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Cablegate: Japanese Morning Press Highlights 12/15/06

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UNCLAS SECTION 01 OF 12 TOKYO 006979

SIPDIS

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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;
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 12/15/06

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Index:

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

4) Jiji poll shows drastic plunge of 9.5 points in Abe Cabinet
support rate to 41.9%

Defense and security issues:
5) Defense "Ministry" to be launched next month as bill clears the
Diet today
6) Foreign Ministry worried about the new political clout of the new
defense ministry and that it will lose the lead in security policy

7) Government to present USFJ realignment-related bills to the next
regular Diet session that starts in January
8) USFJ realignment costs to include 100 billion yen in subsidies to
local communities hosting US bases, with related legislation to be
submitted next year

North Korea problem:
9) US to tell North Korea at restarted 6-party talks it will
guarantee its security in return for its scrapping nuclear program

10) Prime Minister Abe states that Japan's highest priority at
upcoming 6-party talks on North Korea will be the abduction issue
11) Government formally adopts tougher restrictions on North Korean
exports

12) Japan seeking breakthrough on deadlocked territorial talks with
Russia, so idea of splitting the northern islands, as Foreign
Minister Aso stated, is a possibility

Political agenda:
13) Ruling, opposition camps reach basic agreement on revisions to
bill setting referendum on constitutional reform
14) Education reform bill to pass the Diet today, first revision of
basic law in 59 years
15) Ruling camp ready to extend the current Diet session, expecting
a no-confidence resolution from an intransigent opposition camp
16) Ruling parties set tax system reform outline that gives priority
to hefty corporate tax cuts, slights individual taxpayers

Articles:

1) TOP HEADLINES

Asahi:
Ruling coalition tax reform outline proposes 1 trillion yen in tax
cuts, little impact on households

Mainichi:
Ruling camp tax reform plan calls for 600 billion yen in tax cuts,
focusing on revitalizing corporations

Yomiuri:
Bill amending Basic Education Law to pass into law today, making
first revision in 59 years

Nihon Keizai:
Japan Tobacco reaches basic agreement to acquire Britain's Gallaher

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for 2.2. trillion yen in biggest takeover by Japanese company

Sankei:
Simulation on nuclear attack on Tokyo by bomb similar to one dropped
on Nagasaki: 50,000 people would be killed, 5 million injured

Tokyo Shimbun:
Ruling coalition tax reform plan focuses on corporate tax cuts

Akahata:
LDP, New Komeito take forced vote on education reform bill at Upper
House committee, ignoring public opinion

2) EDITORIALS

Asahi:
(1) Tax reform plan: Corporate tax cut unreasonable
(2) Abolishing of Social Insurance Agency is enough step for
reforms

Mainichi:
(1) Final report on town meetings: Tax money was used for the
government's stage-management of town meetings
(2) Tax reform plan for FY 2007: What happen to the government's
fiscal reconstruction efforts

Yomiuri:
(1) India is strong partner for regional cooperation
(2) Tax reform outline: "Consideration" is not enough for budget for
next fiscal year

Nihon Keizai:
(1) Half improvement in tax reform plan for economic revitalization

Sankei:
(1) Northern Territories divided into two parts? What is Foreign
Minister Aso thinking about?
(2) Ruling coalition tax reform plan: Government should explain
drastic reform plan now

Tokyo Shimbun:
(1) What is the real purpose of upgrading the Defense Agency
Ministry to a ministry?
(2) Can the government regain public confidence by just abolishing
the Social Security Agency?

Akahata:
(1) No reason to force a vote on bill amending Basic Education Law

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, December 14

NIHON KEIZAI (Page 2) (Full)
December 15, 2006

08:03
Met Deputy Chief Cabinet Secretary Suzuki at the Kantei.

09:00
Upper House Special Committee on the Basic Education Law


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12:06
Handed over a recommendation letter to a person expected to run in
the Aichi Prefecture gubernatorial election at the LDP headquarters.
Secretary General Nakagawa was present.

SIPDIS

12:41
Received the Indian prime minister and his wife at the Kantei. Then
attended an event welcoming them.

13:05
National Gathering to Consider Abduction Issue held at the Hibiya
Hall.

16:11
Indian Prime Minister Singh delivered a speech at the Lower House
plenary session hall.

17:33
Meeting of the Council on Economic and Fiscal Policy at the Kantei.
Then met Chief Cabinet Secretary Shiozaki.

