. However,
he refused both voluntary resignation and disciplinary punishment.
The government therefore felt it had no choice but to retire him
under the age limit.

Democratic Party of Japan (Minshuto) President Ichiro Ozawa
criticized the early retirement of Tamogami, saying: "The government
dismissed him and then retired him under the age limit. The
government lacks public accountability. It's very regrettable."

The DPJ, the Japanese Communist Party, the Social Democratic Party,
and the People's New Party held a meeting of their Diet affairs
committee chairmen yesterday, in which the four opposition parties
agreed to summon Tamogami to the House of Councillors Foreign
Affairs and Defense Committee. They will pursue Prime Minister Aso's
responsibility, as well as Defense Minister Hamada's, seeking to
drive the government and the ruling parties into a corner. For that
purpose, a DPJ executive implied that the committee would go so far
as to refuse to take a vote on the refueling bill.

Encountering such sharp reactions from the opposition parties, the
government and the ruling parties do not expect discussion of the
legislation to be as smooth as planned. "This will inevitably affect
Diet deliberations on the bill amending the new antiterror special
measures law," said an executive of the LDP Diet Affairs Committee.
The government allowed Tamogami's early retirement, since it was in
a hurry to settle the problem. Consequently, such action ended up
incurring the wrath of the opposition parties.

The Defense Ministry announced its punishment of seven senior
officials yesterday evening at Aso's orders, including Hamada's
return of part of his pay. The government wants to dodge the
opposition bench's attack. This, however, does not seem to be
convincing to the opposition parties.

10) Talks on timetable for refueling bill breaks down as DPJ demands
summoning ex-ASDF chief to Diet over controversial essay

MAINICHI (Page 5) (Full)
November 5, 2008

The top executive members of the Liberal Democratic Party (LDP) and
the Democratic Party of Japan (DPJ) in the House of Councillors
Foreign Affairs and Defense Committee yesterday discussed the
timetable for deliberations on a bill amending the New Antiterrorism
Special Measures Law to extend the Maritime Self-Defense Force's
refueling mission in the Indian Ocean. But the talks ended with no
agreement as the DPJ executive unofficially sounded out his
counterpart on the party's plan to summon Toshio Tamogami, who was
dismissed as Air Self-Defense Force chief of staff over his essay
contradictory to the government's current position on Japan's
wartime history, to the Diet for testimony. The LDP executive
insisted on an early vote on the bill, remarking: "We have fully
discussed the issue." The DPJ will formally propose in an executive
meeting today the summoning of Tamogami to the Diet.

The DPJ, the Japanese Communist Party, the Social Democratic Party,

TOKYO 00003080 008 OF 013


and the People's New Party held a meeting of their Diet Affairs
Committee chairmen yesterday in the Diet Building. The four chairmen
agreed to call on the government to summon Tamogami to the Diet. If
Tamogami is summoned, they will pursue the government's
responsibility in intensive deliberations at the said committee and
other meetings, focusing on why it appointed Tamogami as ASDF chief
of staff and why he contributed the controversial essay to contest.
They aim to bring Tamogami into the Diet on Nov. 11, at the
earliest.

The DPJ has also indicated an intention to invoke its right to
investigate state affairs over the report on a fact-finding team to
Afghanistan to be submitted by the government to the executive
meeting today of the Upper House Foreign Affairs and Defense
Committee if the party finds its contents insufficient. It has thus
become more uncertain for the refueling bill to clear the Diet.

11) Foreign Ministry set up policy office tasked with anti-piracy
measures

MAINICHI (Page 5) (Full)
November 5, 2008

The Foreign Ministry set up a maritime safety policy office under
the National Security Policy Division of the Foreign Policy Bureau
yesterday. The ministry will be more actively involved in maritime
safety, tackling piracy and other problems.

Prime Minister Taro Aso has indicated a positive view about new
legislation to enable Japan to dispatch Maritime Self-Defense
Force's vessels to guard commercial freighters and other ships from
possible attacks by pirates in pirate-infested waters off Somalia,
East Africa. The new office will take the initiative in drafting a
new law in the Foreign Ministry.

According to the Foreign Ministry, about 99 PERCENT of Japan's
trade depends on maritime transport, so the government has been
urged as an important task to prepare measures to ensure safe
navigation, as well as to combat terrorists and pirates. The
government enacted the Basic Law of the Sea in April of last year,
based on the UN convention on the Law of the Sea. This legislation
has made it possible for Japan to promote maritime policies in a
comprehensive way and prompted the ministry to establish the said
office.

