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UNCLAS SECTION 01 OF 11 TOKYO 003818 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR E, P, EB, EAP/J, EAP/P, EAP/PD, PA; 
WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST DIVISION; 
TREASURY/OASIA/IMI/JAPAN; DEPT PASS USTR/PUBLIC AFFAIRS OFFICE; 
SECDEF FOR JCS-J-5/JAPAN, 
DASD/ISA/EAPR/JAPAN; DEPT PASS ELECTRONICALLY TO USDA 
FAS/ITP FOR SCHROETER; PACOM HONOLULU FOR PUBLIC DIPLOMACY ADVISOR; 
CINCPAC FLT/PA/ COMNAVFORJAPAN/PA. 
 
E.O. 12958: N/A 
TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA
 
SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 07/10/06 
SPECIAL PRESS-HOLIDAY EDITION FROM THE WEEKEND DAILIES 
 
 
Index: 
1) 48 PERCENT  of public support Abe for next prime minister in 
Yomiuri poll 
 
2) Yomiuri poll: 92 PERCENT  would back sanctions on North Korea 
over missile issue; 63 PERCENT  want MD installation speeded up 
 
3) Kyodo poll finds 80 PERCENT  favoring tougher sanctions on North 
Korea due to missile launches 
 
4) JDA chief Nukaga: North Korea used new type of Scud missile in 
missile tests 
 
5) JDA: Little chance of another North Korea missile launch soon 
 
6) Government will impose financial sanctions on North Korea if 
another missile launched 
7) Missile defense: PAC-3 deployment to be speeded up due to North 
Korea missile threat 
 
8) Foreign Minister Aso strengthens cooperation on North Korea 
issues with Secretary Rice, seeks same with Russian counterpart 
 
9) Government may float idea of Japan-North Korea foreign 
ministerial meeting; G8 summit to criticize North Korea in statement 
 
 
10) US, Japan, China agree to push for restart of 6-party talks on 
North Korea issues this month 
 
11) Joint seven-country proposed resolution to impose sanctions on 
North Korea to be presented to UNSC on July 10 
 
12) Japan, US to try to persuade China, Russia to back proposed UNSC 
resolution against North Korea 
 
13) Government is bullish that China, Russia will either abstain or 
be absent from UNSC vote on North Korea sanctions 
 
14) GSDF begins pullout from Iraq 
 
15) JDA suddenly refuses to let press corps cover the Kuwait portion 
of GSDF pullout from Iraq 
 
16) Prime Minister Koizumi sets off on July 11 for the Middle East 
and then G8 Summit 
 
17) Minshuto President Ozawa's soft statements on North Korea 
missile issue not sitting well with his party 
 
18) Government sets economic policy guidelines for 2006 that gives 
consideration to future consumption tax hike 
 
Articles: 
1) Poll: Abe tops all others at 48 PERCENT  in post-Koizumi race 
 
YOMIURI (Page 2) (Full) 
July 8, 2006 
 
In the latest Yomiuri Shimbun survey, respondents were asked to pick 
the most appropriate person as Prime Minister Koizumi's successor 
 
TOKYO 00003818  002 OF 011 
 
 
from among five lawmakers in the ruling Liberal Democratic Party. In 
response, 48 PERCENT  picked Chief Cabinet Secretary Abe, with one 
of his predecessors in the CCS post, Yasuo Fukuda, ranking second at 
21 PERCENT . 
 
In this July's face-to-face survey, Abe stood at 44 PERCENT , 
followed by Fukuda at 19 PERCENT . The results of previous polls and 
the one taken this time cannot be simply compared due to different 
polling methodologies. However, the increase rate of Abe's 
popularity is higher than that of Fukuda, with Abe retaining his big 
lead over Fukuda. Abe is known as a hardliner toward North Korea. He 
meets the press every day as chief cabinet secretary and has shown a 
strong attitude toward North Korea. This can be taken as reflecting 
public support for Abe. 
 