19:43
Met with the chairman of the Indian Industry Federation and others
at Four Seasons Hotel Chinzanso Tokyo. Then met with Singh.

20:12
Opening ceremony for the Japan-India Exchange year at Chinzanso.

22:12
Arrived at the official residence.

4) Poll: Cabinet support nosedives to 41.9%

TOKYO (Page 2) (Full)
December 15, 2006

The rate of public support for the cabinet of Prime Minister Shinzo
Abe in December was 41.9%, down 9.5%age points from last month,
according to findings from a Jiji Press poll released yesterday. The
popularity rating for the Abe cabinet leveled off over 50% in
October and November. However, it substantially dropped three months
after the Abe cabinet came into office. In the survey, respondents
were asked if they would support the ruling Liberal Democratic
Party's reinstatement of its "postal rebels," who voted against the
LDP-led government's now-enacted package of postal privatization
bills in the Diet as LDP members and were ousted from the LDP. In
response to this question, "no" added up to 53.2%. This problem, as
well as the faking of questions for government-sponsored town
meetings, is believed to have led to the sharp drop in the Abe
cabinet's support rate.

The survey was conducted Dec. 7-10 across the nation on a
fact-to-face basis, with a total of 2,000 persons chosen from among
men and women aged 20 and over. The response rate was 67.3%.

Meanwhile, the disapproval rating for the Abe cabinet was 27.0%, up
7.2 points from last month. It has been rising since the Abe
cabinet's inauguration. The top-ranking reason given for not
supporting the Abe cabinet was "nothing can be expected," accounting
for 13.5%, up 3.2 points from last month.

5) 'Defense Ministry' to launch next month

TOKYO 00006979 004 OF 012

NIHON KEIZAI (Page 2) (Abridged)
December 15, 2006

The House of Councillors Foreign and Defense Affairs Committee
yesterday approved a government-introduced package of legislative
measures to upgrade the Defense Agency to the status of a ministry,
and the legislation is certain to be enacted into law in the current
Diet session. The Defense Agency will hurry to prepare for its
upgrading set for Jan. 9 next year. The agency, after becoming a
ministry, will be empowered to present its own bills in cabinet
meetings. It will now go further than to oversee the Self-Defense
Forces and is enthusiastic about planning security policies on its
own.

Even so, there is no knowing how far the Defense Agency can carry
weight if a National Security Council is set up at the prime
minister's office. There are also issues that can't wait like the
planned realignment of US forces in Japan, so the agency cannot be
just wild with joy over its upgrading.

The Defense Agency is currently under the Cabinet Office. Competence
related to national security is vested in the prime minister, who is
in charge of the Cabinet Office. The agency can only present
legislative measures through the Cabinet Office. Above all, the
agency, since the SDF came into being, has desired to have its own
minister who is in charge of Japan's security policy.

Meanwhile, the Foreign Ministry used to take the initiative in
Japan-US Security Consultative Committee (SCC) or "two-plus-two"
ministerial meetings. The Defense Agency cannot attend the six-party
talks over North Korea. The agency, both internally and externally,
has been seen as an "accessory" to the Foreign Ministry. The agency
therefore wants to wipe away such an image.

The issue of realigning the US military presence in Japan is one of
the few issues initiated by the Defense Agency. Defense Agency
Director General Fumio Kyuma has also underscored the necessity of
implementing US military realignment in a steady way. However, there
are many challenges in store, such as coordination with Okinawa
Prefecture. In addition, US Secretary of Defense Rumsfeld will soon
go out with his replacement coming in. The driving force of
realignment is therefore feared to weaken in the United States.

The Defense Agency has yet to clear up its role sharing with the
Foreign Ministry and the prime minister's office. The Foreign
Ministry outwardly welcomes the Defense Agency's upgrading to a
ministry. In October this year, however, North Korea conducted a
nuclear test. At the time, the Foreign Ministry insisted that the
event should be recognized as a "neighboring contingency," while the
Defense Agency was cautious about it. The Foreign Ministry and the
Defense Agency would inevitably be at odds with each other whenever
there are needs for the SDF's overseas activities.