The number of attacks by pirates has decreased in Southeast Asia.
But such attacks off Somalia, as well as in the Gulf of Aden and the
Red Sea have surged. The number increased from 21 in 2003 to 63 in
the period between January and the end of September this year.
Damage on ships or tankers owned by Japanese companies has been
reported.

12) Will Aso dissolve Lower House in January? Diet session might be
substantively extended for passage of financial bill

SANKEI (Page 5) (Full)
November 5, 2008

The government and ruling parties yesterday decided in a House of
Representatives Financial Affairs Committee session to bulldoze
through the committee today a vote on a bill revising the Financial
Functions Strengthening Law in order to get it through the Lower

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House on the 6th. This bill will enable the government to inject
preliminary public funds into financial institutions. The ruling
camp has judged it necessary to show a clear stance before Prime
Minister Taro Aso attends the emergency summit of the Group of
Twenty on the global financial crisis on Nov. 15. If the opposition
camp toughens its attitude from now on, the ruling bloc will be
forced to substantively extend the current extraordinary session
until early next January with a two-thirds lower chamber majority
override vote or 60-day constitutional rule in mind. (Article 59 of
the Constitution stipulates that if the upper chamber rejects a
bill, it can still be passed by a two-thirds lower chamber
overriding vote.) Given that situation, there is a possibility that
the Lower House may still be dissolved in January.

No choice

Ruling Liberal Democratic Party (LDP) Diet Affairs Committee
Chairman Tadamori Oshima said: "All parts that the Democratic Party
of Japan (DPJ) suggested have been modified. I want to take a vote
on the financial bill tomorrow."

DPJ Diet Affairs Committee Chairman Kenji Yamaoka stated: "Are you
going to hold a vote before going through thorough deliberations?
Well, we then have no choice."

The Oshima-Yamaoka meeting ended in just 15 minutes yesterday.
Oshima judged that he was able to obtain Yamaoka's approval with his
words: "We have no choice." Later in the day, Yamaoka bumped into
New Komeito Diet Affairs Committee Deputy Chairman Hiroyoshi Nishi
in the Diet building and told him: "The talks ended in failure. A
forced vote that your party likes will be taken tomorrow. You will
keep using two-thirds (lower chamber override vote) from now on,
won't you?"

Wrapping up consultations on revising the financial bill with three
opposition parties, the ruling coalition intends to take a vote on
the bill tomorrow afternoon in a Lower House plenary session after
carrying out a question-and-answer session today in a Lower House
Financial Affairs Committee session. The ruling coalition has come
up also with the idea of having the opposition camp take a litmus
test by putting both the government's original bill and the revised
one to votes.

Until G-20 summit

The ruling camp has been forced to shift to taking a hard-line
tactic because it needs to show a clear stance before the G-20
financial summit. Another reason is that it has judged that it will
not be able to accept the DPJ's demand that public funds not be
injected into the troubled bank, ShinGinko Tokyo, and that Diet
approval be required to inject public funds into the Norinchukin
Bank (agricultural cooperative bank). The ruling coalition also is
trying to urge the opposition to agree to an early passage of the
legislation.

However, if deliberations are stalled in the opposition
camp-controlled Upper House, the ruling coalition will be pressed to
largely extend the ongoing session, which ends on Nov. 30. It will
possible on Jan. 5 to take a two-thirds lower chamber override vote
on the financial legislation. In case the Upper House fails to take
a vote on a bill amending the new Antiterrorism Special Measures Law
to allow the Maritime Self-Defense Force to continue its refueling

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mission in the Indian Ocean, there is a possibility that an override
vote will be taken on the two bills in the Lower House.

If such happens, the opposition camp will probably submit a
no-confidence motion against Prime Minister Aso to the Upper House.
There may be a possibility that Aso will dissolve the Lower House
immediately after taking overriding votes, arguing that he would
like to ask for the people's vote of confidence in order to quickly
implement a fresh economic stimulus package after presenting a
second additional budget for fiscal 2008 that includes the economic
package, as well as the state budget for fiscal 2009.

DPJ to demand for revisions to financial bill

The DPJ plans to call for correction of the financial bill by
pursuing severely the allegation that a ruling coalition member
acted as an intermediary for ShinGinko Tokyo's loans, as well as the
practice of amakudari in which retired administrative agriculture
vice ministers take the president's post a the Norinchukin Bank.
Although a mood calling for Lower House dissolution is certain to
grow, the ruling and opposition camps will likely continue their war
of nerves, with an eye on public approval ratings for the cabinet
and on the economic situation.