2) Poll on North Korea's missile launches: 92 PERCENT  support 
sanctions, 63 PERCENT  insist on need to hurry up missile defense 
 
YOMIURI (Page 2) (Full) 
July 8, 2006 
 
In the wake of North Korea's recent firing of missiles, the Yomiuri 
Shimbun conducted a telephone-based spot nationwide public opinion 
survey on July 6-7. The government has already invoked such sanction 
measures as barring the North Korean ferry Mangyongbong's entry into 
Japanese ports and restricting visits to and from North Korea. In 
the survey, 92 PERCENT  answered "yes" and 5 PERCENT  said "no" when 
they were asked they if they supported these sanctions. The poll 
shows that many people, shocked at the missile launches, think Japan 
should take a tough stance toward North Korea. 
 
The government is preparing a draft resolution for the United 
Nations Security Council to denounce North Korea with sanctions. 
Asked whether to support this UNSC resolution, 90 PERCENT  answered 
"yes," with only 4 PERCENT  saying "no." The government is planning 
additional economic sanction measures, such as stopping remittances 
from North Korean residents in Japan to their country and 
restricting trade with North Korea. Asked about these measures, 65 
PERCENT  or a majority of respondents answered that the government 
should implement these measures immediately, with 28 PERCENT 
preferring to take such measures in stages. Respondents were also 
asked if they thought even more strongly of North Korea as a threat 
after its firing of missiles. In response to this question, 77 
PERCENT  answered "yes," with 20 PERCENT  saying "no." 
 
In the survey, respondents were further asked if they thought Japan 
should expedite its introduction of a missile defense system to 
shoot down enemy missiles in cooperation with the United States. In 
response, 63 PERCENT  answered "yes," with 24 PERCENT  saying "no." 
 
Asked about diplomatic normalization talks between Japan and North 
Korea, 43 PERCENT  answered that Japan should normalize its 
diplomatic relations with North Korea but there was no need to 
hurry, with 21 PERCENT  saying there is no need to normalize 
diplomatic relations with North Korea. The proportion of those who 
think Japan should normalize diplomatic relations with North Korea 
but there is no need to hurry showed a decrease of 11 percentage 
points over a previous telephone-based survey taken after Prime 
Minister Koizumi's second visit to North Korea in May 2004. There 
was an increase of 10 points in the proportion of those who think 
there is no need to normalize diplomatic relations with North Korea. 
 
TOKYO 00003818  003 OF 011 
 
 
Meanwhile, 28 PERCENT  said Japan should normalize diplomatic 
relations with North Korea. 
 
In the latest survey, 78 PERCENT  answered "yes" when they were 
asked if they thought the missile launches would further delay a 
solution to the issue of Japanese nationals abducted to North Korea. 
Negative answers accounted for 13 PERCENT . 
 
3) Poll: 80 PERCENT  call for stronger pressure on North Korea 
 
TOKYO SHIMBUN (Page 1) (Full) 
July 9, 2006 
 
In the wake of North Korea's July 5 firing of missiles, Kyodo News 
conducted a telephone-based spot nationwide public opinion survey on 
July 7-8. In the survey, 80.7 PERCENT  said Japan should step up its 
economic sanctions against North Korea, including measures to stop 
remittances from North Korean residents living in Japan to their 
country, and intensify trade controls. Those negative about such 
strengthened economic sanctions accounted for 12.6 PERCENT . 
 
The government has now invoked economic sanctions for the time 
being, including an order to bar the North Korean ferry 
Mangyongbong-92's entry into Japanese ports. In the survey, 
respondents were asked if they supported these measures. In response 
to this question, 82.6 PERCENT  answered "yes," with 12.9 PERCENT 
saying "no." The poll shows that the Japanese people are taking a 
serious view of the missile launches. 
 