6) Defense Agency set to become ministry; Foreign Ministry alarmed
at new ministry's political power and that it may take lead in
security policy

ASAHI (Page 3) (Abridged slightly)
December 15, 2006

The Defense Agency, which was established in 1954, will become the

TOKYO 00006979 005 OF 012


Defense Ministry in January 2007. Since the end of the Cold War, the
Defense Agency and the Self-Defense Forces have conducted not only
the defense of the homeland -- their main duty -- but also overseas
missions, such as peacekeeping operations and joining multinational
forces. The upgrade is certain to increase their political power in
decision-making on security policies, as well as their
responsibilities. The upgrading is likely to bring about some change
in its relationship with the Foreign Ministry, which has taken the
lead in the country's security policy, centering on the United
States.

Defense AgencQRk>Q;Q>NQ[
2RQhe act as a "regional contingency."

The Foreign Ministry was eager to recognize it as a contingency,
while the Defense Agency, aware of the US Defense Department's
reluctance to conduct ship inspections, was unwilling to do so. "You
cannot grasp Washington's true intention correctly unless you
directly obtain information from the US Defense Department," a
senior Defense Agency official explained.

Japanese and US senior foreign and defense officials met on Dec. 4
to discuss the planned relocation of Futenma Air Station from
Ginowan to Cape Henoko in Nago. In the session, the US side demanded
approach lights be installed at four spots on the envisaged V-shaped
pair of runways so that US military aircraft would be able to fly
into the runways from both ends of the runways. The Defense Agency
approved two-way landings in emergency situations, and an agreement
was reached with US concessions.

The upgrade will enable the "defense minister" to directly request
cabinet meetings for submitting bills, allowing the Defense Agency
to move from the control of the Cabinet Office. "As an office
responsible for policy, the upgrade seems to require a different
level of awareness," Kyuma noted. Responsibility for security policy
is expected to grow.

The Foreign Ministry is increasingly alarmed at the upgrade. "The
agency is still hiding its claws. If they try to nip at our heels,
we will fight back," a senior Foreign Ministry official warned. The
comment reflects the Foreign Ministry's fear that the "Defense
Ministry" will directly collect foreign intelligence and deal with
other countries independently.


TOKYO 00006979 006 OF 012


7) Gov't to present US military realignment bills

NIHON KEIZAI (Page 2) (Full)
December 15, 2006

The government and the ruling parties will hold a meeting today to
consult on the planned realignment of US forces in Japan. They are
expected to confirm a course of action to present a package of
realignment-related legislative measures to the Diet in its ordinary
session to be called in January next year. The legislation features
a plan to allocate additional subsidies for municipalities accepting
US military facilities.

8) USFJ realignment: 100 billion yen in new subsidies to be granted
to affected local governments; Government plans to submit related
bills to regular Diet session next year

MAINICHI (Page 1) (Full)
December 15, 2006

In a bid to promote the realignment of US forces in Japan, the
government plans to provide fresh subsidies to affected
municipalities. It yesterday started coordination of views on the
size of the subsidies with the possibility of granting 100 billion
yen over 10 years. It will earmark 5-6 billion yen in the fiscal
2007 budget as the first installment. In a related development, the
government has firmed up a policy of submitting a set of bills
incorporating the establishment of a realignment subsidy system and
other issues to the regular Session of the Diet next year. It
intends to obtain approval from the ruling parties at a meeting of
the government and the ruling parties to be held today to discuss
the USFJ realignment at the Prime Minister's Official Residence.

The bills, which are temporary legislation with a 10-year time
limit, are centered on the allocation and disbursement of the
realignment subsidies and outlays for expenses for the transfer of
Marines stationed in Okinawa to Guam to be shouldered by Japan.

Realignment subsidies will be granted to affected municipalities,
whose burdens to host US base facilities will increase.

The government intends to urge local governments that are reluctant
to the implementation of the USFJ realignment, such as Iwakuni City,
Yamaguchi Prefecture, to accept the plan by earmarking realignment
funds in next fiscal year's budget. For Okinawa Prefecture, in
addition to providing realignment subsidies, the government plans to
continue the existing northern area development policy. It aims with
this approach to bring about the planned transfer of Futenma Air
Station's facilities in Nago City to the coastal part of Camp
Schwab.

9) In upcoming 6-party talks, US likely to propose "security
guarantee" to DPRK on condition of its nuclear abandonment

NIHON KEIZAI (Page 8) (Full)
December 15, 2006

Hiroshi Maruya, Washington

The US Bush administration intends to convey to North Korea during
the upcoming six-party talks set to start on Dec. 18 that it is
ready to confer a security guarantee to North Korea if it drops its

TOKYO 00006979 007 OF 012


nuclear weapons programs. The joint statement released in September
2005 by the six-party talks laid out steps for normalization of
diplomatic relations between the US and North Korea in the way of
matching their respective policies. By reiterating the need to
follow those steps, Washington aims to strongly pressure Pyongyang
to abandon its nuclear programs.

