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Cablegate: Japanese Morning Press Highlights 12/11/08

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UNCLAS SECTION 01 OF 13 TOKYO 003361

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DEPT FOR E, P, EB, EAP/J, EAP/P, EAP/PD, PA;
WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST DIVISION;
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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 12/11/08

Index:

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

4) Visit to Yokota's abduction site most memorable: U.S. envoy
Schieffer (Kyodo)

Defense and security affairs:
5) Refueling bill to allow continued MSDF service in the Indian
Ocean will finally pass the Diet tomorrow by a Lower-House override
vote (Asahi)
6) U.S. sailor please innocent in Yokosuka taxi-driver trial,
claiming he "heard voices" (Tokyo Shimbun)
7) U.S. sailor after taxi slaying returned to Yokosuka base using
friend's ID card, exposing lax security at the facility (Tokyo
Shimbun)
8) U.S. Navy is studying behavioral patterns of large sampling of
personnel in order to prevent reoccurrence of vicious crimes
(Asahi)
9) Japan Coast Guard to send officers to countries neighboring
Somalia but gives up plan to dispatch patrol boats to
pirate-infested waters off that country (Tokyo Shimbun)
10) Liberal Democratic Party (LDP) project team studying possibility
of submitting a permanent law to deal with piracy (Nikkei)

North Korea problem:
11) Six-Party Talks to go into recess with no progress on the
nuclear front (Tokyo Shimbun
12) Japanese government acknowledges lack of progress in Six-Party
Talks and accepts the recess as unavoidable (Tokyo Shimbun)
13) Japan unable to contact North Korean ambassador in charge of
bilateral negotiations, suspect he is under house arrest (Tokyo
Shimbun)

Economic policy:
14) Government to scrap in principle custom of last minute
negotiations with Finance Ministry to restore cuts in budget
requests (Nikkei)
15) Prime Minister Aso quietly shifts policy stance from fiscal
stringency to economic stimulation, realizing that his
administration's life is at stake (Tokyo Shimbun)
16) Democratic Party of Japan plans to submit six economy-related
bills to the Diet (Mainichi)

17) New Komeito feels that politics have reached an impasse, with no
Diet dissolution in sight and public reaction negative to
cash-handout scheme (Yomiuri)

18) Japan's proposals for COP-14 climate talks rejected (Mainichi)


Articles:

1) TOP HEADLINES

Asahi:
Plan for raising cigarette tax abandoned

Mainichi:
Nursing care business gets paid for finding tenants on welfare for

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housing for elderly people

Yomiuri:
Capital punishment (Part 1): Bereaved families changed views

Nikkei:
Japan plans to double credit line to 2.8 trillion yen for South
Korea to stave off currency crisis

Sankei:
MPD to file charges against three individuals, including Taisei
project leader, over Shibuya spa explosion

Tokyo Shimbun:
Six-party talks to adjourn today due to conflict over verification
method

Akahata:
JCP's Yamashita pressed Aso to rescue public hospitals in crisis

2) EDITORIALS

Asahi:
(1) Sony's job cuts: Japanese-style management essential
(2) Finding social welfare funding imperative

Mainichi:
(1) Ruling in murder of Hiroshima girl and lay judge system
(2) Sony's restructuring plan: Jobs in danger

Yomiuri:
(1) Rough-and-ready court procedures under fire
(2) False pension records: Social Insurance Agency's bad nature must
be eliminated

Nikkei:
(1) New road subsidies run counter to freeing up road-related
revenues for general spending
(2) Is Japanese students' academic ability really at top level?

Sankei:
(1) Sony's restructuring plan: Employment stability takes innovative
ideas from private sector
(2) Hiroshima murder case leaves lessons for lay judge system

Tokyo Shimbun:
(1) Mass unemployment feared: More additional measures necessary
(2) Hiroshima murder case offers lessons for lay judge system

Akahata:
(1) WTO agricultural talks: Chairman's plan must be rejected

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, December 10

NIKKEI (Page 2) (Full)
December 11, 2008

09:04
Met at Kantei with Deputy Chief Cabinet Secretary Konoike.


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10:25
Met with New Komeito leader Ota.

10:58
Met at LDP headquarters with Tax System Research Commission Chairman
Tsushima, later joined by Sub-Committee Chairman Yanagisawa and
Chief Cabinet Secretary Kawamura. Kawamura remained.