Respondents were also asked if they felt uneasy about North Korea's 
missile launches. In response, a total of 87.0 PERCENT  answered 
"yes," broken down into 45.2 PERCENT  feeling very uneasy and 41.8 
PERCENT  feeling somewhat uneasy. Among other answers, 9.9 PERCENT 
did not feel very uneasy, with 2.8 PERCENT  not feeling uneasy at 
all. 
 
Polling methodology: The survey was conducted by Kyodo News Service 
over a period of two days, July 7-8, on a random digit-dialing (RDD) 
basis. The computer-aided RDD methodology, which makes and puts out 
telephone numbers at random for polling, can survey those who do not 
have their telephone numbers listed in telephone directories. Among 
those randomly generated telephone numbers, those actually for 
household use with one or more eligible voters totaled 1,461. 
Answers were obtained from 1,011 persons. 
 
4) North Korea fires 3 Rodong, 3 Scud missiles: Nukaga 
 
YOMIURI (Page 1) (Full) 
Eve., July 8, 2006 
 
Appearing on a Fuji-TV program this morning, Defense Agency 
Director-General Nukaga said three of the seven missiles North Korea 
fired on July 5 were possibly of the Rodong type with a range of 
1,300 kilometers and three others the Scud type with a range of 
300-500 kilometers. Nukaga also said the three Scud missiles might 
have included a new-type Scud missile with a longer range. "I hear 
they might have tested a new enhanced version of the Scud missile 
with a range close to the Rodong's range," Nukaga said. North Korea 
reportedly has about 200 Rodong missiles and about 600 Scud 
missiles. The Rodong could reach Japan, but a conventional Scud 
could not. 
 
TOKYO 00003818  004 OF 011 
 
 
 
Nukaga has also indicated that North Korea would not fire a second 
long-range Taepodong-2 missile soon. "They're not ready for now to 
launch another one," Nukaga said on a Yomiuri TV program. 
 
5) JDA: Possibility of another missile launch soon now slim 
 
NIHON KEIZAI (Page 2) (Full) 
July 8, 2006 
 
North Korea had deployed a patrol boat into the Sea of Japan when it 
launched its missiles, but according to Defense Agency (JDA) 
officials yesterday, the boat returned to port on the night of July 
¶6. Based on the view that the deployment of the boat was intended to 
track the projectiles' paths, JDA officials have made this analysis: 
"Judging from the patrol boat's moves, the possibility has now 
become slim that the North will launch an eighth missile soon." 
 
The patrol boat appears to be on a mission of spotting the point of 
impact based on the angle of reflection calculated by irradiating a 
missile with a laser. It reportedly is possible to spot frequency 
band waves emitted from a missile anytime day or night. 
 
6) Government starts preparations to impose financial sanctions if 
North Korea launches another missile 
 
NIHON KEIZAI (Page 2) (Excerpts) 
July 8, 2006 
 
The government has started preparations to impose additional 
sanctions in the event that North Korea launches another Taepodong-2 
missile. If the process of adopting a resolution denouncing North 
Korea does not smoothly move forward at the United Nations Security 
Council, Tokyo will consider invoking financial sanctions, including 
limiting or banning remittances and trade under the revised Foreign 
Exchange and Foreign Trade Law, also keeping in mind sanctions by a 
possible "coalition of the willing" under the lead of the United 
States. 
 
There is a possibility that North Korea would launch a Taepodong-2 
missile from the missile base located in northeastern North Korea. 
The Defense Agency considers: "Although a missile has yet to be set 
on the launch pad, assembly work might have been underway at a 
nearby missile silo." 
 
In a press conference after a cabinet meeting yesterday, Finance 
Minister Sadakazu Tanigaki said that the government would make full 
preparations on the assumption of North Korea launching another 
missile. He said: "It is necessary to make preparations for the 
government to be able to apply (the revised Foreign Exchange and 
Foreign Trade Law) when needed. 
 