13) DPJ head Ozawa orders party to take battle stations: Election
will be between the fall and beginning of next year

SANKEI (Page 5) (Excerpts)
November 5, 2008

Democratic Party of Japan (DPJ) President Ichiro Ozawa at a meeting
of party officials yesterday ordered that they be prepared for
action regarding Diet dissolution and a snap election. He said:
"Although the mass media and Prime Minister Taro Aso are saying
there will be a delay, in my judgment, Diet dissolution will come
between the fall and the beginning of next year. I want you to keep
up your spirit that we will win the election without fail."

Ozawa said that the reason for his belief that the time for the
Lower House election is drawing near was: "Since the Prime Minister
is not a person like former Prime Minister Junichiro Koizumi, who
would avoid a showdown, he is not sharp in his judgment. (His
administration) cannot last until next September (when the Lower
House term ends), so it is inevitable that the time for carrying out
a general election is drawing near. If he does not do so, the Prime
Minister himself will probably have to leave (his position at the
top)."

14) Sales tax to be raised up to 18 PERCENT by 2025, according to
final report by government council: Imperative to finance social
security

TOKYO SHIMBUN (Top Play) (Full)
November 5, 2008

The government's National Council on Social Security, chaired by
Tokyo University Graduate School Professor Hiroshi Yoshikawa, on
November 4 submitted a final report that calls for the strengthening
of the functions of the social security system and the indication of
a way to secure stable fiscal resources to finance that. In
response, the government plans to set up a roundtable led by Deputy
Chief Cabinet Secretary Jun Matsumoto and Yoshikawa to draw up a

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road map for concrete procedures for reform before year's end.

The report notes that in order to finance public expenses needed to
strengthen the functions of the social security system, it would be
necessary to raise the consumption tax 3.3 PERCENT -3.5 PERCENT by
fiscal 2015 and about 6 PERCENT by fiscal 2025, when the aging of
the society is expected to peak.

The report also notes that in the event of adopting a tax system of
financing the whole amount of the basic pension with tax money
alone, a 6 PERCENT -11 PERCENT hike in the sales tax by fiscal 2015
and a 9 PERCENT -13 PERCENT hike by fiscal 2025 would be needed. It
says that the sales tax rate -- currently 5 PERCENT -- should be
raised up to 18 PERCENT .

The report points out that the present social security system is
facing various challenges, including the languished medical service
and nursing-care systems.

Concerning the basic pension, the bone of contention, the report
includes both cases -- the introduction of a social insurance system
of financing it with insurance premiums and tax money as is now the
case and the introduction of a tax system of financing the full
amount with tax money alone, steering clear of reaching a conclusion
on which system should be employed.

As measures for those who did not contribute to the national pension
system and those who can only receive a small amount of pension
benefits, the report proposes that flexible measures, such as
setting up a minimally guaranteed pension amount and additional
pension premium payments, should be looked into.

Regarding medical and nursing-care services, the report calls for
improving services and enhancing efficiency simultaneously, citing
that those services are faced with such challenges as the emergency
medical care issue and impoverished local medical services.

The package characterizes measures to address the declining
birthrate as a task that should be given top priority, noting that
the issue will have an effect on the sustainability of social
security.

15) Government, ruling parties to discuss limiting flat-sum benefit
payment plan in response to sharp criticism

TOKYO SHIMBUN (Page 2) (Abridged slightly)
November 2, 2008

Following Prime Minister Taro Aso's statement on his decision to
exempt high income earners from the list of those entitled to
receiving flat-sum benefit payment, a policy incorporated in the
package of additional economic stimulus measures, the government and
the ruling parties on November 4 started discussing a specific way
of limiting the number of those eligible for the payment. The prime
minister at first announced that benefits would be paid out to every
household. However, he was forced to change that policy, meeting
criticism that the uniform payment of benefits to people, including
high income earners, is tantamount to doling out pork-barrel
largesse.

Regarding the benefit payment, the New Komeito has strongly insisted
that the payment must be made within the current fiscal year to help

TOKYO 00003080 012 OF 013


people in their daily lives. As a result, the government decided not
to set an income limit, giving priority to the adoption of an easy
method that would enable an early implementation of the plan.