12:02
Returned to Kantei.

12:56
Met with Finance Minister Nakagawa and Economic and Fiscal Policy
Minister Yosano in the Diet building.

13:00
Attended Upper House Budget Committee session.

17:07
Returned to Kantei.

17:39
Recorded message to FM Yokohama program at LDP headquarters.
Interviewed by LDP's organ newspaper "Jiyu-minshu (Freedom and
Democracy)".

18:33
Met with Nakagawa.

19:30
Met with U.S. Ambassador Schieffer and his wife at his private
residence in Kamiyama-cho.

4) Visit to Yokota's abduction site most memorable: U.S. envoy
Schieffer

by Janice Tang

TOKYO, Dec. 10 KYODO

Diplomatic negotiations with Japan such as on the U.S. military
realignment may have been tough tasks, but for U.S. Ambassador
Thomas Schieffer a visit to the site where a 13-year-old Japanese
girl was believed to be abducted in 1977 by North Korean agents beat
all other events as the most memorable during his soon-to-end tenure
in Tokyo.

Schieffer, who was named the 2008 Person of the Year by the American
Chamber of Commerce in Japan on Wednesday, also said that while his
three-year term has been a ''busy time,'' it has achieved ''a lot of
positive things'' such as fruitful negotiations on the realignment
as well as stronger bilateral relations since the time of former
Prime Minister Junichiro Koizumi's administration.

''The most memorable had to be the time when I went up to Niigata
and walked with the Yokotas on the path that Megumi took,''
Schieffer, whose ambassadorship is expected to end next month, told
reporters.

He was referring to a visit in March 2006 to the hometown of
abductee Megumi Yokota, who is among at least a dozen missing
Japanese believed to have been kidnapped to the North.

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The ambassador has played an important role in raising the abduction
issue with U.S. President George W. Bush and facilitated a meeting
between Bush and Yokota's mother Sakie in Washington in late April
that year. Bush later described the meeting as ''one of the most
moving meetings since I've been the president.''

When Washington took North Korea off its blacklist of nations
sponsoring terrorism this October, Schieffer met in person with the
families of the missing abductees in Tokyo and sought their
understanding that the decision was made to keep the stalled
six-party nuclear talks with the North alive.

No progress has been made since then on the abduction issue,
including Pyongyang's promise to reinvestigate the cases.

In his acceptance speech at the ACCJ award ceremony on Wednesday,
Schieffer warned that Japan must open its market to foreign
investors and that especially amid current financial difficulties
reverting to protectionism by Japan and the United States would be
damaging to both sides.

''Most Japanese would argue today, I think, that Japan's future
prosperity is dependent upon engaging the rest of the world. Yet
there are still a significant number of Japanese who argue that
Japan would be better off if it erected regulatory and technical
barriers to make it more difficult for foreigners to do business in
Japan than it is for Japanese to do business abroad,'' the envoy
said.

''If 'Japan passing' occurs in the future, it will not be, in my
judgment, because of this or that American was elected president. It
will be because Japan believes that it has no role to play in the
international community and foreigners are not welcome in the
(Japanese) economy,'' Schieffer added.

He also told an audience of business representatives at the ceremony
that governments should act to ensure the integrity of free markets,
saying, ''Market places, like baseball games, need good umpires and
government should perform that function.''

The ACCJ created the Person of the Year award in 1996 in recognition
of individuals who have made significant contributions to business
and commerce and the U.S.-Japan relationship.

Allan Smith, president of the chamber, said Schieffer was awarded
for having been a ''resolute advocate'' for bilateral ties during
his tenure and for his ''leadership in promoting the U.S.-Japan
relationship at such a critical time in the development of the
global economy.''

Schieffer, who served as ambassador to Australia in 2001-05 before
his posting to Tokyo, has said he plans to step down together with
the Bush administration in January as he feels he has fulfilled his
duties.

5) Lower House to take second vote on refueling, financial bills
tomorrow

ASAHI (Page 4) (Full)
December 11, 2008


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The expectation is that a bill amending the new Antiterrorism
Special Measures Law to extend by one year the Maritime Self-Defense
Force's refueling mission in the Indian Ocean will be put to a
two-thirds overriding vote in the House of Representatives' plenary
session tomorrow and the bill will be enacted the same day. This is
because the House of Councillors Committee on Foreign Affairs and
Defense agreed yesterday to take a vote on the legislation today.
The bill will be voted down in the Upper House's plenary session
tomorrow but it will be readopted in the Lower House's plenary
session the same day.