7) Defense Agency to deploy four sets of PAC-3 missiles in 2007 as 
part of missile defense 
 
YOMIURI (Top play) (Excerpts) 
July 8, 2006 
 
The government decided yesterday to deploy three sets of Patriot 
Advance Capability-3 (PAC-3) ground-to-air missiles in 2007 as part 
of missile defense (MD) ahead of the original timeline of March 
 
TOKYO 00003818  005 OF 011 
 
 
¶2008. In the wake of North Korea's ballistic missile launches, the 
government has recognized the need to build the interceptor system. 
 
The Defense Agency plans to deploy by the end of fiscal 2006 one set 
at the Air Self-Defense Force's Iruma base in Saitama Prefecture, 
which houses headquarters of the 1st surface-to-air missile group. 
 
The agency originally planned to deploy one set each at Kasumigaura 
(Ibaraki Prefecture), Narashino (Chiba), and Takeyama (Kanagawa) by 
the end of fiscal 2007. But now, the agency intends to complete 
deploying them in 2007. 
 
8) Aso, Rice reaffirm Japan-US cooperation in adopting resolution 
condemning North Korea's missile launches 
 
NIHON KEIZAI (Page 2) (Full) 
July 8, 2006 
 
Foreign Minister Taro Aso held a telephone conversation with United 
States Secretary of State Rice for about 10 minutes last night. They 
reaffirmed that Japan and the US would cooperate in ensuring the 
adoption of a resolution submitted by Japan to the United Nations 
Security Council denouncing North Korea for missile launches. 
 
Aso also talked with Russian Foreign Minister Lavrov on the phone 
for about 20 minutes, In reference to missile parts landing in 
waters off Nakhodka, Aso asked Lavrov to support Japan's draft 
resolution, saying: "It should be in the interest of Japan and 
Russia to send a resolute message." Lavrov stopped short of making a 
clear-cut reply, just saying: "We share Japan's concern." 
 
Aso proposed that North Korea's missile problem should be taken up 
at the upcoming G-8 summit (St. Petersburg Summit). Lavrov replied: 
"We are ready to discuss the issue." 
 
9) Japan to call for adoption of statement condemning North Korea at 
G8 summit at St. Petersburg and other international arenas; Japan 
also working on North Korea to hold foreign ministerial talks 
 
NIHON KEIZAI (Page 2) (Excerpts) 
July 9, 2006 
 
The Japanese government intends to call for the adoption of a 
statement condemning North Korea for its recent missile launches at 
the series of international conferences to take place during July, 
including the Group of Eight industrialized countries (G8) summit 
conference at St. Petersburg that will start on July 15. The purpose 
is to put pressure on North Korea to exercise self-restraint in the 
way for a broad range of countries, such as the G8 and Asian 
nations, to express concerns. Tokyo has also begun sounding out on 
North Korea about arranging a foreign ministerial meeting on the 
sidelines of the ASEAN Regional Forum (ARF). 
 
The Japanese government is working on other G8 members to put the 
North Korean issue including missile launches on agenda for the 
upcoming G8 Summit. While condemning North Korea's moves, Japan 
intends to call on North Korea to (1) exercise self-restraint on 
taking such provocative acts as re-launching missiles; and (2) 
return to the six-party talks. 
 
The Foreign Ministry is considering creating a special statement (on 
 
TOKYO 00003818  006 OF 011 
 
 
North Korea) to be released at the upcoming G8 Summit, but the host 
nation of the Summit is Russia, a country that is friendly with 
North Korea. Russia may express disagreement to releasing a strong 
message that could irritate North Korea. Whether such a statement 
will be released in the form of a special statement, a chairman's 
summary statement or a chairman's statement remains unclear. 
 