When he released the package of additional economic stimulus
measures on October 30, the prime minister categorically said that
the flat-sum benefit would be paid to every household. He noted:
"The benefit will be paid to every household. The amount should come
to about 60,000 yen per household, according to a simple
calculation."

The opposition parties immediately after the release of the economic
package started criticizing this measure as pork-barrel largesse
aimed at the upcoming next Lower House election. Many lawmakers from
the ruling parties, who returned to their home constituencies over
the three-day holiday weekend, came to take the view that there
should be an income restriction, with one veteran Diet member
saying, "Many of our supporters said that it is strange to pay out
such a benefit to high income earners as well."

State Minister for Economic and Fiscal Policy Kaoru Yosano, who
compiled the economic package, repeatedly stressed on TV talk shows
the need to set an income restriction. The government and the ruling
parties had no choice but to switch to the adoption of an income
restriction, prodded by public opinion.

There is, however, a barrier to the setting of an income
restriction. Complicated procedures, such as an amendment to
relevant laws, would become necessary in order for local governments
that will be in charge of actual work of paying out the benefit to
use tax-related information to grasp each household's income. If it
takes time to undergo this procedure, it would become difficult to
pay out the benefit within the current fiscal year.

Yosano during a press conference on the 4th underscored: "It would
not be so difficult, if payment is made, based on the amount of
income declared by recipients themselves. This method would not
require any legal changes." However, it would be controversial to
adopt a method that could lead to false income declarations.

Yosano, LDP Policy Research Council Chairman Kosuke Hori, Acting
Chairman Hiroyuki Sonoda and former State Minister for Financial
Policy Hakuo Yanagisawa on the 4th conferred on specific matters.
However, with the talks focusing on procedures, participants were
unable to work out an income restriction demarcation line.

16) Bill to strengthen financial system to clear Lower House
tomorrow but to deadlock in Upper House due to DPJ's demand for
amendments

MAINICHI (Page 5) (Full)
November 5, 2008

Liberal Democratic Party (LDP) Diet Affairs Committee Chairman
Tadamori Oshima conveyed to his Democratic Party of Japan (DPJ)
counterpart Kenji Yamaoka in the Diet Building yesterday his party's
plan to take a vote in a meeting of the House of Representatives'
Financial and Monetary Affairs Committee today on a bill amending
the Financial Function Strengthening Law to enable the government to
pour public funds into local financial and other institutions. The
bill is likely to be adopted at the committee and clear the Lower
House by a majority from the ruling coalition tomorrow. But the LDP

TOKYO 00003080 013 OF 013


and the DPJ remained divided in talks on revising the bill. Four
opposition parties have decided to vote against the bill in the
meeting today.

The DPJ aims to revise the bill in line with its proposals in the
opposition-controlled House of Councillors. After the DPJ's bill is
adopted in the Upper House and then sent to the Lower House, the
ruling coalition will have to either agree on the DPJ bill or use
its two-thirds override vote in the Lower House to reinstate its own
bill. Should the bill revised in the Upper House pass the Diet with
a second lower chamber overriding vote, it will be the first case in
51 years. The revision bill is likely to be a test case in the
divided Diet for Prime Minister Taro Aso, who forwent his original
plan for dissolving the Lower House for a snap election.

In the meeting of the LDP and DPJ Diet affairs committee chairmen
yesterday, Oshima indicated his willingness to deal with the
following three contentious points in the talks on revising the bill
by adopting a supplementary resolution: (1) Necessity for a Diet
resolution in the case of public funds injected into the
Agricultural and Forestry Central Bank; (2) political neutrality of
the said central bank; and (3) removal of New Bank Tokyo from those
eligible for public funds. But Yamaoka demanded rewriting the bill,
saying: "There will be no substantive effect." As it stands, the two
failed to find common ground. The ruling coalition now intends to
independently revise only the matters that both sides agreed on.

Speaking before reporters in the Diet Building yesterday, Oshima
explained why the ruling camp is eager to push the revised bill
through the Lower House: "The prime minister hopes to quickly take
best measures to strengthen the domestic financial system. It is
necessary to establish a safety net to prevent local economies from
being negatively affected by the current situation." Meanwhile, a
senior DPJ member told reporters in Tokyo: "The public should
understand our party's view toward the Agriculture and Forestry
Central Bank and New Bank Tokyo. I wonder if the ruling camp would
be able to resort to an override vote under such a situation."

SCHIEFFER

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