In the Lower House's plenary session tomorrow, a second vote will
likely be taken on a bill revising the Financial Functions
Strengthening Law, as well.

6) U.S. sailor pleads not guilty in murder of taxi driver

TOKYO SHIMBUN (Page 27) (Full)
December 11, 2008

The Yokohama District Court yesterday held the first hearing of U.S.
Navy Seaman Apprentice Olatunbosun Ugobogu, a 22-year-old Nigerian
national stationed at the U.S. Navy's Yokosuka base in Kanagawa
Prefecture, over his alleged murder in Yokosuka of Masaaki
Takahashi, a 61-year-old taxicab driver. Ugobogu admitted to
stabbing the taxi driver but denied any criminal intent, telling the
court that did not intend to kill or rob Takahashi and he heard
"voices" ordering him to stab him.

His defense counsel asserted Ugobogu's innocence, maintaining that
Ugobogu was not mentally competent at the time of the incident due
to schizophrenia with auditory hallucinations and other symptoms.
The counsel sought a psychiatric test for Ugobogu, citing a
detention physician's diagnosis of his case as suspected
schizophrenia.

Prosecutors stated to the court that Ugobogu had made up his mind to
rob the taxi driver with a kitchen knife to get money to spend on
amusement and living expenses. Ugobogu was not suspected of having
any mental illnesses in the U.S. Navy. Given this, the prosecutors
stressed that he was fully capable of being held liable for the
murder. They claimed that he lied to avoid responsibility.

According to the indictment, Ugobogu caught a taxi near Shinagawa
Station in Tokyo on the evening of March 19 and exited the taxi in
the city of Yokosuka, where he stabbed Takahashi in the left
shoulder with a kitchen knife and ran away without paying the fare
of about 20,000 yen.

7) Yokosuka deserter returned to base with colleague's ID card; U.S.
Navy admits to security flaws

TOKYO SHIMBUN (Page 27) (Full)
December 11, 2008

In the wake of this March's murder of a taxi driver in Yokosuka,
Kanagawa Prefecture, the Japanese and U.S. governments have agreed
to report on U.S. military deserters in Japan. Meanwhile, the
incident has also revealed security flaws at the U.S. Navy's
Yokosuka base, as seen from the fact that the U.S. sailor who
committed the heinous crime entered the base with a colleague's ID
card.

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Prosecutors, in an opening statement to the Yokohama District Court,
noted that Olatunbosun Ugobogu, a Yokosuka-based U.S. sailor charged
with fatally stabbing the taxi driver, returned to the base shortly
after the crime using a colleague's ID card with its photo blacked
out.

According to the prosecutors' statement, Ugobogu got through the
main gate of the base, which is situated about 600 meters from the
scene of the crime, on March 19 at around 9:30 p.m., about 10
minutes after the crime, and he withdrew 400 dollars from an on-base
ATM. At the gate were shore patrolmen. However, Ugobogu passed
through the gate with his colleague's ID card he had obtained before
his desertion.

"The base access control system was defective, so we improved the
system after the incident," a base official told the Tokyo Shimbun.
However, the official did not explain how Ugobogu got through the
gate, citing security reasons.

8) U.S. Navy begins personnel checks to prevent recurrence

ASAHI (Page 38) (Full)
December 11, 2008

Fumiaki Sonoyama

In the wake of this March's murder in Yokosuka of a taxicab driver
by a Yokosuka-based U.S. Navy sailor, U.S. Naval Forces Japan
(USNFJ) has started a program checking the backgrounds of its
personnel numbering about 20,000. The program is intended to
discover potential violence at an early stage for correction through
education and training.

According to USNFJ headquarters, about 10 personnel have so far been
found questionable and are now being counseled to learn how to
control their anger. Some may be diagnosed by a psychoanalyst. No
one has been sent back to the United States, according to the
headquarters.