10) Japan, US and China agree to urge North Korea to resume 
six-party talks within July 
 
NIHON KEIZAI (Page 1) (Excerpts) 
July 8, 2006 
 
Hirotada Momoi, Beijing 
 
The governments of Japan, the United States and China held 
government-to-government meetings separately on July 7 in Beijing of 
their chief envoys to the six-party talks on North Korea's nuclear 
programs. In order to prevent another ballistic missile launch by 
North Korea, the three chief negotiators reached an accord to work 
on Pyongyang to rejoin the six-party talks, which have been 
suspended, before the end of this month. They also confirmed that 
Chinese Vice Foreign Minister Wu Dawei, who is expected to travel to 
Pyongyang early next week, would convey the decision by the three 
countries to North Korea. Tokyo, Washington and Beijing, which have 
different views on whether to impose sanctions on the North, are 
keeping in step on this matter. 
 
11) Seven countries to jointly submit UN resolution condemning North 
Korea for a vote on July 10; 13 UNSC members support it, China 
against it, Russia keeps silent 
 
YOMIURI (Top play) (Excerpts) 
Evening, July 8, 2006 
 
Yoshikazu Shiraishi, New York 
 
Japan, the United States, Britain, and France jointly submitted to 
an informal UN Security council meeting held on the afternoon of 
July 7 (early hours of July 8, Japan time) a resolution condemning 
North Korea's missile launches. Denmark, Slovakia, and Greek are 
also expected to become cosponsors of the resolution. Opposed to the 
resolution, China is prepared to exercise its veto. Japan, the US, 
Britain, and France, however, are expediting efforts with the aim of 
adopting the resolution on July 10. 
 
An outline of the draft resolution condemning North Korea 
 
7The series of missile launches by North Korea posed a threat to 
international peace and stability. 
7The Security Council will act in accordance with Article 7 of the 
UN Charter (allowing economic sanctions and military action). 
7The United Nations condemns North Korea's missile launches. 
7North Korea must immediately halt developing, testing, deploying, 
and proliferating ballistic missiles. 
7The transfer of funds, supplies, and technologies to North Korea 
for the development of missiles and weapons of mass destruction and 
the procurement of missile-related materials and technologies from 
North Korea must be blocked. 
7North Korea must return to the six-party talks immediately and 
unconditionally and implement swiftly the joint declaration issued 
 
TOKYO 00003818  007 OF 011 
 
 
by the six-party talks in September 2005. 
 
12) Japan, US to do everything to persuade China, Russia to agree to 
sanctions resolution 
 
NIHON KEIZAI (Page 1) (Excerpts) 
July 9, 2006 
 
The Japanese and US governments will do everything to persuade China 
and Russia, which are both opposed to the sanctions resolution 
against North Korea as jointly proposed by Japan, the United States, 
Britain, France, and other countries on the United Nations Security 
Council (UNSC). Japan and the US also are considering an option of 
imposing sanctions by a "coalition of the willing" that would 
consist of nations favoring the resolution if their efforts to 
persuade China and Russia end in failure. 
 
"We will firmly pursue the issuance of a resolution that contains 
sanctions," Foreign Minister Taro Aso stressed in a speech delivered 
in Osaka City on the afternoon of July 8. Aso held consultations 
with senior officials of his ministry at the minister's office until 
late at night the previous day. During the discussions, they 
confirmed the policy direction of opposing China's move to have the 
UNSC issue a less binding chairman's statement instead. 
 
Japan's tough stands comes from the judgment that if it fails to 
take a severe stance now, it would set a bad precedent for the 
future. Most UNSC members favor the resolution, but China and 
Russia, both of which have a veto right, are reluctant to adopt it. 
Tokyo has made this analysis about Russia: (1) Given that the Group 
of Eight industrialized nations (G8) summit conference at St. 
Petersburg is nearing, it would be difficult for Russia, the host of 
the G8 St. Petersburg Summit, to be lenient toward North Korea; and 
(2) China appears reluctant to exercise its veto right alone. 
Considering these factors, Japan has calculated that China and 
Russia would prefer to abstain from voting. 
 