President Bush has stated: "If North Korea opts for the path of
peace, then the US, along with other members of the six-party talks,
is ready to guarantee North Korea's security." Specifically, the US
would declare an end to the Korean War, where there is presently
only a truce, and also declare it is ready to initiate talks on
normalization of diplomatic ties so as to sign a peace treaty.

China, the chair of the six-party talks, has sounded out the US and
other members about the possibility of establishing working groups
to talk about economic assistance and other measures as mentioned in
the joint statement. The proposed working groups include the one for
talks on diplomatic normalization. The proposals the US has made to
the North include Pyongyang's acceptance of inspectors from the
International Atomic Energy Agency (IAEA) and freezing its nuclear
facilities at Yongbyon. Washington is readying itself to enter into
substantive talks at a working group once Pyongyang comes up with a
concrete response.

Even on the financial sanctions imposed on North Korea, the US has
indicated a plan to launch overtures for a working group based on
Pyongyang's requests. Washington is thus assuming a flexible
approach in an effort to accelerate talks. US Assistant Secretary of
State Christopher Hill, the chief representative to the six-party
talks, stated at a press briefing on Dec. 13: "We expect tangible
progress." Essential for that are measures for the implementation of
the joint statement. As one tactic, the US has come up with the idea
of holding overtures on the financial issue between the US and North
Korea.

The US and the North are both looking for a compromise point. When
asked what will be achieved definitely, Hill has repeatedly shown a
cautious position, noting: "I never can tell before the start of the
talks."

China has simply conveyed to other members that the upcoming session
will be a good one." But what response the North will come up with
remains unclear. A rumor flying around among the countries concerned
is that the US may think about a small package (small achievement).

10) Prime Minister Abe expresses resolve to prioritize abduction
issue in negotiations with North Korea

ASAHI (Page 4) (Full)
December 15, 2006

The government held its first gathering to consider the abduction in
Tokyo yesterday. In a speech at the gathering, Prime Minister Abe
expressed his determination to give top priority to a settlement of
the abduction issue in negotiations with North Korea. He said, "As
long as I am in office as prime minister, I will follow without fail
the principle of not responding to normalization talks unless the
abduction issue is resolved." The gathering was held as part of "the
week to consider North Korea's abuse of human rights (Dec.10-16)," a
program starting this year. About 850 people participated in the
gathering, including abductees' families.

TOKYO 00006979 008 OF 012

11) Japan to tighten regulations applicable to DPRK

YOMIURI (Page 4) (Full)
December 15, 2006

At a cabinet meeting today, the government will revise the Foreign
Exchange Ordinance and the Export Trade Control under the Foreign
Exchange and Foreign Trade Control Law in order to strengthen the
regulations on exports to North Korea, for instance, exports of such
products that could lead to production of weapons of mass
destruction.

At present, in the case of exporting military convertible computers
or telecommunications-related equipment to such countries as North
Korea, if their prices are 50,000 yen or above, exporters are
obligated to obtain permission from the minister of economy, trade
and industry (METI). But the prices of those products are falling
now. For instance, integrated circuits capable of decrypting are
traded at prices of 5,000 yen or below, so exporters of all those
products will be obligated to obtain the METI minister's permission.
In addition, if domestic firms mediate trade between third countries
or if they reload trade cargo from a third country's ship to another
third country's ship at Japanese ports, those firms will be
obligated to obtain the METI minister's permission.

12) Northern Territories issue: Japan moving to find a way out,
envisioning the possibility of dividing islands into two equal
parts

ASAHI (Page 4) (Excerpts)
December 15, 2006

Some in the Japanese government are moving to look for ways to
resolve the long disputed Northern Territories issue between Japan
and Russia, envisioning the possibility of dividing the disputed
territories into two equal parts by area. Japan wants to settle the
issue while the Putin administration of Russia, which is positive
about resolving the issue, is in office. As part of efforts to find
a clue for resolving the issue, Japan intends to use the upcoming
vice minister-level strategic dialogue with Russia slated for early
next year as an aid for the start of a full-fledged bilateral
dialogue.