Olatunbosun Ugobogu, a Yokosuka-based U.S. Navy sailor charged with
fatally stabbing the taxicab driver, was a deserter, and this fact
also became a problem. Later on, Japan and the United States reached
an intergovernmental agreement to immediately report facts about
U.S. military deserters to the Japanese government. According to the
Foreign Ministry, the U.S. government has so far reported six
deserters since early July. One of them has returned to a base, the
ministry said. Such information is transmitted to local
governments.

In September this year, the USS George Washington, a U.S. Navy
nuclear-powered aircraft carrier, arrived at Yokosuka for
deployment. Its crew-numbering about 2,000-has started a new life in
Japan. The U.S. Navy sent a special team to the George Washington
before her deployment in Japan to brief the crew on Japanese culture
and responsible behavior. This has probably worked well, and none of
the crew has so far caused trouble.

9) Anti-piracy measures off the coast of Somalia: Japan Coast Guard
withdraws idea of dispatching patrol boat but will send officers to
neighboring countries Yemen and Oman


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TOKYO (Page 27) (Excerpts)
December 11, 2008

In response to the problem of pirates operating in the waters off
Somalia, which has become an international issue, the Japan Coast
Guard (JCG) will dispatch for a week starting on Dec. 12 three JCG
officers to Yemen, which is on the opposite shore of the Sea of
Aden, and Oman, which neighbors to the East. Approximately 80
PERCENT of the damage from pirate attacks this year in waters off
Somalia occurred in the Sea of Aden and the Red Sea. Since Somalia
is in civil war and a start of anarchy, the decision was made that
it would be more effective to strengthen security patrols of the two
other coastal countries. The on-site investigation by the officers
will look into practical measures to assist.

JCG has given up on dispatching a patrol boat, but it plans to
cooperate by such means as beginning exchanges with coastal security
forces in Yemen and Oman this year and improve their investigative
capabilities. Coastal security forces in both countries explained to
JCG that the multinational force is not actively working to
eliminate piracy from the waters. For that reason, a senior U.S.
military officer is reported to have said: "If we are attacked by
pirates, who feel challenged by our movements, we will return fire.
The result would be clear (the pirate ship would sink), but we would
be criticized internationally."

In actuality, the Indian Navy last month accidentally sunk a Thai
fishing boat that had been boarded by pirates. Many crew members who
were hostages were lost at sea. The multinational force recognizes
the danger of excessive defense and seems to be operating
cautiously.

10) Application of general law for measures against piracy to be
taken into consideration

NIKKEI (Page 2) (Full)
December 11, 2008

The Liberal Democratic Party's (LDP) project team to look into
measures to deal with damage caused by the rampant piracy off
Somalia (chaired by Gen Nakatani), at a meeting on December 10
decided to include among options the application of a general law,
which does not limit the areas and duration of activities, as the
law that serves as the basis for dispatching MSDF vessels. It will
also take the establishment of a special measures law into
consideration.

11) Six-party talks to go into recession with no progress on
nuclear-verification methods

TOKYO SHIMBUN (Top Play) (Full)
December 11, 2008

Norihiro Shinkai, Beijing

Chief negotiators of the six-party talks on North Korea's
denuclearization held separate negotiations and a plenary session in
Beijing on the afternoon of Dec. 10, the third day of the talks.
Foreign Ministry's Asian and Oceanian Affairs Bureau Director
General Akitaka Saiki, Japan's chief envoy, told reporters last
night, "We will also discuss matters tomorrow," indicating that the
talks would be extended. But U.S. Assistant Secretary of State

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Christopher Hill, U.S. chief negotiator, said: "If we fail to reach
an agreement, the talks will probably go into recession." The gap
remains wide between the U.S. and North Korea over ways to verify
information North Korea has given on its nuclear programs. The
six-party talks are now likely to be adjourned today

Vice Foreign Minister Wu Dawei of China, the chair of the talks,
presented a draft proposal serving as a basis for working out
nuclear-verification methods to each nation on the 9th. Japan, the
U.S., South Korea, and Russia called for revising the draft to
ensure Pyongyang's information to be verified more strictly, while
North Korean Vice Foreign Minister Kim Kye Gwan fiercely reacted to
the contents of the draft. Wu continued consultations with other
countries in an effort to put an accord on nuclear verification into
writing yesterday, but the U.S. and North Korea remained at odds.
According to South Korean envoy and director of Korean Peninsula
Peace Negotiations Kim Sook, Kim Kye Gwan emphasized in the session
that North Korea is now a nuclear power.