Diplomatic maneuvering over this resolution involving the UNSC is 
likely to affect the now stalled six-party talks. China has begun 
moving to get the talks resumed. Reportedly, the Japanese government 
has informally conveyed to the countries concerned this stance: "If 
the six-party talks are restarted, the resolution could be modified 
on a step by step basis." If North Korea were to move to try to gain 
time, Tokyo is ready to impose sanctions by the UN or a join a 
coalition of the willing to oppose that country. Japan intends to 
use a carrot-and-stick policy in order to encircle North Korea. 
 
13) Kantei pushing China, Russia not to veto resolution on North 
Korea; hopes they will be absent or abstain 
 
ASAHI (Page 1) (Excerpts) 
July 9, 2006 
 
Japan has led the move to submit a punitive resolution on North 
Korea's missile launches to the United Nations Security Council, 
reflecting the strong desire of the Prime Minister's Official 
Residence (Kantei). By pushing China and Russia not to use their 
veto when the resolution is put to a vote at the UNSC, Japan intends 
to get these two countries to be absent or abstain from voting. 
 
"Japan's move this time is far different from the previous tendency 
 
TOKYO 00003818  008 OF 011 
 
 
of Japanese representatives to the UN, who have given priority to 
balance and been attentive to others." 
 
This sort of view was exchanged in hallways and lounges at the UN 
headquarters among representatives from other countries who were 
surprised at Japan's rush to submit a resolution. A Japanese 
diplomatic source at the UN revealed: "The Kantei made the decision 
without regard to our situation at the UN." 
 
On July 6, the day after missile launches, Prime Minister Koizumi 
told reporters: "Even China and Russia cannot accept North Korea 
launching missiles." 
 
14) 1st group of GSDF troops arrives in Kuwait from Iraq by air 
 
TOKYO SHIMBUN (Top play) (Excerpts) 
July 8, 2006 
 
Takeshi Hamaguchi, Kuwait City 
 
The first group of Ground Self-Defense Force troops has arrived in 
Kuwait from the southern Iraqi city of Samawah to head home. 
Following a withdrawal order issued on June 20, the 10th GSDF 
contingent in Samawah and a support group have begun transporting 
equipment and supplies. Some 600 GSDF troops will head for Kuwait by 
air in groups. All GSDF troops are scheduled to leave Iraq in July, 
bringing an end to Japan's first "battlefront" mission. 
 
The first group composed of some 30 GSDF troops left the Samawah 
camp at around 6:10 a.m., July 7 (11:10, July 7, Japan time) on a 
coalition helicopter and arrived at the Kuwaiti Abdulah Al-Mubarak 
Air Base via Tallil Airport some 100 kilometers southeast of 
Samawah. The withdrawal from Iraq will be completed in a short 
period of time for security reasons. After spending about a week in 
Kuwait, troops from Iraq will head for Japan in groups. 
 
The transport of vehicles, including light-armored vehicles, and 
equipment started June 25 by using private firm trailers. A 
100-strong transport unit dispatched to Kuwait will load them onto 
civilian vessels after thoroughly cleaning them. The Air 
Self-Defense Force's C-130s will airlift weaponry and ammunition to 
Kuwait. They will later be transported to Japan on civilian planes. 
 
The transport unit is expected to return home in September. 
 
15) Defense Agency shuts out press in Kuwait 
 
TOKYO SHIMBUN (Page 1) (Full) 
July 8, 2006 
 
In order to cover the arrival of the first group of Ground 
Self-Defense Force troops from Iraq, some 40 journalists were 
waiting at the Kuwaiti Abdulah Al-Mubarak Air Base. But shortly 
before the troops' arrival, the journalists were forced onto a bus 
prepared by the Defense Agency and moved outside of the airport. 
 
An agreement had been reached between the Defense Agency press club 
composed of major newspapers and television broadcasters and the 
Defense Agency to allow the press to cover the troops' arrival at 
the airport. But the press was shut out of the airport without any 
clear explanation. 
 