"Approximately 25% of Etorofu Island plus the remaining three
islands (Kunashiri, Shikotan, and Habomai) constitute 50% of the
total acreage of the four northern islands," Foreign Minister Aso
stated at the Lower House Committee on Foreign Affairs meeting on
Dec. 13.

On the Northern Territories issue, Japan's position has been that
the four northern islands are Japan's territory, and following that
position, Japan has insisted that the four islands all be returned
to Japan. Russia, however, has asserted that the issue be resolved
if two islands, Habomai and Shikotan, are returned (to Japan), in
accordance with the 1956 Japan-Soviet Union Joint Declaration. At
the committee meeting, Aso also stated, "Adhering to either the
return of two islands or the return of four islands is no more than
a matter of winning or losing; consequently both sides cannot reach
an accord." He thus indicated the need to look for ways to bring
about a practical solution.


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On the territory issue, a bottleneck for Japan in relations with
Russia, the Japanese government has recently become active. The vice
minister-level strategic dialogue between Japan and Russia, which
was proposed in the Japan-Russia foreign ministerial talks in
November, is scheduled to take place in late January. High on agenda
in the dialogue will be the territory issue. Administrative Vice
Foreign Minister Shotaro Yachi, who enjoys the confidence of Prime
Minister Abe and who recently achieved results in vice
minister-level talks with China and South Korea, will work at the
forefront in the planned dialogue with Russia.

According to a government official, this move has come against the
backdrop of the government's calculation that progress on the
territory issue would help boost the Abe administration. With
relations with China and South Korea progressing now, some in the
government have begun viewing Russia as the next centerpiece of
Japanese diplomacy. "The prime minister, as well, is very eager" to
promote relations, an aide to the prime minister said.

Also, another conceivable reason is that President Putin, who is
willing to resolve the territory issue, is to step down from his
post in the spring of 2008. During a press conference in January of
this year, Putin stated: "I've begun looking for ways to resolve the
issue in a way to be acceptable to both Japan and Russia."

13) Ruling camp, Minshuto reach broad agreement on revisions to
referendum bill

YOMIURI (Page 2) (Full)
December 15, 2006

In a meeting of the House of Representatives' Constitution Research
Council yesterday, the Liberal Democratic Party, Minshuto
(Democratic Party of Japan), and the New Komeito reached a basic
agreement on revisions to the referendum bill governing procedures
for constitutional revision. The three parties agreed on these key
points: (1) Specify the age of eligible voters for a national
referendum at 18 or over in principle (at 20 or over in the
transitional period); and (2) put the law into effect three years
after the promulgation and during this period freeze deliberations
on amending the Constitutions at a constitutional review panel to be
set up in the Diet.

In the meeting yesterday, LDP member Hajime Funada presented nine
revisions laid out by the ruling parties.

Minshuto member Yukio Edano replied that the party will agree on
five of them, saying: "Although Minshuto has called for
implementation after a period of two years, the party will agree on
the ruling camp's call for a period of three years." Edano also
indicated a willingness to look into the remaining four proposals in
a positive manner, adding, "If possible, I expect the bill to be
enacted by Constitution Day on May 5 of next year." A decision was
also made to continue deliberations on both plans of the ruling
party and Minshuto. The three parties will soon start discussion on
provisions, with the aim of enacting the bill in the ordinary
session next year.

14) Bill amending Basic Education Law to be enacted today, first
revision in 59 years

YOMIURI (Top Play) (Abridged slightly)

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December 15, 2006

A bill to amend the Basic Education Law, the most important piece of
legislation this session for Prime Minister Shinzo Abe, yesterday
passed the House of Councillors Special Committee on the Basic
Education Law with the approval of a majority of committee members
from the two ruling Liberal Democratic Party (LDP) and its coalition
partner, New Komeito. The ruling coalition plans to have the bill
approved at today's Upper House plenary session and enacted.
Meanwhile, four opposition parties, including Minshuto (Democratic
Party of Japan), agreed last night to prevent the legislation from
passing the Diet by submitting today a no-confidence motion against
the Abe cabinet. The ruling camp is considering a minor extension of
the current Diet session, which ends on Dec. 15, unless the
opposition changes its hard-line stance. This would be the first
change in the Basic Education Law since it was enacted in 1947.

The special committee held yesterday morning a question-and-answer
session with attendance of Prime Minister Abe. Following a break, it
resumed the session on the evening in which opposition parties
raised questions. After that, the ruling coalition submitted calling
for a vote on the bill. The bill was adopted while opposition
lawmakers were opposing taking a vote, gathering themselves around
Committee Chairman Hirofumi Nakasone.