Saiki said last night: "I feel that the gap will not be easily
bridged." Hill categorically said: "North Korea has not made efforts
to establish a verification method in accordance with international
standards. There was no progress at all. ... (China) will hold talks
with other countries and it is expected that if there is no
progress, it will declare the end of the talks."

12) Government views recess of six-party talks as unavoidable

TOKYO SHIMBUN (Page 2) (Full)
December 11, 2008

The expectation is that the ongoing six-party head-of-delegation
meeting will recess as early as today, since the meeting has yet to
reach an agreement on ways to verify North Korea's nuclear
declaration. The Japanese government views a recess as inevitable as
it cannot make any easy concessions to North Korea.

In the meeting, Japan's chief envoy Akitaka Saiki stated: "It is
important to codify a verification protocol in an agreement so that
there will be neither misunderstanding nor distortion." In
cooperation with his U.S. and South Korean counterparts, Saiki
strongly called for the codification of a verification protocol,
including sampling, something Pyongyang has refused. However, Japan
had been concerned that it could be left behind if Washington and
Seoul made concessions.

Therefore, in a Japan-U.S.-South Korea head-of-delegation meeting,
the Japanese government repeatedly mentioned the need for
codification of a verification protocol. The Japanese government's
effort succeeded in creating a net encircling North Korea along with
the United States, South Korea and Russia. This net eventually
pressed China, host of the six-party talks, not to make any broad
concessions.

The Japanese government thinks that it has been able to keep itself
from being isolated from the rest of the six-party member countries,
even though the talks did not make any progress.

Meanwhile, no progress was made on the issue of North Korea's
abductions of Japanese nationals, since the Japanese and North
Korean chief envoys failed to hold a meeting.


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North Korea criticized Japan in the meeting, asking under what
status Japan was attending the meeting. The North may step up its
attack against Japan. If so, the chance to resolve the abduction
issue will slip away.

13) Japan unable to make contact with North Korean negotiator in
normalization talks

TOKYO SHIMBUN (Page 1) (Excerpts)
December 11, 2008

Yasunobu Kiuchi, Beijing

Japan has been unable to make contact with Song Il Ho, chief envoy
of normalization talks with Japan, since October, according to
informed sources yesterday.

Rumors are afloat that since he disclosed internal information on
Japanese nationals abducted by North Korean agents, he is taking the
blame and exercising restraint in his activities.

Song as the representative of North Korea attended the working-level
talks between Japan and North Korea held in Shenyang, China, in
mid-August, in which both side agreed to set up a committee on
reinvestigating the whereabouts of the abduction victims. He
responded to an interview with Kyodo News after North Korea informed
the Japanese government in early September of its decision to delay
the investigation.

A Foreign Ministry source said that since then, the Japanese
government became unable to make contact with him.

According to sources familiar with Japan-North Korea relations, Song
gave information to the Japanese government this summer indicating
that an abduction victim is living in North Korea, so he might have
been subject to suspension on the grounds that he had leaked
information with no permission from the leadership. An informed
source in Beijing said: "There are rumors that he is receiving
reeducation on ideology and other matters."

14) Budget compilation: Restoration negotiation to be abolished in
principle; Government decides to revise established practices; Prime
minister to allocate priority items

NIKKEI (Page 2) (Full)
December 11, 2008

The government will substantively revise accepted practices
concerning budget compilation. It will abolish, in principle,
so-called restoration negotiations, an established practice, by
concentrating negotiations between the finance minister and other
cabinet ministers in a period before the informal release of the
Finance Ministry's draft proposal. Priority items will be
established so that the prime minister can exclusively decide on
budget allocations. The aim is to prioritize budget items under the
leadership of the Prime Minister's Office, by preventing government
agencies and legislators tied to vested interests from jointly
demanding a budget increase. The government wants to implement those
proposals starting in the year-end period, when the compilation of
the fiscal 2009 budget starts.

Revisions to those established practices have been made based on

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Prime Minister Taro Aso's order. Funding resources for restored
budget items as a result of negotiations after the release of the
Finance Ministry's draft budget have been about 50 billion yen in
the past. The practice serves to have cabinet ministers to play an
active role, backed by various LDP divisions. However, it has
recently taken on a strong flavor of being formality. Ministerial
negotiations before the informal release of the Finance Ministry
draft on December 20 will be allowed, in principle, starting with
the compilation of the fiscal 2009 budget.