TOKYO 00003818  009 OF 011 
 
 
 
16) Prime Minister Koizumi to leave tomorrow for Middle East and 
then G-8 summit in Russia 
 
YOMIURI (Page 2)(Excerpts) 
July 9, 2006 
 
Prime Minister Junichiro Koizumi will leave tomorrow for a three-day 
trip to Israel and the Palestinian-ruled territory. Koizumi intends 
to urge both sides' self-restraint to ease tensions caused by the 
series of armed conflicts, such as Israeli military's intrusion into 
the Palestinian-controlled Gaza Strip on the pretext of rescuing a 
soldier abducted by Palestinians. 
 
The Japanese prime minister will visit Israel and the Palestinian 
Authority for the first time in 11 years since Prime Minister 
Tomiichi Murayama went in 1995. After visiting Jordan on July 12-15, 
he will fly to Russia to attend the G-8 summit to be held in St. 
Petersburg. He will report the results of his Middle East tour to 
the summit. 
 
Koizumi will meet on July 12 with Israeli Prime Minister Ehud Olmert 
to urge him to resume a dialogue with the Palestinian Authority for 
an early peace settlement and to express his concern about the armed 
conflicts. The expectation is that the two leaders will agree to 
strengthen bilateral relationships on such areas as politics, the 
economy, and culture. 
 
Koizumi will hold talks on the 13th with Palestinian leader Abbas to 
announce Japan's support for his peace policy. He will also tell 
Abbas that Tokyo will continue to assist the Palestinian Authority. 
He will then urge the Palestinian leader to release the Israeli 
soldier as early as possible since his abduction by a Palestinian 
armed group has brought about the present turmoil. 
 
17) Minshuto head Ozawa plays up stance of placing emphasis on 
China; Some party members unhappy with remarks about sanctions on 
North Korea 
 
YOMIURI (Page 4) (Full) 
July 8, 2006 
 
Ryota Akatsu, Tailien 
 
Minshuto (Democratic Party of Japan) President Ichiro Ozawa wrapped 
up on July 7 the main part of his trip to China. He will return home 
on the 8th. With Prime Minister Junichiro Koizumi unable to find 
ways to repair relations with China, Ozawa was about to realize a 
meeting with Chinese President Hu Jintao and succeeded in playing up 
a stance of attaching importance to China relations. During his 
China tour, he was also required to make clear his party's position 
when North Korea launched missiles. 
 
Ozawa proudly said to reporters accompanying him to China: 
 
"To resolve the North Korea issue, the Chinese side promised to deal 
with it through calm discussion. As I happen to be in Beijing, I was 
able to obtain a certain level of achievement." 
 
All eyes were focused on a series of his meetings with Chinese 
leaders as he was in Beijing where countries concerned were working 
 
TOKYO 00003818  010 OF 011 
 
 
actively on North Korea's missile launches. Chinese Vice Foreign 
Minister Wu Dawei told Ozawa that he would visit Pyongyang soon. As 
a result, Ozawa succeeded in strengthening his political identity. 
Some senior Minshuto members looked into the possibility of having 
Ozawa and other senior party members visiting China protest at the 
North Korean Embassy in Beijing, but Ozawa rejected such an idea, 
saying, "That's what the Japanese government should do." He appeared 
to have been alert to the possibility of it being taken as just a 
performance by the main opposition party. 
 
Ozawa told the reporters: "There is a possibility of using military 
power as a sanction. We need to consider what countermeasures would 
then be taken." His remarks created quite a stir in Japan since 
Ozawa was taken as being negative about imposing economic sanctions 
on North Korea. Junior Minshuto lawmakers, who believe that tough 
sanctions are needed, were unhappy with Ozawa's remarks. One young 
lawmaker said, "Since Mr. Ozawa is not in Japan, he does not 
understand public opinion." 
 