The four opposition parties -- Minshuto, the Japanese Communist
Party, the Social Democratic Party, and the People's New Party --
discussed last night their response in meetings their secretaries
general and Diet affairs committee chairmen. As a result, the four
parties agreed to submit a no-confidence motion against the cabinet
to the speaker of the House of Representatives on the morning of
Dec. 15. They also agreed to submit to the president of the House of
Councillors a no-confidence motion against the prime minister.

In an effort to prepare for the passage of the education reform bill
and other key measures, the ruling parties have started looking into
the possibility of extending the ongoing session. Abe will meet this
morning with the secretaries general and Diet affairs chiefs of the
LDP Upper and Lower Houses to make a final decision on how many days
the session should be extended.

Since the Finance Ministry will unofficially announce a draft budget
for fiscal 2007 on Dec. 20, the session will likely be extended
three to four days.

If the session is extended, the ruling party will reject the
opposition's motion after approving the Diet extension at the Lower
House plenary session this afternoon. If the opposition submits to
the Upper House a no-confidence motion against a cabinet minister,
the ruling coalition will kill it. The ruling coalition intends to
pass the education reform bill and other bills into law before the
end of the 15th. Depending on a move by the opposition, the passage
of these bills may be delayed to the early hours of the 16th.

15) Opposition bloc to submit no-confident motion against Abe
cabinet; Ruling camp ready to extend Diet session

NIHON KEIZAI (Page 1) (Full)
December 15, 2006

The House of Councillors' special committee yesterday approved a
bill amending the Fundamental Law of Education by a majority from

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the ruling parties. The Abe administration has defined the bill as
the most important one in the current Diet session. The government
and the ruling coalition intends to pass the bill into law at the
plenary session of the Upper House on Dec. 15, the last day of the
current session. In reaction to the forcible voting, four opposition
parties agreed to submit a no-confidence motion against the Abe
Cabinet. The ruling bloc intends to extend the current Diet session
for about three days.

As the reason for submitting a non-confidence motion, the opposition
bloc said, "The government wasted tax money for stage-managing town
meetings." The opposition parties are also studying a submission of
a censure motion to the Upper House against the prime minister. The
ruling camp stressed, "Full deliberations were conducted," but the
opposition side opposed taking a vote, calling for intensive
deliberations on the town meeting fiasco.

Based on the judgment that it would be difficult to persuade the
opposition camp, the government and the ruling coalition presented a
motion for suspending the interpretation session. Surrounded by
opposition members, Chairman Hirofumi Nakasone declared that the
bill was adopted.

After the voting, Prime Minister Shinzo Abe told reporters,
"(Revising the law) is my long-cherished wish and a key task for the
cabinet, so it was really good."

The bill includes "patriotism-oriented education," using this
expression, "cultivate a mind that loves the nation and homeland."
It also stipulates such concepts as "life-long learning" and "home
education." The education law has not been revised since 1947.

16) Companies to get tax break worth 450 billion yen: Ruling
parties' tax code revision outline attaches importance to growth;
Capital investment encouraged; Individual tax payers' burden to
increase due to abolition of fixed-rate tax break

NIHON KEIZAI (Page 1) (Excerpts)
December 15, 2006

The ruling parties yesterday outlined tax code revisions for the
fiscal 2007. The outline features a reduction in corporate tax
burdens. In order to encourage companies to make capital investment,
the write-off system will be revised so that companies can report
the entire amount they used for investment as a loss. The aim is to
back the economic growth policy advocated by Prime Minister Abe on
the tax system front. The decision this time will lead to a
reduction of 450 billion yen in the corporate tax in the fiscal
2007. However, if about more than 1 trillion yen squeezed from the
abolition of the fixed-rate cut in the income tax as decided last
year is taken into account, taxes for the next fiscal year will be
increased. Debate on a consumption tax hike and a reduction in the
effective tax rate imposed on companies, which is said to be higher,
compared with foreign countries, has been put off.

The government last year decided to abolish the fixed-rate tax
break, which reduces the income tax and local tax individual
taxpayers pay up to 290,000 yen. If over 1 trillion yen squeezed
from this measure is taken into account, the tax burden of
individual taxpayers and companies will increase.

TOKYO 00006979 012 OF 012


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