No individual requests from each government agency and division will
be accepted, in principle, after the release of the draft budget.
Secretaries general of the LDP and New Komeito will instead put
together requests from each division and present them to Finance
Minister Shoichi Nakagawa. Another aim of this method is to sort out
priority items from a cross-sectional viewpoint.

The allocation of priority items, the prime minister's prerogative,
will be decided at the final stage, based on proposals by the
secretaries general of the ruling parties. The budget request
guidelines set a framework for the promotion of key issues worth 330
billion yen. The allocation of priority items by the prime minister
will serve to absorb the ruling parties' discontent, based on that
framework.

The allocation of priority items will be decided after consultation
with the finance minister and reflected in the government draft as
is. If pressure for a spending boost mounts in the ruling camp,
there is a possibility of the 330 billion yen framework being
expanded. In that event, compatibility with the goal of maintaining
the ceiling of budget estimates will become an issue.

15) Aso shifts policy from fiscal reconstruction to economic growth;
Declaration on policy switch might cost his job

TOKYO SHIMBUN (Page 2) (Abridged slightly)
December 11, 2008

Shohei Yoshida

Prime Minister Taro Aso has effectively shifted to an expansionist
fiscal policy line by shelving the spending-cut policy course amidst
the economic downturn. The prime minister does not admit it,
however. The question of fiscal reconstruction or the economy has
vexed many past prime ministers. The question cost former Prime
Minister Hashimoto his administration. Aso, who has shifted his
policy without offering an adequate explanation to the public, might
end up following the fate of the Hashimoto administration.

Prime Minister Aso's approach is to add social security and public
works spending to a separate budget slot while keeping the
spending-cut framework intact. The prime minister said with
confidence: "Economic stimulus measures and fiscal reconstruction
are compatible."

Aso's comment brings back memories of former Prime Minister
Hashimoto. In January 1998, in the closing days of his
administration, Prime Minister Hashimoto remarked: "It is natural to
take necessary steps in response to the economic and financial
situations. I do not think this conflicts with fiscal structural
reform." He thus announced that in order to tackle the financial
crisis that erupted the previous year, his administration would

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pursue both economic stimulus measures and fiscal reconstruction.

To shore up the economy, Hashimoto implemented 2-trillion-yen in tax
cuts, while setting a cap on all spending under fiscal structural
reform legislation. Hashimoto did not admit a policy turnaround, and
his approach was called a policy shift without an announcement.
Immediately before the Upper House election that summer, he
announced the introduction of permanent tax cuts by reversing his
stance. His inconsistent policy course came under fire from the
public. The ruling camp suffered a humiliating setback in the
election, and his cabinet resigned as a result.

Hashimoto was replaced by Keizo Obuchi. At its initial cabinet
meeting, the Obuchi cabinet adopted the prime minister's statement
to freeze the fiscal structural reform law for the time being to
take aggressive fiscal policy. Although this helped the cabinet's
support ratings shoot up, it also resulted in a sharp rise in the
nation's budget deficit. In fiscal 1999, the administration issued
government bonds worth over 37 trillion yen, which is still a
record.

Aso's reluctance to announce the policy shift is ascribable to the
budget deficit that has swollen since the Obuchi administration. In
compiling the fiscal 2002 budget, then Prime Minister Junichiro
Koizumi declared a strict spending-cut policy, saying, "We will not
take conventional measures to turn around the economy. Despite that,
the balance of government bonds has increased.

As far as tax revenue is concerned, fiscal 2008 is better than
fiscal 2002. The general public might find it difficult to support
the shift to expansionary fiscal policy at this point in time.

There are strong calls in the Liberal Democratic Party for upholding
the structural reform course, and this also makes the prime
minister's stand precarious.

16) DPJ to submit six economic bills to current Diet session, review
roadmap

MAINICHI (Page 5) (Full)
December 11, 2008

The Democratic Party of Japan (DPJ) has decided to submit to the
House of Councillors by Dec. 15 six bills containing economic and
monetary measures as part of efforts to deal with the ongoing
financial crisis and to buoy the flagging economy. The decision was
made in a meeting of its shadow cabinet yesterday. With this
decision, the DPJ has started reviewing its roadmap that specifies
how to secure financial resources for the major policy measures
listed in its manifesto for the next House of Representatives
election and the target fiscal years to attain those measures.