One senior member explained: 
 
"Mr. Ozawa made that remark thinking that if Japan imposes 
sanctions, it must prepare for the aftermath. He did not reject 
sanctions. He was just calling for a calm argument in consideration 
of the situation in the party in which there were cautious and 
Hard-line arguments." 
 
All the more because the missile issue will likely be prolonged, 
Ozawa will probably find it difficult to set the party's policy 
after he returns home. 
 
18) Primary balance to be brought into black in fiscal 2011; 
Government adopts basic policy guidelines on economic and fiscal 
management and structural reforms for fiscal 2006 budget; 
Consumption tax hike eyed as social security funding resource 
 
NIHON KEIZAI (Top Play) (Full) 
July 8, 2006 
 
The government during a special cabinet meeting on July 7 adopted 
basic policy guidelines on economic and fiscal management and 
structural reforms for the fiscal 2006 budget. For fiscal 
reconstruction, it intends to bring the primary balance of both the 
national and local finances into the black without fail by fiscal 
¶2011. It will aim at achieving a balanced budget, under which 
necessary expenditures are covered without borrowings. The report 
also included a plan to cut expenditures up to 14.3 trillion yen. 
Under the guidelines, the government will consider increasing the 
consumption tax in order to finance social security expenditures, 
which are expected to rise, though a specific rate has not been 
included in the package. 
 
The basic policy guidelines for fiscal 2006 is the last package 
mapped out under Prime Minister Junichiro Koizumi, who has declared 
his intention to step down in September. The prime minister told 
reporters after the cabinet meeting: "It was unprecedented for the 
ruling camp to have been cooperative for spending cuts to this 
extent. I want to make the best use of this cooperative relationship 
for the compilation of the next fiscal year's budget." Koizumi also 
released a dialogue, in which he pointed out the need to facilitate 
his reform initiative over the mid- to long-term in order to settle 
 
TOKYO 00003818  011 OF 011 
 
 
such issues as the declining birthrate and the colossal amount of 
fiscal deficit. 
 
The package clearly indicates a government policy of achieving 
fiscal reconstruction by the middle of the 2010s under two 
timeframes. In the first stage, the deficit in the primary balance - 
an indication of impossibility of financing administrative expenses 
without borrowing - will be reviewed and the national and local 
finance will be brought into the black in combined terms. The report 
then noted that in the second timeframe, the underlining uptrend in 
government debts would be stemmed so as to lower their ratio to 
gross domestic product (GDP) in a stable manner. 
 
Regarding the first task of bringing the primary balance into the 
black, the report estimated under the reliable premise of a nominal 
economic growth rate of about 3 PERCENT  that there would be a 
shortage of 16.5 trillion yen, of which 11.4 - 14.3 trillion yen 
would be covered through spending cuts and 2-5 trillion yen with a 
tax hike. 
 
The Liberal Democratic Party (LDP) undertook coordination of 
spending cuts at the order of the prime minister. As a result, a 2.6 
trillion yen cut in personnel expenses for national and local 
government employees and 1.6 trillion yen cut in social security 
spending have been decided. Public works expenditures are expected 
to be slashed in the range between 3.9 trillion and 5.6 trillion 
yen. The latitude has been allowed out of consideration for local 
economies. For other spending items, the report noted that necessary 
examinations and revisions would be carried out. To this end, a 
flexible clause allowing a revision of the latitude has been 
incorporated. 
 
Regarding revenues, the report referred to the need to reform the 
tax system, including a tax increase. Though it did not touch on a 
possible timeline and tax items subject to a hike, it judged that an 
increase in expenditures in the social security field would be 
unavoidable due to an increase in social security payments and the 
need to improve measures to deal with the declining birthrate. 
Consideration will be given to the possibility of characterizing the 
consumption tax as a stable funding resource for the payouts of 
social security benefits. 
 
Following the adoption of the guidelines, the government will get 
down to compiling the fiscal 2006 budget. It will adopt budgetary 
request guidelines on the 21st. 
 
SCHIEFFER