The government has decided to give up on submitting its second
supplementary budget bill to the current Diet session. As its
counterproposals, DPJ President Ichiro Ozawa announced a plan to
submit the six bills to the current Diet session. The party will
present today four bills designed to support families raising
children, abolish the current provisional gasoline and other tax
rates, rescue small businesses, and introduce a financial assessment
system to obligate financial institutions to disclose loan terms for
small businesses. On the remaining two bills intended to create
jobs, such as job assistance for job-hopping part-timers, and to

TOKYO 00003361 012 OF 013


revise the tax system, including a measure to halve the corporate
tax for small businesses, since it is necessary to coordinate views
with other opposition parties, the DPJ intends to submit them on the
15th.

The current roadmap estimates the amount of expenditures needed to
implement these key measures at 20.5 trillion yen annually. It also
specifies when the measures should be completed by during the next
four years, how much money is needed to implement them, as well as
where the necessary money will come from. The DPJ plans to
completely abolish the provisional tax rates and implement some
parts of the plans for child-bearing support and for waiving express
tolls in fiscal 2009. To do so, the party has decided to raise 9.1
trillion yen by taking measures to cut lavish spending, like
introducing a system in which government agencies give subsidies to
local governments in a package and banning amakudari (golden
parachuting of government employees into private industry). It also
plans to squeeze 7.2 trillion yen out of such untapped funds as
reserves in special accounts.

Tax revenues are expected to significantly decrease due to the
economic downturn. To implement measures to create jobs and support
small businesses, it will become necessary to explore new fiscal
resources. Given these, the DPJ will restudy the order of priorities
for the listed policy measures and ways to secure new fiscal
resources.

17) New Komeito feels it is reaching impasse with Lower House
dissolution not in sight, cash payments plan unpopular

YOMIURI (Page 4) (Excerpts)
December 11, 2008

With members of the ruling Liberal Democratic Party (LDP) now
distancing themselves from Prime Minister Taro Aso, the New Komeito,
the LDP's junior coalition partner, feels that it has reached in
impasse. The party realizes that the House of Representatives will
not be dissolved early, as it had once expected, and the
party-initiated flat-sum cash payouts plan is unpopular with the
public.

New Komeito Chief Representative Akihiro Ota yesterday called on Aso
at the Prime Minister's Official Residence to ask him to implement a
package of stimulus measures worth 10 trillion yen by fiscal 2010.
According to Ota, Aso said: "I share the view with you that
companies are in a severe situation. So, we are now working on a
package of economic measures to meet the emergency."

Although the two ruling coalition leaders appear to have
demonstrated their cooperation, many New Komeito lawmakers have
become increasingly alarmed, with one member saying: "The New
Komeito could go down together with the Aso cabinet and the LDP, if
we do nothing." Another member said: "We have no intention at
present to leave the Aso administration, and there is no candidate
in the LDP to succeed Aso."

Since the New Komeito has placed priority on next summer's Tokyo
Metropolitan assembly election, the party wants to have the interval
period between the next Lower House election and the Tokyo assembly
election be as long as possible. However, one senior party member
said:


TOKYO 00003361 013 OF 013


"Under the present public support ratings for the Aso cabinet, it is
difficult for the prime minister to decide on his own when to
dissolve the Lower House. I wonder whether he may have to call a
general election after being forced to dissolve the lower chamber;
and as a result, the dates for the snap election and the Tokyo
assembly race could be close."

18) Japanese proposal not included in COP14 working group's draft
report

MAINICHI (Page 2) (Full)
December 11, 2008

A draft report compiled by a working group established under the
Kyoto Protocol was revealed on December 10 at the 14th session of
the Conference of the Parties to the Climate Change Convention
(COP14). A sector-specific approach for industrialized countries to
set nation-specific caps, which the Japanese government had insisted
on, was not included in the draft. The wording "25 PERCENT -40
PERCENT reduction by 2020" has also been changed to more moderate
wording.

The sector-specific approach was included in the initial proposal.
However, it was deleted along with other controversial proposals due
to opposition from developing countries, which insisted that
industrialized countries should set an ambitious goal.

SCHIEFFER

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